Treasury StockQualification checklist

Shares repurchased by listedcompanies for financialmanagement purposes if, atthe time of purchase:

- The firm’s share price is below its fundamental value (P/BV < 1 time and/or P/E ratio < industry average)

- The company’s retained earnings and financial liquidity are high, and the company has no need for fund raising.

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The company has positive retained earnings:

The company has excess liquidity, so that over the next sixmonths, the company is able to repurchase shares withoutany impact on its debt servicing ability.

The company’s free float shares are equal to or higher thanSET requirements: (That is, the free float shares are not lessthan 15 percent of paid-up capital and 150 retail shareholders.)

Share repurchasing can be conducted by less than the amountof total retained earnings. Part of the firm’s retained earningsshould be allocated as a reserve equivalent to the amount paidfor share repurchasing. The reserve should be maintained untilall repurchased shares are resold, or the company reduces capitalby reducing shares unsold, as the case may be.

Share repurchase/resale methods

There are two methods available, as follows: 1. Repurchase/Resale via the main board 2. Repurchase/Resale via a general offer (GO)

The company is able to resell its shares six months afterrepurchasing them. The resale procedure shall be conductedwithin three years.

After three years, if there are still shares unsold:• Unsold shares must be reduced using capital reduction procedures and:• The company must proceed with its capital reduction with the Ministry of Commerce.

Treasury stock is…

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Relevant notifications

Treasury Stock

Finansia Syrus Securities Pcl., (FSS)

“The company chose this financial instrument as the stock price was lowerthan its fundamental value, while the company had ample retained earnings and an excessof liquidity. Treasury stock is a way to reduce capital at a lower cost comparing to thenormal capital reduction process and/or to obtain capital at a lower cost when the companyresells repurchased shares to the market. Accordingly, returns to shareholders improve.Treasury stock should become a standard tool for cash and excess liquidity managementin order to generate better returns for shareholders. The factors of success include timingand procedures.

“The company has benefited from using treasury stock twice. The first time helpedinflate KCE’s stock price from lower-than-fundamental price / actual performance. The company repurchased shares at an average price of THB1.10 apiece, while its BV stoodat approximately THB5 per share. This consequently generated capital gains from the shareresale and increase cash liquidity for business operations.

The second time, after the firm issued 10 million ESOP shares to employees, the companylaunched a treasury stock program equivalent to the issued ESOP in order to eliminate thedilution effect from the ESOP shares to benefit shareholders. The company aims to graduallyrepurchase shares using cash from the ESOP. The repurchased shares are not eligible fordividends, so there will be no impact on shareholders.

Capital gains from treasury stock programs are not subject to tax. Capital gains from resellingrepurchased shares at a price higher/lower than repurchasing cost will be booked as changes toshareholders’ equity, not as profit (loss) from share sales in the income statement.

- If the share resale price is higher than the cost, the profit shall be booked as a surplus in shareholders’ equity, under “premium on treasury shares”.

- If the share resale price is lower than the cost, the loss shall be deducted from premium on treasury shares (if any) first. The remaining amount shall be settled against retained earnings.

TIPS

Mr. Adirek SripratakPresident and Chief Executive OfficeCharoen Pokphand Foods Pcl., (CPF)

Listed Company Development Department, The Stock Exchange of Thailand62 The Stock Exchange of Thailand Building, Ratchadapisek road, Klongtoey, Bangkok 10110

joins with

Ms.Tanyarat TessaleeAccounting Director,KCE Electronics Pcl.,. (KCE)

Treasury Stock Treasury Stock

Benefits of treasury stock

Issues for consideration and practices in treasury stock

Adds demand for the company’s shares, which could boost the company share price

Boosts earnings per share. After the listed company repurchases shares, its number of free floatshares will decline. The repurchased shares will not be counted in earnings per share calculation.The higher earnings per share may accordingly boost share prices, which may create the opportunityfor shareholders to profit from stock trading without paying taxes.

Reduces the number of free float shares, consequently increasing earnings per share

Boosts dividends per share because repurchased shares are not included in dividend per share calculation.

Can be a financial instrument in giving returns to shareholdersGenerates capital gain for the company. If the company’s management is confidentof future performance and believes that the company’s share price is significantlylower than its fundamental value, share resale in a proper time will generate profitablereturns.

Repurchasing/resale limitations if repurchasing shares from the main board include: - Repurchasing treasury stock cannot be done when the company is disclosing information that is sensitive to price movement or may impact its share price or shareholder benefits, e.g., before disclosure of financial statements, before announcing a capital increase, before paying dividends, being taken over or when there are facts showing that the company is going to be taken over. - Repurchasing treasury stock cannot be conducted with connected persons

Treasury stock cannot be conducted on the big lot board or using the put-through method.

Repurchasing treasury stock can reduce conflict between shareholders and the company. If someshareholders are against the firm’s policy on voting rights or dividends, the company is able torepurchase shares from these shareholders in order to allow the firm to conduct smoother businessoperations.

If there are several treasury stock programs, shares of all programs shall be combined in carryingout calculations.

The company has to ensure that it does not need a capital increase while it is conducting the treasurystock project, as regulations do not allow a capital increase during that time; the firm must resell allrepurchased shares before a new capital increase.

The company discloses treasury stock program

Disclose the resolution to SET withinthe date of resolution or within 9:00 a.m. ofthe next business day

Disclose at least 14 days beforeactual repurchase

No less than 10 days

Disclose the resolution to SETwithin the resolution date or 9:00

a.m. of the next business day

Within 7 days following registeringcapital reduction at MOC

Disclose board resolution at least 14 daysbefore resale of repurchased shares.

Treasury stock report• If repurchase from SET: Within 9:00 a.m. of the business day following share repurchase/ resale date• If GO: Within 5 business days following share repurchase/resale date

The firm can start treasury stock program again after 1 yearfollowing the end of latest treasury stock program.

Not exceeding10% Exceeding/not exceeding 10%

Repurchase fromSET main board

Sold out

Not sold out

Within 14 days

Board of directors resolvesto resell repurchased stocks

Procedures in share repurchasing for financial management

After 6 months

Within 3 years

TIPS

Listed Company Development Department The Stock Exchange of Thailand

Shareholders

Company

General offer (GO)

Resell on SET main board Resell via public offeringwith SEC approval

Repurchasecommencement date

The end of repurchasing(the last date of repurchasing period)

Company submits repurchaseoffer to shareholders and SET

Share resale commencement date

The date that all shares are resold /End of resale period

The company reports capital reduction+ reduction of unsold shares

Register changed registered capitalwith Ministry of Commerce (MOC)

Disclose capital reduction registration to SET End of program

Repurchase price:< 115%of average closing pricesof previous 5 trading days

Resale price: > 85%of average closing price of

previous 5 trading days

Repurchasing PeriodIf repurchase from SET: < 6 monthsIf repurchase via GO: > 10 days but < 20 days

Shareholders’ resolution approved(unless the company’s articles of association specify that share

repurchasing can be done using a board resolution alone, and therepurchase is < 10% of paid-up capital)