ANNUAL REPORT MARCH 14, 2008 – DECEMBER 31, 2008
QUALITY HOSPITALITY LEASEHOLD PROPERTY FUND
TRANSLATION This Annual Report is executed in a text using the Thai language which shall be the governing language.
Annual Report For the Period of March 14, 2008 – December 31, 2008
Table of Contents
Page
Statement from the Asset Management Company
1
Quality Hospitality Leasehold Property Fund
2
Portfolio Valuation
6
Details of Property Invested by the Fund
7
Details of Purchasing and Leasing of Properties
8
Details of Property Disposal or Leasehold Rights Transfer
9
Market Outlook
10
Total Expenses as called from Property Fund
11
List of Related Persons having transactions with the Funds managed by ING Funds (Thailand) Company Limited
12
Details of the Return on Investment Receipt
13
Supervisor Report
16
Auditor Report
17
ING Funds (Thailand) Co., Ltd.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 2 Quality Hospitality Leasehold Property Fund Abbreviation as "QHOP� The Asset Management Company ING Funds (Thailand) Co., Ltd Type of the Fund Project Closed-end Property fund Project Life Not Specified Objectives The Project will mobilize fund from general investors. The mobilized fund will be utilized in purchasing and/or taking lease the property, including to benefit the immoveable property, to improve, change, improve potential and/or to distribute various properties invested or acquired by the Fund regardless whether or not for leasing out, sub-leasing, and/or disposing or to manage in any other manner for the benefit of the property in order to generate income and return for the Fund and the unitholders including any other interest by mean of any method according to the laws on securities and/or any other relevant laws. Investment of the Fund Initial Investment: The Management Company shall make an investment by leasing a hotel project, namely the Amari Boulevard Hotel Project, for a period of 30 years. General Information and Location of the Amari Boulevard Hotel The Amari Boulevard Hotel is a four-star hotel accredited by the Ministry of Tourism and Sports. It offers a total of 315 superior, deluxe and suite rooms, as well as amenities and services such as restaurants, fitness center, banquet rooms, laundry services, 24-hour business center with internet connection, and retail shops, etc.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 3 The Amari Boulevard Hotel comprises two connected buildings which are: (1) The Siam Wing, a 14-storey building; and (2) The Krungthep Wing, a 27-storey building with 178 parking spaces. Situated on a land area of 2 Rai and 57.9 square Wah, the two buildings have a total of 315 rooms and an estimated usable area of 30,315 square meters. The Amari Boulevard Hotel is located at No. 2, Soi 5, Sukhumvit Road (Lerdsin 1), North Klongtoey, Wattana, Bangkok. Sukhumvit Road is considered one of the major business roads in Bangkok with office buildings, shopping centers, restaurants, movie theaters, banks and numerous shops. Furthermore, it is complete with efficient utility and transportation systems, with easy access to the BTS light rail and underground train stations and the Sukhumvit Highway. Dividend Payment Policy The Project has a policy to pay dividends to Unitholders at least once a year. (1) In case the Fund has net profit each year, the Management Company shall pay dividends to Unitholders in the amount no less than 90% of the annual net profit. (2) In case the Fund has retained earnings, the Management Company may pay dividends to Unitholders based on the retained earnings. In this regard, in case the Fund has unrealized net profit from the appraisal of immovable properties, leasehold rights, securities and/or assets of the Fund in a fiscal year or any other operational period when dividends are to be paid, the Management Company shall first deduct such unrealized net profit from the net profit. Therefore, the dividends from the results of operation for such operational period to be paid by the Management Company shall not include the unrealized net profit from the appraisal of immovable properties, leasehold rights, securities and/or assets of the Fund. In a fiscal year or any other operational period when dividends are to be paid, should the Fund have unrealized net loss from the appraisal of immovable properties, leasehold rights, securities and/or assets of the Fund, the Management Company shall consider paying dividends based on the Fund’s net profit from which such unrealized net loss has been deducted.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 4 Conditions for Dividend Payment to Unitholders: In considering making dividend payment, should the interim dividend per Investment Unit to be paid be less than or equal to Baht 0.10, the Management Company reserves the right not to pay dividends at such occasion and shall postpone such dividends to be paid together with the dividends due for payment at the end of the fiscal year. With regard to the rules for dividend payment, the Management Company shall proceed as specified. However in cases where the Securities and Exchange Commission, the Office of the Securities and Exchange Commission and/or any other authorities have amended, changed, made additions to, announced, prescribed, ordered, approved and/or relaxed the rules to be otherwise, the Management Company shall proceed accordingly, and it shall be deemed to have been approved by the Unitholders. Such cases include the Fund’s payment of dividends in the amount less than 90 percent of the annual net profit as a result of appropriation of reserve for capital expenditures, for example, expenses for structural repairs and expenses for changing or purchasing additional Leased Furniture and Fixtures, etc. In this regard, the Management Company shall seek approval and/or exemption from the Securities and Exchange Commission, the Office of the Securities and Exchange Commission and/or other authorities. When such approval and/or exemption are granted, the Management Company shall proceed accordingly, and it shall be deemed to have been approved by the Unitholders. Project Capital
:
Baht 1,913 Million
Number of Units
:
191.30 Million units
Type of Investment units
:
Holder name specified
Trustee
:
Thai Military Bank Plc. (Effective till 28 February 2009) The Hongkong and Shanghai Banking Corp Ltd. (Effective from 1 March 2009)
:
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 5 Investment Units Registrar
:
ING Funds (Thailand) Co., Ltd.
Fund Advisor
:
-None-
Property Manager
:
-None-
List of Fund Manager
:
The Asset Management Company has prepared and gathered information on the Fund, e.g., prospectus, general information of the funds, properties invested by the Fund, performance results, press releases and dividend payments record, etc., for dissemination to investors. More information can be viewed at www.ingfunds.co.th. Any expenses for preparation and dissemination of said information will be collected from the Fund.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 6
Quality Hospitality Leasehold Property Fund PORTFOLIO VALUATION As at December 31, 2008 ASSETS 1. BANK DEPOSIT
Market Value (Baht)
% of Total Asset
28,299,437.83
1.45%
PROMISSORY NOTES AND BILLS OF EXCHANGE - DIRECT ISSUE
-
0.00%
PROMISSORY NOTES AND BILLS OF EXCHANGE - AVAL
-
0.00%
10,992,085.70
0.56%
-
0.00%
10,992,085.70
0.56%
-
0.00%
1,861,000,000.00
95.14%
1,861,000,000.00
95.14%
11,256,131.30
0.58%
216,386.72
0.01%
44,672,003.25
2.28%
768,599.11
0.04%
56,913,120.38
2.91%
1,957,204,643.91
100.06%
(1,142,745.16)
-0.06%
(22,556.40)
0.00%
(1,165,301.56)
-0.06%
TOTAL NET ASSET VALUE
1,956,039,342.35
100.00%
NO OF UNITS NET ASSET VALUE PER UNIT
191,300,000.0000 10.2249
UNITS BAHT
2. P/N, B/E, T-BILL AND BOND
BOND TREASURY BILL Sub-total 3. INVESTMENT IN PROPERTY PROPERTY LEASEHOLD RIGHTS Sub-total 4. OTHER ASSETS RECEIVABLES FROM RENTAL ACCRUED INTEREST DEFERRED CHARGES OTHER ASSETS Sub-total TOTAL ASSETS 5. LIABILITIES ACCRUED FEES AND EXPENSES OTHER LIABILITIES TOTAL LIABILITIES
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 7
Quality Hospitality Leasehold Property Fund Details of Property Invested by the Fund As of December 31, 2008 The Fund invested in certain leasehold rights of Amari Boulevard Hotel, Total area about 30,315 square meters Project Location Project Feature
Land Purpose of Use Project Area and Area Invested by the Fund
No. 2, Soi Sukhumvit 5 (Lerdsin 1), North Klongtoey, Wattana, Bangkok Leasehold right over land and buildings of the Amari Boulevard Hotel comprising of two connected buildings which are (1) The Siam Wing, a 14-storey building; and (2) The Krungthep Wing, a 27-storey building with 178 parking spaces. The two buildings have a total of 315 rooms. Land under Title Deeds No. 10023, 10038, 191276-191283, 192788-192795, total 18 Title Deeds having area of 2 rai 57.9 square wahs Hotel Detail
1. Room Area Superior Rooms Deluxe Rooms DeluxeTerrace Rooms Deluxe Corner Rooms Suites 2. Common Area* 3. Parking Spaces 4. Machine rooms and other areas** 5. Outdoor Area Total
Lease Period Appraisal Value Income per Year Investment
Obligation
Number of Rooms
Area (square meters)
Ratio to Total Rental Space (%)
315 127 138 16 20 14
10,516 28 32 40 49 66 10,149.50 6,612 2,452.50
34.69
33.48 21.81 8.09
585 30,315
1.93 100.00
Remarks : * Common area includes meeting rooms, banquet rooms, lobby, fitness center, swimming pool, retail shops and the back office. ** Machine rooms and other areas include rooms for air conditioners, boiler room, employees’ cafeteria and dressing room and rooftop water tank area, etc. From March 18, 2008 to Mach 17, 2038 (30 Years) 1,861,000,000 Baht (as of December 1, 2008) by Sallmanns (Far East) Limited (Valuation Date of December 1, 2008 - Income Approach) 136.64 Million Baht (start from March 18, 2008 to December 31, 2008) Rental for property 1,780,000,000 Baht Purchase of furniture and fixture 50,000,000 Baht Total 1,830,000,000 Baht None
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 8
Quality Hospitality Leasehold Property Fund Details of Purchasing and Leasing of Properties For the period from March 14, 2008 – December 31, 2008 Type of Assets
Starting dated of Leasehold right Value of Leasehold Right Transferor Appraisal Value
Leasehold right over land and buildings of the Amari Boulevard Hotel comprising of two connected buildings (1) The Siam Wing, a 14-storey building (2) The Krungthep Wing, 27- storey with 178 parking spaces. The two buildings have a total of 315 rooms. March 18, 2008 Baht 1,780 Milllion Quality Inn Co., Ltd. 1. Sallmans (Far East) Co., Ltd as of December 4, 2007 2. American Appraisal (Thailand) Co., Ltd. as of November 30, 2007
: :
Baht 2,210 Million Baht 2,000 Million
Related Expenses
Appraisal method is income approach Details of related expenses are as followings :
Reasons for Investment
1. Registration fee and Stamp Duty Baht 19,580,000 2. Appraisal fee Baht 535,000 Total Baht 20,115,000 Seeking benefits from the property with the aim to generated income and return to the Fund and unitholders
Remark : Fund purchased furniture and fixture from Quality Inn Co., Ltd. for the use of Amari Boulevard Hotel on March 18, 2008 at Baht 50 Million (Included VAT)
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 9
Quality Hospitality Leasehold Property Fund Property Disposal or Leasehold Rights Transfer For the period from March 14, 2008 – December 31, 2008 Transaction
Profit (Loss) (Thousand Baht)
Property Disposal or Leasehold Rights Transfer
None
Less Acquisition of Property Disposal or Leasehold Rights Transfer
None
Transfer Fee and Selling Expenses
None
Net Profit (Loss) from Property Disposal or Leasehold Rights Transfer
None
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 10 Quality Hospitality Leasehold Property Fund Property Market Outlook Demand According to the latest data, the number of guest arrivals at accommodation establishments in Bangkok during Q2 2008 stood at 3,215,486 persons, decreasing by 3.2% from the corresponding period last year. In the first half of 2008, the number of guest arrivals at accommodation establishments in Bangkok was 6,920,264 persons, equaled to 52.0% when compared with the total figures for the whole year of 2007. Up to now, relevant authorities have not announced the official figure of guest arrivals at accommodation establishments in Bangkok for the whole year of 20081. However the number of passengers at Suvarnnabhumi and Don Muang Airport in 2008 totaled 31,632,867 persons, decreasing by 5.1% from the previous year, which resulted mainly from the airport closures from late November to early December and cost-cutting policies from businesses and individual travelers due to the economy slowdown2. Supply By the end of Q4 2008, total rooms of mid-range hotels (hotels which have average room rate at 2,500 – 4,500 Baht per room per night) in Ploenchit and Sukhumvit area were totaling 8,758 rooms, increasing by 0.8% from the previous year. In 2009, it is expect that the total mid-range hotel rooms in this area will increase by 580 rooms, or 6.6%. Ploenchit and Sukhumvit areas remains the popular residential area for businesses and individual travelers, due to conveniences from the mass transit system and good proximities to a lot of attractive places, thereby leading to the highest supply of hotel services in these areas, equal to a share of 71.0% of mid-range hotels in Bangkok. These are followed by Silom and Sathorn areas and the areas on both sides of the Chao Phraya River at 19.3% and 9.7%, respectively3. Average Room Rates and Average Occupancy Rate The average room rates among mid-range hotels were 3,272 Baht per room per night, increasing by 7.5% and the average occupancy rate was 75%, decreasing by 15.7%. These figures result to a drop in the average revenue per available room (RevPar) to 2,447 Baht per room per night or decreasing 9.7% from 20074. Future Outlook The hotel market has been affected adversely by the global economy slowdown, especially those luxury hotels, as evidenced from reduced seminar/conference budgets among corporate business entities and reduced travelling budgets among tourists. As for the airport closure, we do not expect any lasting effects on the tourism sector. For the mid-range and economy sector we forecast there will be more demand than the luxury sector. In addition, it is important to remember that hotels in Bangkok still have to encounter stiff competition with serviced apartments. Nonetheless, it is difficult to forecast when the tourism industry will return to normal, which will rely chiefly on the government tourism promotions and the subsequent roadshows to restore confidence among tourists in foreign markets.
1
Office of Tourism Development Airport of Thailand 3 CB Richard Ellis, Bangkok Property Report - Fourth Quarter 2008 4 Analyst Meeting of ERAWAN Q4 2008 2
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 11
Quality Hospitality Leasehold Property Fund Total Expenses as called from Property Fund For the period from March 14, 2008 – December 31, 2008 Amount (Thousand Baht)
% of Net Assets Value
5,016.50
0.26
Trustee Fee*
668.86
0.03
Registrar Fee*
836.08
0.04
Auditing Fee*
641.22
0.03
8,538.06
0.44
Asset Appraisal Fee*
103.79
0.01
Other Expenses*
212.36
0.01
Total Expenses**
16,016.87
0.82
Fund's Direct Expense Management Fee*
Fund's Setting Up Expenses -Written Off*
Remark * Included VAT ** Not included brokerage fee
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 12
Quality Hospitality Leasehold Property Fund List of Related Persons having transactions with the Funds managed by ING Funds (Thailand) Company Limited For the period from March 14, 2008 – December 31, 2008 No.
List of Related Persons having transactions with Mutual Funds
1
Other funds which are under management of the Asset Management Company
2
Unitholders whose investment units exceeding 10% of the total units sold of the Fund and being Property Manager of the Fund
“The investor can inspect the transactions entered into with the related persons of the mutual fund at the management company directly or at the website of the management company (www.ingfunds.co.th) and the Office of SEC (www.sec.or.th)”
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 13
Details of the Return on Investment Receipt Research paper including in-depth report of listed company, industry analysis, trend and outlook, economic and political situation both in domestic and foreign those influence the investment decision. Specific inquiry including the information further than the released research paper that support the investment decision Conference call direct to analyst Pay a visit to present the remarkable issue Report issue or concern of the market and securities during trade hour Organize seminar, related to the remarkable company. In addition, issue and concern situation at that moment, hosted by direct officers including lawyer, government representatives, or management. They all would provide in-depth information in order to make further investment decision. Arrange company visit as request in order to follow the progress of operation or any change that alter the fundamental. The company management would provide the latest information of business and the development of industry. List of brokers who create the yield in favour of the Fund Securities Companies Adkinson Securities Public Company Ltd. Asia Plus Securities Public Company Ltd. Ayudhya Securities Public Company Ltd. Bualuang Securities Public Company Ltd. CLSA Securities (Thailand) Ltd. Capital Nomura Securities Public Company Ltd. DBS Vickers Securities (Thailand) Company Ltd. TMB Macquarie Securities (Thailand) Ltd. KGI Securities (Thailand) Public Company Ltd. Credit Suisse Securities (Thailand) Ltd. Kim Eng Securities (Thailand) Public Company Ltd.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 14 Thanachart Securities Public Company Ltd. TISCO Securities Company Ltd. Trinity Securities Company Ltd. Phatra Securities Public Company Ltd. SCB Securities Company Ltd. Syrus Securities Public Company Ltd. UBS Securities (Thailand) Ltd. Seamico Securities Public Company Ltd. Siam City Securities Company Ltd. Citicorp Securities Thailand Ltd. TSFC Securities Ltd. Finansa Securities Ltd. BT Securities Company Ltd. United Securities Public Company Ltd. Barclays Capital Securities (Thailand) Ltd. Commercial Banks - Domestic Bank of Ayudhya Public Company Ltd. Bangkok Bank Public Company Ltd. Bankthai Public Company Ltd. Kasikorn Bank Public Company Ltd. Kiatnakin Bank Public Company Ltd. Krung Thai Bank Public Company Ltd. Thanachart Bank Public Company Ltd. Land and Houses Retail Bank Public Company Ltd. Siam Commercial Bank Public Company Ltd. Standard Chartered Bank (Thai) Public Company Ltd. Tisco Bank Public Company Ltd. TMB Bank Public Company Ltd. United Overseas Bank (Thai) Public Company Ltd.
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008 15 Commercial Banks – Foreign Branches ABN-AMRO Bank N.V. JPMORGAN Chase Bank, N.A. Oversea-Chinese Banking Corp., Ltd. The Bank of Tokyo-Mitsubishi Ufj, Ltd. Citibank, N.A. Calyon Corporate and Investment Bank The Hongkong and Shanghai Banking Corp., Ltd. Deutsche Bank AG. Mizuho Corporate Bank, Ltd. Sumitomo Mitsui Banking Corporation BNP Paribas The Bank of Nova Scotia Others Companies Thanachart Capital Public Company Limited
Quality Hospitality Leasehold Property Fund
Annual Report For the Period of March 14, 2008 – December 31, 2008
ING FUNDS (THAILAND) COMPANY LIMITED Background The Asset Management Company was registered on November 4, 1996 with a fully paidup registered capital of Baht 100 million. It was granted a license to operate asset management business from the Ministry of Finance under the license number 011/2539 dated January 2,1997. After ING group, a financial services conglomerate with Dutch origin, became the major shareholder; the name of the Asset Management Company was changed to “ING Mutual Funds Management (Thailand) Co., Ltd.” in April 1999 and to “ING Funds (Thailand) Co., Ltd.” in May 2003. At present, ING Funds (Thailand) Co., Ltd. is a member of the ING Group of Netherlands Network - a global banking, insurance, and investment management business operator. Location of the Office ING Funds (Thailand) Co., Ltd. is located at 130-132 Sindhorn Building Tower 1, G Floor and Sindhorn Building Tower 3,15th and 17th Floor, Wireless Road, Lumpini, Patumwan, Bangkok 10330. Tel: (02) 688-7777 Fax: (02) 688-7707-8 www. ingfunds.co.th
Quality Hospitality Leasehold Property Fund