Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Review report and interim consolidated

Transcription

1 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Review report and interim consolidated financial statements For the three-month and nine-month periods ended

2 Independent Auditor s Report on Review of Interim Financial Information To the Unitholders of Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust I have reviewed the accompanying consolidated balance sheet and consolidated details of investments as at, the related consolidated statements of income and comprehensive income for the three-month and nine-month periods ended, and the related consolidated statements of changes in net assets and cash flow, and significant financial information for the nine-month period then ended, as well as the condensed notes to the consolidated financial statements of Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries. I have also reviewed the separate financial information of Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust for the same period. The Trust management is responsible for the preparation and presentation of this interim financial information in accordance with Thai Accounting Standard 34 Interim Financial Reporting. My responsibility is to express a conclusion on this interim financial information based on my review. Scope of Review I conducted my review in accordance with Thai Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Thai Standards on Auditing and consequently does not enable me to obtain assurance that I would become aware of all significant matters that might be identified in an audit. Accordingly, I do not express an audit opinion. Conclusion Based on my review, nothing has come to my attention that causes me to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with Thai Accounting Standard 34 Interim Financial Reporting. Waraporn Prapasirikul Certified Public Accountant (Thailand) No EY Office Limited Bangkok: 14 November

3 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Balance sheet As at (Unit of presentation currency: Thousand Baht) Consolidated financial statements Seperate financial statements Note 31 December December 2017 (Unaudited, (Audited) (Unaudited, (Audited) Assets but reviewed) but reviewed) Investments in immovable and movable properties at fair value 5.2 4,170,987 4,512, (At cost: Baht 4,171.0 million (31 December 2017: Baht 4,512.1 million)) Investment in subsidiaries at cost ,816,338 4,851,128 Cash and cash at banks 6 50, ,662 18, ,474 Receivables Rental 7, 19 28,331 6, Dividend ,430 - Others 13, 19 42,767 5,991 41,551 - Short-term loan to related party 9, ,045 - Refundable input value added tax 263, , Deferred expenses 8 121, , , ,423 Cash at bank - deposit for income guarantees 13 81,017 81,602 81,017 81,602 by asset seller Restricted bank deposits 11 14, Deferred tax assets 17,065 20, Other assets 10 69,038 3,585 35,491 2,576 Total assets 4,858,726 5,382,063 5,189,763 5,319,203 The accompanying notes are an integral part of the interim financial statements.

4 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Balance sheet (continued) As at (Unit of presentation currency: Thousand Baht) Consolidated financial statements Seperate financial statements Note 31 December December 2017 (Unaudited, (Audited) (Unaudited, (Audited) Liabilities but reviewed) but reviewed) Accounts payable and accrued expenses 19 71, ,677 45, ,500 Deposit for income guarantees from asset seller 13, 19 81,017 81,602 81,017 81,602 Long-term loan from financial institutions 11 1,639,464 1,506,431-1,506,431 Long-term loan from related party 12, ,539,313 - Derivative liabilities 20 1, Other liabilities 876 2, ,344 Total liabilities 1,794,712 1,865,954 1,666,015 1,811,877 Net assets 3,064,014 3,516,109 3,523,748 3,507,326 Net assets: Registered capital 352,836,700 units of Baht each (31 December 2017: 352,836,700 units of Baht 10 each) 15 3,496,134 3,528,367 3,496,134 3,528,367 Capital from unitholders 15 3,496,134 3,528,367 3,496,134 3,528,367 Retained earnings (deficits) 16 (58,306) (9,532) 62,304 (12,490) Net assets before other components of unitholder s equity 3,437,828 3,518,835 3,558,438 3,515,877 Other components of unitholders equity Exchange differences on translation of financial statements (373,814) (2,726) (34,690) (8,551) Net assets 3,064,014 3,516,109 3,523,748 3,507,326 Net asset value per unit (Baht) Number of units issued at the end of period (Units) 352,836, ,836, ,836, ,836,700 The accompanying notes are an integral part of the interim financial statements.

5 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Details of investments As at Details of investments classified by investment classes (Unit of presentation currency: Thousand Baht) Consolidated financial statements 31 December 2017 Seperate financial statements 31 December 2017 (Unaudited, but reviewed) (Audited) (Unaudited, but reviewed) (Audited) Percentage of Percentage of Percentage of Percentage of Investments Cost Fair value investment Cost Fair value investment Cost investment Cost investment Investments in immovable and movable properties (Note 5.2) Pullman Jakarta Central Park 2,997,970 2,997,970 72% 3,320,812 3,320,812 74% Capri by Fraser 680, ,735 16% 695, ,242 15% - - Ibis Saigon South 492, ,282 12% 496, ,004 11% - - Total investments in immovable and movable properties 4,170,987 4,170, % 4,512,058 4,512, % Investment in subsidiary (Note 5.1) ,816, % 4,851, % Total investments 4,170,987 4,170, % 4,512,058 4,512, % 4,816, % 4,851, % The accompanying notes are an integral part of the interim financial statements.

6 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of income For the three-month (Unit of presentation currency: Thousand Baht) Consolidated Separate financial Note financial statement statement Investment income Rental income 19 68,985 - Dividend income 19-55,254 Interest income Other income 13, 19 40,634 40,623 Gain on exchange Total income 109,730 96,439 Expenses Trust manager fee 18, 19 3,459 3,459 Trustee fee 18, 19 3,901 3,901 Registrar fee Professional fees 5, Amortisation of deferred expenses 7,385 7,385 Other expenses 12,820 1,018 Loss on exchange rate 10,601 - Finance costs 14 22,869 - Income tax expenses 1,746 - Total expenses 68,555 16,995 Net investment income 41,175 79,444 Increase in net assets from operations 41,175 79,444 The accompanying notes are an integral part of the interim financial statements.

7 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of income For the nine-month (Unit of presentation currency: Thousand Baht) Consolidated Separate financial Note financial statement statement Investment income Rental income ,747 - Dividend income ,909 Interest income Other income 13, 19 40,634 40,623 Total income 238, ,645 Expenses Trust manager fee 18, 19 10,098 10,098 Trustee fee 18, 19 11,358 11,358 Registrar fee 18 2,366 2,366 Professional fees 13,184 6,552 Amortisation of deferred expenses 8 21,484 21,484 Other expenses 28,330 2,898 Loss on exchange rate 12,420 1,357 Finance costs ,578 96,220 Income tax expenses 3,048 - Total expenses 221, ,333 Net investment income 16, ,312 Increase in net assets from operations 16, ,312 The accompanying notes are an integral part of the interim financial statements.

8 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of comprehensive income For the three-month (Unit of presentation currency: Thousand Baht) Consolidated financial statement Separate financial statement Increase in net assets from operations 41,175 79,444 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods - Exchange differences on translation of financial statements in foreign currency (120,084) - Other comprehensive income not to be reclassified to profit or loss in subsequent periods - Exchange differences on translation of financial statements in functional currency to presentation currency (74,454) (84,255) Other comprehensive income for the period (194,538) (84,255) Total decrease in net assets from oparations and other components of unitholders' equity (153,363) (4,811) The accompanying notes are an integral part of the interim financial statements.

9 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of comprehensive income For the nine-month (Unit of presentation currency: Thousand Baht) Consolidated financial statement Separate financial statement Increase in net assets from operations 16, ,312 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods - Exchange differences on translation of financial statements in foreign currency (341,172) - Other comprehensive income not to be reclassified to profit or loss in subsequent periods - Exchange differences on translation of financial statements in functional currency to presentation currency (29,916) (26,139) Other comprehensive income for the period (371,088) (26,139) Total increase (decrease) in net assets from oparations and other components of unitholders' equity (354,344) 114,173 The accompanying notes are an integral part of the interim financial statements.

10 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of changes in net assets For the nine-month (Unit of presentation currency: Thousand Baht) Consolidated Separate financial Note financial statement statement Increase in net assets from operations Net investment income 16, ,312 Increase (decrease) in net assets during the period Cash paid for capital reduction during the period 15 (32,233) (32,233) Cash paid for distributions of net income during the period 17 (65,518) (65,518) Decrease in net assets from other components of unitholders' equity Exchange differences on translation of financial statements (371,088) (26,139) Increase (decrease) in net assets during the period (452,095) 16,422 Net assets at the beginning of period 3,516,109 3,507,326 Net assets at the end of period 3,064,014 3,523,748 The accompanying notes are an integral part of the interim financial statements.

11 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Statement of cash flows For the nine-month (Unit of presentation currency: Thousand Baht) Cash flows from operating activities Consolidated financial statement Separate financial statement Increase in net assets from operations 16, ,312 Adjustments to reconcile increase in net assets from operations to net cash provided by operating activities: Increase in investments in immovable and movable properties (5,004) - Increase in investment in subsidiary - (3) Unrealised exchange (gains) losses 9,970 (1,122) Amortisation of deferred expenses 21,484 21,484 Loss on fair value of derivative 1,731 - Finance costs 119,578 96,220 Income tax expenses 3,048 - Increase in receivables from rental (21,259) - Increase in dividend receivables - (30,183) Increase in other receivables (36,520) (41,214) Decrease in refundable input value added tax 41,460 - Increase in other assets (78,969) (32,665) Increase in accounts payable and accrued expenses ,585 Increase in short-term loan to related party - (46,165) Decrease in other liabilities (1,341) (1,256) Net cash from operating activities 71, ,993 Cash flows from financing activities Cash paid for issuance and offering of trust units costs (215,241) (215,241) Cash paid for capital reduction (32,233) (32,233) Cash paid for distributions of net income (65,518) (65,518) Net cash received from long-term loans 1,605,424 1,521,173 Cash paid for long-term loan repayment (1,521,173) (1,521,173) Cash paid for interest expenses and loan prepayment penalty (69,633) (55,654) Net cash used in financing activities (298,374) (368,646) Exchange differences on translation of financial statements (35,936) (3,014) Net decrease in cash and cash at banks (262,910) (234,667) Cash and cash at banks at the beginning of period 313, ,474 Cash and cash at banks at the end of period (Note 6) 50,752 18,807 The accompanying notes are an integral part of the interim financial statements.

12 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Significant financial information For the nine-month (Unit of presentation currency: Baht) Consolidated financial statement Separate financial statement Operating performance information (per unit) Net asset value at the beginning of period Income from investing activities Net investment income Total income from investing activities Decrease of net assets during the period Cash paid for capital reduction during the period (0.0914) (0.0914) Cash paid for distributions of net income during the period (0.1857) (0.1857) Increase in net assets value from other components of unitholder's equity Exchange differences on translation of financial statements (1.0517) (0.0741) Net asset value at the end of period Ratio of net increase (decrease) in net assets from operations to average net assets during the period (%) Significant financial ratios and additional significant information Net assets at the end of period (Thousand Baht) 3,064,014 3,523,748 Ratio of total expenses to average net assets during the period (%) Ratio of total investment income to average net assets during the period (%) Ratio of weighted average investment purchases and sales during the period to average net asset value during the period (%)* Average net asset value during the period (Thousand Baht) 3,290,062 3,515,537 * Investment purchases and sales during the period exclude cash at bank and investments in promissory notes, and must be real purchases or sales of investments which exclude purchases under resale agreements or sales under repurchase agreements. The accompanying notes are an integral part of the financial statements.

13 Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust and its subsidiaries Notes to consolidated financial statements For the three-month and nine-month periods ended 1. Description of Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust Strategic Hospitality Extendable Freehold and Leasehold Real Estate Investment Trust ( the Trust ) is a real estate investment trust established under the Trust for Transaction in Capital Market Act, B.E.2550 in accordance with the Trust Deed executed on 20 December 2017 between Strategic Property Investors Company Limited as the trust settlor and Krung Thai Asset Management Company Limited as the trustee. On 20 December 2017, the Trust was established as a specific closed-end real estate investment trust with an indefinite term. The Trust s objective is to mobilise fund, raised from investors and loan from a financial institution, to invest in real estate through acquiring the shares in or granting loans to the various offshore holding companies. The three subsidiary companies in Indonesia and Vietnam are the companies invested in ownerships or leasehold rights of land, ownership of the buildings, and movable properties of hotels located in Southeast Asia as listed below. Properties Location Type of ownership of Properties Pullman Jakarta Central Park Jakarta, Indonesia Ownership of strata title, building and movable properties Capri by Fraser Ho chi minh city, Vietnam Leasehold of land, of which the term will expire on 19 May 2043 and ownership of building and movable properties Ibis Saigon South Ho chi minh city, Vietnam Leasehold of land, of which the term will expire on 19 May 2043 and ownership of the building and movable properties The Trust has a policy to seek benefits from the invested properties by leasing the properties to related companies of the trust manager who will hire hotel management to operate the hotel business. The trust manager is responsible for managing the properties and setting policies to seek benefits from them. 1

14 The Stock Exchange of Thailand approved the listing of the Trust s units and permitted their trading from 27 December 2017 onwards. Strategic Property Investors Company Limited acts as the trust manager (the Trust Manager ) and Krung Thai Asset Management Company Limited acts as the trustee (the Trustee ) of the Trust. 2. Basis of preparation of financial statements 2.1 Basis for the preparation of interim financial statements These interim financial statements are prepared in accordance with Thai Accounting Standard 34 Interim Financial Reporting, with the Trust choosing to present condensed interim financial statements. However, the Trust has presented balance sheet, details of investments, statement of income, comprehensive income, changes in net assets, cash flows, and significant financial information in the same format as that used for the annual financial statements and in accordance with the regulations and format specified in Thai Accounting Standard 106 Accounting for Investment Business. These interim financial statements are presented in Thai Baht which is different from the functional currency of the Trust, which is US Dollar (USD). The presentation of financial statements is in Thai Baht in accordance with the regulatory requirements in Thailand. The USD functional currency financial statements are translated into the Thai Baht presentation currency financial statements at the rate of exchange prevailing on the end of reporting period in respect of assets and liabilities, and at a rate that approximates the actual rate at the date of the transaction in respect of revenues and expenses, differences being recorded as Exchange differences on translation of financial statements in functional currency to presentation currency in other comprehensive income, other components of unitholders' equity. The interim financial statements are intended to provide information additional to that included in the latest annual financial statements. Accordingly, they focus on new activities, events and circumstances so as not to duplicate information previously reported. These interim financial statements should therefore be read in conjunction with the latest annual financial statements for the period as from 20 December 2017 (date of trust establishment) to 31 December The interim financial statements in Thai language are the official statutory financial statements of the Trust. The financial statements in English language have been translated from the Thai language financial statements. 2

15 2.2 Basis of consolidation These consolidated interim financial statements have been prepared on the same basis as that applied for the consolidated financial statements from 20 December 2017 (date of trust establishment) to 31 December However, there were the changes in the composition of the Group during the period. On 16 August, the Trust acquired a 100% interest in Strategic Hospitality Holdings 2 Limited (SHH2), which was incorporated in the British Virgin Islands (BVI), from a related party of the Trust Manager at a price equal to the shares par value of USD 100. As of the purchase date, SHH2 held 100% interests in SHR-CK Limited (SHR-CK) and SHR-ND Limited (SHR-ND), which were incorporated in the British Virgin Islands (BVI), for the purpose of preparing to invest in companies that have invested in ownership or leasehold rights of land, and ownership of the buildings and movable properties of hotels in which the Trust plans to invest in the future. On 9 July SHR-CK and SHR-ND entered into share sale and purchase agreements with conditions to acquire shares of three companies incorporated in Malaysia and Indonesia with several sellers, as described in Note 21.3 to the financial statements, and as a result the Trust Group has been bound to these agreements from the date that the Trust acquired SHH2. The Trust has consolidated the financial statements of SHH2, SHR-CK, and SHR-ND starting from 16 August. 3. Financial reporting standards that will become effective in the future (a) Financial reporting standards that became effective in the current year During the period, the Trust and its subsidiaries have adopted the revised financial reporting standards and interpretations (revised 2017) and new accounting treatment guidance which are effective for fiscal years beginning on or after 1 January. These financial reporting standards were aimed at alignment with the corresponding International Financial Reporting Standards with most of the changes directed towards disclosures in the notes to financial statements. The adoption of these financial reporting standards does not have any significant impact on the financial statements of the Trust and its subsidiaries. (b) Financial reporting standard that will become effective in the future During the period, the Federation of Accounting Professions issued the financial reporting standard TFRS 15 Revenue from Contracts with Customers, which is effective for fiscal years beginning on or after 1 January 2019 and a set of 5 standards related to financial instruments, which are effective for fiscal years beginning on or after 1 January Key principles of these standards are summarized below. TFRS 15 Revenue from Contracts with Customers 3

16 TFRS 15 supersedes TAS 11 Construction Contracts and TAS 18 Revenue, together with related Interpretations. Entities are to apply this standard to all contracts with customers unless those contracts fall within the scope of other standards. The standard establishes a five-step model to account for revenue arising from contracts with customers, with revenue being recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model. The management of the Trust and its subsidiaries believe that the standard will not have any significant impact on the Trust and its subsidiaries financial statements when it is adopted. Thai Financial Reporting Standards related to financial instruments The set of TFRSs related to financial instruments consists of five accounting standards and interpretations, as follows: Financial reporting standards: TFRS 9 TFRS 7 Financial Instruments Financial Instruments: Disclosures Accounting standard: TAS 32 Financial Instruments: Presentation Financial Reporting Standard Interpretations: TFRIC 16 TFRIC 19 Hedges of a Net Investment in a Foreign Operation Extinguishing Financial Liabilities with Equity Instruments These TFRSs related to financial instruments make stipulations relating to the classification of financial instruments and their measurement at fair value or amortised cost (taking into account the type of instrument, the characteristics of the contractual cash flows and the Company s business model), calculation of impairment using the expected credit loss method, and hedge accounting. These include stipulations regarding the presentation and disclosure of financial instruments. When the TFRSs related to financial instruments are effective, some accounting standards, interpretations and guidance which are currently effective will be cancelled. The management of the Trust and its subsidiaries is currently evaluating the impact of these standards to the financial statements in the year when they are adopted. 4. Significant accounting policies 4

17 The interim financial statements are prepared by using the same accounting policies and methods of computation as were used for the financial statements for the period as from 20 December 2017 (date of trust establishment) to 31 December As described in Note 20 to the financial statements, during the current period a subsidiary entered into a derivative contract with a Singapore financial institution to hedge foreign currency risk. Derivatives are presented in the financial statements at fair value and any gains or losses arising from changes in the fair values are recorded in profit or loss. 5. Investments 5.1 Investment in subsidiaries (separate financial statements of the Trust) On 20 December 2017, the Trust invested in the common shares of Strategic Hospitality Holdings Limited, which was incorporated in the British Virgin Islands. Strategic Hospitality Holdings Limited, through the various offshore holding subsidiary companies, invested in three hospitality properties located in Indonesia and Vietnam as described in Note 1 to the financial statements. As described in Note 2.2 to the financial statements, on 16 August the Trust acquired a 100% interest in SHH2 for the purpose of investing in offshore holding companies that will invest in companies holding ownership of or leasehold rights to land, and ownership of the buildings and movable properties of hotels in which the Trust plans to invest in the future. Movement of investment in subsidiaries for the nine-month are as follows: (Unit: Million Baht) Investment in subsidiary at beginning of period 4,851 Add: Investment during the period 0 Exchange differences on translation of financial statements (35) Investment in subsidiaries at the end of period 4,816 The Trust has pledged the shares certificates to shares of all subsidiaries, except for SHH2, SHR-CK and SHR-ND, as collateral for the credit facilities obtained from a financial institution as described in Note 11 to the financial statements. 5

18 5.2 Investments in immovable and movable properties (consolidated financial statements) Movement of investments in immovable and movable properties for the hospitality business of the Trust and its subsidiaries for the nine-month are as follows: (Unit: Million Baht) Cost Fair value Investments in immovable and movable properties for the hospitality business at beginning of the period 4,512 4,512 Increase 5 5 Exchange differences on translation of financial statements (346) (346) Investments in immovable and movable properties for the hospitality business at the end of the period 4,171 4,171 As at the balance sheet date, the Trust measured value of investments in immovable and movable properties at fair value. The fair value is estimated based on the acquisition costs of the investment which is the recent transaction prices. The management of the Trust believe that the value is the appropriate fair value for the interim financial statements. The Trust and its subsidiaries have pledged the ownership of immovable properties of Pullman Jakarta Central Park as a collateral for the credit facilities that the Trust obtained from a financial institution described in Note 11 to the financial statements. 6

19 6. Cash and cash at banks (Unit: Thousand Baht) Consolidated financial statements Separate financial statements 31 December December 2017 (Audited) (Audited) Balance Interest rate per annum Balance Interest rate per annum Balance Interest rate per annum Balance Interest rate per annum (%) (%) (%) (%) Cash Cash at banks Savings account Siam Commercial Bank Public Company Limited 18, , , , Current account Oversea-Chinese Banking Corporation Limited 1,783-23, KEB Hana Bank, Singapore Branch 159-1, PT Bank CIMB Niaga Tbk 15, , Industrial Bank of Korea, Ho Chi Minh Branch 3, , Ocean Bank Baoviet Bank 5, , Joint Stock Commercial Bank for Foreign Trade of Vietnam The Vietnam Bank for Agriculture and Rural Development Petrolimex Group Commercial Joint Stock Bank Malayan Banking Berhad, Singapore 4, Total cash at banks 50, ,042 18, ,474 Total cash and cash at banks 50, ,662 18, , Receivables from rental (Unit: Thousand Baht) Consolidated financial statements 31 December 2017 Aged on the basis of due dates Not yet due 27,220 6,948 Past due up to 3 months 1,111 - Total 28,331 6,948 7

20 8. Deferred expenses Movement of deferred expenses for the nine-month are as follows: (Unit: Thousand Baht) Consolidated / Separate financial statement Deferred expenses at beginning of period 130,423 Add: Increase 13,257 Less: Amortisation for the period (21,484) Exchange differences on translation of financial statements (1,112) Deferred expenses at end of period 121, Short-term loan to related party On 4 July, SHH entered into loan agreement with the Trust amounting to USD 1.39 million for payment off the cost to obtain a loan from an oversea financial institute. On 5 July, SHH drawdown such loan. This loan is unsecured, interest free and due at call. 10. Advance payment under share sale and purchase agreements As described in Notes 2.2 and 21.3 to the financial statements, SHR-CK entered into share sale and purchase agreements with conditions with the sellers of assets. In accordance with the agreements, SHR-CK has made advance payments totaling of MYR 3.87 million, which are for tax payments of MYR 1.16 million to the tax authority in Malaysia and deposits of MYR 2.71 million which were placed in an escrow account and will be paid to the asset sellers when the sale and purchase transactions are completed. If the sale and purchase transactions are not completed within the specified period or as mutually agreed and it is not SHR-CK s default on some conditions of the agreements, all the advance payments will be returned to SHR-CK, together with interest income in the escrow account. However, if the sale and purchase transactions are not completed due to SHR-CK s default, the advance payments shall be forfeited by the sellers. 8

21 11. Long-term loan from financial institutions The movement of balances of loan from financial institutions for the nine-month period ended are as follows: (Unit: Thousand Baht) Consolidated financial statement Exchange differences on Balance as at translation of Balance as at 1 January Adjustments Loss on financial /Amortisation Addition Repayment Exchange rate statement Long-term loan from financial institution 1,550,433-1,693,269 (1,521,173) 11,176 (10,514) 1,723,191 Less: Deferred transaction costs (45,321) 8,521 (92,087) 42, (85,889) Add: Adjustments to reflect the effective interest rate 1,319 17,013 - (16,151) - (19) 2,162 Net 1,506,431 25,534 1,601,182 (1,494,877) 11,176 (9,982) 1,639,464 Separate financial statement Exchange differences (Unit: Thousand Baht) Balance as at Adjustments on translation of Balance as at 1 January /Amortisation Repayment financial statement Long-term loan from financial institution 1,550,433 - (1,521,173) (29,260) - Less: Deferred transaction costs (45,321) 1,608 42,447 1,266 - Add: Adjustments to reflect the effective interest rate 1,319 14,869 (16,151) (37) - Net 1,506,431 16,477 (1,494,877) (28,031) - The Trust On 21 December 2017, the Trust obtained a loan of USD 47.5 million (the Original Loan ) from a Thai financial institution to fund investment in properties and to pay trust establishment costs. There was a grace period of three years from the drawdown date on principal, with principal to be subsequently payable on a semi-annual basis in year 4 to year 13. On 29 June, the Trust fully repaid the Original Loan using the proceeds from a loan amounting to USD 47.5 million obtained from a subsidiary described in Note 12 to the financial statements. The Trust has recorded the early repayment fee and the loss from derecognition of the Original Loan totaling of USD 1.3 million, or equivalent to Baht 41.4 million, as expenses in the statement of income of the current period. In connection with the loan early repayment, the Trust offered the right of first refusal to the financial institution for the right to act as arranger or underwriter if the Trust Group is to refinance the existing debt by obtaining credit facilities or issuing of bonds in the amount up to USD 47.5 million, provided that the financial institution offer such service at a market-competitive level. 9

22 Strategic Hospitality Holding Limited (SHH) On 28 June, SHH obtained a long-term loan facility amounting to EUR million from a financial institution in Singapore for the purpose of refinancing the Original Loan of the Trust, together with any expenses and outstanding balances related to the Original Loan. The SHH s loan is payable at the end of year 3 and interest is payable on a quarterly basis at EURIBOR plus 3.25% per annum for the first year after the drawdown date, at EURIBOR plus 3.75% per annum in the second year, and at EURIBOR plus 4.25% per annum in the third year. Whenever EURIBOR is negative, the value of this EURIBOR is held to be zero. On 29 June, SHH drew down all EUR million of the loan facility, equivalent to USD 51.5 million. The costs associated with loan acquisition was USD 2.6 million. SHH lent a long-term loan of USD 47.5 million to the Trust, as described in Note 12 to the financial statements, and paid the Trust a dividend of USD 1.8 million on the same date. Under the loan agreement with the financial institution, when SHH receives loan repayment from the Trust it is required to make loan repayments of an equal amount to the financial institution. On 17 August, SHH entered into a loan amendment agreement to increase the loan facility from the financial institution described in the previous paragraph by EUR 1.5 million, from the existing EUR million to EUR million, for the purpose of making asset acquisitions in Malaysia. The additional loan has the same terms of principal repayment and interest rate as the loan amounting EUR million. However, the loan will be immediately due if the Trust Group receives a refund or other recovery or reimbursement for the purpose of funding the asset acquisitions in Malaysia or incurs any financial indebtedness for the purpose of funding the asset acquisitions in Malaysia. On 20 August, SHH drew down EUR million from the long-term loan facility, equivalent to USD 1.32 million. Costs associated with sourcing the loan were equivalent to USD 0.3 million. Under the loan agreement with the financial institution, SHH has the right to request an additional loan facility of EUR 86.7 million for the purpose of financing additional future investment in property by the Trust and its subsidiaries. However, such additional loan facility needs to be approved by the lender in writing. The credit facility is secured by the pledge of share certificates of all subsidiaries of the Trust, except for SHH2, SHH-CK, and SHR-ND, guarantees provided by all subsidiaries of the Trust, except for SHH2, SHH-CK, and SHR-ND, the mortgage of properties in Indonesia, the conditional transfer of fiduciary rights over receivables under the hotel management agreement of an Indonesian hotel, and the fiduciary rights over insurance proceeds of properties in Indonesia, SHH, rights of claim in receivables under the assigned intercompany 10

23 loan agreement related to the additional loan for the asset acquisition in Malaysia. There are also restrictions on a bank account reserved for SHH s borrowing purposes. Under the credit facility agreement, the Trust is required to comply with certain covenants, pertaining to various matters including, among other things, the maintenance of financial ratios prescribed in the agreement, such as a debt to total asset ratio and loan to value ratio, maintenance of the SET listing status of the units of the Trust, limitations on certain material transactions of the Trust and its subsidiaries, maintenance of the Trust s group shareholding structure, and an execution of certain derivative contracts for hedging foreign currency exchange rate risk. Furthermore, the Trust has to comply with certain requirements subsequent to the drawdown of the loan within the timeframes stipulated in the credit facility agreement. As at, the Trust Group is in the process of fulfilling the requirements. If fulfillment of certain conditions is not completed within the timeframe, such as providing the agent with a copy of the full business license of a subsidiary in Indonesia, the Trust has received a waiver from the borrower and consent to extend the timeframe. 12. Loan from a subsidiary On 28 June, the Trust executed a loan facility agreement of USD 47.5 million with SHH, for the purpose of refinancing the Original Loan from a Thai financial institution and payment of costs and outstanding interests related to such loan. On 29 June, the Trust drew down USD 47.5 million of this loan. The intercompany loan is unsecured, interest free, and due at call. However, SHH will charge interest at 6% per annum if the Trust does not repay at call. 13. Income from guaranteed net operating income Under the asset purchase agreement of Pullman Jakarta Central Park, the seller agreed to provide support in the form of guarantees of the annual net operating income of the Pullman Jakarta Central Park for a period of 3 years starting from 1 January. The guaranteed net operating income of the property is USD 8.25 million but the seller will fund any shortfall between the actual achieved net operating income and this guaranteed net operating income only to the extent it does not exceed USD 2.50 million per annum, and this is payable to the Trust on a yearly basis. The Trust received a cash deposit of USD 2.50 million from the seller as a performance guarantee and this was recorded as cash at bank - deposit for income guarantee by assets seller and deposit for income guarantees from asset seller (liabilities). The seller may later pledge a bank guarantee with the Trust in place of such cash deposit. However, the guarantee period does not include periods during which the guaranteed net operating income is not achieved due to force majeure events, such as natural disasters or riots. 11

24 On 25 September, the Trust Group entered into the amendment agreement with the Seller, which changed the basis of the guaranteed payments of the year from a yearly basis to the following: Period of the net operating income of the hotel Guaranteed net operating income for each period (US Dollars) January until September 5,527,500 October until December 2,722,500 However, the total funding for the capped at shortfall is USD 2.50 million per year. The claiming of the shortfall amount for the period of January to September will be based on the operating results of the hotel prepared by management which may not be reviewed by the auditor. The Trust shall not be required to refund the claim if the shortfall for the period based on the audited operating result for the year is lower, and the Trust shall not claim the additional shortfall from the seller if the shortfall for the period based on the audited operating result for the year is higher. The trustee is required to provide the seller with a written statement indicating the claimed amount prior to the withdrawal. Income arising from the guaranteed net operating income of the hotel for the period of 1 January to was USD 1.26 million. 14 Finance costs Finance costs for the three-month and nine-month periods ended are summarised as follows: (Unit: Thousand Baht) Consolidated financial statements Separate financial statements For the three - month For the nine - month For the three - month For the nine - month Effective interest rate expenses 22,869 78,211-54,853 Early repayment costs and loss from loan derecognition - 41,367-41,367 Finance costs 22, ,578-96,220 12

25 15. Registered capital Movements of trust units and capital contributed by trust unitholders during the nine-month were as follows: Units Value per unit Amount (Unit) (Unit: Baht) (Unit: Thousand Baht) Capital at the beginning of 352,836, ,528,367 period Reduction of the Trust s capital - (0.0914) (32,233) Capital at the end of period 352,836, ,496,134 During the second and the third quarters of the current year, the Trust announced capital reductions of Baht 17.5 million, or Baht per unit and Baht 14.7 million, or Baht per unit, respectively, without any change in the number of units, in order to decrease the excess liquidity including those arising from non-cash expenses. As of the book closing date, 68,345,300 trust units held by two asset sellers, out of the total of 352,836,700 trust units, had been forfeited to receive distributions from the capital reduction, based on the conditions as stipulated in the investment agreement between the Trust and the asset sellers. As a result, unitholders other than the asset sellers were entitled to receive a distribution of Baht per unit and Baht , respectively, from the capital reduction. On 14 August the Extraordinary General Trust Unitholders' Meeting No.1/ passed resolutions to approve an increase in the capital of the Trust by issuing and offering up to 415,000,000 additional trust units, in order to fund the additional investment, with at least 50% of the additional trust units to be allocated to the existing unitholders and the remainder to the public; and to approve the borrowing of an amount not exceeding the equivalent of USD 62.5 million from one or more financial institution(s) in order to fund the additional investment, and provide collateral for this borrowing. As at, the Trust was in the process of application for an approval from relevant regulatory bodies to issue and offer such additional units. 13

26 16. Retained earnings (deficits) Details of retained earnings (deficits) for the nine-month and for the period from 20 December 2017 to 31 December 2017 are as follows: (Unit: Thousand Baht) Consolidated financial statements Separate financial statements For the nine-month For the period from For the nine-month For the period from 20 December 2017 to 20 December 2017 to 31 December December 2017 (Audited) (Audited) Net investment losses (9,532) - (12,490) - Deficits at the beginning of period (9,532) - (12,490) - Add: Increase (decrease) in net assets resulting from operations 16,744 (9,532) 140,312 (12,490) Less: distributions of net income (Note 17) (65,518) - (65,518) - Retained earnings (deficits) at the end of period (58,306) (9,532) 62,304 (12,490) 17. Distributions of net income to unitholders Distributions of net income during the period detailed as the following: Announcement date Periods Per unit* Total (Baht) (Million Baht) 16 May 20 December March August 1 April 31 July Total dividend payments for the nine-month *Calculated using the numbers of trust units with the right to receive distributions of net income As of the book closing date, 68,345,300 trust units which were held by two asset sellers, out of the total of 352,836,700 trust units, are forfeited to receive distributions from net income, based on the conditions stipulated in the investment agreement between the Trust and the asset sellers. 18. Expenses Details of trust manager fee, trustee fee, and registrar fee are as described in Note 14 to the latest annual financial statements. 14

27 19. Related party transactions During the three-month and nine-month periods ended, the Trust and its subsidiaries had significant business transactions with its related parties, which have been agreed upon in the ordinary course of business between the Trust, its subsidiaries and its related parties. The pricing policies and amount for particular type of transactions are as follows: (Unit: Thousand Baht) Consolidated financial statements For the three-month For the nine-month Transfer Pricing Policy Transactions with related company Rental income 68, ,747 At the rate stipulated in the lease agreements Other income 40,623 40,623 At the rate stipulated in the agreements Trust manager fee 3,459 10,098 At the rate stipulated in the service agreement Trustee fee 3,901 11,358 At the rate stipulated in the service agreement Separate financial statements (Unit: Thousand Baht) For the three-month For the nine-month Transfer Pricing Policy Transactions with related company Dividend income 55, ,909 According to announcement Other income 40,623 40,623 At the rate stipulated in the agreements Loan to - 46,165 No interest charge Trust manager fee 3,459 10,098 At the rate stipulated in the service agreement Trustee fee 3,901 11,358 At the rate stipulated in the service agreement Loan from - 1,521,173 No interest charge 15

28 As at, the Trust and its subsidiaries have the following significant outstanding balances with its related parties as follows: (Unit: Thousand Baht) Consolidated financial statements Separate financial statements 31 December 31 December (Audited) (Audited) Related Company Receivables from rental 28,331 6, Dividend receivables ,430 - Other receivables 41,188-41,492 - Short-term loan to (Note 9) ,045 - Accounts payable and accrued 18,917 32,863 11,241 25,470 expenses Deposit for income guarantees 81,017 81,602 81,017 81,602 by asset seller Long-term loan (Note 12) - - 1,539, Derivative On 29 June, a subsidiary entered into a derivative contract related to future foreign currency exchange rate (EUR/USD Call Spread contract) with a settlement date at the end of year 3 from the date of contract amounting to EUR 21.2 million, to hedge the foreign currency exchange rate exposure resulting from a Euro-denominated loan from a Singapore financial institution, as described in Note 11 to the financial statements. The subsidiary has a commitment to pay the fees at 1.9% per annum of the contract notional amount. As of, the full amount of the contract was outstanding and the fair value was loss of USD 0.05 million. 21. Commitments 21.1 The Trust is committed to pay fees to the trust manager, trustee, and registrar under the terms and conditions as described in service agreements A subsidiary has future minimum payments required under the non-cancellable derivative contract as mentioned in Note 20. (31 December 2017: None) 16

29 21.3 On 9 July, SHR-CK and SHR-ND entered into conditional share sales and purchase agreements with sellers to make investments in three companies with ownership or leasehold rights of land, and ownership in buildings and movable properties of hotels in Indonesia and Malaysia in which the Trust plans to invest in the future. The share sale and purchase agreements will be completed if the purchasers and sellers fulfill certain conditions precedent. Examples of significant conditions are obtaining regulatory approval from the SEC for the increase in the Trust s capital, obtaining approval from the unitholders of the Trust for the increase in the Trust s capital, and the purchase of the shares, issuing and offering the additional trust units for the increase in capital of the Trust, and remitting the proceeds to the Trust. Based on the agreements, the combined purchase prices of the shares amount to approximately MYR million and IDR 1.65 trillion. 22. Segment information Operating segment information is reported in a manner consistent with the Trust s internal reports that are regularly reviewed by the chief operating decision maker in order to make decisions about the allocation of resources to the segment and assess its performance. The Trust and its subsidiaries are principally engaged in leasing out the properties and related movable assets. Segment performance is measured based on operating profit or loss, on a basis consistent with that used to measure operating profit or loss in the financial statements. As a result, all of the revenues, operating profits and assets as reflected in these financial statements pertain to the aforementioned reportable operating segment. Geographic information The Trust and its subsidiaries operations are carried on in Southeast Asia. The revenue from external customers for the three-month and nine-month periods ended based on the location are as follow. (Unit: Million Baht) Consolidated financial statements For the three-month For the nine-month Indonesia Vietnam Total

30 The investment in immovable and movable properties information based on the location are as follow. (Unit: Million Baht) Consolidated financial statements 31 December 2017 (Audited) Indonesia 2,998 3,321 Vietnam 1,173 1,191 Total 4,171 4,512 Major customers The Trust and its subsidiaries earned rental from two major customers amounted to Baht 69 million and Baht 198 million for the three-month and nine-month periods ended, respectively, arising from the engaged in leasing out the immoveable and movable properties. 23. Functional currency financial statements The US dollar functional currency balance sheets as at are as follow. (Unit: Thousand USD) Consolidated financial statements Separate financial statements 31 December December 2017 (Audited) (Audited) Assets Investments in immovable and movable properties at fair value 128, , Investment in subsidiaries at cost , ,622 Cash and cash at banks 1,566 9, ,765 Receivables From rental Dividend Others 1, ,282 - Short-term loan to related party - - 1,390 - Refundable input value added tax 8,131 9, Deferred expenses 3,736 3,996 3,736 3,996 Cash at bank - deposit for income guarantees by asset seller 2,500 2,500 2,500 2,500 Restricted bank deposits Deferred tax assets Other assets 2, , Total assets 149, , , ,962 18