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Initial Public Offering (IPO) February 2017

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Strictly Private & Confidential

Initial Public Offering (IPO)

February 2017

Strictly Private & Confidential1

1KEY ISSUES IN IPO

Strictly Private & Confidential2

Connected Transactions

SEC

Consideration Points

Incentive to Transfer Benefit

of Existing Shareholders

Transaction Frequency

Transaction Size

Type of Transactions

Transaction Size to NTA

Approval Bodies

Consideration Points

SET/SEC

Approval Process After IPO Duty

Concern of Conflict of Interest from Connected Transactions

Transactions between listed company and other companies having the same following persons are regarded as connected transactions

• Management

• Major shareholders

• Persons having control over company

• Related persons of above

Transactions between listed company and its persons listed above

The connected transactions can exist if transparency and good governance are set up to protect minority shareholders from conflict of

interest and benefits transfer

Strictly Private & Confidential3

Financial Statements Preparation

Applicant’s Financial Statements for the last year and the last quarter before submission of the application to SET must conform to the

followings

(1) Financial Statements are prepared in accordance with i) general accepted accounting principles (GAAP) that are applied to public companies

and ii) other requirements according to section 56 of SEC rules

(2) Financial Statements are audited /reviewed (in case of quarterly financial statements) by CPAs, approved by SEC to audit listed companies. The

audit/ review has to be conducted in accordance with the applicable auditing standards.

(3) Type of auditor’s opinion in the report of independent auditor according to cannot be any of the followings

(a) Disclaimer of Opinion or Adverse Opinion

(b) Qualified Opinion; that some transaction was not treated in accordance with GAAP is quoted as the reason for qualifying

(c) Qualified Opinion; the limitation of scope is quoted as the reason for qualifying

Ref: Notification of Capital Market Supervisory Board TorChor 39/2559 “Application for and Approval of Offer for Sale of Newly Issued Shares”

201820172016

F/S for the fiscal year and for the quarter before IPO have to be audited/ reviewed by an auditor approved by SEC

IPOMust

IPOMustShould Be

For Illustration Only

Strictly Private & Confidential4

Internal Control

Internal Control and Accounting System

Lawyer Accountant Industry Expert

Audit Committee

Evaluate the adequacy of the company’s internal

control system before IPO and once a year thereafter.

The company’s external auditor

cannot take a job as the evaluator

of the internal control system

Internal Control Specialist evaluate the

adequacy of the company’s internal control system

Segregation of Duties & Documentations

Strictly Private & Confidential5

Internal Control (Cont’d)

Audit Committee : Qualifications Vs. Duties and Responsibilities

Qualifications

1. Appointed by the Board of Directors and shareholders

2. Consist of at least 3 members, each of which has to be independent i.e.

Has no more than 1% of voting shares in the Company, its subsidiaries, and its associates;

Do not hold a position as a full time employee/advisor of the Company, its

subsidiaries, its associates, and other connected entities; and

Has no family relationship with or being a spouse with connected persons

leading to independency.

3. Has sufficient knowledge and experience to review the reliability of the

financial statements

4. Require at least 1 audit director having finance and accounting background

Recommended Structure

Lawyer Accountant Industry Expert

Duties & Responsibilities

1. Review the sufficiency, consistency and credibility of the financial report

2. Review the adequacy and effectiveness of internal control and audit systems

3. Review the compliance with the public Act., the SEC Act., regulations of the SET and the relevant regulations.

4. Consider or approve the compliance with all disclosures of the connected transaction or the conflict of interest transaction.

5. Acknowledge the accountability of financial information in the annual report

Strictly Private & Confidential6

Preliminary Solutions

Issues Description Possible Solutions

Related Party

Transaction

To protect conflict of interest, the listed company and

subsidiary is required to disclose the related

transaction

The Company needs to disclose the related party

transaction in filing. With subjecting to due diligence,

Financial Advisor may advise appropriate structure for

listing

The related party transactions as arm-length basis

need to agree on market terms and conditions

Related Business for

Listing

To protect the conflict of interest, the Company and

subsidiaries, which has a similar business and/or

provides the integrated business, shall be consolidated

for listing

Subject to further due diligence, Financial Advisor will

advice an appropriated business group structure for

listing

Internal Control System To provide the best interest for shareholders, the

Company shall have an effectiveness of internal

control system

The Company shall employ Internal Auditor to evaluate

the adequacy of the company’s internal control system

before IPO and follow an annual audit plan thereafter

Financial Statements To comply with SEC and SET’s regulations, financial

statement of the Company shall be audited/reviewed

by CPAs, approved by SEC to audit listed companies on

PAE accounting basis (Public Accountable Entities)

The Company is required to provide consolidated

financial statement on PAE accounting basis

Strictly Private & Confidential7

2SEC & SET RELATED REGULATIONS

Strictly Private & Confidential8

SEC Approval CriteriaQualitative Requirements Key Tasks/ Action Plan

Company Status Must be a public company limited The Company to call for BOD meeting and shareholder meeting

to get the approval on the conversion into Public Company

Limited

Required special resolution for transformation to public company limited (super majority vote (75% or more) is required)

Application and Approval

A public company limited wishing to IPO its shares shall file an

application filing together with supporting documents with SEC (to

be jointly prepared by financial advisor whose name approved by SEC)

The Company to engage

– Financial advisor to prepare relevant documents (i.e. filing,

marketing material for placement, etc)

– Legal advisor to prepare the require documents (i.e. listing

application, filing, amendment of corporate documents (if

any), etc)

Financial Advisor

Financial advisor must meet qualifications determined by SEC and under SEC approved lists

Selected the financial advisor whose name is under SEC approved lists

Management Qualifications of management and controlling persons should be in

line with the SEC regulations and they should not possess any characteristics prohibited by the SEC

The Company and its legal advisor to check qualifications of

management whether require any amendment of composition of BOD

Corporate Governance

Must demonstrate good corporate governance with qualified audit

committee

At least 1/3 of directors (but not less than 3) must be independent

directors

Establish audit committee consisting of at least 3 persons, one of

whom must have knowledge in finance and accounting

Independent director shall comply with the following:-

– Must not be management, employee, or consultant that

receives monthly payment from the Company

– Must be free of any financial or other interest in the company's

management and business

– Holding share not exceeding 1% of total number of shares in the

company, its parent company, subsidiary company, associate

company

The Company to call for BOD meeting and shareholder meeting

to approve on

– Appointment of Audit Committee and independent directors

– Specify the scope, roles, duties, and responsibilities of Audit Committee and independent directors

Strictly Private & Confidential9

SEC Approval Criteria (Cont’d)

Qualitative Requirements Action

Accounting and

Financial

Statement Preparation

Financial statements (F/S) comply with public company and SEC

guideline

Auditor must be approved by SEC

The audited F/S shall not express i) disclaimed opinion on F/S or

adverse opinion and ii) qualified opinion due to any material

accounting particular

The Company to engage auditor for

– F/S preparation to comply with Thai Financial

Reporting Standards for Publicly Accountable Entities

Internal Control Internal control system must be established The Company to engage internal control evaluator for

– Internal control review and establishment

Article of Associations

Article of Associations must reflect fairness and governance over related party transactions

Engage legal advisor for the review and preparation of all

required documents to comply with the related rules and

regulations to amend Article of Associations

Conflict of Interest

& Shareholding Structure

No conflict of interest among group affiliates and major shareholders

Fair and full disclosure of potential related party transactions

No shareholder and management structure of which shall be

prejudicial to minority shareholders

Financial advisor and legal advisor to

– Evaluate current corporate and conflict to interest

– Restructure group holding structure (if any)

Disclosure of Information

The information disclosed to public must not demonstrate reason to

doubt incomplete, and inadequate in making investment decisions or

contain misleading statements to investors

Disclose the latest accounting year and the most recent quarter of

financial statements prior to the filing of application

Financial advisor and legal advisor to assist the Company

to comply with relevant rules and regulation and for the

best interest of the shareholders of the Company as a

whole in disclosing the Company information in filing and prospectus

Provident Fund Must be established prior to the date of application Engage asset management company to establish provident fund for the Company’s employees

Strictly Private & Confidential10

3IPO WORK PLANS &

INDICATIVE TIMELINE

Strictly Private & Confidential11

IPO Work Plans

Module Estimated time Major work plans Responsible Parties Key deliverables

Internal Control Up to 5-6 months

(can be done in parallel with module 2-5)

Internal control evaluation

Internal control development

Financial Advisor

Internal Auditor

Internal audit report

Internal control sufficiency form

Legal, and

commercial due diligence

~5-6 months Due diligence the Company’s

information

Management interview

Developing 3-5 years business plan

and financial projection

Financial Advisor

Legal Advisor

Financial advisor work paper or

supporting documents

The Company’s business plan and financial forecast

Financial model,

projections and valuation

~3 months Conduct financial model based on

the Company’s information and management interview

Financial Advisor

Auditor

The Company’s preliminaryvaluation

Corporate Formality ~1-2 months Call Board meeting and shareholders’

meeting

Preparation of BOD and EGM minutes

of meeting

Appointment of BOD, independent directors and sub-committee

Financial Advisor

Legal Advisor

BOD/EGM minute of meeting,

and other relevant documents

The Company become a public company limited

1

2

3

4

Strictly Private & Confidential12

IPO Work Plans (Cont’d)

Module Estimated time Major work plans Responsible Parties Key deliverables

SEC/SET documents preparation

~4 months Filing and draft prospectus Financial Advisor

Legal Advisor

Internal Auditor

Auditor

Filing (69-1)

Other SEC documents as

required

Other SET documents as required

SEC/SET processes Within 165 days Company visit by SEC and SET

Correspondence with SEC & SET for their queries

Financial Advisor

Legal Advisor

Internal Auditor

Auditor

SEC to approve application and

filing

SET to approve the listing of shares

Placement process ~2-3 months Construct attractive equity story and

positioning

Estimate potential demand and

indentify target investors

Tranching and allocation of the

offering

Educate investors on the Company’s

equity story and establish demand

momentum for the offering

Preparation of marketing materials

Organize premarketing and

roadshows Bookbuild and finalize the IPO price

Financial Advisor

PR Consultant

Analyst presentation(s)

Research reports

Roadshow materials

Other documents related to

placement process

Successful and fully subscribed

of the Company IPO

5

6

7

Strictly Private & Confidential13

Indicative IPO Timeline

W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

Month 6Month 1 Month 2 Month 3 Month 4 Month 5 Month 13Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Commercial and legal due diligence

BOD to approve FS, RPT, internal control evaluation, PCL conversion

and other related IPO agendas

Financial projection and valuation

Submit SEC and SET application

SEC Consideration Period (within 165 days)

Draft filing

1st trading day

SEC approve filing

Kick-off

Corporate Governance Preparation

Update valuation

EGM to approve on PCLconversion

Corporate Restructuring

Internal audit system preparation

Appoint internal auditor

BOD to approve filing and listing application

Note : The tentative timeline is subject to change as per further due diligence and SEC /SET consideration period

Appoint external auditor & legal advisor

Bookbuilding

Analyst Meeting

Marketing & Roadshow

Subscription Period

Filing Updates

Strictly Private & Confidential14

SEC Approval Process

Pre-consult

Submit SEC and SET

application

Approx. 30-45 days

SEC review working paper of FA and auditor

SEC/SET

company visit

Within 30 days

Company/FA to submit

minute of meeting from

company visit and all

relevant documents

Within 120 days:

Count Day 1

120 days 45 days

SEC internal

consideration process

Effective filing

Completed part 3 information relating

to the offer of securities

(IPO price and allocation)

SEC approve

filing

First day trade

Strictly Private & Confidential15

PRELIMINARY DUE DILIGENCE

REQUEST LIST

4

Strictly Private & Confidential16

Preliminary Due Diligence Request List

No. Information & document

(1) Company & Business

1.1 Copy of Memorandum of Association

1.2 Copy of Certificate Registration of Company

1.3 Copy of Article of Association

1.4 Copy of Shareholders List

1.5 Copy of Board of Directors' meeting minutes / memo

1.6 Copy of Shareholders' meeting minutes / memo

1.7 Copy of current Group Structure

1.8 Copy of Shareholders Agreement (if any)

1.9 Copy of Share Purchase Agreement (if any)

1.10 Company profile, brochures, and other introduction booklets

1.11 Company annual report (if any)

1.12 Most recent business plan (any formats are acceptable)

1.13 Key business developments/milestones

(2) Industry & Products

2.1 List of products and services including type and price

2.2 List of top 10 customers and suppliers by value and % of total value

2.3 Description of key businesses and operating structure such as business flow diagram

2.4 Copy of all relevant permits, licenses, consents, orders or authorizations from regulatory authorities

2.5 Copy of quality management system certificates e.g. ISO

2.6 Copy of awards or commendations

2.7 Relevant industry research, journals and publications on industry trend/ government policies and regulation (if any)

Strictly Private & Confidential17

Preliminary Due Diligence Request List (Cont’d)

No. Information & document

(3) Operational/ Technical

3.1 Flow of production process of types of products/ services

3.2 List of name plated capacity, maximum capacity, actual capacity of each service

3.3 List of factory and office with location, capacity and products/service

3.5 Feasibility or technical reports which are relevant to the business (if any)

3.7 Key historical performance measure

3.8 Maintenance scheduled/plan

3.9 Major unplanned shutdown or maintenance record with reasons behind

3.10 The Company’s budget vs. actual performance (if any)

Strictly Private & Confidential18

Preliminary Due Diligence Request List (Cont’d)

No. Information & document

(4) Commercial Agreement & Other Agreement

4.1 Copy of all commercial agreements with key customers/suppliers/sub-contractors

4.2 Copy of all sales, agency, distribution and advertising contracts

4.3 Copy of all agreements relating to joint venture, partnership and equity or debt investments (if any)

4.4 Copy of all agreements or contracts with potential connected person (if any)

4.5 Copy of relevant financial agreements e.g. loan agreement, financial lease, currency hedging , etc.

4.6 Copy of all insurance policy

4.7 Copy of all tax filing at Revenue Department Corporate Income Tax, VAT, WHT, etc.)

4.8 Copy of all internal control manual, work procedure, all standard operating procedure (SOP)

4.9 All licenses, permits, approvals, orders, authorizations, consents and the like issued or granted by applicable governmental or regulatory

authorities to the Company and any significant correspondence related thereto (if any)

4.10 All reports to or correspondence with any governmental authorities/bodies with respect to the operations (if any)

4.11 All reports, notices or correspondence with any governmental authorities relating to any purported violation or infringement from any government

regulations (if any)

4.12 Recent assets appraisal reports (if any)

4.13 List of all patents (including patent applications), trademarks, trade names, service marks and copyrights owned or used by the Company granted

by any jurisdiction and all products or applications of technologies based thereon or related thereto

4.14 Documents evidencing any patent, trademark, trade name, service mark, copyright, license or other contract right owned or used by the Company

4.15 BOI/ Tax & Investment Privilege Approval Letter, certificate, operating confirmation

4.16 Copy of all agreements to purchase or sell real property/key assets at some future date

Strictly Private & Confidential19

Preliminary Due Diligence Request List (Cont’d)

No. Information & document

(5) Management & Employment

5.1 Copy of organization chart - please describe each functional responsibilities

5.2 Authorities of the management

5.3 Head count of each department

5.4 CV of Management, Controlling Person and Audit Committee (if any)

5.5 Copy of employment agreement (standard form)

5.6 Copy of employee guideline

5.7 Copy of Provident Fund setting up

5.8 Details of past employee disputes

5.9 Details of employee benefits, training programs, welfare etc.

5.10 Details of any bonus, retirement, profit sharing, and incentive compensation of management

(6) Auditors and Internal Control

6.1 Auditors' annual management letters and management responses

6.2 Company representation letters provided to auditors with respect to the last five fiscal years (if any)

6.3 Non-publicly filed internal control reports prepared by management and the Company’s auditors and related documents

6.4 Audit Committee policies and procedures such as AC checklist, business control audit plan and business control audit process, committee member

and responsibility (if any)

6.5 All letters or reports from auditors to the management of the Company regarding control systems, methods of accounting, etc., and all of

management’s responses thereto, for the last 5 yr

6.6 Significant tax records of the Company, including reports issued in connection with any government tax audit, tax sharing or tax allocation

agreements and letters from auditors regarding tax issues for the last five years

6.7 List of material pending tax issues

Strictly Private & Confidential20

Preliminary Due Diligence Request List (Cont’d)

No. Information & document

(7) Financial Information

7.1 Copy of audited financial statement of the company and all subsidiaries

7.2 Financial model of each business (if any)

7.3 Copy of management accounts

7.4 Copy of trial balance (if available)

7.5 Copy of recent tax return form - please illustrate accumulative tax loss carried forward (if any)

7.6 Break down sale by distribution channel

7.7 Break down sale by products/service and by key customers

7.8 Breakdown of cost of goods sold by products/service and by key customers (if available)

7.9 Breakdown of SG&A

7.10 Details of assets used in the business of the company and subsidiaries, which are not owned by the Company

7.11 Break down account receivable

7.12 Break down account payable

7.13 An aging of account receivable

7.14 An aging of account payable

7.15 A list and details of all notes receivable and other debtors (amount, terms and conditions)

7.16 A list and details of all notes payable and other debtors (amount, terms and conditions)

7.17 A list of fixed assets by category - please indicate year of purchase, cost, and depreciated book value and proof of ownership

7.18 A list of all loans, borrowings, debt securities outstanding, and credit line (amount, terms and conditions)

7.19 Management Letter (if any)

7.20 Details of related party transactions of the Company and all subsidiaries , including amount and nature of the transactions

7.21 Excel spreadsheets used to create audited financial statements and breakdown

Strictly Private & Confidential21

Preliminary Due Diligence Request List (Cont’d)

No. Information & document

(8) Capital Budgeting

8.1 Detailed breakdown of 5-year plan

- Breakdown sales budget by product category

- Breakdown cost of sales budget

- Marketing and selling expense budget

- General and administrative expense budget

- Breakdown capital expenditure budget (CAPEX) with description of project detail (including benefits), current status and expected operation

date

- Financing plan and budget

8.2 Detailed financial projections and key assumptions in arriving at budget projection

8.3 Feasibility report of new planned project

(9) Litigation

9.1 A list of all pending litigation, arbitration proceedings, or governmental investigations and proceedings relating to the Company, including

descriptions of parties, damages, and other remedies sought, nature of action

9.2 All pleadings and other important documents relating to litigation, arbitration and governmental proceedings relating to the Company