Benefits of Making Business in East Timor | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN EAST TIMOR 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 EAST TIMOR WWW.MERGERSCORP.COM

4. Country Overview Timor-Leste, also known as East Timor. The relative new nation is situated in the eastern half of the island of Timor, at the eastern 'end' of the Lesser Sunda Islands, north of the Timor Sea and Australia. The country is bordered by Indonesia in west and the Savu Sea in north. The country occupies an area of 14,874 km², including the islands of Pulau Acrobat and Paula Jaco, compared it is about half the size of Belgium, or slightly larger than the Bahamas. The nation has a population of 1.2 million people (in 2015), capital and largest city is Dili, spoken languages are Tetuma and Portuguese (both official), Indonesian, English. East Timor is located in the eastern part of Timor, an island in the Indonesian archipelago that lies between the South China Sea and the Indian Ocean. East Timor includes the enclave of Oecussi, which is located within West Timor (Indonesia). After Indonesia, East Timor's closest neighbor is Australia, 400 mi to the south. It is semiarid and mountainous.

5. Executive Summary East Timor's road to independence - achieved on 20 May 2002 - was long and traumatic. The people of the first new nation of the century suffered some of the worst atrocities of modern times in their struggle for self-determination. When their Portuguese colonial masters withdrew in 1975, Indonesia claimed the territory for itself and ruthlessly suppressed the independence movement. Eventually the UN took over the administration and supervised the territory's transition to independence. About 40 different Papuan and Malayan languages or dialects are spoken, dominated by Tatum. Portuguese is spoken by a small fraction of the population, but it is one of the country’s two official languages, the other being Tatum; Indonesian and English are considered to be “working” languages.

6. Introduction – Doing business in the East Timor The economy is largely based on offshore oil and gas exploration in the Timor Sea. The Petroleum Fund was established to manage revenue transparency and sustainability. In July 2011 the Timor-Lesteese Government released a Strategic Development Plan seeking to use its oil revenue to support long-term economic development, diversification of the economy and poverty reduction. Under developed industries, with little onshore mineral exploration and identified as potential resources that would benefit from investment are: gold, oil and gas, manganese, marble. Business opportunities relate to major infrastructure projects. Other sectors offering opportunities are: oil and gas, manufacturing, infrastructure, building and construction inputs, tourism infrastructure. Subsistence agriculture, forestry and fishing sustain most of the population. The sole export products are coffee beans, timber and sandalwood. The economy as a whole was chronically underdeveloped as a result of centuries of neglect by the Portuguese.

7. Conducting business in East Timor Timor-Leste is a small, developing nation that occupies half an island located between Indonesia and Australia. It is one of the world’s youngest democracies. It remains a country with enormous poverty, however, with high unemployment and underemployment rates, incomplete infrastructure, and low social development indicators, especially in health and education. Oil and gas revenues have surged in recent years as projects in the Joint Petroleum Development Area that Timor- Leste shares with Australia have come online. The government set up a sovereign Petroleum Fund to ensure the sustainable use of its revenues very the long term. Government spending is mostly financed by withdrawals from the Fund. Fund assets exceeded $13.6 billion as of June 2013. Government spending, largely on infrastructure and social transfers, drives economic growth. Private sector development has been slow due to human capital shortages, an incomplete and bureaucratic regulatory environment, and basic infrastructure inadequacies.

8. Taxation in East Timor Timor-Leste residents are subject to income tax on worldwide taxable income, where taxable income is essentially the difference between gross income and allowable deductions. Non-residents without a PE may be subject to a 10% withholding tax. Income Tax, Services Tax, Petroleum Tax, Import Duty and Sales Tax, and Excise Tax. See how to pay taxes, due dates, forms, and contacts if you have a tax enquiry. Income tax is levied on tax subjects: individuals companies undivided estates trusts partnerships government enterprises, and associations, cooperatives and similar organisations, Import Duty and Sales Tax applies to imported goods. It is administered by the Timor-Leste Customs Service: Import Duty is 2.5% of the customs values of the goods, and Sales Tax is 2.5% of the customs value of the goods imported into Timor- Leste. Taxes and Duties Act 2008.

9. Trade Timor-Leste is the 182nd largest export economy in the world. In 2017, Timor-Leste exported $108M and imported $651M, resulting in a negative trade balance of $543M. In 2017 the GDP of Timor-Leste was $2.95B and its GDP per capita was $7.21k. The top exports of Timor-Leste are Crude Petroleum ($65.9M), Coffee ($26.4M), Used Clothing ($4.58M), Locust beans, seaweed, sugar beet, cane, for food ($1.51M) and Vegetable Saps($917k), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($105M), Rice ($31M), Cars ($25.5M), Cement ($21.7M) and Poultry Meat ($19.9M). The top export destinations of Timor-Leste are Singapore ($67.3M), the United States ($10.4M), Indonesia ($7.64M), Germany ($5.32M) and China($3.52M). The top import origins are Indonesia($202M), China ($112M), Singapore ($85.4M), Hon g Kong ($55.9M) and Vietnam ($37.1M).

10. Banking in East Timor Established in January 2001, our Timor-Leste branch offers a wide range of services to our business customers. With staff dedicated to helping both local and international business customers, ANZ Timor-Leste has brought services and expertise in international transactions, trade services, and electronic banking services to the Timorese community. ANZ Timor-Leste is led by Terence Low, appointed Country Head in April 2019. He brings a wealth of experience over his 30-year banking career having worked in Fiji as a Senior Relationship Manager, and then in Kiribati as the Country Head. He most recently held the position of Director Institutional Banking, Papua New Guinea managing the significant Natural Resources Portfolio. Terrence has worked in Commercial, Corporate and Institutional Banking over the course of his career and brings with him invaluable experience in commercial, corporate and institutional banking, underpinned by sound risk management and a focus on customer service.

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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