Benefits of Making Business in Armenia | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN ARMENIA WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN ARMENIA WWW.MERGERSCORP.COM

4. Country Overview Armenia is located in the southern Caucasus and is the smallest of the former Soviet republics. It is bounded by Georgia on the north, Azerbaijan on the east, Iran on the south, and Turkey on the west. Contemporary Armenia is a fraction of the size of ancient Armenia. Armenia is a nation, and former Soviet republic, in the mountainous Caucasus region between Asia and Europe. Among the earliest Christian civilizations, it’s defined by religious sites including the Greco-Roman Temple of Garni and 4th- century Etchmiadzin Cathedral, headquarters of the Armenian Church. Khor Virap Monastery is a pilgrimage site near Mount Ararat, a dormant volcano just across the border in Turkey.

5. Executive Summary Armenia has a long tradition of excellence in science, technology, and education. During the Soviet era, Armenian capabilities were oriented to a significant degree toward supporting the Soviet military-industrial complex. At its height, Ancient Armenia was subjected to constant foreign incursions, finally losing its autonomy in the 14th century CE. The centuries-long rule of Ottoman and Persian conquerors imperiled the very existence of the Armenian people. Eastern Armenia was annexed by Russia during the 19th century, while western Armenia remained under Ottoman rule, and in 1894–96 and 1915 the Ottoman government perpetrated systematic massacres and forced deportations of Armenians.

6. Introduction – Doing business in Armenia Armenia is ranked 47 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Armenia deteriorated to 47 in 2019 from 41 in 2018. The main objectives of the state policy in the investment area in Armenia are the following: improvement of investment environment, improvement of legal framework and promotion of investments in the economy of the Republic of Armenia, including foreign direct investments (hereinafter FDI). The main goal of Armenia's investment policy is to create a favorable investment and business environment, increase transparency of regulatory environment, reveal the country's competitive advantages and more.

7. Conducting business in Armenia There are many pros to starting any business in any country. In Armenia, the legalities lean more towards the pros. It often takes less than a single business day to register a company. Registration costs are low. There are no minimum capital requirements to starting a business. There are few reporting requirements throughout the year. Tax exemptions exist for small and medium enterprises, with generally low tax rates on businesses. There are no requirements for local directors or employees, nor connections with local banks. Furthermore, the considerable network of Double Tax Treaties with 41 countries, as well as the Free Trade Agreements, gives Armenia a large market to work with.

8. Taxation in Armenia The Personal Income Tax Rate in Armenia stands at 36 percent. Personal Income Tax Rate in Armenia averaged 25.63 percent from 2003 until 2018, reaching an all time high of 36 percent in 2014 and a record low of 20 percent in 2004. Dividends received by Armenian citizens are taxed at a rate of 5%. The income tax on rental income is calculated at a rate of 10%; however, if the total rental income received during the tax year exceeds AMD 58.35 million, an additional income tax of 10% is calculated on the excess.

9. Trade Armenia is the 125th largest export economy in the world. In 2017, Armenia exported $2.44B and imported $3.96B, resulting in a negative trade balance of $1.52B. In 2017 the GDP of Armenia was $11.5B and its GDP per capita was $9.6k. The top exports of Armenia are Copper Ore ($846M), Rolled Tobacco ($231M), Hard Liquor ($203M), Gold ($142M) and Aluminium Foil ($119M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Petroleum Gas ($325M), Refined Petroleum ($216M), Packaged Medicaments ($149M), Diamonds ($121M) and Broadcasting Equipment ($96.9M).

10. Banking in Armenia The banking system remains the biggest part of the Armenian financial market. As of 31 December 2017, there were 17 commercial banks operating in the Republic of Armenia. They had 528 branches in Armenia and in Nagorno Karabakh, from which 237 were located in Yerevan. The total number of employees in the Armenian commercial banks was about 11,175. The share of capital of Armenian banks in GDP at the start of 2020 was 3.1% and the share of assets was 16.8%. The banking system is small because not all cash flow passes through the banking system. Armenia has a large shadow economy, so much of the real sector prefers to work with cash..

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com