Opinion of Independent Financial Advisor on Acquisition/Disposition of Assets and Connected Transaction

Transcription

1 (Translation) Opinion of Independent Financial Advisor on Acquisition/Disposition of Assets and Connected Transaction of Advance Paint & Chemical (Thailand) Public Company Limited Prepared by JVS Financial Advisory Co., Ltd. 11 November 2010

2 (Translation) No. J.048/2553 November 11, 2010 Subject : To : Opinion of Independent Financial Advisor on Sale of Assets that are Connected Transaction of Advance Paint & Chemical (Thailand) Public Company Limited The Audit Committee and the Shareholders Advance Paint & Chemical (Thailand) Public Company Limited Refer to: 1) Resolution of the Board of Director Meeting of Advance Paint & Chemical (Thailand) Public Company Limited No. 7/2010 dated October 21, ) Restructuring (Rehabilitation) Plan of Advance Paint & Chemical (Thailand) Public Company Limited 3) Information of Memorandum regarding the Acquisition of Assets and Connected Transaction dated October 22, ) Information of Memorandum concerning the Disposition of Assets dated October 22, ) Capital Increase Form of Advance Paint & Chemical (Thailand) Public Company Limited dated October 22, ) Shareholder Structure pre and post Transaction of Advance Paint & Chemical (Thailand) Public Company Limited dated October 22, ) Information of Memorandum concerning the Disposition of Assets dated October 22, 2010 (same as(4)) 8) Financial Statements of Advance Paint & Chemical (Thailand) Public Company Limited for the year ended December 31, and first 6 months as of June 30, ) Financial Statements of Energy Perfect Company Limited audited by Grand Audit Co., Ltd. As of June 30, 2010 and year ended December 31, ) Valuation Reports for Advance Paint & Chemical (Thailand) Public Company Limited by the Valuation & Consultants Co., Ltd. And Preferred Appraisal Co., Ltd. on September 2010 (4 Reports) 11) Valuation Report for Energy Perfect Company Limited by dated September 30, ) Information Memorandum, Memorandum of Association, and other documents including management interview of Advance Paint & Chemical (Thailand) Public Company Limited, Energy Perfect Company Limited and other related officers/parties Attachments: 1) Profile of Advance Paint & Chemical (Thailand) Public Company Limited 2) Profile of Energy Perfect Company Limited 3) Names of Connected persons who have no right to vote - 2 -

3 Shareholding Structure of APC (Pre and Post Transactions) Letter of Intent proposed by EPCL for the Merger and Acquisition between APC and EPCL Notice regarding the transfer of debts obligation from Thai Military Bank Public Company Limited dated May 13,2009 Debt Restructuring Agreement between APC and Suti Nopakun dated September 30, ) Financial Statements for the first 6 months as of June 30, 2010 of EPCL audited by Grand Audit Co., Ltd. Financial Statements of Fiscal Year of 2009 as at December 31, 2009 of EPCL Financial Statements of Fiscal Year of 2009 as at December 31, 2008 of EPCL Disclaimer: 1) The IFA opinions by JVS Financial Advisory Co., Ltd. ( Financial Advisor or JVS FA ) has been rendered based on information, assumptions and documents obtained from the APC, EPCL and their both representatives, publicly available information, SEC s website ( and SET s website ( 2) Financial Advisor will not responsible for any profit or loss incurred or as the result of the Transactions 3) Financial Advisor opinions has been rendered with best knowledge with careful which are based on professional practice. 4) Financial Advisor has considered and gives the opinions under the current circumstance and current information. Any material changes of the information may affect the opinions 5) This IFA opinion report prepared for APC s Audit Committed and APC shareholders is on only the Reasonableness of the Transactions and Fairness of Price. The opinion does not cover the possibility or the success of the Transaction as well as the changing its business into the Coal distribution in the future According to the board of directors meeting No. 7/2010 of Advance Paint& Chemical (Thailand) Public Company Limited ( the Company or APC) which held on October 21, 2010, the meeting has appointed JVS Financial Advisory Co., Ltd. ( Financial Advisor ) as an Independent Financial Advisor ( IFA ) to give the opinion to Audit committee and shareholders regarding (1) the reasonableness and benefits of the transactions to APC and APC shareholders, (2) the fairness of price and conditions of the transactions, and (3) recommendation as to whether the shareholders should vote in favor of the transactions, together with supporting reasons, for the consideration to approve the Transactions as follow: 1. To reduce the Company s issued share to 222,712,675 shares at the par value of 1 Bath per share and then increase newly issued share of 2,000,000,000 shares to total amount of 2,222,712,675 shares. All of these new shares shall be allocated as private placement to Energy Perfect Limited ( EPCL ) shareholders at the price of Baht 0.10 per share. In term of settlement, EPCL s shareholders will then acquire EPCL s common share of 20,000,000 shares at the par value of Baht each instead of cash payment by using - 3 -

4 share swap at the exchange ratio of 1 share of EPCL to 100 shares of APC. (hereafter called Increase Capital to Acquire Share or Transaction No. 1 ) As per the Agenda No. 2-4 approved by the board of directors meeting No. 7/2010 dated October 21, To approve the Company to settlement its overdue debt repayment by transferring of its assets as stated in its financial statement as at June 30, 2010, which amounted to Baht 54,328,702 ( Transferring Assets for Debt Settlement ) to Mr. Suti Nopakun ( Suti ), who is the Company s main creditor. The accumulative outstanding debt up to September 30, 2010 (including interest expenses) is amounted to Baht 70,493,020, will be repaying by using this scheme instead of cash settlement. (hereafter called Transferring Assets for Debt Settlement Transaction or Transaction No.2 ) As per the Agenda No. 10 approved by the board of directors meeting No. 7/2010 dated October 21, 2010 Of these, Increase Capital to Acquire Share Transaction or Transaction No.1 and Transferring Assets for Debt Settlement Transaction or Transaction No.2 are co-approved together as such if either one transaction cannot be achieved, the other transaction will also cancel and vice versa. (Transaction No.1 and Transaction No.2 shall collectively call Merger and Acquisition Transaction or Transactions ). Nature of Transaction No. 1 The acquisition of the ordinary shares of EPCL is considered as an acquisition of assets of listed company in Class 4 Transaction or Backdoor Listing under the Notification of the Capital Market Supervisory Board No. TorJor 20/2551 (20/2008) Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets B.E (2004). The size of the transaction is equivalent to % calculated on the newly issued shares which the consideration received in accordance with the Company s financial statements as of June 30, As a result, the acquisition of assets shall be deemed as a connected transaction according to the definition of the connected person which is the management or controlling persons of a listed company, as per the Notification of the Capital Market Supervisory Board No. TorJor 21/2551 (21/2008) regarding Rules on entering into Connected Transactions and the Notification of the Board Governors of the Stock Exchange of Thailand Re: Disclosure of Information and other acts of Listed Companies concerning the Connected Transaction B.E (2003). The transaction value is over Baht 20 million or exceeding 3% of total net tangible assets of the Company, which the Company must obtain an approval from Board of Director, prepare the Information Memorandum regarding the Acquisition of Assets and Connected Transaction and is obliged to seek the approval from the shareholders meeting as well as appointing an independent financial advisor to prepare an opinion report to the shareholders for the consideration

5 Nature of Transaction No. 2 The Company s book value of the disposal assets consisting of the Company s land, building/factory, machines and equipments ( the Assets ) is Baht 54,328,702. The appraisal value by 2 independent appraisal firms; 1) the Valuation & Consultant Co., Ltd. appraised the Assets for Baht 46,848,000 dated September 1, 2010 and 2) the Preferred Appraisal Co., Ltd. appraised the Assets for Baht 51,430,000 dated September 1, The Assets will be transferred to settle Suti s debts which as of September 30, 2010 the outstanding values totaling Baht 70,493,020. The transaction value is % of the Company s total assets, calculated as of June 30, 2010, which will be considered as Class 1 Transaction under the Notification of the Capital Market Supervisory Board No. TorJor 20/2551 (20/2008) regarding Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets B.E (2004). The Company must obtain the Board of Director s approval, prepare the Information Memorandum regarding Disposition of Assets submitting the SET, and is obliged to seek the shareholder approval for the transaction, as well as appointing an independent financial advisor to prepare an opinion report to the shareholders for their consideration. In order to obtain the shareholder approval on both Transactions, the Company must send shareholders the notice to attend the Shareholders Meeting no less than 14 days prior to the date of the shareholders meeting. The notice to shareholders also include the IFA s Opinion Report regarding to the Reasonableness and Advantages of the Transactions, the Fairness of price and the Appropriateness of the Conditions of Transaction together with the Recommendation as to whether the shareholders shall vote to approve or not approve the Transaction with the supporting reasons. In this regard, the Company s Board of Director Meeting No., 7/2010 dated October 21, 2010 has appointed JVS Financial Advisory Co., Ltd. as the Independent Financial Advisor ( the IFA ) to provide such opinion to the shareholders. As the IFA, JVS Financial Advisory Co., Ltd. will give the opinion based on the information obtained from the Company and the publicly disclosed information, i.e. resolution of APC Board of Directors meeting approving the making of the transaction and related information, information memorandum on the Transactions, the auditor s report, financial statements of APC, property valuation reports of 2 independent appraisers, as well as interviewed with the managements of the Company, and field surveys of the land and factory building, as well as from the EPCL. Note that our opinion is based on the assumption that the information and documents obtained are true and correct without any material changes, and also purely on the economic condition and the information prevalent at the time of this study. Thus, any significant changes in those factors from the current circumstance may pose impacts on the Company and also on this transaction. As a consequence, we may not affirm whether there will be any potential material impact exerted on the Company in the future. (IFA issues the IFA opinion report in Thai language version only. This English version is translated from the Thai version for the convenience of foreign shareholders of APC. This Translated version of the IFA opinion report is not the definitive and official document) - 5 -

6 Executive Summary According to the board of directors meeting No. 7/2010 of Advance Paint& Chemical (Thailand) Public Company Limited ( the Company or APC) which held on October 21, the meeting has unanimously approved the Transactions as follows. 1. To reduce the Company s issued share to 222,712,675 shares at the par value of 1 Bath per share and then increase newly issued share of 2,000,000,000 shares to total amount of 2,222,712,675 shares. All of these new shares shall be allocated as private placement to Energy Perfect Limited ( EPCL ) shareholders at the price of Baht 0.10 per share. In term of settlement, EPCL s shareholders will then acquire EPCL s common share of 20,000,000 shares at the par value of Baht each instead of cash payment by using share swap at the exchange ratio of 1 share of EPCL to 100 shares of APC. (hereafter called Increase Capital to Acquire Share or Transaction No. 1 ) 2. To approve the Company to settlement its overdue debt repayment by transferring of its assets as stated in its financial statement as at June 30, 2010, which amounted to Baht 54,328,702 ( Transferring Assets for Debt Settlement ) to Mr. Suti Nopakun ( Suti ), who is the Company s main creditor. The accumulative outstanding debt up to September 30, 2010 (including interest expenses) is amounted to Baht 70,493,020, will be repaying by using this scheme instead of cash settlement. (hereafter called Transferring Assets for Debt Settlement Transaction or Transaction No.2 ) Of these, Increase Capital to Acquire Share Transaction or Transaction No.1 and Transferring Assets for Debt Settlement Transaction or Transaction No.2 are co-approved together as such if either one transaction cannot be achieved, the other transaction will also cancel and vice versa. (Transaction No.1 and Transaction No.2 shall collectively call Merger and Acquisition Transaction or Transactions ). In addition, all agenda from No.4 till No. 13 of shareholder s meeting on December 2, 2010 must gain resolution approval. JVS FA would like to give our opinion that increase capital transaction of APC for shareholders of EPCL in order to acquire all ordinary shares of EPCL share is deemed to be reasonable and for benefit of both Company and APC s shareholders. The share swap price between newly issued shares of APC and EPCL shares are also deemed as appropriate price. Therefore, APCs shareholder should approve resolution to increase newly issued shares to acquire EPCL shares by the way of share swap. For Transferring Assets for Debt Settlement Transaction as an importance condition of increasing newly share to acquire EPCL, JVS FA would like to give our opinion that transferring assets of APC to settle its debt with creditors is appropriate and would provide a benefit to both the Company and APC s shareholders. Therefore, APC s shareholder should approval this debt settlement transaction

7 However, the decision to vote to approve this transaction. The discretion of the shareholders of APC by shareholders should study the documents. Attached to the notice of extraordinary in General meeting of shareholders No.2/ 2553 this time for its consideration in deciding to cast their votes properly. Shareholders should carefully study this IFA report and key issues in the IFA s opinion on page Current Status of the Company Prior to Transaction APC is currently cannot operated in paint business as usual. Due to lack of funding capital, the Company continuously record accumulative losses and nowadays has more debts than its assets and consequently unable to repay these outstanding debts. In addition, the company has liquidity problem. As the Company s total revenues continues to record lesser amount than its overall costs, resulting in accumulative trend of retained losses, which then effect shareholders' equity to decline to negative worth. For these reasons, financial institutions refuse to provide credit facility line to APC. Also, no supplier would give credit term to APC and their customers would not trust the Company. If APC want to continue to operate its business. Company would require to increase its funding capital. However, due to negative shareholder s net worth and APC shares are unable to trade in the Stock Exchange as normal, this would restrict APC to seek new investors. However, senior management of APC is trying to maintain the Company and also try to find new investor and/or divest assets of the Company to repay debt. If APC only sell the Company's core assets out alone this may merely solve the problem of outstanding debt. However, the Company would then have no core asset to run its business. Company s senior management therefore look for new business partner as well as solving debt problem by transferring assets for debt settlement. (On October 22, 2553, IFA makes a site visit to explore APC s plant site and also interview senior management of the Company. Key finding summary is that the company s business status is awkward as there is only 4 working staffs left. If there is no significant change in term of injecting new funding capital, investing in new machinery and also changes all management and marketing team). In past, senior management attempted to seek for new investors and/or outsider acquirers to divest its core assets then use those cash proceeds to settle outstanding debt and other liability obligations. Nevertheless, the company did try to negotiate with current creditors for debt restructuring scheme, but was never unsuccessful. Senior management continuously tried to divest its core property and look for new investors. On September 27, 2553 the Company received the offering letter from EPCL to merger both companies together as states in Transaction 1 and 2 above. IFA s opinion can be summarized as follows. Fairness of Increasing Capital to Acquire Share Transaction or Transaction No. 1 In case of Increasing Capital to Acquire Share Transaction is successful executed. APC will change its existing core business to energy or import and distribute coal business, which the core business of EPCL. Due to the transaction 1 (or Increase Capital to Acquire Share) has prerequisite condition that APC must execute the Transaction 2 (or Transferring Assets for Debt Settlement Transaction) too. As such that total liability of APC shall not excess cash balance - 7 -

8 amount of APC (Please also see balance sheet estimation post the Transaction 2). The Company estimates that its retained loss will be approximately equal to its paid-up capital after the Transaction 2. (i.e. existing paid up capital is Baht 222,712,675 shall equals the estimated retained loss which will result in shareholder s equity amount close to amount of zero baht). After issuing newly shares to do a share swap with EPCL, APC s balance sheet shall have only one key asset item as investment in EPCL. Meaning, APC will only has one business of EPCL. Therefore, the analysis of the reasonableness of those transactions shall be basically comparing the existing non operating business of APC with the exiting business of EPCL as well as to evaluate the impact of share dilution effect to exist APC s shareholder. Overview Structure of Transaction No.1 APC plus EPCL equal to EPCL (when APC = 0) Existing Shareholder of APC Existing Shareholder of EPCL Note: + + increase in value from accumulated tax credits, for more details on calculation of return in tax credits please see page 11 From the chart above it illustrates that Existing shareholders of APC hold 100% stake in current APC or a negative or a Baht 0 company After Transaction No.1, APC's shareholders will own 10.02% on EPCL business Existing shareholders of EPCL hold 100% stake in EPCL After Transaction No.1, EPCL s shareholders will own 89.98% on EPCL business Analysis on Business Transformation. IFA estimated that post completion of both transactions the balance sheet and income statement of APC shall be similar to consolidated financial statements of EPCL

9 Analysis on Impact of Changes in Management Structure. After the transaction, the company will change all directors (See the resolution for approval of change of directors) and also management team will be changed. Analysis on Share Dilution Impact. Impact of Price Dilution Unable to calculate due to APC s share has been suspended to trading in the Stock Exchange. Impact on Earning per Share Dilution Unable to calculate due to the operation results of the APC in 2009 till the first 6 months of 2010 has shown continued loss earnings results. However, if calculated base on profitability of EPLC new business, APC s existing shareholders will earn 10.2 percent of new business entity (i.e. calculating from the number of existing shares and number of newly issued shares = 222,712,675 * 100 / (222,712, ,000,000,000) = 10.02%). Impact on Voting Rights or Control Dilution Existing shareholders has control dilution by percent (i.e. calculated from the number of newly issued shares to be offered and comparing with all outstanding shares = 2,000,000,000 * 100 / (222,712, ,000,000,000) = 89.98%), the existing shareholders of APC hold approximately percent in APC after the transaction. Shareholding Structure Post the Transactions Note: The shareholders of EPCL will have an obligation to carry out tender offer for all remaining APC shares after the transaction 1&2, to comply with SEC rules and regulations Benefits from transaction The Company will be positioned in a better debt financing status after settlement all debt obligation according to the Transaction No.2. For post Transaction No.1, shareholder s equity would likely to improve from negative to approximately zero

10 Post execution of Transaction No.1 and No. 2, the Company would have shareholders' equity increased to approximately Baht 200 million, thus base on percent shareholding of APC s existing shareholder, the net worth of APC s existing shareholder as per book value view is approximately equivalent to Baht million. When include the asset revaluation from land and retained earnings of EPCCL as at June 30, 2010, the shareholders equity of EPCL would amounted to Baht million (as per Forma Consolidate Financial Statement). Thus if we calculated base on percent shareholding of APC s existing shareholder, the net worth of APC s existing shareholder as per book value would approximately equivalent to Baht million (excluding potential change during June 30, 2553 till now). The Company will have strong financial position in term of increasing in capital base structure and also sound investment in better EPCL s business. The newly acquired business has a potential to success in increasing revenue stream and also improve business performance. To adjust the Company s criteria for requesting to be as listed company status. The Company also plans to submit an application for its shares to be re-traded as normal from the current status as Non Performing Group in Companies Under Rehabilitation Section To enhance value of securities of the Company with proved historical profit record of EPCL in the past. Disadvantage of Transaction Dilution effect impact, the existing shareholders hold approximately of percent in the Company post EPCL s shareholders has taking control of the Company. The Company will change the all business to EPCL s business. Risks of Undertaking Transactions Risks arising from the company's new business as the nature of new business will rely on securing raw materials, transportation, marketing, manufacturing and other risk factors such as raw material price, competition etc. Risks resulting from new management team of EPCL. Risk from changing of major shareholders, the Company may alter various management and financial control policies such as dividend payment policy in the future. Risks arising from existing shareholders of the EPCL may propose tender offer to existing shareholder of APC and using the offering price at the minimum price or proposed share swap ratio at Baht 0.10 each, thus the existing APC s shareholder might or might not be interested to take such offer

11 Risks arising from Khun Preecha Punnakitikasem as Chairman of APC may not pay the whole outstanding debt obligation after transferring assets to settle debt obligation to comply with prerequisite condition set in the Transaction No. 1 that must be completed. Source of Capital The company will use newly issued shares in exchange for EPCL s shares with existing shareholders of EPCL EPCL has sufficient capital adequacy to carry out its current business operation. If the company plans to expand its business in the future. The company may require raising a new capital or alternatively merely borrowing from financial institutions as other normal business. Fairness of Price and related Conditions for Transaction No 1. The share swap ratio of 1 EPCL s share (the offering price of Baht 10 per share) for 100 shares of APC (the offering price of Baht 0.10 per share) is deemed appropriate and reasonable. APC share price. IFA would like to give an opinion that fair price range of APC shares is ranged between Baht per share based on valuation method as follows. 1. Book Value Approach. The book value of APC before Transaction No.1 but post the completion of Transaction No.2 would value approximately Baht 0 each. 2. Discounted Cash Flow Approach APC s share value under discounted cash flow method, prior to the Transaction 1 but after the Transaction 2 is deemed to be zero or unable to calculated. 3. Adding Back Tax Credit or Tax Shield Approach IFA has summarized potential tax credits as follows If all tax credit expire in No. of shares Price per share Tax credit 77,674,403.63** (Baht) 30% 23,302, ,712, Discount rate* 15% 20,262, ,712,

12 In case of using tax credit during 2011 to Price per share Tax credit 25,000, ,000, ,674, No. of shares (Baht) 30% 7,500, ,500, ,302, ,712, Discount rate* 15% 6,521, ,671, ,458, ,712, Note: * discount rate = reference from the highest interest rate charge according to laws **Tax credit figures are source from APC and then calculated and summarized by the Company IFA would like to further comment that tax credit approach may not deteriorated and reduce, if the company was unable to utilize all or partial benefit. However, the existing shareholders of APC would receive such benefit as they would hold percent in APC anyway 4. Added Value Approach as listed companies. IFA would like to give an opinion that this approach is insignificant, due to APC share is currently cannot be traded in the stock exchange. Although, in the event that the Company is able to re trade in the stock exchange, the market share price may be higher than current book value, however the existing shareholder of APC will receive such benefit in equal proportion as new shareholder anyway EPCL Share Price IFA recommends that the appropriate valuation approach of the business is to apply the present value of free cash flow (DCF). While Price to Book Value Approach and Price to Earnings Ratio Approach were used for benchmarking with other companies in the same industry group. Therefore, the fair share value of EPCL is ranged between Baht per share. Such present value of free cash flow approach would take into account of both current business operation and also view potential profitability of the business in the future, by taking into consideration of free cash flow of EPCL in the future that estimated to receive with the trend of overall industry outlooks. Other valuation methods can be summarized as follows. Summary table comparing the share price of EPCL by various approach of valuation Valuation Approach Share Price (Baht per share) 1. Book value approach(bv) Adjust book value approach (ABV) Price to Book Value Approach (P/BV) Price to Earning Ratio Approach (P/E) Present Value of Free Cashflow Approach (DCF)

13 Of those, shares valuation methods above, each approach has both pro and con side, which would reflect to how to deem the appropriateness of the choosing share valuation approaches. These factors can be summarized as follows. 1) 1. Book Value Approach and Price to Book Approach Value Approach will consider the financial position at one particular time and will merely recognize assets value at that particular time without taking into account of true market value of assets and/or the ability of the business to generate earnings in the future. 2) 2. Adjusted Book Value Approach will allow recognition of assets true value; however it will not reflect ability of the Company to generate earnings in the future. 3) 3. Price to Book Value Approach will consider the current net worth of the business without taking into account of ability to generate profit in the future. Therefore, the result valuation would merely compare book value of the companies in the same industry group. However, this approach can be used for benchmarking for comparison of price premium to book value of the Company. 4) 4. Price to Earnings Ratio Approach will merely consider the short term profitability of the business without taking into account the future. Therefore, the result valuation would only reflect short term view rather than the true value the business. However, this approach can be used for benchmarking for comparison of short term profitability view. 5) 5. Present Value of Free Cashflow Approach (DCF) is a way to consider the business and profitability of the business in the future. This assessment is based on the present value of free cash flows that business is expected to generate in the future by key rational and assumptions from both past performance, as well as taking into account of future business trend. Therefore, the method would reflect the fair value of the business better than other methods. Thus, IFA would deem that the appropriate share valuation of EPCL is using DCF, which derived price range between Baht per share. Because this approach allows profitability of the business to be taking into consideration for both the present time and future. In addition, IFA viewed that both P/BV and P/E can also be used for comparison purpose, however EPCL is currently just expand its overall capacity and its utilize is still yet relatively low, thus these valuation approaches would result in the lower price range (P/E ratio of UMS and AGE is also relatively high). Therefore, IFA concluded that the fair price range of EPCL is between Baht per share. Note: the share price of EPCL will be reduced from to payment of dividends to existing shareholders of EPCL before the transaction completion, if EPCL pays dividends of Baht 19 million, share price of EPCL should reduce by Baht 0.95 per share (calculated base on book value approach). Such reduction applies to the book value and the present value of discount cash flow (DCF) as DCF approach will derive firm value then deduct debt and add back remaining cash in firm

14 Comparison Table : Shares swap ratio between APC shares with EPCL shares EPCL APC , From the shares swap ratio table, the Swap ratio of 1 APC shares with 100 EPCL shares, on IFA opinion, is fair to the shareholders of APC. Base on the fair price of EPCL share at Baht and fair price of APC share at Baht 0.05 to 0.10, the Swap ratio of the mentioned price shall be approximately in the range of APC shares per 1 EPCL share. Reasonableness of the Transferring Assets for Debt Settlement or Transaction No.2 According to EPCL s merger and acquisition proposal on the Transaction No. 1, a precedent condition is that the Company is required to transfer assets as at June 30, 2010 which amounted to Baht 54,328,702 to repay for Suti s debts as the outstanding debt up to September 30, 2010 (including the interest) amounting to Baht 70,943,020 instead of cash payment (Refer as Transferring Assets for Debt Settlement " or "Transaction No. 2"). Thus, APC s total liabilities will not exceed to its cash balance (see detailed forecast balance sheet after the transferring assets for debt settlement). With these mentioned transactions, APC will benefit from booking the profits of the difference between the assets book value and the debts. In addition, IFA s opinion has a view on the following 3 analysis: Analysis on the sale of the company's core assets. IFA views that the Transferring Assets for Debt Settlement or Transaction No. 2 is a precedent condition of Transaction No.1. If the Transaction No. 1 is not approved by the shareholders, the Transaction No.2 will be canceled. However, if the Transaction No.1 is approved, the Company will change its core business to be EPCL business Coal business. Selling APC s current assets to pay APC debts is to make the new APC not to bear the assets that will not be used for EPCL s Coal business and not to bear APC s current debts. IFA views that under the EPCL s Coal business, new APC will apply to the SET to resume their share trade by submitting an application for its shares to be re-traded as normal from the current status as Non Performing Group in Companies Under Rehabilitation Section

15 Analysis on debt repayments The Transferring Assets for Debt Settlement is to transfer the Company s assets to pay Suti s debt which the value of assets is less than the value of debt. The Company has entered into the debt restructuring with Suti on September 30, 2553 which one of payment choices is to transfer the assets for the debt settlement. After the Transferring Assets for Debt Settlement, the Company s liabilities shall not exceed to its cash balance. If there is any remaining debt left, Mr. Preecha Punkittikasame, chairman of the Company, will pay the remaining debt for the Company. From an interview with APC executives, IFA is informed that Mr. Preecha Punkitikasem, chairman of the Company, will be responsible for the remaining debts which mostly are the unpaid expenses to Directors, in the amount of approximately 7-10 million. Analysis on Impact to the Company After the Transferring Assets for Debt Settlement (the Company transfers assets as at June 30, 2010 which amounted to Baht 54,328,702 to repay for Suti s debts as the outstanding debt up to September 30, 2010 (including the interest) amounting to Baht 70,943,020 instead of cash payment, the Company will book the profits of approximately Baht million. Advantages of Transaction The Company can repay the major debts. The Company will book the profits, reducing the future interest expenses and depreciation expenses. The Company will be able to complete the precedent condition of Transaction No. 1 and thus the Increase Capital to Acquire Share will be proceeding. Disadvantages of transaction The Company will have the risk on the completion of the Transactions due to the completion of the other 2 transactions 1) to pay its debts in such that the Company s liabilities will not exceed to than its cash balance and 2) Increase Capital to Acquire Share Transaction. If the Transactions are failed to complete, the company will has no core assets used in operations. This may cause financial risks associated with the criteria that the withdrawal from the Stock Exchange in accordance with Article 9(6) of the regulations of the Stock Exchange. Risks associated with the transaction The Company will not have its core assets for the operation. This may cause the risk associated with the criteria that withdrawal from the Stock Exchange in accordance with Article 9(6) of the regulation, a stock exchange (the detail in the disadvantages of the transaction

16 APC does not make legal due diligence or review of any other legal liability or lawsuits. IFA cannot determine whether any debt or lawsuit or any claims arising out of any account. IFA only refer to the documents such as Debt restructuring between the Company and Suti, Debt restructuring agreement dated September 30, 2010 and the notice of transfer of debt from Thai Military Bank, dated May 13, Fairness of Increasing Capital to Acquire Share Transaction or Transaction No. 2 The value of assets used for transferring for the debt settlement According to the 2 independent appraisal companies and the Company book value as of June 30, 2010, the value of the assets for debt settlement is approximately Baht million lower than Sutee s total debts as of September 30,2010, in the amounts of Baht 70,493,020. Although the highest price of each methods are used, the total debt of Mr. Sutee is Baht 12 million higher Comparison Table of Assets Valuation by each Method Methods Comparison Value (Baht) Total Land Value Construction Machines & Equipment (1) Suti s Debts (2) Comparison Value with debts (2) (1) Appraised Value of Treasury Department 11,197, ,197,500 70,493,020 n.a. n.a. Book Value (As of June 30, 2010) 26,127,500 22,394,815 5,806,387 54,328,702 70,493,020 16,164, Independent Appraisal Value 1. The Valuation & Consultants Company Limited 2. Preferred Appraisal Company Limited 27,620,500 26,127,500 17,798,315 24,617,000 1,448,000* 690,000* 46,866,815 51,434,500 70,493,020 70,493,020 23,626,205 19,058,520 Maximum Value 27,620,500 24,617,000 5,806,387 58,043,887 70,493,020 12,449, Note: * the figures apart from the items that cannot be found and/or be damaged (39 items) ** Suti s total Debts as at September 30,2010 n.a. = cannot calculate for this comparison Although the appraisal values by both independent appraisal companies raised by 20% will not be exceed to Suti s total debts To appraise the value of land, one appraisal company give the value of Baht 3.5 million per rai while the another appraisal company appraised for Baht 3.7 million. To compare both appraisal values ranging from Baht million per rai, IFA select the appraisal value of Baht 3.7 million which the appropriate land value will be Baht million. The Construction values are appraised for Baht 17.8 million by Valuation & Consultants Company Limited and Baht 24.6 million by Preferred Appraisal Company Limited. There are some parts of the construction that the Valuation Diff. (%)

17 & Consultants Company Limited does not appraise. Thus, IFA select the appraisal value of Baht 24.6 million by Preferred Appraisal Company Limited is appropriate. The Construction values are appraised for Baht 17.8 million by Valuation & Consultants Company Limited and Baht 24.6 million by Preferred Appraisal Company Limited. There are some parts of the construction that the Valuation & Consultants Company Limited does not appraise. Thus, IFA select the appraisal value of Baht 24.6 million by Preferred Appraisal Company Limited is appropriate. For the appraisal value of machines and equipments, to be conservative, IFA selects the Book value approach due to the loss and damages of 39 items which the appraisal company does give the values. Thus, the total value or the maximum value of Land, Construction and Machines & Equipments is Baht 58 million which IFA s opinion is the appropriate and fair value for the transaction. APC s board meeting approves to sell or transfer the assets of Land, Construction, and Machines & Equipments to pay for Khun Suti s debts of Baht million as of September 30, Using the maximum value of all approaches, the appraisal value of Baht million is less than the debts of Baht million by Baht million or by 21.4%. IFA opinion on the price of transfer value is appropriate and fair. Conditions Timeframe for the Debt Settlement The transaction of transfer the assets to pay debt to Mr. Suti will be occurred by 7 days from the date of shareholder meeting to approve the transaction IFA s opinion on the appropriateness of the transaction conditions IFA recommends that the transaction No. 2 shall be done after the completion of the signing of the share capital acquisition (for the transaction no. 1) between APC and EPCL in order to reduce the risk of the completion of both transactions of which will be approved by the shareholders. IFA also informs this risk to both APC and EPCL and recommend to finish the draft of share purchase agreement by the shareholder s meeting on December 2,

18 Conclusion of IFA s opinions To understand the Transactions, the below Flow Chart shows the change of APC value before and after the Transactions (this is not intention to indicate or forecast the market share price) Flow Chart of the development of APC share value in accordance with the Transactions Note: According to the interview with EPCL s management, EPCL plans to pay dividend to its existing shareholders prior to the Transactions. The estimated EPCL s dividend of Baht 19 million will reduce the APC s book value from approximately Baht 0.14 per share to Baht per share. Comparison between Pre-Transaction and Post-Transaction Pre-Transaction Core Business Manufactures and distributes products of decorative paint, industrial paint and other paint products Post-Transaction Energy Coal Distribution Financial Performance Negative performance for the past years Potentially profits in the future Financial status Lack of liquidity Liquidity will be improved Ability to pay debts Cannot pay the debts Better credit that could borrow from Banks Shareholder s equity Negative To be Positive APC credit status Could be sued and be in collateral litigation or/and bankruptcy filing Credit Status to be normal Revenues and earnings Reducing every year in the past Expected to be increased in the future Trading status of APC shares Companies Under Rehabilitation To propose the SET to be out of Companies under rehabilitation Sector to its normal Sector which shares shall be traded

19 As per the above reasons and benefits, we recommend the APC shareholders to approve the Company s Rehabilitation Plan (Transaction#1 and Transaction2), since the Transactions will be beneficial to the Company and its Shareholders which shall be summarized as follows: The Transaction will improve APC s financial conditions that the Company could reduce its debts which is now greater than the Company s assets APC s new business (EPCL) has a good potential to expand and grow which will generate more revenues and profits to the Company in the future. EPCL s management team consists of new young active people and they have good intention in running their business. The offered APC s share price is fair and full value while the offered EPCL s share price is offered at the discount to book value. The Exchange ratio of which 1 EPCL share to 100 APC shares is the fair ratio which will be beneficial to APC shareholders. The Debt Settlement pay Suti s debts together with the plan to clear all debts that makes the APC s shareholder equity to be more than Baht zero will also be beneficial to APC shareholders IFA concludes that the APC s rehabilitation plan which consists of Debt Settlement (all debts to be paid and APC equity to be more than zero) and Share Acquisition (at the fair exchange price) will overall be beneficial to APC s shareholders. Hereafter, IFA would like to give our opinion on the transaction to the Audit Committee and the shareholders to support their decision making. The details are as per the following contents

20 Contents Objective and Background of the Transactions 22 Criteria for the IFA to give the opinions 23 SECTION 1 : Transaction No. 1 : 1. Nature and Characteristics of the Transaction No Transaction parties and transaction date List of connected persons who have no the right to vote Nature of the transaction Nature of the acquisition/disposition of assets Value of consideration Reasonableness and Benefits of the Transaction No Reasonableness of the Transaction Advantages of entering into the transaction Disadvantages of entering into the transaction Risks associated with the transaction Fairness of Price and Conditions of the Transaction No Fairness of price Conditions of the transaction Conclusion of the IFA s Opinions on the Transaction No.1 51 SECTION 2 : Transaction No. 2 : 5. Nature and Characteristics of the Transaction No Transaction parties and transaction date List of connected persons who have no the right to vote Nature of the transaction Nature of the acquisition/disposition of assets Value of consideration Reasonableness and Benefits of the Transaction No Reasonableness of the Transaction Advantages of entering into the transaction Disadvantages of entering into the transaction Risks associated with the transaction Fairness of Price and Conditions of the Transaction No Fairness of price Conditions of the transaction

21 8. Conclusion of the IFA s Opinions on the Transaction No Conclusion of the IFA s Opinions on the Transactions 64 Attachment 1: Company Profile : APC 1.1 Nature of business operations Operating results and financial position of APC Shareholding structure Industry and Market Outlook 74 Attachment 2: Company Profile : EPCL 2.1 Nature of business operations Operating results and financial position of APC Shareholding structure Industry and Market Outlook 83 Attachment 3: Names of the Connected persons who have no right to vote Shareholding Structure for Pre and Post Transactions Letter of Intent proposed by EPCL for the Merger and Acquisition between APC and EPCL Notice regarding the transfer of debts obligation from Thai Military Bank Public Company Limited dated May 13,2009 Debt Restructuring Agreement between APC and Suti dated September 30, 2010 Attachment 4: EPCL Financial Statements Financial Statements for the first 6 months as of June 30, 2010 of EPCL audited by Grand Audit Co., Ltd. Financial Statements of Fiscal Year of 2009 as at December 31, 2009 of EPCL Financial Statements of Fiscal Year of 2009 as at December 31, 2008 of EPCL

22 Objectives and Background of the Transactions APC is currently cannot operated in paint business as usual. Due to lack of funding capital, the Company continuously record accumulative losses and nowadays has more debts than its assets and consequently unable to repay these outstanding debts. In addition, the company has liquidity problem. As the Company s total revenues continues to record lesser amount than its overall costs, resulting in accumulative trend of retained losses, which then effect shareholders' equity to decline to negative worth. For these reasons, financial institutions refuse to provide credit facility line to APC. Also, no supplier would give credit term to APC and their customers would not trust the Company. If APC want to continue to operate its business. Company would require to increase its funding capital. However, due to negative shareholder s net worth and APC shares are unable to trade in the Stock Exchange as normal, this would restrict APC to seek new investors. However, senior management of APC is trying to maintain the Company and also try to find new investor and/or divest assets of the Company to repay debt. If APC only sell the Company's core assets out alone this may merely solve the problem of outstanding debt. However, the Company would then have no core asset to run its business. Company s senior management therefore look for new business partner as well as solving debt problem by transferring assets for debt settlement. (On October 22, 2553, IFA makes a site visit to explore APC s plant site and also interview senior management of the Company. Key finding summary is that the company s business status is awkward as there is only 4 working staffs left. If there is no significant change in term of injecting new funding capital, investing in new machinery and also changes all management and marketing team). In Summary, the Company needs to have a solid rehabilitation plan due to the following reasons Rehabilitation Plan APC s business has been running at loss for many consecutive years APC s debts are increasing and APC s shareholder s equities are reducing to be more negative every year APC s business cannot generate any return to shareholders APC lacks of liquidity, losing creditability, requiring more funding and capital APC assets cannot be utilized in its capacity for running its business effectively In past, senior management attempted to seek for new investors and/or outsider acquirers to divest its core assets then use those cash proceeds to settle outstanding debt and other liability obligations. Nevertheless, the company did try to negotiate with current creditors for debt restructuring scheme, but was never unsuccessful. Senior management continuously tried to divest its core property and look for new investors. On September 27, 2553 the Company received the offering letter from EPCL to merger both companies together

23 On October 21, 2010, the board of director of APC No. 7/2010 has the meeting resolution to approve the Transactions which are summarized as follow: 1. To reduce the Company s issued share to 222,712,675 shares at the par value of 1 Bath per share and then increase newly issued share of 2,000,000,000 shares to total amount of 2,222,712,675 shares. All of these new shares shall be allocated as private placement to Energy Perfect Limited ( EPCL ) shareholders at the price of Baht 0.10 per share. In term of settlement, EPCL s shareholders will then acquire EPCL s common share of 20,000,000 shares at the par value of Baht each instead of cash payment by using share swap at the exchange ratio of 1 share of EPCL to 100 shares of APC. (hereafter called Increase Capital to Acquire Share or Transaction No. 1 ) 2. To approve the Company to settlement its overdue debt repayment by transferring of its assets as stated in its financial statement as at June 30, 2010, which amounted to Baht 54,328,702 ( Transferring Assets for Debt Settlement ) to Mr. Suti Nopakun ( Suti ), who is the Company s main creditor. The accumulative outstanding debt up to September 30, 2010 (including interest expenses) is amounted to Baht 70,493,020, will be repaying by using this scheme instead of cash settlement. (hereafter called Transferring Assets for Debt Settlement Transaction or Transaction No.2 ) Of these, Increase Capital to Acquire Share Transaction or Transaction No.1 and Transferring Assets for Debt Settlement Transaction or Transaction No.2 are co-approved together as such if either one transaction cannot be achieved, the other transaction will also cancel and vice versa. (Transaction No.1 and Transaction No.2 shall collectively call Merger and Acquisition Transaction or Transactions ). Criteria for the IFA to give the opinions IFA s opinions are on both Transaction No. 1 and No. 2 as a combined transaction. The opinions are not on any one specific transaction either Transaction No.1 or No.2. In case that one of Transaction No. 1 or No.2 is canceled, IFA s opinions are subject to change and IFA may give totally different opinions. Thus, IFA will not give the opinions if APC enters into only one transaction ie., APC only transfers its assets to pay Suti s debt or Transaction No.2 without doing the Share Swap transaction or Transaction No.1. Transaction No.1 is the core transaction and will be approved by the shareholders first. Transaction No.2 is the precedent condition of the Transaction No.1, and thus, both Transactions No.1 and No.2 are combined transaction. In order to accomplish the precedent condition of the Transaction No.1, APC can enter other transaction such as selling assets to other parties at the higher price than the book value or the appraisal valued by independent valuation firms or the proceeds from selling the assets are exceeding to Suti s total debts within the timeframe. In this IFA s opinion report is to give the opinion in accordance with the resolution of APC s board of director meeting, which is the Transfer assets for debt settlement

24 After the approval of the Transactions by shareholders on December 2, 2010 (if approve), APC will enter into 3 major transactions 1) APC will enter into Transaction no.2 or Transfer Assets for Debt Settlement within 7 days after the shareholder meeting, 2) APC will liquidate other remaining assets to pay all debts in such that APC will have less outstanding debt than the outstanding cash balance, and 3) APC will enter into Transaction No. 1 or Increase Capital to Acquire Share. All 3 transactions are expected to be completed in this year, IFA views that all 3 transactions are not done on the same date and thus, there will be the risk of the transaction associated with the Risk of Completion of the Transactions. After After the approval of the Transactions by shareholders on December 2, 2010 (if approve), IFA recommends that APC shall enter into the Share Swap Agreement with EPCL (instead of existing Letter of Intent) in order to reduce the risk associated with legal documents. IFA also recommends APC to enter into the legal due diligence on both APC and EPCL In general, as same as other Merger & Acquisition transactions, EPCL plans to pay dividends from its profits to existing shareholders of EPCL prior to entering into the Transaction. By law, EPCL shall pay dividend only from 90% of its retained earning (10% will be for the legal reserve). IFA estimates that EPCL shall pay Baht 19 million dividends. However, in case that EPCL could earn more profits during the 2 nd half of year 2010, EPCL has right to pay more dividends to existing shareholders. Thus, when APC enters into the Share Swap Agreement with EPCL, the minimum total assets or shareholder s equity shall be specific. In the IFA Report, IFA has put the note on the impact of dividend payout on the EPCL share price (approximately Baht 0.19 per EPCL share for Baht 19 million dividends) After the Transaction No.1 and No. 2 are completed, EPCL existing shareholders will hold more than 75% of the total APC s issued shares. EPCL existing shareholders will have the duty to make a tender offer for all securities of APC from all APC existing shareholders. In this tender offer transaction, the Company or APC will appoint an independent financial advisory to make the opinion on the tender offer transaction for consideration of the shareholders. The decision to accept or reject the tender offer will be on shareholders individual basis. After the Transaction No.1 and No. 2 are completed, the New APC have a plan to adjust the Company s criteria for requesting to be as listed company status. The Company also plans to submit an application for its shares to be re-traded as normal from the current status as Non Performing Group in Companies Under Rehabilitation Section. The Company s application will be reviewed by the Stock Exchange of Thailand or involvement parties for the approval. Information, assumptions, and documents obtained from APC and EPCL and its representatives, interviews with the APC and EPCL s executives and its representatives, or their financial advisor as well as financial information from their audit companies and appraisal information from their appraisal firms, IFA will consider and evaluate the said information with careful and to the standard of professional practice. IFA is unable to ensure a

25 verification or guarantee on the correctness and completeness of such information. IFA can only assume that such information are done with their professions, especially professional parties such as audit company or appraisal firm, unless otherwise IFA receives new solid evidence for the changes. In the Letter of Intent proposed by the EPCL, there is no minimum shares for the exchange/swap. IFA recommend that in the Share Swap Agreement shall specific the minimum shares for the exchange/swap. IFA recommend that APC and EPCL shall agree and complete the draft of Share Swap Agreement by December 2, 2010 on the date of APC shareholders meeting and thus it should be presented to APC shareholders on that date. If the Transactions are approved by APC shareholders, this Share Swap Agreement shall be signed by both parties prior to the Transfer of Assets for Debt Settlement to minimize the Transaction Completion risk

26 SECTION 1 Transaction No. 1 - Increase Capital to Acquire Share

27 1.1 Feature and Details of Transaction 1 Buyer of Issued Share Securities Share swap Price Issuer : : : Shareholder of EPCL Newly Issued share of APC amounts to 2,000,000,000 shares Baht 0.10 per share : APC Execution Date : Expect to complete within December 2010 Buyer : Securities : Share swap Price : Seller : Execution Date : APC Common Share of EPCL amounts to 20,000,000 shares Baht per share Shareholder of EPCL Expect to complete within December 2010 The share swap ratio is set at 1 EPCL share per 100 newly issued share of APC Relationship with Listed Company EPCL and its shareholder of EPCL do not have any kind of relationship in the past, but because shareholder of EPCL intends to sell common share of EPCL to APC and in return will accept payment in form of newly issued shares, thus post the share swap transaction APC would become a major shareholder of EPCL. Whilst, 100% shareholder of EPCL will instead then holding APC s shares. EPCL s shareholder will have a right to appoint new director and/or management of the Company. Therefore, EPCL can be considered as the major shareholder of the Company or have full authority over the Company and will management the Company afterward. So, under such incident this transaction would be considered as connected transaction according to definition of connected persons, in which EPCL as business entity, whom has its management, shareholders, authorized persons/management staffs as well as other of relative s family and/or related person in accordance to the Notification of the Office of the Securities and Exchange Commission TorJor. 21/2551 Re: Rules and Guideline of Connected transaction and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, List of connected person that do not have right to vote Board of Director and/or Management of EPCL (Please see name list in attachment 3) 1.3 General Nature of the Transaction The resolution of board of director on 21 October 2010 Agenda 2-4 approved the Company to reduce its capital to 222,712,675 share at par value of Baht 1 each and then increase new capital for 2,000,000,000 shares to the total of 2,222,712,675 shares. Then, do the private share placement with the shareholder of Energy Perfect Limited (EPCL) at the offering price of Baht 0.10 per share in exchange for 20,000,000 EPCL s share at the price of Baht 10 each, instead

28 of using cash settlement by the way of share swap at the ratio of 1 EPCL share per 100 newly issued share of APC (hereafter called Increase Capital to Acquire Share or Transaction No. 1 ) The transaction of acquiring common share of EPCL is considered to be substantial transaction class 4 or backdoor listing transaction in accordance to the Notification of the Office of the Securities and Exchange Commission TorJor. 20/2551 Re: Regulation for making substantial transaction that concerning the acquisition and disposition of assets and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets, The transaction size is percent which calculate base of the share value that were issued for payment and the financial statement as at 30 June Furthermore this transaction is a connected transaction in accordance to the Notification of the Office of the Securities and Exchange Commission TorJor. 21/2551 Re: Rules and Guideline of Connected transaction and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, The transaction size is more than Baht 20 million or 3 percent of net tangible assets which the Company is responsible to gain its board of approval resolution and prepare report the disclose information of these transaction to the Stock Exchange of Thailand as well as gain shareholder s approval by appointing independent financial advisor to provide opinion to its shareholders. Unit: Baht million Financial Items (As at 30 June 2010) APC EPCL Total Assets , Intangible Assets Total Liabilities Total Shareholder s Equity (23.66) Net Profit (loss) for the 1 st 6 months (4.83) NTA (23.66) Total number of shares 222,692,675 20,000,000 Note: the Company has increased its paid-up capital from Baht 222,692,675 to Baht 222,712,675 through the excised of its issued warrants Comparing calculation for size of the transaction 1. Assets Value = 2. Core Operating Profit = 3. Total Return Benefit = 4. Note: Value of Issued Securities that use as the payment of assets = NTA Proportion of Business (%) X 100 NTA Proportion of Listed Firm = N/A Profit of the Company that is Acquire/divest X 100 Net Profit of Listed Firm = N/A Received or Paid Cash Payment X x 100 = Total Assets of Listed Firm Number of Issued Share for Asserts X 100 2,000,000,000 X 100 Total Paid Up Capital = 222,712,675 = = NTA is equal to total assets minus intangible assets minus total liabilities minus intangible minority shareholder s equity (equivalent to goodwill and accrued expenses)

29 1.4 Feature of Acquisition and Disposition of Assets The Company intends to acquire an asset which is common share of EPCL in amount not more than 20 million shares at the par value of Baht 10 each, represent total investment amount of not more than Baht 200 million. Key details of EPCL are as follows. Company Name Energy Perfect Limited ( EPCL ) Established Date 5 January 2007 Office Location No. 889 Thai C C Tower, 12th Floor, unit , South Sathon Road, Yannawa Sub district, Sathon District, Bangkok Registered Capital Baht 200,000,000 (20,000,000 shares at par value of Baht 10 per share) Existing Shareholding None No. of Acquired Share Not excess 20,000,000 shares Post Shareholding Not excess 100% of paid up capital Business Nature Importer and distributor of coal in Thailand and oversea market 1.5 Value of Considerations The transaction of acquiring EPCL s common share in which total value would not excess Baht 200 million. The Company will execute the transaction once gain a resolution approval from the extraordinary meeting of shareholders No.2/ 2553 that would arrange on 2 December The compensation value of this transaction for acquiring common share of EPCL are paid by newly issued share of the Company that will be offered through private placement to the shareholders of EPCL, amount not excess 2,000 million shares for par value of Baht 1 per share (or equivalent to 89.98% of total number of issued share post the transaction) at the offering price of Baht 0.10 each or representing compensation value of not excess Baht 200 million. Due to share of the Company has been suspended form share trading since 15 November 2005; the last trading price was Baht 0.60 per share. Therefore, the Company has appointed IFA to evaluate the fair share price value of APC, for board s consideration on the issuance of discounted newly issued share. According to IFA report on 4 October 2010, value of APC common ordinary share is Baht 0.00 per share. Therefore, this APC s share offering price would not be considered as discounted price in accordance to the Notification of the Office of the Securities and Exchange Commission TorJor. 28/2551, Re: Rules of Securities Issuance and the Notification of the Board of Governors of the Stock Exchange of Thailand Sor Jor 39/2551, Re: Calculation of Securities Offering price and Market Price to consider discounted share offering price. The insurance of new discounted share that lower than market price of assets that will acquire and then receive compensation as EPCL s share of not more than 20,000,000 shares at par value of Baht 10 each, book value as at 30 June 2010 is equal to Baht per share (or equivalent to shareholder s equity of Baht million, consisting of paid up capital of Baht 200 million or 20 million shares). Subsequently, the Company will recompense by issuing 2,000 million share of APC at par value of Baht 1 each, at offering price of Baht 0.10 per share to EPCL s shareholders or share swap ratio of 1 EPCL share per 100 newly issued shares of APC

30 Guidelines for Determining Value of Considerations The guideline that the Company has set to derived share price for EPCL s shareholders are determined from the offering price of Baht 0.10 per share which is not lower than 90% of its fair share value. EPCL s share value is set base on EPCL s paid up capital of Baht 200 million Details of person that has conflict of interest, connected person and scope of conflict of interest The acquisition of EPCL is considered as connected transaction for assets or services in accordance to the Notification of the Office of the Securities and Exchange Commission TorJor. 21/2551 Re: Rules and Guideline of Connected transaction and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003, because EPCL s shareholders and/or management staff have a right to propose new directors and/or new management team after acquisition of EPCL is completed. Therefore, this acquisition would be considered as connected transaction according to definition of connected persons, in which EPCL has management, shareholders, authorized persons/management staffs, major shareholder, authorized person of subsidiary or parent company as well as other of relative s family and/or related persons and the transaction is also over Baht 20 million or more than 3 percent of NTA (as at 30 June 2010) i.e. whichever one is higher. Thus the offering price of EPCL share is equal to Baht 200 million which is higher than transaction size of Baht 20 million. According to the shareholder register of the Company as at 9 April 2010, there is no shareholder that has relationship connected to management staffs that will position as the new senior management or no director and major shareholders of EPCL. Benefit from Acquisition of these Assets to the Company The Company s financial position will become more solid after acquiring the newly issued shares. The company will have its paid up capital increases from Baht mm to Baht 2, mm, consisting of 2, million shares at par value of Baht 1 each. The private placement price is Baht 0.10 per share. The new business has a potential to generate higher income and achieve good business performance. EPCL has the business model that can continuously generate revenue steam and profit. During 2008 the 1st 6 months of 2010, EPCL has total revenue of Baht mm, Baht 1, mm and Baht mm respectively and net profit of Baht mm, Baht 7.73 mm and Baht mm respectively. To adjust criteria of the Company to comply with regulation of maintaining the status of listed companies to its shareholders Help increase share value from introducing new business that have sound historical performance of continuously making profit Post the approval of transaction to acquire the asset from shareholder, the Company will submit an application to be get its ordinary shares to be re-trading in the stock exchange as normal

31 Source of Fund The Company will pay for the asset by issuing new shares and will offer these shares through private placement in amount of 2,000 million shares at par value of Baht 1 each for the offering price of Baht 0.10 per share, representing a total share value of Baht 200 mm. Condition of the Transaction The transaction of acquiring common share of EPCL is considered to be substantial transaction class 4 or backdoor listing in accordance to the Notification of the Office of the Securities and Exchange Commission TorChor. 20/2551 Re: Regulation for making substantial transaction that concerning the acquisition and disposition of assets and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets, Furthermore this transaction is a connected transaction in accordance to the Notification of the Office of the Securities and Exchange Commission TorChor. 21/2551 Re: Rules and Guideline of Connected transaction and the Notification of the Board of Governors of the Stock Exchange of Thailand, Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, Therefore, the company will have following duty. Must disclose information memorandum of the transaction to SET Thus the Company must send shareholder s meeting letter, together with IFA s report to its shareholders at least 14 days before the shareholder s meeting date To gain approval resolution from its shareholder with at least 3 out of 4 votes of total voting right or proxy (if any) that attend the meeting and have voting right, but will not count vote of shareholders that have conflict of interest. The extraordinary shareholder s meeting No. 2/2553 will be arranged on 2 December 2010 to consider this transaction The Company will not be materially deteriorated in term of its financial status, financial performance and trend of the business. After the transaction, existing shareholder of EPCL will become major shareholder of the Company. In case of the shareholder s meeting approves this transaction, the shareholder of EPCL will hold share of the Company more than 75 percent of total issued shares and voting right. Therefore, shareholder of EPCL will have the obligation to make a tender offer to all other shareholders to comply with SEC s rules and regulation. Post transaction the Company will have its core revenue derived from importing and distributing of coal business, which is the main job experience of new management that would take over the Company. This new business is in energy and utility group

32 2. Reasonableness and Benefit of Transaction Reasonableness of Transaction 1 In case of Increasing Capital to Acquire Share Transaction is successful. APC will change its existing core business to energy or import and distribute coal business, which the core business of EPCL. Due to the transaction 1 (or Increase Capital to Acquire Share) has prerequisite condition that APC must execute the Transaction 2 (or Transferring Assets for Debt Settlement Transaction) too. As such that total liability of APC shall not excess cash balance amount of APC (Please also see balance sheet estimation post the Transaction 2). The Company estimates that its retained loss will be approximately equal to its paid-up capital after the Transaction 2. (i.e. Existing paid up capital is Baht 222,712,675 shall equal the estimated retained loss which will result in shareholder s equity amount close to amount of zero baht). After issuing newly shares to do a share swap with EPCL, APC s balance sheet shall have only one key asset item as investment in EPCL. Meaning, APC will only have one business of EPCL. Therefore, the analysis of the reasonableness of those transactions shall be basically comparing the existing non operating business of APC with the exiting business of EPCL as well as to evaluate the impact of share dilution effect to exist APC s shareholder. Estimated Details Projection of Balance Sheet Post Transferring Asset to Settle Debts Unit: Baht Assets Cash Account Receivable - net Inventory -net PPE - net Other assets Total Assets Liabilities Account payable Loan and suspended interest Suti Loan and suspended interest related persons Accrued expenses Other liabilities Total liabilities Shareholder s Equity Paid Up Capital Retained losses Total Shareholder s Equity Source: Rehabilitation Plan of the Company Actual as at 30 June , ,364 1,052,490 54,328, ,916 56,986, ,586 55,755,993 15,846,349 7,771, ,622 80,648, ,692,675 (246,354,495) (23,661,820) Adjustment (2) (2) (1) (2) (2) (1) (1) (2) (2) (3) (4) Post the Transaction ,712,675 (222,712,675)

33 Explanation of the Transaction (1) The Company intends to transfer assets i.e. land, factory, machinery and all equipments to settle outstanding debts with Mr. Suti Nopakun which is the creditor of the Company that Company has mortgaged its land and building as the collateral (2) For assets type - account receivables, the Company will collect such cash as payment schedule. For inventory, the Company sells all remaining stock to their clients. Then, the Company will use these cash to pay their creditors and suppliers for all outstanding expenses. If after all the assets are sold, but there is still some debt left Mr. Pricha Punnakitikashem as chairman of the Company will pay instead of the Company (3) In the 3 rd quarter of 2010, warrant holder of APC-W2 excised such warrant for a common share of 20,000 shares (4) Reduce retained loss is due to haircut of outstanding debt that will be given by creditor, Mr. Suti Nopakun and remaining debt obligation will be repaid by Mr. Pricha Punnakitikashem instead. When the Company does not have any inventory and all liability is clear and fully repaid, the Company will has its retained loss equal to its registered capital. Overview of Transaction No.1 APC plus EPCL equal to EPCL (when APC = 0) Existing Shareholder of APC Existing Shareholder of EPCL Note: + + Value added that was mention in Reasonableness and Benefit of Transaction 1 From the chart above it illustrates that Existing shareholders of APC hold 100% stake in current APC or a negative or a Baht 0 company After Transaction No.1, APC's shareholders will own 10.02% on EPCL business Existing shareholders of EPCL hold 100% stake in EPCL After Transaction No.1, EPCL s shareholders will own 89.98% on EPCL business

34 Analysis on Business Transformation. IFA estimated that post completion of both transactions the consolidated balance sheet and income statement of APC shall be similar to financial statements of EPCL. Analysis on Impact of Changes in Management Structure. After the transaction, the company will change all directors (See the resolution for approval of change of directors) and also management team will be changed. Analysis on Share Dilution Impact. Impact of Price Dilution Unable to calculate due to APC s share has been suspended to trading in the Stock Exchange. Impact on Earnings per Share Dilution Unable to calculate due to the operation results of the APC in 2009 till the first 6 months of 2010 has shown continued loss earnings results. However, if calculated base on profitability of EPLC new business, APC s existing shareholders will earn 10.2 percent of new business entity (i.e. calculating from the number of existing shares and number of newly issued shares = 222,712,675 * 100 / (222,712, ,000,000,000) = 10.02%). Impact on Voting Rights or Control Dilution Existing shareholders has control dilution by percent (i.e. calculated from the number of newly issued shares to be offered and comparing with all outstanding shares = 2,000,000,000 * 100 / (222,712, ,000,000,000) = 89.98%), the existing shareholders of APC hold approximately percent in APC after the transaction. Shareholding Structure Post the Transactions Note: The shareholders of EPCL will have an obligation to carry out tender offer for all remaining APC shares after the transaction 1&2, to comply with SEC rules and regulations 2.2 Benefits from transaction The Company will be positioned in a better debt financing status after settlement all debt obligation according to the Transaction No.2. For post Transaction No.1, shareholder s equity would likely to improve from negative to approximately zero