Benefits of Making Business in Micronesia | Buy & Sell Business

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

4. Country Overview Micronesia, country in the western Pacific Ocean. It is composed of more than 600 islands and islets in the Caroline Islands archipelago and is divided roughly along cultural and linguistic lines into the states of—from west to east—Yap, Chuuk, Pohnpei, and Kosrae. The capital is Palikir, on the island of Pohnpei. To the west of the Federated States of Micronesia lies the Republic of Palau, also in the Caroline archipelago, and to the east is the Republic of the Marshall Islands. The islands are of two general types: high volcanic islands that support a large variety of plant forms and low-lying coral atolls with poorer soil.

5. Executive Summary Federated States of Micronesia (FSM), a tropical 2,700 km (1,678 mi) long island chain, some hundred miles north of the equator. The FSM covers a total land area of 702 km², this is about the size of Singapore, or about four times the size of Washington, DC. The FSM has a population of about 110,000 inhabitants. Largest island is Pohnpei, home to the nation's capital Palikir, a town with about 4,800 people. Largest city is Weno on Chuuk, a huge atoll about 450 mi west of Pohnpei. Spoken languages are English, and the Austronesian languages Chuukese, Kosraean, Pohnpeian, Yapese, Ulithian, and Woleaian (all of them official).

6. Introduction – Doing business in Micronesia Micronesia is ranked 158 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Micronesia improved to 158 in 2019 from 160 in 2018. The economic activity of the Federated States of Micronesia consists primarily of subsistence agriculture and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists. The advantageous location, underutilized natural resources, and close relationship with the U.S. present numerous opportunities for investors and business partners.

7. Conducting business in Micronesia Federated States of Micronesia offers the following non-resident corporate entities, which are governed by the Federated States of Micronesia Companies act of Title 32 of national code. •Limited liability company; •Corporations; •Private Foundations; •General and Limited Partnership; and •Foreign Maritime Entities(FME) Entity Formation is simple; a company may be formed in one business day. The following information needs to be provided to any MISR office in order to proceed with the incorporation of a FSM IBC: corporate name, share structure, and organizational activity. RMI IBCs may also be formed online.

8. Taxation in Micronesia The personal income tax rate is 10%, and the corporate tax rate is 21%. Sales tax: 3% to 5% depending on the state. Company Tax : Corporate income tax: 21% Withholding Taxes : Dividend: 0%; Interest: 0%; Royalties: 0%. Social Security Contributions Paid By Employers :7.5%

9. Trade Micronesia is the 200th largest export economy in the world. In 2017, Micronesia exported $29.8M and imported $154M, resulting in a negative trade balance of $125M. In 2017 the GDP of Micronesia was $336M and its GDP per capita was $3.69k. The top exports of Micronesia are Non-fillet Frozen Fish ($25.8M), Fish Fillets ($1.93M), Copper Foil ($243k), Medical Instruments($230k) and Tantalum ($189k), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($49.5M), Planes, Helicopters, and/or Spacecraft ($7.09M), Poultry Meat($5.12M), Rice ($4.25M) and Other Edible Preparations ($2.71M).

10. Banking in Micronesia Bank of Hawaii, with branches in Pohnpei, Yap and Kosrae; and the Bank of Guam, with branches in Pohnpei and Truk. There is also a domestic Bank of the FSM that operates branches throughout the islands. The FSM Development Bank commenced operations in 1982. It provides loans for projects that meet criteria based on the government's development priorities and is authorized to provide loan guarantees to other financial institutions in the FSM. However, it can only make loans of up to $200,000 because of capital limitations. Tradable securities are not issued by the FSM government, state governments, or enterprises residing in the FSM. The currency is the US dollar. The Commercial banking operations are regulated by the FSM Banking Board. There are two foreign commercial banks: the

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