Kiatnakin Bank Public Company Limited : Notification of Execution of the Memorandum of Agreement for the Merger with Phatra Capital Public Company Limited

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SorGor 191/2554
December 9, 2011
Re: Notification of Execution of the Memorandum of Agreement for the Merger with Phatra Capital Public
Company Limited
To: President
The Stock Exchange of Thailand
Kiatnakin Bank Public Company Limited (the 0Bank1), would like to inform that the Board of Directors Meeting No. 13/2011 held on December 9, 2011, approved the Bank to enter into the Memorandum of Agreement (the 0MOA1) between the Bank, Phatra Capital Public Company Limited (0Phatra1) and certain shareholders of the Bank and Phatra for the merger between the Bank and Phatra to jointly operate the financial businesses, consisting of commercial banking, securities and other supporting businesses. The purpose of this merger is for the greater mutual benefit of the Bank and Phatra. The material details of the MOA are as follows:

1. Method and Mechanism for the Merger

1.1 The Bank will make a delisting tender offer to purchase all securities from all of Phatra8s shareholders for delisting the securities of Phatra from the Stock Exchange of Thailand (the 0SET1) under the condition that at the end of the tender offer period Phatra8s shareholders accepting the tender offer shall not represent less than 75 percent of the total number of shares sold of Phatra (under the condition of the waiver of the Takeover Panel). The Bank will pay a consideration to Phatra8s shareholders accepting the tender offer by issuing new ordinary shares of the Bank as a share swap.
Pursuant to the MOA, Phatra will hold a shareholders meeting for the approval of the delisting of Phatra8s securities from the SET.
1.2 In the case that Phatra8s shareholders have approved the delisting of Phatra8s securities from the SET, and the above-mentioned tender offer for delisting the securities of Phatra from the SET will result in the Bank holding shares in Phatra of up to 90 percent or more of the total number of issued shares, the Bank will transfer all shares of Kiatnakin Securities Company Limited (0Kiatnakin Securities1) and Kiatnakin Fund Management Company Limited (0Kiatnakin Fund Management1) held by the Bank to Phatra, and the transfer price of the shares in Kiatnakin Securities will be equal to the book value of Kiatnakin Securities and the transfer price of the shares in Kiatnakin Fund Management will be equal to the
acquisition cost of the Bank.

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2. Swap Ratio and Adjustment
2.1 The swap ratio as a consideration to Phatra8s shareholders who accept the tender offer is at the rate of 1 share of Phatra for 0.9135 shares of the Bank (the 0Swap Ratio1).
Each of the Bank and Phatra will appoint an independent financial advisor to give opinion on the agreed
Swap Ratio and the merger plan in order to propose to their shareholders meeting for further approval.
2.2 The Bank and other parties to the MOA have agreed that the Swap Ratio is subject to be adjusted under the conditions specified in the MOA, which include, among other things, the following material events:
(a) the outcome of the due diligence on the Bank and the companies under its supervision or on Phatra or Phatra Securities Public Company Limited (0Phatra Securities1) (as the case may be) showing that there is information or facts that significantly affect the Swap Ratio and such information has never been previously disclosed.
(b) there is a situation significantly resulting in a material adverse effect upon the financial status, assets, or business operations, including the efficiency to operate business, of the Bank and/or the companies under its supervision or Phatra and/or Phatra Securities.

3. Conditions Precedent to the Merger

The above-mentioned merger, in some cases referred to as the tender offer, is subject to the completion of the conditions precedent as specified in the MOA (except for the case that some conditions precedent have been waived, cancelled, or amended by written confirmation of the parties to the MOA), which includes, among other things, the following material conditions:
3.1 all parties receive complete and sufficient information required for due diligence;
3.2 the result of the due diligence of the Bank and the companies under its supervision or Phatra and Phatra
Securities (as the case may be);
3.3 the major shareholders of the Bank, the Bank, the major shareholders of Phatra and Phatra (as the case may be) will enter into the Share Purchase Agreement containing conditions precedent provisions, and in the form, conformity and conditions as agreed by all parties;
3.4 the Bank and Phatra have obtained approval from their board and shareholders meetings for the merger and the operation of all related procedures as necessary for the merger;

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3.5 the Bank has obtained an approval from the Bank of Thailand for the merger according to the framework agreed upon by all parties and the framework of consolidated supervision of the Bank agreed upon by all parties;
3.6 RPIC Pte Ltd., a major shareholder of Phatra, shall acquire an approval from its shareholders meeting for the merger and the operation of all related procedures under the MOA including the swapping of the shares of Phatra and the newly issued shares of the Bank;
3.7 the Bank has obtained an approval from the Office of the Securities and Exchange Commission (the
0SEC1) to be a major shareholder of Phatra Securities;
3.8 RPIC Ptd Ltd., who is the major shareholder of Phatra, and the major shareholders of the Bank have executed a shareholders agreement in relation to the merger in the form and under the terms and condition agreed upon by the parties.
3.9 the Bank and/or Phatra has obtained an approval, consent or waiver from its/their contractual parties or third parties under any agreement to which the Bank, the companies under its supervision, Phatra or Phatra Securities is a party or related thereto. Such waiver and consent required also include a consent from Merrill Lynch International Incorporated in relation to the change of control in Phatra Securities.
3.10 there is no material adverse effect upon the financial status, assets, or business operations of the Bank and the companies under its supervision, or Phatra and Phatra Securities (as the case may be).
3.11 there is no situation or amendment of any law, regulation, or other related rule which may cause the merger not to be legally proceeded with, nor is there any amendment of any law, regulation, or other related rule which may have a material adverse affect upon the business performance or status of the Bank and/or the companies under its supervision or Phatra and/or Phatra Securities or which may cause a significant burden in respect of the performance under the MOA.

4. Business Co-operation

The Bank and Phatra have agreed that the operation of the financial institution business and securities business shall be according to the frame principles of business operation for financial institution business and securities business, in respect of both the existing business and new business of the financial institution business and securities business. This is for the financial value by applying the positive potentiality of both the Bank and Phatra, operating the business by focusing on the greater advantage of the organization without any condition
that such business operation shall be under which company.

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The operation of the financial institution business and securities business shall be a joint operation between the Bank and Phatra, where the operation of the financial institution business will be operated by the Board of Directors nominated by the Bank and Phatra, in the number not exceeding 15 persons (consisting of 6 independent directors, Group Executive Committee, Group CEO), and the operation of securities business will be operated and/or owned by Phatra. The Board of Directors of Phatra will consist of not exceeding 13 directors (consisting of 4 independent directors). The frame principles of business operation primarily consist of (details as specified in the Attachment):
4.1 High Net Worth Client Business;
4.2 Finance and Debt Instruments for Medium and Large Enterprises;
4.3 Derivatives Business;
4.4 Investment Business;
4.5 Fund Management Business; and
4.6 Securities Business for Retail Investors.
The execution of the MOA is the primary agreement of the parties to the method and mechanism of the merger. There are various conditions precedent with which the parties must comply. Therefore, the merger will not occur if the mechanism of the merger cannot be completed due to certain limitations, or the Bank or other parties cannot completely perform its/their obligations as specified in the MOA.
The Bank views that this notification contains substantial information which is material to investment decision of the shareholders and investors. The Bank, therefore, would like to request the SET to continue suspending the trading of securities of the Bank on December 9, 2011, so that the shareholders and investors will have sufficient time to analyze the matters before continuing to trade securities of the Bank.
Please be informed accordingly
Yours faithfully,

Investor Relations

Telephone [phone]

Facsimile 0-2841-5529

(Mr. Tawatchai Sudtikitpisan) Chief Executive Officer and President

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Attachment

Summary of Business Co-Operation

1. High Net Worth Client Business
To jointly proceed with the development of High Net Worth Client Business including the increase of channels to approach customers, the increase of variety of financial products, the development of new financial products, together with the supporting business for developing the growth of High Net Worth Client Service, in terms of both the size of assets under the supervision and in terms of income.

2. Finance and Debt Instruments for Medium and Large Enterprises

To jointly proceed with the development of business for Finance and Debt Instruments for Medium and Large Enterprises with the object of increasing the variety of sources of income and increasing the potential of the Bank and investment banking of Phatra.

3. Derivative Business

To jointly proceed with the development of the issuing of derivatives to be an option for investment for the customers of the Bank, Phatra and other subsidiaries; such as Principal Protected Notes, OTC Derivatives Warrants, etc.

4. Investment Business

To jointly develop the Investment Business to apply the positive potential of both organizations with the objective of gaining profit from companies8 funds at an appropriate risk level. In addition, the Investment Business is the beginning of the development of the Fund Management Business as it has companies8 funds as the initial funds.

5. Fund Management Business

To jointly develop the Fund Management Business to apply the positive potential of both organizations with the objective of increasing the potential and the size of the Fund Management Business to make it one of the organization8s main businesses in the future.

6. Securities Business for Retail Investors

To jointly develop the Securities Business for Retail Investors to apply the positive potential of both organizations with the main objective of developing such business to be Low Cost Leadership for the benefit of business
expansion, including the increase of market share through new channels such as bank and internet.

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