Benefits of Making Business in Tuvalu | Buy & Sell Business

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

4. Country Overview Tuvalu is a group of nine tiny islands in the South Pacific which won independence from the United Kingdom in 1978. Five of the islands are coral atolls, the other four consist of land rising from the sea bed. Formerly known as the Ellice Islands, all are low- lying, with no point on Tuvalu being higher than 4.5m above sea level. Local politicians have campaigned against climate change, arguing that it could see the islands swamped by rising sea levels. Life on the islands is simple and often harsh. There are no streams or rivers, so the collection of rain is essential. The first settlers were from Samoa and probably arrived in the 14th century AD. Smaller numbers subsequently arrived from Tonga, the northern Cook Islands, Rotuma, and the Gilbert Islands. Niulakita, the smallest and southernmost island, was uninhabited before European contact; the other islands were settled by the 18th century, giving rise to the name Tuvalu, or “Cluster of Eight.” The group includes both atolls and reef islands. The atolls Nanumea, Nui, Nukufetau, Funafuti, and Nukulaelae have islets encircling a shallow lagoon; the reef islands Nanumanga, Niutao, Vaitupu, and Niulakita are compact with a fringing reef. The islands are low-lying, most being 13 to 16 feet above sea level.

5. Executive Summary Tuvalu became independent from the United Kingdom in October 1978. It is a constitutional monarchy with a 15-member unicameral parliament elected every four years. Cabinet consists of the Prime Minister, elected by a majority of the members of parliament, and several ministers. The Prime Minister is the head of government. There are no organised political parties and members usually align with informal groupings. Members of Parliament have very close links with their island constituencies. Funafuti is an atoll and the capital of the island nation of Tuvalu. It has a population of 6,025 people, making it the country's most populated atoll, with 56.6 percent of Tuvalu's population. The current population of Tuvalu is 11,734 as of Friday, February 7, 2020, based on the latest United Nations estimates. Tuvalu population is equivalent to 0.00015% of the total world population. Tuvalu ranks number 225 in the list of countries (and dependencies) by population. The culture of Tuvalu is unique yet typical of the culture of the South Pacific Islands. Tuvalu is largely Polynesian (96%), with an emphasis on traditional ways, friendliness and a relaxed lifestyle. The people are famous for their dancing, music and handcrafts, which are highly regarded in the Pacific.

6. Introduction – Doing business in Tuvalu Tuvalu's main business industries are fishing and tourism, and the country also exports small quantities of copra (dried coconut meat from which oil may be extracted). Manufacturing sub- sectors include small-scale timber processing and various handicrafts. Tuvalu’s wealth is concentrated in its fairly large exclusive economic zone of over 900, 000 sq. km teeming with all kinds of marine resources. The priority economic sectors are Agriculture, Fisheries, Tourism and Migrant Labor. Now that Tuvalu’s maritime boundaries have been set, a long term plan has been put in place for the orderly exploration and development of mineral deposits and other renewable resources within its territorial waters.

7. Conducting business in Tuvalu The government of Tuvalu is actively seeking investors and partners to develop and diversify the economy with a focus initially on ecotourism and the processing of organic agricultural and fishery products for niche markets in the Asia-Pacific region. It is currently reviewing its investment framework with a view to creating a more business-friendly and secure investment climate for investors. Tuvalu is a party the Pacific Agreement on Closer Economic Relations Plus. This represents a total market of over A$2 trillion and a population of about 40 million. This archipelago with its opportunities to investors and a once-in-a-lifetime experience for the adventurous tourist. Subsistence farming and fishing are the primary economic activities. Other sources of revenue for the economy come from small-scale copra exports, sale of postage stamps and coins, sale of passports and resale of rights to international telephone codes. Tuvalu is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia, with a population of 11,192 per the 2017 census.

8. Taxation in Tuvalu ​​​​​​​​​​​​​​​The personal income tax rate on chargeable income is 30%. The company income tax rate on chargeable income is also 30%, down from 40%. The income of both nonresidents and foreign resident companies is taxed at a flat rate of 40%. There are a variety of sales taxes applied to a variety of goods and services. Island councils also levy a head tax and a land tax based on territorial extent and soil fertility. There is a fixed income tax of 30 percent on all income above US$1,900, and all corporate profits are also taxed at the flat rate of 30 percent. There are also sales taxes on certain goods and services. The government also taxes stamp sales, copra, and fishing licenses. The government maintains price limits on fuel and basic food items.

9. Trade outdated, they give a sense of the reliance upon imports: in 1989, the country imported US$4.4 million in goods and services while exporting just US$165,000 worth of goods and services. The main export of Tuvalu is copra, while the nation's main imports include food, animals, mineral fuels, machinery, and manufactured goods. Tuvalu's main trading partners are Australia, Fiji, New Zealand, and the United States. Tuvalu is a net importer of goods and services. The country's main imports are foodstuffs, animals, mineral fuels, machinery and manufactured goods. Tuvalu is a net importer of goods and services. The country's main imports are foodstuffs, animals, mineral fuels, machinery and manufactured goods. In 2010 imports were valued at $16 million and the principal import sources in 2008 were Fiji, Australia, New Zealand and Japan. Tuvalu's main exports are copra, fish and stamps with Belgium, Luxembourg, Fiji, Poland and Hungary being the main export destinations. In 2010 exports from Tuvalu to the European Union were mainly comprised of machinery, transport equipment and textiles. Tuvalu has an import-driven economy and relies upon products produced elsewhere. Though import and export statistics are

10. Banking in Tuvalu Barclays’s interest was replaced by the Westpac Banking Corporation. However, the National Bank is now entirely government owned and there are no branches of multinational financial institutions in the country (2012). The National Bank of Tuvalu’s loan portfolio is dominated by personal borrowing, with only about 30% lent for business purposes. Most bank accounts in Tuvalu are owned by wage employees as all public sector employees have their salaries paid into a bank account. The Bank of Tuvalu was founded in Funafuti in 1980 and has branches on all the islands. The bank is jointly owned by the Tuvalu government (75%) and by Barclays Bank, which was responsible for its operation until mid-1985. The National Bank of Tuvalu was originally established by Barclays Bank and the Tuvaluan government. For a time,

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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