Principal Capital Public Company Limited Prepared by...Independent Financial Advisor’s Opinion...

(Translation)

Independent Financial Advisor’s Opinion Report on the Disposition of Assets to a Connected Person

of

Principal Capital Public Company Limited

Prepared by

Sage Capital

Sage Capital Limited July 24, 2019

Independent Financial Advisor’s Opinion Report on the Disposition of Assets to a Connected Person of Principal Capital Public Company Limited

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Table of Contents

Page Executive Summary 8 Opinion Report on the Disposition of Ordinary Shares of Bangkok Management Co., Ltd. (“BG”) to a connected Person

1. Characteristics and Details of the Transaction 18 1.1 The Objectives and Background of the Transaction 18 1.2 Date / Month / Year of the Transaction 23 1.3 Relevant Parties and Key Points of the Sale and Purchase Agreement for BG

Ordinary Shares 23

1.4 Details of the Assets to be Disposed of 25 1.5 Class and Size of the Transaction 42 1.6 Total Value of Consideration 45 1.7 Basis for Determination of the Value of Consideration 46 1.8 The Expected Benefits 46 1.9 Directors Having Interest 47 1.10 Opinion of the Company’s Board of Directors 47 1.11 Opinion of the Company’s Audit Committee and/or Directors which is Different

from the Opinion of the Board of Directors 47

2. Reasonableness and Benefits of the Transaction 48 2.1 Objectives and Necessity of the Transaction 48 2.2 Advantages and Disadvantages of Entering into the Transaction 48 2.3 Risks in Entering and not Entering into the Transaction 53

3. Appropriateness of the Price and Conditions of the Connected Transaction 55 3.1 Book Value Approach 55 3.2 Adjusted Book Value Approach 56 3.3 Discounted Cash Flow Approach 58 3.4 Appropriateness of the Price for the Entry into the Transaction 69 3.5 Appropriateness of the Conditions of the Entry into the Transaction 71

4. Summary of the Independent Financial Advisor’s Opinion 73 Attachment 1 Profile of Principal Capital Public Company Limited 76 Attachment 2 Summary of the Appraisal Report for the Value of the Property of Bangkok

Management Co., Ltd. 116


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The abbreviations and definitions used by the Independent Financial Advisor in the documents have meanings as specified below: Abbreviation

Full Name

SEC or Office of the SEC Securities and Exchange Commission Stock Exchange Stock Exchange of Thailand The Company or PRIN Principal Capital Public Company Limited BG Bangkok Management Co., Ltd. VB V Brilliant Group Holding Co., Ltd. VMSD or “the Buyer” VMS Development Co., Ltd. VMS V Management Services Co., Ltd. TorJor 20/2551 Notification of the Capital Market Supervisory Board No.

TorJor 20/2551 entitled Rules on the Entering into Material Transactions Deemed as the Acquisition or Disposition of Assets

TorJor. 21/2551 Notification of the Capital Market Supervisory Board No. TorJor 20/2551 entitled Rules on Related Party Transactions

Independent Financial Advisor or IFA Sage Capital Limited Dr. Satit Dr. Satit Viddayakorn Miss Satita Miss Satita Viddayakorn Agent in the sale of the assets CBRE (Thailand) Co., Ltd. Independent Appraiser or “the Appraiser” or YEAR

Year Appraisal Co., Ltd.


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No. 06/2019 July 24, 2019 Subject: Independent Financial Advisor’s opinion towards the disposition of assets to a connected person of Principal Capital Public Company Limited Attention: Board of Directors and shareholders Principal Capital Public Company Limited The meeting of the Board of Directors of Principal Capital Public Company Limited (the “Company” or “PRINC”), Session 4/2019, on June 25, 2019, resolved to propose to the Company Shareholders’ meeting to consider and approve the disposition of 9,985,998 ordinary shares of Bangkok Management Co., Ltd. (“BG”), representing approximately 99.99 percent of its total issued and outstanding shares, with a par value of Baht 100 per share (“BG Shares”), which are held by V Brilliant Group Holding Co., Ltd. (“VB”), a subsidiary of the Company, the value of which totals not exceeding Baht 1,328,999,733.83. or at a price of approximately Baht 133.08632 per share, to VMS Development Co., Ltd. (“VMSD”) which is a connected person of the Company, as Dr.Satit Viddayakorn (“Dr.Satit), who is a Director, Chairman of the Executive Committee and a major shareholder of the Company, is an Authorized Director and a major shareholder of VMSD, holding 99.98 percent of registered and paid-up capital of VMSD, which is therefore considered a connected person in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003. The transaction is therefore considered a connected one. The structure of the entry into the transaction is as shown below:

Sage Capital


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In entering into a connection transaction pursuant to the Notification of the Capital Market Supervisory Board No. TorJor 21/2551 entitled Rules on Related Party Transactions and according to the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003, the proposed transaction is a disposition of material assets pursuant to the Notification of the Capital Market Supervisory Board Notification No. TorJor 20/2551 entitled Rules on the Entering into Material Transactions Deemed as the Acquisition or Disposition of Assets. Calculation of the size of the transaction based on the connection transaction notification yields a value of consideration of 1,329.00 Million Baht. When this is combined with the 16.59 Million Baht obligations which BG has to settle with the Company and the subsidiaries as at June 30, 2019 (based on internal information not yet reviewed by the Auditor), the total is 1,345.59 Million Baht. The size of the transaction equals 21.52 percent of the value of the Company’s net tangible assets. The transaction’s value is greater or equal to 20.00 Million Baht and greater or equal to 3.00 of the net value of the Company’s net tangible assets. The Company is therefore required to disclose information to the Stock Exchange of Thailand, to request approval from the Board of Directors and to request approval for entry into the connected transaction from the Shareholders’ Meeting with three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right, excluding interested shareholders’ equity. The Company is required to send a notice to the shareholders to attend the Shareholders’ Meeting no less than 1 4 days prior to the date of the Shareholders’ Meeting and to specify the names and numbers of shares of the shareholders who have no right to vote in the notice to attend the Shareholders’ Meeting. The Company is also required to have an independent financial advisor to give an opinion regarding


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reasonableness and fairness of the price and conditions of the transaction to present to the shareholders, in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003.

In addition, this transaction falls in the category of disposition of assets in accordance with Notification of the Capital Market Supervisory Board No. Torchor 20/2551 entitled Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.21-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets, 2004. Calculation of the sizes of the assets acquired and disposed of shows the largest transaction equal to 16.36 percent of the value of the Company’s net tangible assets based on the reviewed financial statements as at March 31, 2019, using the basis for calculation of the value of net tangible assets. The Company did not have any asset disposition transaction during the six-month period prior to the agreement to enter into this transaction. 2 The entry into the transaction is therefore considered Class 2 disposition of assets; i.e., the value is equal to 15 percent or more but lower than 50 percent. Hence, the Company is obliged to prepare an information memorandum for disclosure to the Stock Exchange. However, the Board of Directors deemed it appropriate to propose to the Shareholders’ Meeting for approval of the entry into the transaction disposing of the assets in accordance with the notification regarding material acquisition and disposition of assets as well, requiring the Company to prepare an information memorandum for disclosure and follow the same procedure as that required for entering into Class 1 asset disposition in accordance with the notification, which includes having an independent financial advisor to provide an opinion regarding the asset disposition transaction entry for presentation to the shareholders.

VMSD, which would like to purchase all the ordinary shares of BG, is a connected person of the

Company as VMSD’s major shareholder and director, Dr. Satit Viddayakorn (Dr. Satit) , is a major shareholder and Director of the Company. In addition, Dr.Satit (1) is a son of Dr. Pongsak Viddayakorn, Chairman of the Board of Directors of the Company (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the Company (3) is the father and concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a concert party of Peak Development Holdings Ltd., a shareholder of the Company. Hence, disposition of BG’s ordinary shares of which main assets are land and buildings in the categories of hotel and shop houses, currently operated by VMS, which is a connected person of the Company (please refer to details in 1.4.6.1 Lease Agreement with VMS for RetrOasis Hotel) in the name of RetrOasis Hotel, to VMSD may constitute a conflict of interest between the Company and the connected person as presently the


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Company still operates a hotel and a serviced apartment business, Marriott Executive Apartment Sathorn Vista– Bangkok and Somerset Ekamai Project.

The Company has therefore appointed Sage Capital Limited (“Independent Financial Advisor”) as the independent financial advisor to present an opinion to the shareholders regarding the disposition of assets to a connected person. In presenting an opinion to the shareholders, the Independent Financial Advisor will base the consideration on public information and documents, such as the Annual Registration Statement (Form 56-1), the Annual Report and the Company’s financial statements as well as property appraisal reports prepared by independent appraisers.

The Independent Financial Advisor‘s presentation of opinion is based on the assumption that the acquired information, assumptions and documents are complete and accurate and that there are no alterations or revisions after they were received by the Independent Financial Advisor. Hence, the Independent Financial Advisor is not in a position to certify or guarantee accuracy or completeness of the information received from the Company and parties concerned. In addition, the Independent Financial Advisor considered only the economic conditions and information perceivable at the time of the study. Hence, in the event of significant changes, the opinion of the Independent Financial Advisor, including appropriate share prices, may change accordingly. In preparing this report to present their opinion, the Independent Financial Advisor has certified that they have carefully and reasonably considered information in accordance with their professional standards and the reasons were presented based on information and objective analysis, with principal importance placed on the Company shareholders’ interest.


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Executive Summary

The meeting of the Board of Directors of Principal Capital Public Company Limited, Session 4/2019, on June 25, 2019, resolved to propose to the Company Shareholders’ to consider and approve the disposition of 9,985,998 shares of Bangkok Management Co., Ltd. (“BG”), representing approximately 99.99 percent of its total issued and outstanding shares, with a par value of Baht 100 per share (“BG Shares”), which are held by V Brilliant Group Holding Co., Ltd. (“VB”), a subsidiary of the Company, to VMS Development Co., Ltd. (“VMSD”) which is a connected person of the Company. The value of the disposition totals not exceeding Baht 1,328,999,733.83, or at a price of approximately Baht 133.08632 per share In this regard, VB is obliged to sell and transfer the shares to VMSD, strictly subject to obtaining approval from the Board of Directors’ Meeting and the Shareholder’s Meeting and the sale and purchase transaction must be conducted by October 31, 2019. VMSD has put a deposit with VB in the amount of 265,800,000 Baht, divided into (a) a 10,000,000 Baht tender guarantee for bid submission and (b) a 255,800,000 Baht deposit for making a Sale and Purchase agreement. The balance of 1,063,199,733.83 Baht will be paid to VB on the day of the transfer of BG share ownership to VMSD in cash, or by cashier’s check, or by any other method as to be agreed by the parties to the Share Sale and Purchase Agreement. VB will transfer ownership in the BG shares to VMSD upon receiving the balance amount from VMSD. VMSD will accept the transfer of all BG liabilities as at the ownership transfer date. As at June 30, 2019 (based on information from BG internal financial statements which have not been reviewed by the Auditor), BG had obligations to pay 16.59 Million Baht to the Company and the subsidiaries, divided into 13.00 Million Baht share payables to be paid to VB, 3.50 Million Baht promissory notes to be paid to VB, 7,287.67 Baht accrued interest on promissory notes to be paid to VB and a 0.86 Million Baht fee for accrual administration to be paid to the Company. VMSD agrees to arrange for BG to pay all the said amounts to the Company and the relevant subsidiary within 90 days of the transfer of ownership in BG shares. The objective of the asset disposition is to use the proceeds from the share disposition as working capital and for expansion of the hospital and medical service business in accordance with the Company’s current business strategy, which is in line with its policy to concentrate on expanding the hospital business and stop expanding the property development for sale whereby there will be no new property development project and the company is prepared to sell its land bank and existing projects on appropriate and beneficial occasions in order to obtain a source of fund for further development of the healthcare business, as resolved by the Board of Directors’ Meeting, Session 6/2018 on October 17, 2018. The information in this matter was disclosed to the Stock Exchange of Thailand on October 17, 2018. Subsequently, the Company requested the Stock Exchange of Thailand to reclassify its industry group from “Property Development and Construction” to “Services” under “Healthcare Service Services” Sector. The reclassification took effect on February 13, 2019.


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In disposition of the assets, the Company contracted CBRE (Thailand) Co., Ltd., the (Agent in the sale of the assets), which has no connection with the Company, to act as the sole agent for sale by formal tender of

1) All the BG shares, or 2) Nine plots of land with buildings in the categories of hotel and shop house at Number 503 Soi

Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, which are owned by BG The Agent in the sale of the assets publicized information about the sale of the assets, both by dealing

directly with potential buyers and using various media such as print ads, its website and social media. The tender was scheduled for May 15, 2019. VMSD was the only party formally submitting a bid of 1,329 Million Baht for all the BG shares. The Agent in the sale of the assets announced that there were three other parties interested in bidding for the purchase of the lands and buildings but they did not formally submit a bid. However, the initial prices which the three parties made known to the Agent in the sale of the assets were lower than the VMSD bid price. Class and Size of the Transaction

Entry into this transaction is considered a connected transaction of a listed company in the category of assets or services pursuant to the Notification of the Capital Market Supervisory Board No. TorJor. 21/2551, entitled Rules on Related Party Transactions and the Notification of the Board of Governors of the SET No. BorJor/Por 22-01, entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003. The size of the transaction calculated under the Related Party Transaction Rules indicates a consideration of 1,329.00 Million Baht. When combined with BG’s obligations to pay to the Company and the subsidiary, as at June 30, 2019 (based on information from BG internal financial statements which have not been reviewed by the Auditor) amounting to 16.59 Million Baht, the total value is 1,345.59 Million Baht. Compared with the value of the Company’s net tangible assets based on the consolidated financial statements of the Company as at as at March 31, 2019 which has been reviewed, which totals 6,253.94 Million Baht, the transaction size equals 21.52 percent of the total net tangible assets of the Company based on the consolidated financial statements of the Company as at March 31, 2019.

The value of this transaction is greater or equal to 20.00 Million Baht and is higher or equal to 3.00 % of

the value of the Company’s net tangible assets as at March 31, 2019. The Company is therefore obliged to disclose this information to the Stock Exchange of Thailand, to request approval from the Board of Directors and to request approval for entry into the connected transaction from the Shareholders’ Meeting with three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right, excluding interested shareholders’ equity. The Company is required to send a notice to the shareholders to attend the Shareholders’ Meeting no less than 14 days prior to the date of the Shareholders’ Meeting and to specify the


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names and numbers of shares of the shareholders who have no right to vote in the notice to attend the Shareholders’ Meeting. The Company is also required to have an independent financial advisor to give an opinion regarding reasonableness and fairness of the price and conditions of the transaction to present to the shareholders, in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003.

In addition, the transaction falls into the category of a disposition of assets pursuant to the Notification of the Capital Market Supervisory Board Notification No. TorJor 20/2551, entitled Rules on the Entering into Material Transactions Deemed as the Acquisition or Disposition of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por 21-01, entitled Disclosure of Information and Other Acts of the Listed Company Concerning the Acquisition or Disposition of Assets, 2004. The size of the asset acquisition and disposition when calculated in accordance with the net tangible asset value basis, the transaction size is the highest value of the transaction size, which equals 16.36 per cent of the value of net tangible assets based on the consolidated financial statements of the Company as at March 31, 2019 which has been reviewed, total net tangible assets of the Company in accordance with the net tangible asset value basis. In this connection, the Company has not entered into any previous disposition during the six-month period prior to this disposition. The transaction is therefore classified as Class 2 Transaction, having a transaction size of 15 per cent or more but less than 50 percent. Based on the foregoing, the Company is obliged to prepare an information memorandum concerning the disposition of assets and disclose it to the SET. However, the Board of Directors deemed it appropriate to propose to the Shareholders’ Meeting for approval of the entry into the transaction disposing of the assets in accordance with the notification on material acquisition and disposition of assets as well, requiring the Company to prepare an information memorandum for disclosure and follow the same procedure as that required for entering into Class 1 asset disposition in accordance with the notification, which includes having an independent financial advisor to provide an opinion regarding the asset disposition transaction entry for presentation to the shareholders.

The meeting of the Board of Directors, Session 4/2019, on June 25, 2019, resolved to propose to the Company Shareholders to consider and approve the disposition of all the shares of Bangkok Management Co., Ltd. (“BG”) indirectly held by the Company and to appoint Sage Capital Limited (“Independent Financial Advisor”) as the independent financial advisor to present an opinion to the shareholders regarding the disposition of assets to a connected person. An Extraordinary General Meeting of Shareholders has been scheduled for September 5, 2019.


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Advantages and disadvantageous of the entering into the transaction There are advantages and disadvantages of entering into the transaction of disposition of all the shares

of Bangkok Management Co., Ltd. (“BG”) as well as advantages of entering into the transaction. There are also advantages and disadvantages of entering into the transaction with a connected person. Risks are also involved. The following is a summary,

1) Advantages of entering into the transaction 1.1 It allows for restructuring of the Company assets to suit the business policy.กา รจ าห น่ า ย

Disposition of all the BG shares is in line with the Company’s business policy and serves to restructure the Company’s assets for appropriateness. According to the policy approved by the Board of Directors’ Meeting, Session 6/2019, on October 17, 2019, the Company will concentrate on expanding the hospital business and will stop expanding the property development for sale business with no further development of property projects from existing ones. The Company is also prepared to sell its land bank and existing projects on appropriate and beneficial occasions to use the proceeds as the source of capital for development of the healthcare business.

1.2 The Company can use the proceeds from the asset disposition to invest in the healthcare business, or to repay debts or to choose other investment options yielding better returns. The disposition of BG ordinary shares will entitle VB, which is the Company’s subsidiary, to proceeds from the sale of BG ordinary shares totaling 1,329 Million Baht, which the Company and/or the subsidiary can use as capital for development of the healthcare business in which the Company specialize, in accordance with the Company’s business policy. Alternatively, the Company may use the proceeds from the disposition of BG ordinary shares to repay borrowings from financial institutions which will enable the Company and/or the subsidiary to lessen the financial cost burden. In addition, the Company may use the proceeds as its working capital or for investing in other assets yielding better returns.

1.3 Risks from not having lessees for BG assets or from having lower rents are reduced. Although BG currently leases out land and buildings in the categories of hotel and shop houses to a connected person and an outside party, the tenants have an option to renew or not to renew the lease agreement with no penalty imposed. For the shop houses leased out for convenience store operation, the tenant has sent a non-renewal notice. The Lease agreement will terminate on October 1, 2019. There is therefore a risk of not having a


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lessee or the rent to be received in the future may be lower. Disposition of BG ordinary shares can reduce such rental risks.

1.4 Risks from receiving low returns in the event of developing the assets are reduced. Although the Company has adopted a policy to stop expanding the property development for sale business and will not launch further development projects from the existing ones, if it decided to develop the land held by BG into a condominium project in accordance with the original objective when purchasing the assets, a great deal of capital would be required to implement the project. Also, the condominium market is presently experiencing a slowdown and there is intense competition from the big players. These may impose the Company to risks in pricing and sale delay. The disposition of BG ordinary shares can reduce the risks from having lower return from developing the assets into a property development for sale project than from the disposition of the shares.

1.5 The price for the disposition of BG ordinary shares is higher than their fair value. จาก The fair value of 9,985,998 BG ordinary shares, as appraised by the Adjusted Book Value Approach, is 1,194.03 Million Baht or a fair value of approximately 119.57002 Baht per share. This is lower than VMSD’s bid price of 1,329.00 Million Baht, or approximately133.08632 Baht per share. VB’s selling of BG ordinary shares at a price higher than the fair value is beneficial to the Company and the shareholders.

2) Disadvantages of entering into the transaction Disposition of BG ordinary shares is considered restructuring of assets to align with the Company’s business policy. Moreover, the Company and/or the subsidiary can use the proceeds for investment in the healthcare business or repayment of borrowings or other investments yielding better returns. The Independent Financial Advisor is therefore of the opinion that there are no disadvantages of entering into the transaction. 3.1) Advantages of entering into the transaction with a connected person.

3) Advantages of entering into a transaction with an outside party In the disposition of BG ordinary shares, the Company has contracted CBRE (Thailand) Co., Ltd., the “Agent in the sale of the assets, which has no connection with the Company, to act as the sole agent for sale by formal tender of the assets. The Agent in the sale of the assets conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media, such as print ads, its website and social media. VMSD was the only bidder, formally submitting a bid price of 1,329 Million Baht, in a tender publicized to general potential bidders. The connected person was treated in the same way as outside


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parties. The Independent Financial Advisor is therefore of the opinion that there are no advantages of entering into the transaction with a connected person.

4) Disadvantages of entering into a transaction with a connected person 4.1 Entering into the transaction may create a conflict of interest and business

competition. VMSD, which would like to purchase all the ordinary shares of BG, is a connected person of the Company as VMSD’s major shareholder and director, Dr. Satit Viddayakorn (Dr. Satit), is a major shareholder and Director of the Company. Hence, disposition of BG’s ordinary shares of which main assets are land and buildings in the category of hotel, currently operated by VMS, which is a connected person of the Company, in the name of RetrOasis Hotel, to VMSD may constitute a conflict of interest between the Company and the connected person as presently the Company still operates two hotel and a serviced apartment businesses. However, the hotel and the serviced apartment projects operated by the Company and the subsidiary have daily room rates which are higher than the rates of RetrOasis Hotel and RetrOasis Hotel is relatively old. It is therefore not in direct competition with the hotel and serviced apartment projects operated by the Company and the subsidiary. In addition, Dr. Satit Viddayakorn, who is an authorized director and major shareholder of VMSD has signed a non-compete agreement for the Company since 2016, pledging not to engage in any business or perform any act or invest in more than 10 % of the total capital of any business which is in competition with the Company or its subsidiaries or constitute any other interest which may be in conflict with the best interest of the Company or its subsidiaries, either directly or indirectly, as well as to prevent persons implied under Section 258 of the Securities and Exchange Act B.E. 2535 (as amended) from performing such acts.

4.2 There are expenditure and time burdens concerning disclosure and execution of connected transaction requirements. As VMSD, which would like to purchase all BG ordinary shares, is a connected person of the Company and the value of the transaction of investment in BG ordinary shares is higher than 2020 Million Baht and greater than 3% of the value of the Company’s tangible assets based on the consolidated financial statements


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which have been reviewed as at March 31, 2019, the Company is required to act in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003. In fulfilling the requirement, the Company incurs additional expenditure and has time burden I considering the entry into the transaction.

Risks of entering and not entering into the transaction 1) Risks of entering into the transaction

1.1 Risks from VMSDs’ failure to obtain money to pay for the assets In entering into the transaction of disposition of BG ordinary shares to VMSD, VMSD and VB made a Sale and Purchase Agreement for BG ordinary shares, with VMSD making a payment of a 10 Million Baht tender guarantee on May 15, 2019, and a deposit for making the Agreement at the rate of 20 % of the selling price, less the tender guarantee, amounting to 255,800,000 Million Baht, on June 14, 2019, leaving a balance which VMSD is obliged to pay on the asset sale/purchase/transfer day in the amount of 1,063,200,000 Million Baht, constituting a risk if VMSD cannot find money to pay for the balance.

2) Risks of not entering into the transaction 2.1) Disposition of the assets may be delayed and the opportunity to use the proceeds received to

invest or repay debts may be lost. Disposition of BG ordinary shares or its land with buildings, which are BG’s main assets, takes time. If VB does not sell the BG shares, it is exposed to a risk of delay in the sale of BG ordinary shares or its land with buildings, which are BG’s main assets, and the Company and/or the subsidiary will lose the opportunity to use the proceeds from the asset disposition to repay borrowings from financial institutions to lessen its financial cost burden.

In valuation of BG ordinary shares, the Independent Financial Advisor used a number of approaches, each having advantages and disadvantages in different ways, summarized as follows:

Valuation approach Value based on each approach (Million Baht)

Transaction Value (Million Baht)

Comparison of appraised value with the transaction value

1. Book Value Approach 1,023.30 1,329.00 The value of the transaction is 305.70 Baht higher than the value from this approach

or is higher than the appraisal value by 23 % of the transaction value.


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2. Adjusted Book Value Approach

1,194.03 1,329.00 The value of the transaction is 134.97 Baht higher than the value from this approach or is higher than the appraisal value by

10.16 % of the transaction value. 3. Discounted Cash Flow

Approach /1 934.37 1,329.00 The value of the transaction is 394.63 Baht

higher than the value from this approach or is higher than the appraisal value by

29.69 % of the transaction value. 4. Market Comparable

Approach Not selected - The Independent Financial Advisor did not

select the Approach for appraising the value of BG ordinary shares./2

Notes: /1 The Discounted Cash Flow Approach is a method used to make a comparison of values, with an assumption that BG operates a hotel business which is presently its assets, which is not in line with the policy of the Company to concentrate on expanding the hospital business and to stop expanding the property development for sale, without additional property development projects. /2 The Independent Financial Advisor did not choose the Market Comparable Approach for appraising the value of BG ordinary shares because presently BG is engaged in the business of leasing property (mainly its land and buildings). The nature of its business is different from listed companies on the stock market. Also, it holds assets for lease at only one location and, compared to listed companies, the size of its assets is quite small. Listed companies with similar business nature and appropriate sizes cannot be found for comparison.

The Independent Financial Advisor considered the approaches for calculating the fair value of the

property and is of the opinion that the approach appropriate for this transaction is the adjusted book value approach, which takes into account the cost of property acquired and adjusts it to reflect the current market value with the difference taken from the property appraisal report prepared by the Independent Appraiser as most of BG’ assets are land and buildings in the category of hotel and shop houses located on Soi Sukhumvit 39. The price used in the transaction of disposition of all the BG ordinary shares which the Company holds through VB is 1,329 Million Baht. In comparison with the value assessed by using the adjusted book value approach, the price is 134.97 Million Baht higher than the appraised fair value, or greater than 10.16 % of the transaction value.

The Independent Financial Advisor has considered the Book Value Approach and the Discounted Cash Flow Approach and is of the opinion that they are not suitable for valuation of BG ordinary shares for the following reasons:

1) The Book Value Approach does not reflect the true market value of BG assets, nor does it reflect future obligations and liabilities.

2) The Discounted Cash Flow Approach is merely a method for making a value comparison, assuming that BG operates the hotel business which is presently its assets. This is not in line with the Company’s


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policy to concentrate on expansion of the hospital business and to stop expanding the property development for sale business, with no further property development projects from the existing ones. Summary of the opinion of the Independent Financial Advisor regarding reasonableness of disposition of assets to a connected person The Independent Financial Advisor is of the opinion that entering into the transaction of disposition of all the shares of Bangkok Management Co., Ltd. (“BG”), which is a subsidiary, held indirectly by the Company through V Brilliant Group Holding Co., Ltd. (“VB”), altogether 9,985,998 shares, constituting 99.99 percent, valued at 1,328,999,733.83 Baht, or 133.08632 Baht per share, to VMS Development Co., Ltd. (“VMSD”) was in line with the policy of the Company to concentrate on expanding the hospital business and to stop expanding the property development for sale business with no further property development projects from the existing ones. The Company can use proceeds from the asset disposition to invest in the healthcare service in accordance with the policy, or to repay debts or to choose other investment options yielding better returns. In addition, the Company has contracted the Company contracted CBRE (Thailand) Co., Ltd., which has no connection with the Company, to act as the sole agent for sale by formal tender. CBRE conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media. Although VMSD was the only bidder, the Agent in the sale of the assets revealed that there were three other parties interested in bidding for the purchase of the lands and buildings but they did not formally submit a bid. However, the initial prices which the three parties made known to the Agent in the sale of the assets were lower than the VMSD bid price. In terms of appropriateness of the price, the Independent Financial Advisor is of the opinion that the price for the entry into the transaction is appropriate as the fair price of all the BG ordinary shares held by the Company through VB was 1,194.03 Million Baht, 134.97 Million Baht lower than VMSD’s bid price of 1,329 Million Baht. The conditions for entering into the transaction are general conditions for buying and selling assets by tender. The conditions require the buying party to make a guarantee payment or parties bidding by tender and to make a deposit payment when the sale and purchase agreement is made. There is also a precondition that the selling party is obliged to sell and transfer the shares to the buying party only upon receiving approval from the Company’s Board of Directors and Shareholders’ Meeting, which is a condition suitable for a listed company. Besides, VMSD, which would like to purchase all the ordinary shares of BG, is a connected person of the Company as VMSD’s major shareholder and director, Dr. Satit Viddayakorn (Dr. Satit) , is a major shareholder and Director of the Company. In addition, Dr.Satit (1) is a son of Dr. Pongsak Viddayakorn, Chairman of the Board of Directors of the Company (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the


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Company (3) is the father and concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4 ) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a concert party of Peak Development Holdings Ltd., a shareholder of the Company Hence, disposition of BG’s ordinary shares of which main assets are land and buildings in the categories of hotel and shop houses, currently operated by VMS, which is a connected person of the Company in the name of RetrOasis Hotel, to VMSD may constitute a conflict of interest between the Company and the connected person as presently the Company still operates a hotel and a serviced apartment businesses: 1) Marriott Executive Apartment Sathorn Vista– Bangkok and 2) Somerset Ekamai Project. However, the hotel and the serviced apartment projects operated by the Company and the subsidiary have daily room rates which are higher than the rates of RetrOasis Hotel which is operated by V Management Services Co., Ltd. (“VMS”) which is a connected person of the Company as the hotel and serviced apartment projects operated by the Company and the subsidiary target customers with higher purchasing power than RetrOasis Hotel and RetrOasis Hotel is relatively old. It is therefore not in direct competition with the hotel and serviced apartment projects operated by the Company and the subsidiary. In addition, Dr. Satit Viddayakorn, who is an authorized director and major shareholder of VMSD has signed a non-compete agreement for the Company since 2016, pledging not to engage in any business or perform any act or invest in more than 10 % of the total capital of any business which is in competition with the Company or its subsidiaries or constitute any other interest which may be in conflict with the best interest of the Company or its subsidiaries, either directly or indirectly as well as to prevent persons implied under Section 258 of the Securities and Exchange Act B.E. 2535 (as amended) from performing such acts. The Company has in place a monitoring measure, having assigned Internal Audit to verify as to whether Dr. Satit Viddayakorn strictly abides by the non-compete agreement. After considering the advantages of entering into the transaction and the advantages and disadvantages of entering into a transaction with the connected person, as well as risks involved with entering into the transaction and VMSD‘s bid price, the Independent Financial Advisor is of the opinion that the shareholders should consider granting approval for the Company’s entry into the transaction.

However, the shareholders may consider the information and opinions about various points presented by the Independent Financial Advisor in making a decision to approve or not to approve the Company’s request to enter into the transaction. The decision rests with the shareholders’ judgment.


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Opinion Report on

the Disposition of Assets to a Connected Person

1.1 The Objectives and Background of the Transaction

The meeting of the Board of Directors of Principal Capital Public Company Limited, Session 4/2019, on June 25, 2019, resolved to propose to the Company Shareholders’ meeting to consider and approve the disposition of 9,985,998 shares of Bangkok Management Co., Ltd. (“BG”), representing approximately 99.99 percent of its total issued and outstanding shares, with a par value of Baht 100 per share which are held by V Brilliant Group Holding Co., Ltd. (“VB”), a subsidiary of the Company, to VMS Development Co., Ltd. (“VMSD”) which is a connected person of the Company. The value of the disposition totals not exceeding Baht 1,328,999,733.83, or at a price of approximately Baht 133.08632 per share. The structure of the entry into the transaction is as shown below:

The objective of the asset disposition is to use the proceeds from the share disposition as working capital and for expansion of the hospital and medical service business in accordance with the Company’s current business strategy, which is in line with its policy to concentrate on expanding the hospital business and stop expanding the property development for sale whereby there will be no new property development project and the company is prepared to sell its land bank and existing projects on appropriate and beneficial occasions in order

Part 1 Characteristics and Details of the Transaction


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to obtain a source of fund for further development of the healthcare business, as resolved by the Board of Directors’ Meeting, Session 6/2018 on October 17, 2018. The information in this matter was disclosed to the Stock Exchange of Thailand on October 17, 2018. Subsequently, the Company requested the Stock Exchange of Thailand to reclassify its industry group from “Property Development and Construction” to “Services” under “Healthcare Service Services” Sector. The reclassification took effect on February 13, 2019.

Entry into this transaction is considered a connected transaction of a listed company in the category of

assets or services pursuant to the Notification of the Capital Market Supervisory Board No. TorJor. 21/2551, entitled Rules on Related Party Transactions and the Notification of the Board of Governors of the SET No. BorJor/Por 22-01, entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003. The value of the transaction calculated under the Related Party Transaction Rules indicates a consideration of 1,329.00 Million Baht. When this is combined with the 16.59 Million Baht obligations which BG has to settle with the Company and the subsidiaries as at June 30, 2019 (based on internal information not yet reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations.), the total is 1,345.59 Million Baht. Compared with the value of the Company’s net tangible assets based on the consolidated financial statements of the Company as at as at March 31, 2019 which has been reviewed, which totals 6,253.94 Million Baht, the transaction value equals 21.52 percent of the total net tangible assets of the Company based on the consolidated financial statements of the Company as at March 31, 2019.

The value of this transaction is greater or equal to 20.00 Million Baht and is higher or equal to 3.00 % of the value of the Company’s net tangible assets as at March 31, 2019. The Company is therefore obliged to disclose this information to the Stock Exchange of Thailand, to request approval from the Board of Directors and to request approval for entry into the connected transaction from the Shareholders’ Meeting with three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right, excluding interested shareholders’ equity. The Company is required to send a notice to the shareholders to attend the Shareholders’ Meeting no less than 14 days prior to the date of the Shareholders’ Meeting and to specify the names and numbers of shares of the shareholders who have no right to vote in the notice to attend the Shareholders’ Meeting. The Company is also required to have an independent financial advisor to give an opinion regarding reasonableness and fairness of the price and conditions of the transaction to present to the shareholders, in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003.

In addition, the transaction falls into the category of a disposition of assets pursuant to the Notification of the Capital Market Supervisory Board Notification No. TorJor 20/2551, entitled Rules on the Entering into Material


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Transactions Deemed as the Acquisition or Disposition of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por 21-01, entitled Disclosure of Information and Other Acts of the Listed Company Concerning the Acquisition or Disposition of Assets, 2004. The value of the asset acquisition and disposition when calculated in accordance with the net tangible asset value basis, the transaction value is the highest value of the transaction value, which equals 16.36 per cent of the value of net tangible assets based on the consolidated financial statements of the Company as at March 31, 2019 which has been reviewed, total net tangible assets of the Company in accordance with the net tangible asset value basis. In this connection, the Company has not entered into any previous disposition during the six-month period prior to this disposition. The transaction is therefore classified as Class 2 Transaction, having a transaction value of 15 per cent or more but less than 50 percent. Based on the foregoing, the Company is obliged to prepare an information memorandum concerning the disposition of assets and disclose it to the SET. However, the Board of Directors deemed it appropriate to propose to the Shareholders’ Meeting for approval of the entry into the transaction disposing of the assets in accordance with the notification on material acquisition and disposition of assets as well, requiring the Company to prepare an information memorandum for disclosure and follow the same procedure as that required for entering into Class 1 asset disposition in accordance with the notification, which includes having an independent financial advisor to provide an opinion regarding the asset disposition transaction entry for presentation to the shareholders.

The Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003, requires that the Company make an arrangement to have an Independent Financial Advisor. The Company has therefore appointed Sage Capital Limited (“Independent Financial Advisor”) to act as the independent financial advisor to prepare an opinion to present to the shareholders regarding this asset disposition to a connected person.

In disposition of the assets, the Company contracted CBRE (Thailand) Co., Ltd., the (Agent in the sale of the assets), which has no connection with the Company, to act as the sole agent for sale by formal tender of

1) All the BG shares, or 2) Nine plots of land with buildings in the categories of hotel and shop house at Number 503 Soi

Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, which are owned by BG. The contract hiring the agent in the sale of the assets is summarized as follows: Agreement parties : Principal Capital Public Company Limited (“Hirer”)

CBRE (Thailand) Co., Ltd. (“Agent in the sale of the assets”) Agreement date : February 11, 2019


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Agreement term : February 11, 2019 – August 10, 2019 (six months) Agreement type : Agreement appointing an Exclusive Agent in asset formal tender Asset offered for sale : 1. Land and building of hotel category on Soi Sukhumvit 29, with nine

title deeds (Title Deeds Numbers 3570 50500 50504 50505 50506 50507 50508 50509 and 50510, total area: 1-2-51 rai or

2. All ordinary shares of BG Scope of operation : 1. Prepare information about the assets including relevant information

and present the information to potential buyers 2. Prepare marketing materials; e.g., information, the Hirer’s Terms of

Reference as well as other documents pertaining to the tender process for potential buyers

3. Coordinate with the Hirer and its lawyer to prepare tender documents which include the Sale and Purchase Agreement and other documents used in the tender such as the Confidentiality Agreement, Memorandum and Written Notice for potential buyers

4. Through coordination with the Hirer, manage verification of the assets by potential buyers; prepare marketing information to convince and negotiate with potential buyers to support their decision making.

5. Make recommendations regarding the sale and the tender to ensure that the tender will be successful and the highest possible price will be attained; advise the seller on answering bidders’ questions and negotiation tactics for use with potential buyers.

6. Coordinate and communicate directly with the bidder regarding the tender procedure and other irrelevant information.

7. Prepare written reports for submission to the seller throughout the sale process

8. Recommend appropriate price and conditions for the sale based on the condition and features of the assets

9. Prepare a list of target buyers and deal directly with the buyers to offer the assets for sale

10. Analyze the proposal and announce the winner of the tender as selected by the Hirer.


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11. Coordinate with the Hirer and the selected bidder in the event the bidder proposes additional conditions on the sale of the property up until the Company and the bidder agree to make a Sale and Purchase Agreement.

12. Coordinate with the buyer and the hirer’s lawyer in registration of the asset transfer

Tender date : May 15, 2019

The Agent in the sale of the assets publicized information about the sale of the assets, both by dealing directly with potential buyers and using various media such as print ads, its website and social media. The tender was scheduled for May 15, 2019. VMSD was the only party formally submitting a bid of 1,329 Million Baht for all the BG shares. The Agent in the sale of the assets announced that there were three other parties interested in bidding for the purchase of the lands and buildings but they did not formally submit a bid. However, the initial prices which the three parties made known to the Agent in the sale of the assets were lower than the VMSD bid price. VMSD and VB made a Share Sale and Purchase Agreement dated June 14, 2019. As part of the process, VMSD has paid a total deposit of 265,800,000 Million Baht to VB, divided into (a) 10 Million Baht as a guarantee for submitting the bid and (b) a 255.80 Million Baht deposit for making a Sale and Purchase Agreement and will pay the outstanding amount, 1,063.20 Million Baht on the day of the transfer of share ownership to VMSD in cash or by cashier’s check, or by any other method as to be agreed by the parties to the Share Sale and Purchase Agreement. In this regard, in the event the Meeting of the Company’s Board of Directors and/or the Shareholders’ Meeting resolves not to approve the entry into the transaction, VB is obliged to return all the deposit it has received to VMSD within seven days of the day the Meeting of the Company’s Board of Directors and/or the Shareholders’ Meeting resolves not to approve the entry into the transaction, with no interest. VB is obliged to sell and transfer the shares to VMSD, strictly subject to obtaining approval from the Board of Directors’ Meeting and the Shareholder’s Meeting and the sale and purchase transaction must be conducted by October 31, 2019. VB will transfer ownership in the BG shares to VMSD upon receiving the balance amount from VMSD. VMSD will accept the transfer of all BG liabilities as at the ownership transfer date. As at June 3 0 , 2 0 1 9 (based on information from BG internal financial statements which have not been reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations), BG had obligations to pay 16.59 Million Baht to the Company and the subsidiaries, divided into 13.00 Million Baht share payables to be paid to VB, 3.50 Million Baht promissory notes to be paid to VB, 7,287.67 Baht accrued interest on promissory notes to be paid to VB and a 0.86 Million Baht fee for accrual administration to be paid to the Company. VMSD agrees to arrange for


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BG to pay all the said amounts to the Company and the relevant subsidiary within 9 0 days of the transfer of ownership in BG shares.

1.2 Date / Month / Year of the Transaction

As the Meeting of the Board of Directors, Session 4/2019, on June 25, 2019, resolved to propose to the Extraordinary meeting of shareholders, Session 1/2019 (Shareholders’ Meeting to consider approving the disposition of BG ordinary shares, the Company will enter into the transaction of disposition of BG shares after approval has been granted by the Shareholders’ Meeting, scheduled for September 5, 2562, which is an essential precondition stipulated in the Share made on June 14, 2019 between VB and VMSD. As a preliminary estimate, if approval for the transaction is granted by the Shareholders’ Meeting, the entry into the transaction is expected to be completed by October 2019.

1.3 Relevant Parties and Key Points of the Sale and Purchase Agreement for BG Ordinary Shares

1.3.1 Relevant Parties Buying party : V Brilliant Group Holding Co., Ltd. (“VB”) Selling party : VMS Development Co., Ltd. (“VMSD”) Relationship : VMSD has a major shareholder and director, Dr. Satit Viddayakorn, (Dr.

Satit) who is a major shareholder and director of the Company. Details are as follows:

(ก) As at June 25, 2019, Dr. Satit directly held 99.99 % of VMSD shares and was a directpr of VMSD, and

(ข) As at July 15, 2019, Dr.Satit directly held 806,728,800 Company shares, or 24.90 % of all the Company shares and was a Company Director.

In addition, Dr.Satit (1) is a son of Pongsak Viddayakorn, Chairman of the Board of Directors of the Company (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the Company (3) is the father and concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a


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concert party of Peak Development Holdings Ltd., a shareholder of the Company.

1.3.2 Key Points of the Sale and Purchase Agreement for BG Ordinary Shares

Agreement date : June 14, 2019 Selling party : 1. V Brilliant Group Holding Co., Ltd. (“VB”)

2. Miss Satita Viddayakorn 3. Miss Monticha Autchapun (together referred to as “Selling

party” Buying party : VMS Development Co., Ltd. (“VMSD”) Assets to be bought/sold

: All ordinary shares of Bangkok Management Co., Ltd. (“BG”) (9,986,000 shares) VMSD will buy the shares from

1. V Brilliant Group Holding Co., Ltd. ( 9,985,998 shares) 2. Miss Satita Viddayakorn (1 share) 3. Miss Monticha Autchapun (1 share)

Asset price : Total value 1,329,000,000 Baht Payment condition : - First payment A tender guarantee of 10 Million Baht on May 15,

2019 - Second payment A deposit at 20 % of the selling price of the

assets, less the tender guarantee, amounting to 255,800,000 Million Baht on the Enforcement Date of the Agreement

- Third payment Payment for the balance of the asset selling price, amounting to 1,063,200,000 Baht on the day the assets are sold and transferred (by October 31, 2019, as specified).

Other essential conditions

: 1. The selling party is obliged to sell and transfer the shares to the buying party only upon receiving approval from the Company’s Board of Directors’ and Shareholders’ Meetings, which must be convened within October 31, 2019.

2. The parties shall conduct the buying/selling within October 31, 2019.

3. The Buying Party agrees to pay the balance of the payment for the


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purchase of BG shares to the Selling Party on the day of asset sale/purchase/ transfer.

4. The Selling Party will transfer ownership in BG shares to the Buying Party upon receiving the balance of the payment for the purchase of the assets from the Buying Party.

5. In the event the Meeting of the Company’s Board of Directors and/or the Shareholders’ Meeting resolves not to approve on the agenda item related to the buying/selling of BG shares, VB, the selling party, agrees to return the tender guarantee and the deposit with no interest to the buying party within seven days of the day the Meetings of the Company’s Board of Directors and/or the Shareholders’ resolves not to approve on the said agenda item. If the buying party returns the tender guarantee and the deposit after the lapse of the period cited above, the selling party agrees to pay interest at the rate of 7.5 % per annum.

6. The Selling and Buying Parties will assume the responsibility for expenses and taxes arising out of this Sale and Purchase Agreement in according with their respective roles and duties.

1.4 Details of the Assets to be Disposed of

VB, which is a subsidiary of the Company, will disposed of all investments in BG ordinary shares which it is holding in the amount of 9,985,998 shares, with a par value of 100 Baht per share, representing 99.99 % of BG’s registered and paid-up capital. BG details are as follows:

1.4.1 Nature of business Bangkok Management Co., Ltd. was incorporated on June 19, 1992. It is located at Number 29,

Floor 23, Bangkok Business Center Building, Sukhumvit 63 Road, Klongtan Nua, Wattana, Bangkok 10110. It is engaged in property development and rental. Presently, is has a registered and paid-up capital of 998,600,000 Baht, divided into 9,986,000 ordinary shares, with a par value of 100 Baht per share.

Currently, BG owns nine plots of land and buildings in the categories of hotel and shop house at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok. (For details, please see 1.4.5 Details of BG main assets).


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1.4.2 Shareholding structure BG’s shareholding structure as at June 30, 2919

Shareholder Number of shares

%

1. V Brilliant Group Holding Co., Ltd. 9,985,998 99.99 2. Miss Satita Viddayakorn 1 0.00 3. Miss Monticha Autchapun 1 0.00

Total 9,986,000 100.00 V Brilliant Group Holding Co., Ltd. Is a subsidiary of the Company, with the Company holding 99.99 % of the

5,772,807,700 Baht registered and paid-up capital.

1.4.3 Board of Directors BG’s Board of Directors as at June 30, 2919, comprising four Directors:

Name Position 1. Dr. Satit Viddayakorn Director 2. Mr. Veera Srichanachaicho Director 3. Ms.Preeyaporn Aphiwathwitthaya Director 4. Miss Satita Viddayakorn Director

The authorized directors are Dr. Satit Viddayakorn, Mr. Veera Srichanachaichok, Ms.Preeyaporn Aphiwathwitthaya and Miss Satita Viddayakorn, two of whom can cosign to bind the company, with the company seal affixed.


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1.4.4 Summary of financial information and an analysis of the operation

1.4.4.1 Financial statement Statements of financial position

Item

December 31, 2016 December 31, 2017 December 31, 2018 March 31, 2019 (reviewed) /1

Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Assets Current assets Cash and cash equivalents

0.89 0.03 8.67 0.29 1.04 0.10 1.39 0.14

Restricted deposits at financial institutions - current

0.06 0.00 - - - - - -

Short-term investments - - 558.19 18.72 - - - - Other receivables 0.25 0.01 0.04 0.00 - - - - Short-term loans to related parties

- - 1,143.87 38.37 - - - -

Other current assets 6.76 0.24 14.97 0.50 15.11 1.44 15.13 1.44 Total current assets 7.96 0.29 1,725.73 57.88 16.15 1.54 16.52 1.58 Non-current assets Investment property, net 2,777.77 99.70 1,255.18 42.10 1,033.13 98.42 1,031.37 98.38 Equipment, net 0.08 0.00 0.06 0.00 0.04 0.00 0.03 0.00 Other non-current assets 0.45 0.02 0.44 0.01 0.42 0.04 0.42 0.04 Total non-current assets 2,778.29 99.71 1,255.68 42.12 1,033.59 98.46 1,031.82 98.42 Total assets 2,786.25 100.00 2,981.42 100.00 1,049.74 100.00 1,048.34 100.00 Liabilities and equity Current liabilities Other payables 0.55 0.02 0.25 0.01 13.18 1.26 13.21 1.26 Short-term borrowings from related parties

37.58 1.35 - - - - - -


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Item

December 31, 2016 December 31, 2017 December 31, 2018 March 31, 2019 (reviewed) /1

Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Income tax payable - - 66.99 2.25 3.49 0.33 3.50 0.33 Advances received from customers- current

6.31 0.23 6.31 0.21 6.31 0.60 6.31 0.60

Other current liabilities 0.04 0.00 0.01 0.00 0.00 0.00 0.00 0.00 Total current liabilities 44.49 1.60 73.57 2.47 22.99 2.19 23.02 2.19 Non-current liabilities Advances received from customers

15.95 0.57 9.63 0.32 3.32 0.32 1.74 0.17

Other non-current liabilities

0.12 0.00 0.13 0.00 0.13 0.01 0.13 0.01

Total non-current liabilities

16.07 0.58 9.76 0.33 3.45 0.33 1.87 0.18

Total liabilities 60.56 2.17 83.32 2.79 26.44 2.52 24.89 2.37 Equity Authorized share capital 2,850.60 102.31 2,850.60 95.61 998.60 95.13 998.60 95.26 Issued and paid-up share capital

2,850.60 102.31 2,850.60 95.61 998.60 95.13 998.60 95.26

Retained earnings (deficits)

Appropriated - legal reserve

- - 25.30 0.85 27.81 2.65 27.81 2.65

Unappropriated (124.91) (4.48) 22.19 0.74 (3.11) (0.30) (2.96) (0.28) Total equity 2,725.69 97.83 2,898.09 97.21 1,023.30 97.48 1,023.45 97.63 Total liabilities and equity 2,786.25 100.00 2,981.42 100.00 1,049.74 100.00 1,048.34 100.00 Note: /1 Figures for the first three months of 2019 were reviewed by BG for preparation of the company’s consolidated financial statements


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Profit and loss statement

Item 2016 2017 2018 Quarter 1/ 2019

Audited Audited Audited Reviewed/1

ล้านบาท ร้อยละ ล้านบาท ร้อยละ ล้านบาท ร้อยละ ล้านบาท ร้อยละ Revenue Revenue from rental

8.96 99.68 9.02 0.89 9.03 16.68 2.26 100.00

Other revenues 0.03 0.32 999.66 99.11 45.11 83.32 - - Total revenue 8.98 100.00 1,008.67 100.00 54.15 100.00 2.26 100.00 Expenses Rental costs (7.05) (78.44) (7.05) (0.70) (7.05) (13.02) (1.76) (78.01) Administrative expenses

(12.39) (137.95) (216.88) (21.50) (12.81) (23.66) (0.31) (13.62)

Total expense (19.44) (216.39) (223.93) (22.20) (19.86) (36.67) (2.07) (91.63) Profit before finance costs and income tax

(10.46) (116.39) 784.75 77.80 34.29 63.33 0.19 8.37

Finance costs (7.37) (82.01) (0.57) (0.06) - - - - Profit before income tax

(17.82) (198.40) 784.18 77.74 34.29 63.33 0.19 8.37

Income tax expense

- - (132.87) (13.17) (6.91) (12.77) (0.04) (1.67)

Net profit (17.82) (198.40) 651.31 64.57 27.38 50.56 0.15 6.70 Note: /1 Figures for the first three months of 2019 were reviewed by BG for preparation of the company’s consolidated financial statements

1.4.4.2 Explanation and analysis of the financial position and operating results Operating results

BG has been engaged in property development and rental, details of which are as follows: BG rented the two-story and three-story hotel buildings and two-unit shop houses to VMS, a connected company for hotel business operation. (2) BG rented two units of two-story shop houses to CP ALL Public Company Limited, a company not connected for convenience store operation. And (3) BG rented part of the ground floor of


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the hotel buildings to Wiwatta Clinic Co., Ltd., a connected person, to operate a sanitarium business. Details of BG operating results from 2016 to Quarter1/2019 are as follows:

Total income BG’s total income is from rents and other income. Rent income is divided into rent and compensation for

renting out. BG’s compensation for renting out shop houses to CP ALL Public Company Limited to operate a convenience store is at a fixed rental rate for three years from 2019 to Quarter1/2019. BG’s total incomes in 2016, 2017, 2018 and Quarter1/2019 were 8.98, 1,008.67, 54.15 and 2.26 Million Baht, respectively.

BG’s income in 2017 totaled 1,008.67 Million Baht, increasing from the previous year by 999.69 Million Baht, or by 11,127.02 %, as a result of the increase in rents by 60,631.56 Baht, representing an increase of 0.68 % due to full year recognition of the new rental rate for the renting of shop houses for convenience store operation. There was also an increase in the rental rate for the hotel buildings in July 2017 and an increase in other income by 999.63 Million Baht, resulting from the sale of land and a building under construction, a 34-story hotel project on Soi Sukhumvit 27. The sale yielded a profit of 984.47 Million Baht. BG also had other incomes from interest on bonds and loans to related businesses totaling 15.19 Million Baht.

As for 2018, the income dropped by 954.53 Million Baht, or 94.63 %, compared to total income in 2017 because of the 984.47 Million Baht profit made in 2017 from the sale of the assets. In 2018, there was an increase in rents by 18,000 Million Baht, or a 0.20 % increase, resulting from recognition of a rental income increase due to a full year extension of the rental contract for the hotel buildings. Other incomes was down from 2017 by 954.54Million Baht, or 95.49 %. IN 2018, BG had interest income of 9.95 million Baht from short-term loans to related businesses and hand profits totaling 34.00 Million Baht from the sales of vacant land in Rayong and Udon Thani Provinces.

BG’s total income in Quarter/2019 dropped by 18.74 Million Baht from Quarter/2018 of which total income was 20.99 Million Baht, representing a drop of 89.24 % because in Quarter/2018 there was profit from the sale of vacant land in Udon Thani Province in the amount of 10.47 Million Baht, interest income from short-term loans to a related business (VB) in the amount of 7.33 Million Baht and unrealized gain from short-term investment in trading securities (unit trust) in the amount of 0.95 Million Baht. Gross profit and gross profit margin

BG’s costs of renting in 2016, 2017, 2018 and Quarter1/2019 were 7.05 Million Baht, 7.05 Million Baht, 7.05 Million Baht and 1.77 Million Baht, or 78.69, 78.16, 78.01, and 78.2 % of income from rents, respectively. Its gross profit from rental in 2016 amounted to 1.91 Million Baht, and in 2017 increased by 60,631.58 Baht to 1.97 Million Baht, representing an increase of 3.18 %. In 2018, gross profit was1.99 Million Baht, increasing from 2017 by17, 999.96 Baht or 0.91 %. And in Quarter 1/2019, BG’s gross profit from rent was 0.49 Million Baht,


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increasing from the corresponding period of the previous year by 679.71 Baht due to diminishing depreciation Gross profit in 2016-2018 and Quarter 1/2019accounted for 21.31, 21.84 21.99, and 21.80 % of rental income in the respective year.

Administrative expenses Administrative expenses incurred by BG in 2016 totaled 12.39 Million Baht, 137.95 % of its total income. In 2017, the company’s administrative expenses totaled 216.88 Million Baht, 21.50 % of the total income. The increase in the administrative expenses in 2017 was attributed to expenses related to the sale of land and building under construction on Soi Sukhumvit 27 (213.79 Million Baht – comprising sale expenses, the transfer fee and the specific business tax). For 2018, BG had administrative expenses totaling 12.81 Million Baht, 23.66 % of total income. The expenses included 10.06 Million Baht related to the sales of vacant land in Rayong and Udon Thani Provinces, comprising the transfer fee and the specific business tax. As for Quarter 1/2019, BG’s administrative expenses totaled 0.30 Million Baht, or 13.42 % of total income. The period’s administrative expenses decreased by 12.79 from Quarter 1/2018 when administrative expenses totaled 5.87 Million Baht, a 94.83 % decrease because there were legal advisory fees for the sales of vacant lands in Rayong and Udon Thani Provinces, totaling 0.53 Million Baht, and there were also transfer fees and specific business taxes totaling 4.97 Million Baht for the land sales.

Financial costs BG had financial costs in 2016 and 2017 of 7.37 and 0.57 Million Baht, respectively, constituting 82.01 and 0.06 % of total income of the respective year. In 2018 and Quarter1/2019, BG had no financial costs as there were no interest bearing liabilities during the year.

Net profit (loss) In 2016, BG had a net loss of 17.82 as it had 8.98 Million Baht of total income while cost of rentals totaled 7.05 Million Baht, sale and administrative expenses totaled 12.39 Million Baht and there were finance charges totaling 7.37 Million Baht.

In 2017, there was a net profit of 651.31Million Baht as there was an extra income from the sale of land and building under construction on Soi Sukhumvit 27, which yielded 984.47 Million Baht profit. Finance charges decreased from 2016 by 6.80 Million Baht.

In 2018, there was a 27.38 million Baht net profit, down from 20017by 95.80 % due to lower other income. During 2018, there was income totaling 249.00 Million Baht from the sales of vacant land in Rayong and Udon Thani Provinces which yield profits totaling 34.00 million Baht and there were no finance charges.

BG’s net profit in Quarter 1/2019 totaled 0.15 Million Baht, decreasing by 10.39 Million Baht from the first three months of 2018 (10.54 Million Baht), the main reason was because in the first three months of 2018 BG had profit of 10.47 Million Baht from the sale of vacant land in Udon Thani Province, interest income from loans to a


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related business (VB) of 7.33 Million Baht and unrealized gains from short-term investment in trading securities (unit trust) of 0.95 Million Baht. Administrative expenses of the period totaled 5.87 Million Baht.

Financial Positon Assets In 2016, BG’s assets totaled 2,981.42 Million Baht, the major item being investment property – net,

accounting for 2,777.77 Million Baht, and representing 99.70 of total assets. Said investment property - net comprised:

1) Four plots of vacant land, with area totaling 40-0-58.9 rai in Tambon Ban Chang, Ban Chang District, Rayong Province, with a book value of 96.93 Million Baht.

2) 17 plots of vacant land, with area totaling 5-3-35.2 rai in Tambon Mak Kaeng, Mueng Disrrict, Udon Thani Province, with a book value of 118.07 Million Baht

3) Land and building under construction, a 34-story hotel building on Soi Sukhumvit 27, Khlongtoei Nua, Wattana, Bangkok, with a book value of 118.07 1,515.53 Million Baht

4) Land, buildings and improvements which are hotel buildings and shop houses on Soi Sukhumvit 29, Sukhumvit Road, Khlongtoei Nua, Wattana, Bangkok, with a book value of 1,047.23 Million Baht.

In 2017, BG‘s assets totaled 2,981.42 Million Baht, increasing 195.17 Million Baht, or 7.00 %, compared to total assets in 2016. Property for investment – net totaled 1,255.18 Million Baht, decreasing by 1,522.58 Million Baht, or 54.81 % from 2016 due to the sale of land and a building under construction on Soi Sukhumvit 27, which was a 34-story hotel building, valued at 1,144.92 and 370.61 Million Baht, respectively, to a person not connected. In addition, BG had short-term investment in trading security – investment units one year held to maturity securities – treasury bills, totaling 558.19 Million Baht and short-term loans to a related business (VB) totaling 1,143.87 Million Baht.

For 2018, BG’s assets totaled 1,049.74 Million Baht, down by 1,931.68 Million Baht or 64.79 % compared to total assets as at December 31, 2017 due to maturity of short-term investments of which values totaled 558.26 Million Baht and short-term loans to related parties of which values totaled 1,141.00 Million Baht as well as the sales of vacant land in Rayong and Udon Thani Provinces with a total value of 215.00 Million Baht.

At the end of Quarter 1/ 2019, BG’s assets totaled 1,048.34 Million Baht. Its main assets were investment property – net, equal to 1,031.37 Million Baht, representing 98.38 % of total assets. These are land, buildings and improvements. The buildings are the hotel buildings and the shop houses on Soi Sukhumvit 29. The Quarter-end total assets decreased by 1.39 Million Baht, or 0.13 % from total assets at the end of 2018, which stood at 1,049.74 Million Baht. The main reason was depreciation of investment property by 1.76 Million Baht and the


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increase in cash and cash equivalents by 0.35 Million Baht, or an increase of 34.07 % from cash and cash equivalents in the previous period.

Liabilities In 2016, BG’s liabilities totaled 60.56 Million Baht, the item being short-term borrowings from a related

party (VB), 37.58 Million Baht, or 62.06 % of total liabilities. The company’s liabilities in 2017 totaled 83.32 Million Baht, increasing by 22.76 Million Baht, or 37.58 %,

from total liabilities as at December 31, 2019, the main item being deferred income taxes totaling 66.99 Million Baht, or 80.39 % of total liabilities.

In 2018, liabilities totaled 26.44 Million Baht, decreasing by 56.89 Million Baht, or 68.27 % from total liabilities as at December 31 , 2019 , due to reduction by 63.50 Million Baht of deferred income taxes from 66.99 Million Baht, in 2017 to 3.49 Million Baht, while share payables, resulting from the capital decrease in 2018, rose by 13.00 Million Baht.

At the end of Quarter 1/2019, BG’s liabilities totaled 24.89 Million Baht, decreasing by 1.54 Million Baht, or 5.84 % from the end of 2018. The decrease is attributed to the decrease in deferred income by 1.58 Million Baht caused by amortization of deferred income from leasing the hotel buildings to a related business.

Shareholders’ equity During 2016, BG’s shareholders’ equity equaled 2,725.69 Million Baht, paid-up capital 2,850.60 Million Baht and accumulated loss 124.91 Million Baht. Shareholders’ equity in 2017 rose by 172.41 Million Baht to 2,898.09, an increase of 6.33 %, compared to the shareholders’ equity as at December 31, 2016. The paid-up capital remained unchanged at 2,850.60 Million Baht and there were retain earnings totaling 47.49 Million Baht, resulting from the year’s net profit of 651.31 Million Baht. Dividends totaling 478.90 Million Baht were paid during the year.

In 2018, shareholders’ equity stood at 1,023.30 Million Baht, down by 1,874.79 Million Baht, or 64.69 %, as there was a capital decrease and the company’s issued and paid-up capital came down to 998.60 Million Baht, as the Extraordinary General Meeting of Shareholders’ on March 26, 2018, resolved to decrease the company’s registered capital from 28,506,000 ordinary shares, with a par value of 100 Baht per share to 9,986,000 ordinary shares, with a par value of 100 Baht per share. The capital increase was registered with the Ministry of Commerce on April 27, 2018. BG also had 24.70 Million Baht of retained earnings, decreasing by 22.79 Million Baht, or 47.99 %, from the previous year following the dividend payouts totaling 50.17 Million Baht. At the end of Quarter 1/2019, BG’s shareholders’ equity was at 1,023.45 Million Baht, rising by 0.15 Million Baht, or 0.01 % from the end of 2018. The decrease in the shareholders’ equity in this quarter was caused by the increase of retained earnings from 24.70 Million Baht at the end of 2018 by 0.15 Million Baht to 24.85


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Million Baht at the end of Quarter 1/2019, an increase of 2.37 %, resulting from the operation in Quarter 1/2019 in which BG generated a profit of 0.15 Million Baht.

1.4.5 Details of BG main assets

Presently, BG holds ownership of nine plots of land including building s of hotel and shop house categories at 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, with the following details:

Property features : Nine adjacent plots of land with a total area of 1-2-51.0 rai, with buildings in the hotel categories having 63 rooms, under the name of RetrOasis and four units of shop houses

Property location

: Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok

Land Right Document

: Nine title deeds, numbers 3570 50500 50504 50505 50506 50507 50508 50509 and 50510

Total area : 1 rai 2 ngarn 51.0 square wah Buildings : 1) A three-story hotel building

2) A two-story hotel building A two-story hotel building 1) A swimming pool 2) A unit of three-story shop house 3) Three units of two-story shop house The four shop houses are adjacent to Sukhumvit Road, with the ground floor of two units opened for use as an entrance/exit. The front counters of the hotel are in the back. The other two units are rented out for use as a convenience store.

Registered charges : -None - Appraised Priced of the property as appraised by the independent appraiser

: 1,204,350,000 Baht (For details, please refer to Attachment 2: Summary of the Appraisal Report for the Value of the Property of Bangkok Management Co., Ltd.

Current uses : 1) Rented out to a connected person for operation of the RetrOasis Hotel business. Area: 2,050 sq m.

2) Rented out to a person not connected to operate a convenience store

3) Rented of to a connected person (100 sq m)


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(Please refer to detains in 1.4.6 Major contracts for business operations

Relevant laws : The land and the buildings are in a zone subject to the Bangkok Comprehensive City Plan, by virtue of the Ministerial Decree B.E.2556, with the color code: brown (Yor.10-4) very dense residential area.

Relevant license : BG has been granted a license to operate a hotel business in accordance with Section 15 of the Hotel Act, B.E. 2547”, under the name “RetrOasis” The hotel business operation license can be transferred to another party in accordance with the Notification of the Ministry of Interior entitled Criteria and Procedure for Requesting a Transfer and the Permission to Accept a Transfer of a Hotel Business Operation License.

Source: Property Appraisal Report, prepared by Year Appraisal Co., Ltd.

1.4.5.1 Location of the property

Source: Property Appraisal Report, prepared by Year Appraisal Co., Ltd

Location

of the property


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1.4.5.2 Feature of the land pieces

Details of title deeds

1. Title Deed Number 3570 Parcel Number 4164 Area 0-2-54 rai 2. Title Deed Number 50500 Parcel Number 4164 Area 0-2-12 rai 3. Title Deed Number 50504 Parcel Number 4164 Area 0-0-14 rai 4. Title Deed Number 50505 Parcel Number 4164 Area 0-0-15 rai 5. Title Deed Number 50506 Parcel Number 4164 Area 0-0-9.0 rai 6. Title Deed Number 50507 Parcel Number 4164 Area 0-1-9.0 rai 7. Title Deed Number 50508 Parcel Number 4164 Area 0-1-9.0 rai 8. Title Deed Number 50509 Parcel Number 4164 Area 0-2-54 rai

9. Title Deed Number 50510 Parcel Number 4164 Area 0-2-54 rai Source: Property Appraisal Report, prepared by Year Appraisal Co., Ltd.


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1.4.5.3 features of the buildings

Details of the buildings 1. Three-story hotel building 2. Two-story hotel building 3. Three-story shop-houses, two units 4. Two-story shop-houses, two units (7-11)

Source: Property Appraisal Report, prepared by Year Appraisal Co., Ltd. Photos of the property (taken on July 8, 2019)

1.4.5.4 Photo of the part of the property rented to VMS to operate a hotel business


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a) Photo of property rented for operating a convenience store

b) Photo of property rented for operating a clinic

1.4.6 Major contracts for business operations

BG has made a contract for rental of land and hotel buildings and shop houses at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, with details as follows:

1.4.6.1 Lease agreement with VMS for RetrOasis Hotel


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Lessor : Bangkok Management Co., Ltd. (“BG”) Tenant : V Management Services Co., Ltd. (“VMS”)

VMS is a person connected with the Company as its major shareholder and director, Miss Satita Viddayakorn, is a major shareholder of the Company who, as at July 15, 2019, held 1,760,115,114 shares of the Company, constituting 54.32 % of the registered and paid-up capital (holding 498,054,588 shares directly and another 1,262,060,526 shares through UBS AG Hong Kong Branch for Miss Satita Viddayakorn). Miss Satita is also a daughter of Dr. Satit Viddayakorn, a Director and major shareholder of the Company who, as at July 15, 2019, held 806,728,800 shares of the Company, constituting 24.90 % of the registered and paid-up capital

Leased property : Two-story and three-story hotel buildings and two shop house units at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok

Total leased area : 2,050 sq m Lease term : Three years, from July 1, 2017 to June 30, 2020 Rental rate : 63,000 Baht per month Other major conditions : 1. The leased buildings are to be used only for the following

business objectives: opening and operating a hotel, restaurants, cafes, bar, massage and spa, hotel and tourist agency and souvenirs.

2. The lessor agrees to pay a deposit in the amount of 120,000 Baht on the contract date.

3. On completion of the contract term, the lessor pledges that the tenant will be allowed to renew property lease for another three years at a rental rate of 66,000 Baht per month. In the event the lessor fails to allow the tenant to renew the lease as pledged, the lessor is obliged to give a notice to the tenant no less than six months and the two parties agree to negotiate, on a later occasion, the compensation for the tenant resulting from that cause.


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1.4.6.2 Lease agreement for shop houses for a convenience store Lessor : Bangkok Management Co., Ltd. (“BG”) Tenant : CP ALL Public Company Limited (“Lessee”) Leased property : Two units of two-story shop houses at 499 and 500 Sukhumvit

road, Khlongtoei Nua, Wattana, Bangkok Lease term : One year and six months, from April 1 2015 to September 30,

2016 (Renewable for another three years from October 1, 2016 to September 30, 2019)

Rental rate : Rent 49,500 Leasehold rights compensation Leasehold rights compensation 105,000 Baht

Other major conditions : 1. The tenant places a damage deposit with the lessor in the amount of 450,000 Million Baht. The lessor agrees to return the amount to the tenant upon the termination of the agreement with no renewal.

2. The tenant pays advance rents in the amount of 4 9 ,5 0 0 Baht and the 105,000 Baht Leasehold rights compensation. The payments are considered the last month rent and compensation according to the lease term of this agreement. In the event of agreement termination or extinguishment, causing the tenant to rent the leased property in accordance with the lease term of the agreement, the lessor agrees to return the amount immediately.

The tenant has sent a written notice that it will not renew the lease agreement therefore the

agreement will terminate on October 1, 2019.

1.4.6.3 Lease agreement with Wiwatta Clinic Co., Ltd Lessor : Bangkok Management Co., Ltd. (“BG”)

Tenant : Wiwatta Clinic Co., Ltd (“Lessee”) Wiwatta Clinic Co.,Ltd. is a person connected with the Company as its major shareholder and director is Dr. Satit Viddayakorn


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(“Dr. Satit) who is a major shareholder and Director of the Company, details as follows:

a) Dr. Satit, as at April 23, 2019, held 9,998 shares of Wiwatta Clinic Co., Ltd, or 99.98 % of all the shares of the Company. He is also a director of the Company, and

b) As at July 15, 2019, Dr. Satit, directly held 806,728,800 shares of the Company, or 24.90 % of the total shares of the Company. He is also a Director of the Company.

Besides, Dr. Satit (1) is a son of Mr. Pongsak Viddayakorn, Chairman of the Board of Directors of the Company, (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the Company, (3) is the father and a concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a concert party of Peak Development Holdings Ltd., a shareholder of the Company.

Leased property : Part of the area on the ground floor of the RetrOasis Hotel building, at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok

Total leased area : 100 sg m Lease term : Three years, from September 1, 2015 to August 31, 2018.

At present, BG allows the tenant to continue the lease after termination of the lease agreement without issuing a written notice to renew the agreement as the Company wishes to sell the property.

Rental rate : 1,000 Baht per month Other major conditions : 1. The objective of the lease is to provide non-overnight stay

type patient treatment. 2. The lessee pays a 5,000 lease guarantee to ensure

compliance with the lease agreement and as a guarantee for any damage to the lease area and/or the lessor. The


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lessor agrees to return the amount to the lessee upon termination of the agreement.

3. Upon termination of the agreement, and provided that the tenant has not breached any point of the agreement, if the tenant wishes to continue the lease, it must send a written advance notice no less than three months prior to the specified termination of the agreement.

1.5 Class and Value of the Transaction

The meeting of the Board of Directors Session 4/2019, on June 25, 2019, resolved to propose to the Extraordinary General Meeting of Shareholders Session 1/2019 to consider and approve the disposition of 9,985,998 ordinary shares of Bangkok Management Co., Ltd. (“BG”), representing approximately 99.99 percent of its total issued and outstanding shares, with a par value of Baht 100 per share (“BG Shares”), which are held by V Brilliant Group Holding Co., Ltd. (“VB”), a subsidiary of the Company, which is person connected with the Company, at a price of approximately Baht 133.08632 per share, to VMS Development Co., Ltd. (“VMSD”) which is a connected person of the Company the value of which totals not exceeding Baht 1,328,999,733.83. The transaction is considered a connected transaction of a listed company in the categories of assets or services in accordance with the Notification of the Capital Market Supervisory Board No. TorJor. 20/2551 entitled Rules on Connected Transactions and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.20-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003 including being a disposition of assets in accordance with the Notification of the Capital Market Supervisory Board No. TorChor. 20/2551 Entitled Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.21-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions 2004 as well as Notifications on revisions. Details of the calculations of the value of the connected transaction and the value of the asset disposition transaction are as follows:

1.5.1 Calculation of the value of the connected transaction

The transaction is considered a connected transaction of a listed company in the categories of assets or services in accordance with the Notification of the Capital Market Supervisory Board No. TorJor. 21/2551 entitled Rules on Connected Transactions and the Notification of the Board of Governors of the Stock


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Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003.

Calculation based on the Notification yields the value of consideration of 1,329.00 Million Baht. When combined with BG’s obligations to pay to the Company and the subsidiary, as at June 30 (based on internal information not yet reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations.), amounting to 16.59 Million Baht, the total value is 1,345.59 Million Baht. In comparison with the Company’s net tangible assets based on the Company’s reviewed consolidated financial statements as at March 31, 2019 - 6,253.94 Million Baht, the transaction constitutes 21.52 % of the value of with the Company’s net tangible assets based on the Company’s reviewed consolidated financial statements. The value is considered large, with the consideration exceeding or equal to 20.00 Million Baht and is higher than or equal to 3.00 % of the value of the Company’s tangible assets.

Criterion used in the calculation of transaction value

Details Calculation (unit: Million

Baht)

Transaction value (%)

Total value of consideration

Transaction value based on bid price + BG’ liabilities ______________________________________________________________/1

The Company’s net tangible assets//2

1,329.00 + 16.59 6,253.94 21.52

Notes: /1 The transaction value includes the outstanding obligations BG has to the Company and the subsidiary. This is effectively disposition of investment in BG, ending its status of a subsidiary of the Company.

As at June 30, 2019 (based on internal information not yet reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations.), the obligations totaled 16.59 Million Baht, broke down into 13.00 Million Baht share payables to be paid to VB, 3.50 Million Baht promissory notes to be paid to VB, 7,287.67 Baht accrued interest on promissory notes to be paid to VB and a 0.86 Million Baht fee for accrual administration to be paid to the Company. VMSD agrees to arrange for BG to pay all the said amounts to the Company and the relevant subsidiary within 90 days of the transfer of ownership in BG shares.

/2 The value of the Company’s net tangible assets is calculated based on the Company’s reviewed consolidated financial statements as at March 31, 2019; whereas;

The Company’s net tangible assets = total assets – intangible assets – total liabilities – minority interest According to the Notification of the Board of Governors of the Stock Exchange of Thailand No.

BorJor/Por.22-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2003, the Company is required to disclose information to the Stock Exchange of Thailand, to request approval from the Board of Directors and to request approval for entry into the connected transaction from the Shareholders’ Meeting with three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right, excluding interested shareholders’ equity.


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1.5.2 Calculation of the value of the asset disposition transaction This BG asset disposition transaction falls into the category of a disposition of assets pursuant to the

Notification of the Capital Market Supervisory Board Notification No. TorJor 20/2551, entitled Rules on the Entering into Material Transactions Deemed as the Acquisition or Disposition of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por 21-01, entitled Disclosure of Information and Other Acts of the Listed Company Concerning the Acquisition or Disposition of Assets, 2004. The value of the asset acquisition and disposition when calculated equals 16.36 per cent of the value of net tangible assets based on the consolidated financial statements of the Company as at March 31, 2019 which has been reviewed, in accordance with the net tangible asset value basis. The Company has not entered into any previous disposition during the six-month period prior to this disposition. Details of the calculation are shown below:

Criteria used in the

calculation of transaction value

Details Calculation

(unit: Million Baht)

Transaction value (%)

1. Asset value Disposal percentage in the Company x NTA of the Company/1 X 100

NTA of the Company

99.99 x 1,023.45 x 100

6,253.94 16.36

2. Net profits Disposal percentage in the Company x Net profit of the Company x 100

Net tangible assets of the Company

N/A/2

3. Total value of consideration

Total value of consideration+ BG’s obligations /3 x 100

Total assets of the listed company

1,329.00 + 16.59 x 100

14,695.50 9.16

4. Value of shares issued by the listed company in consideration for the assets

Number of shares issued in consideration for the assets x 100

-------------------------------------------------------------- Total number of issued and paid-up shares of the listed company

N/A/4

Notes: /1 Calculation of BG’s net tangible assets is based on BG’s reviewed financial statements as at March 31, 2019, which have been reviewed by the Auditor in preparation of the company’s consolidated financial statements. /2 Calculation is not possible as the company had net losses in the previous four quarters.

/3 The transaction value includes BG’s liabilities to the Company and the subsidiary, which is effectively disposition of investment in BG, ending its status of a subsidiary of the Company. As at June 30, 2019 (based on internal information not yet


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reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations.), the obligations totaled 16.59 Million Baht, broke down into 13.00 Million Baht share payables to be paid to VB, 3.50 Million Baht promissory notes to be paid to VB, 7,287.67 Baht accrued interest on promissory notes to be paid to VB and a 0.86 Million Baht fee for accrual administration to be paid to the Company. VMSD agrees to arrange for BG to pay all the said amounts to the Company and the relevant subsidiary within 90 days of the transfer of ownership in BG shares.

/4 Calculation is not possible as no shares are issued in consideration.

The entry into the transaction is therefore considered Class 2 disposition of assets; i.e., the value is equal to 15 percent or more but lower than 50 percent. Hence, the Company is obliged to prepare an information memorandum for disclosure to the Stock Exchange within 21 days of the date of disclosure to the Stock Market. However, the Board of Directors deemed it appropriate to propose to the Shareholders’ Meeting for approval of the entry into the transaction disposing of the assets in accordance with the notification regarding material acquisition and disposition of assets as well, requiring the Company to prepare an information memorandum for disclosure and follow the same procedure as that required for entering into Class 1 asset disposition in accordance with the Notification of the Capital Market Supervisory Board No. TorJor. 20/2551 entitled Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.21-01 entitled Disclosure of Information and Other Acts of Listed Companies Concerning the Connected Transactions, 2004, including having an independent financial advisor to provide an opinion regarding the asset disposition transaction entry for presentation to the shareholders, as well as convening a shareholders’ meeting to obtain approval for entering into the asset disposition transaction, with no less than three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right.

1.6 Total Value of Consideration This disposition of 9,985,998 BG shares has consideration not exceeding 1,328,999,733.83. In this regard, VMSD has put a deposit with VB in the amount of 265,800,000 Baht, divided into (a) a 10,000,000 Baht tender guarantee for bid submission and (b) a 255,800,000 Baht deposit for making a Sale and Purchase agreement. The balance of 1,063,199,733.83 Baht will be paid to VB on the day of the transfer of BG share ownership to VMSD in cash, or by cashier’s check, or by any other method as to be agreed by the parties to the Share Sale and Purchase Agreement. In the event the Meeting of the Company’s Shareholders’ Meeting resolves not to approve the entry into the transaction, VB is obliged to return all the deposit it has received to VMSD within seven days of the day the Meeting of the Company’s Shareholders’ Meeting resolves not to approve the entry into the transaction, with no interest. VB is obliged to sell and transfer the shares to VMSD, strictly subject to obtaining approval from the Board of Directors’ Meeting and the Shareholder’s Meeting and the sale and purchase transaction must be


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conducted by October 31, 2019. VB will transfer ownership in the BG shares to VMSD upon receiving the balance amount from VMSD. VMSD will accept the transfer of all BG liabilities as at the ownership transfer date. As at June 30, 2019 (based on information from BG internal financial statements which have not been reviewed by the Auditor. This information from the period was chosen to reflect the latest value of BG obligations), BG had obligations to pay 16.59 Million Baht to the Company and the subsidiaries, divided into 13.00 Million Baht share payables to be paid to VB, 3.50 Million Baht promissory notes to be paid to VB, 7,287.67 Baht accrued interest on promissory notes to be paid to VB and a 0 . 8 6 Million Baht fee for accrual administration to be paid to the Company. VMSD agrees to arrange for BG to pay all the said amounts to the Company and the relevant subsidiary within 90 days of the transfer of ownership in BG shares.

1.7 Basis for Determination of the Value of Consideration The criteria for determining the consideration is in accordance with the asset tender procedure. The Company has contracted CBRE (Thailand) Co., Ltd., which is an outside party and has no connection with the Company, to act as the sole agent for sale by formal tender of all the BG shares or land and buildings located at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, which are BG’s assets. The Agent in the sale of the assets conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media. The Agent in the sale of the assets revealed that there were several other parties showing interest in the assets. Most of them informed the Agent in the sale of the assets of their initial bid price range without formally submitting a bid. VMSD was the only bidder, formally submitting a bid price of 1,329,000,000 Baht for acquisition of all BG ordinary shares, totaling 9,986,000 shares, from VB and the other two small BG shareholders, which was higher than the initial bid price ranges of the other interested parties made known to the Agent in the sale of the assets.

1.8 The Expected Benefits

The objective of BG shares is to use the proceeds from the share disposition as working capital and for expansion of the hospital and medical service business in accordance with the Company’s current business strategy, which is in line with its policy to concentrate on expanding the hospital business and stop expanding the property development for sale, with no further property development projects from the existing ones, and the company is prepared to sell its land bank and existing projects on appropriate and beneficial occasions in order to obtain a source of fund for further development of the healthcare business, as resolved by the Board of Directors’ Meeting, Session 6/2018 on October 17, 2018. The information in this matter was disclosed to the Stock Exchange of Thailand on October 17, 2018. Subsequently, the Company requested the Stock Exchange of


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Thailand to reclassify its industry group from “Property Development and Construction” to “Services” under “Healthcare Service Services” Sector. The reclassification took effect on February 13, 2019.

1.9 Directors Having Interest

The following are details of the Directors having interest in the disposition of BG ordinary shares to VMSD Name Position

1. Mr. Pongsak Viddayakorn, Director and Chairman of the Board of Directors

2. Dr. Satit Viddayakorn Director

3. Ms. Tanatorn Viddayakorn Director

On the agenda item of the Board of Directors’ Meeting on June 25, 2019, concerning consideration of the

disposition on BG ordinary shares which is a connected transaction, the Directors having interest were not present at the Meeting to vote.

1.10 Opinion of the Company’s Board of Directors

The Company’s Board of Directors (excluding the directors having interest in the entry into the transaction), considered the matter and is of the opinion that the transaction is appropriate and the selling price and the conditions for the entry into the transaction are reasonable, as VMSD submitted a bid price which is higher than the initial bid price ranges made known to CBRE (Thailand) Co., Ltd. by the other interested parties and higher than the appraised price of the Independent Appraiser. The entry into the transaction is also in line with the Company’ policy as the Company has moved from property development to healthcare, which is the core business in which the Company specializes.

The entry into the transaction will provide the Company with capital for expansion of the hospital business and reduction of liabilities, which should bring about maximum benefits for the Company and the shareholders. The Board of Directors therefore resolved to approve of making a proposal to the shareholders’ meeting which will be held on September 5, 2019 to consider approving the disposition of BG shares to VMSD.

1.11 Opinions of the Audit Committee and/or Directors which are different from the opinion of the

Board of Directors -None-


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2.1 Objectives and Necessity of the Transaction

The meeting of the Board of Directors, Session 4/2019, on June 25, 2019, resolved to propose to the Company Extraordinary General Meeting of Shareholders, Session 1/2019, to consider and approve the disposition of 9,985,998 BG ordinary shares, representing approximately 99.99 percent of its total issued and outstanding shares, with a par value of Baht 100 per share, which are held by VB, a subsidiary of the Company, to VMSD, which is a connected person of the Company, at a price of approximately Baht 133.08632 per share, or a total sale price not exceeding 1,328,999,733.83 Million Baht. The objective of the asset disposition is to use the proceeds from the share disposition as working capital and for expansion of the hospital and medical service business in accordance with the Company’s current business strategy, which is in line with its policy to concentrate on expanding the hospital business and stop expanding the property development for sale with no further property development projects and the Company is prepared to sell its land bank and existing projects on appropriate and beneficial occasions in order to obtain a source of fund for further development of the healthcare business, as resolved by the Board of Directors’ Meeting, Session 6/2018 on October 17, 2018. The information in this matter was disclosed to the Stock Exchange of Thailand on October 17, 2018. Subsequently, the Company requested the Stock Exchange of Thailand to reclassify its industry group from “Property Development and Construction” to “Services” under “Healthcare Service Services” Sector. The reclassification took effect on February 13, 2019.

2.2 Advantages and Disadvantages of Entering into the transaction

2.2.1 Advantages of Entering into the transaction 1) It allows for restructuring of the Company assets to suit the business policyBG’s main assets

are land and buildings in the categories of hotel and shop houses, located at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok. The Company has acquired its shares through purchasing VB ordinary shares since October 10, 2016. The objective of the purchase was to develop a condominium project. So far, the development project has not been implemented. Disposition of BG ordinary shares is therefore in line with the Company’s business policy and will be effectively restructuring the Company’s asset structure for appropriateness in accordance with the policy approved by the Board of Directors’ Meeting, Session 6/2018, on October 17, 2018, to concentrate on expanding the hospital business and stop expanding the property development for sale, with no further property development projects. The Company is prepared to sell its land bank and existing projects on appropriate and beneficial occasions in order to obtain a source of fund for further development of the healthcare business. The information in

Part 2. Reasonableness and Benefits of the Transaction


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this matter was disclosed to the Stock Exchange of Thailand on October 17, 2018. Subsequently, the Company requested the Stock Exchange of Thailand to reclassify its industry group from “Property Development and Construction” to “Services” under “Healthcare Service Services” Sector. The reclassification took effect on February 13, 2019. 2) The Company can use the proceeds from the asset disposition to invest in the healthcare business,

or to repay debts or to choose other investment options yielding better returns. VB, which is a subsidiary of the Company, will receive proceeds totaling 1,329 Million Baht from the

disposition of BG ordinary shares. The Company and/or the subsidiary can use the proceeds as capital for developing the healthcare business in which the Company specializes, in accordance with its business policy. Alternatively, the Company can use the money to repay its borrowings from financial institutions which will effectively reduce the financial cost burden of the Company and/or the subsidiary. The Company’s borrowings are as shown in the financial statements showing the financial position (the consolidated financial statements). As at March 31, 2019, the Company had overdrafts from financial institutions and short-term borrowings from financial institutions totaling 1,036.66 Million Baht, the current portion of long-term loans totaling192.04 Million Baht and long-term borrowings from financial institutions totaling 2,086.89 Million Baht. The Company had financial costs as shown in the statement of comprehensive income under the 2018 financial statements totaling 126.11 Million Baht. Money from the asset disposition can also be used as working capital or for investment in other assets with opportunities for better returns. In 2018, BG’s income from leases totaled 9.03 Million Baht, translated to 0.68 % per annum, compared to VMSD’s bid price of 1,329 Million Baht, which is lower than the rate of return from investment in low-risk financial instruments ( e.g. 10-year government bonds), which yield 2.039739 % per annum.

3) Risks from not having lessees for BG assets or from having lower rents are reduced. Although BG is currently leasing land and buildings in the categories of hotel and shop houses to

connected persons and an outsider i.e., 1. Lease Agreement with VMS for RetrOasis Hotel, 2. Lease Agreement for shop houses for a convenience store and 3. Lease Agreement with Wiwatta Clinic Co., Ltd. (for details please refer to 1.4.6 Major contracts for business operations), the tenants have an option to renew or not to renew the Agreements as there are no penalty clauses. For the Lease Agreement for shop houses for a convenience store, the tenant has sent a written notice that the Lease Agreement, which will terminate on October 1, 2019, will not be renewed. There are therefore risks from not having lessees for BG assets or from having lower rents in the future. Disposition of BG ordinary shares can reduce such rental risks.


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4) Risks from receiving low returns in the event of developing the assets are reduced. BG’s main assets are land and buildings in the categories of hotel and shop houses, located at

Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok. The objective of the purchase in 2016 was to develop a condominium project. The Company has adopted a policy to stop expanding the property development for sale business with no further property development projects from the existing ones. However, if the Company decided to develop a condominium for sale on the land held by BG in accordance with the original objective when purchasing the assets, it would need a great deal of capital for the undertaking. Furthermore, the present condominium market is encountering a slowdown due to consumers’ desire to buy being less than the developers’ desire to sell (the demand being less than the supply) caused by economic uncertainties and absorption of the demand over the past several years, as well as the backlogs of condominiums of various prices. (Source: KResearch) and competition from major players. All these can constitute risks in setting sale prices and sale delays. Disposition of BG ordinary shares can mitigate the risks of having lower returns from developing the assets into a property development for sale project than from disposition of the BG ordinary shares.

5) The price for the disposition of BG ordinary shares is higher than their fair value Valuation of the fair value of BG ordinary shares using the Adjusted Book Value Approach indicates

that the fair value of the 9,985,998 BG ordinary shares held by VB is 1,194.03 Million Baht, or a fair value per share of 119 .57002 Baht, which is lower than the bid price in the tender, as VMSD’s bid price is 1,329.00 Million Baht, or 133.08632 Baht per share. Disposition of BG ordinary shares by VB at a price higher than the fair value is beneficial to the Company and its shareholders.

2.2.2 Advantages of Entering into the transaction

The disposition of BG ordinary shares is a sale of ordinary shares of a subsidiary of which main assets are land and buildings which the Company acquired through buying VB ordinary shares in 2016 with the objective of developing a condominium project. As the Company has not implemented the project and has subsequently changed its policy to concentrating on the hospital business as the core business and will stop expansion of the property development for sale business, with no further property development projects from existing ones, this development is not consistent with the original objective of acquiring the assets. Disposition of BG ordinary shares is in effect rearrangement of assets to suit the Company policy. Also, the Company and/or the subsidiary can use the proceeds from the disposition of BG ordinary shares for investment in the healthcare business or repayment of debts or for other investments yielding better returns. The Independent Financial Advisor is therefore of the opinion that there are no disadvantages of entering nor advantages of not entering into the transaction.


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2.2.3 Advantages of entering into a transaction with the connected person In the disposition of BG ordinary shares, the Company has contracted CBRE (Thailand) Co., Ltd.,

which has no connection with the Company, to act as the sole agent for sale by formal tender of 1) all the BG shares, or 2) nine plots of land with buildings in the categories of hotel and shop house at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, which are owned by BG.

The Agent in the sale of the assets conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media, such as print ads, its website and social media. The tender was scheduled for May 15, 2019. VMSD was the only party formally submitting a bid of 1,329 Million Baht for all the BG shares. The Agent in the sale of the assets revealed that there were three other parties interested in bidding for the purchase of the lands and buildings but they did not formally submit a bid. However, the initial prices which the three parties made known to the Agent in the sale of the assets were lower than the VMSD bid price. VMSD submitted a bid through a tender which had been publicized to general potential bidders and connected persons were treated in the same way as outsiders. The Independent Financial Advisor is therefore of the opinion that there are no advantages of entering into a transaction with the connected person.

Disadvantages of entering into a transaction with the connected person 1) Entering into the transaction with the connected person may create a conflict of interest and

business competition. VMSD, which would like to purchase all the ordinary shares of BG, is a connected person of the Company as VMSD’s major shareholder and director, Dr. Satit Viddayakorn (Dr. Satit) , is a major shareholder and Director of the Company. In addition, Dr.Satit (1) is a son of Dr. Pongsak Viddayakorn, Chairman of the Board of Directors of the Company (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the Company (3) is the father and concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a concert party of Peak Development Holdings Ltd., a shareholder of the Company. Hence, disposition of BG’s ordinary shares of which main assets are land and buildings in the categories of hotel and shop houses, currently operated by VMS, which is a connected person of the Company (please refer to details in 1.4.6.1 Lease Agreement with VMS for RetrOasis Hotel) in the name of RetrOasis Hotel, to VMSD may constitute a conflict of interest between the Company and the connected person as presently the Company still operates a hotel and a serviced apartment business, Marriott Executive Apartment Sathorn Vista– Bangkok and Somerset Ekamai Project. The


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following describes the details of the hotel and serviced apartment projects operated by the Company and a subsidiary in terms of locations and the room rates per night in comparison with RetrOasis Hotel which is operated by VMS.

Project Location Average room rate per night (Baht)/1

Marriott Executive Apartment Sathorn Vista – Bangkok

1 Soi Sathorn 3 Khwaeng Thung Maha Mek, Khet Sathon, Bangkok

3,197

Somerset Ekamai Project 22/1 Soi Ekamai 2, Sukhumvit 63 Road, Phra Khanongnua, Watthana, Bangkok

2,528

RetrOasis Hotel Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok

1,228

/“Source: Average room rate during January – June, 2019, prepared by the Company As can be seen from the detail above, the hotel and serviced apartment projects operated by the

Company and a subsidiary both have average room rates per night from 2,528 to 3,197 Baht, which are higher than the rate of RetrOasis Hotel, which is operated by VMS - a connected person of the Company. This is because the target customers of the Marriott Executive Apartment Sathorn Vista– Bangkok and the Somerset Ekamai Projects have higher purchasing power than those of RetrOasis Hotel. Also, RetrOasis Hotel is relatively old. Therefore, it is not a direct competitor of the hotel and serviced apartment projects operated by the Company and a subsidiary.

In addition, Dr. Satit Viddayakorn, who is an authorized director and major shareholder of VMSD has signed a non-compete agreement for the Company since 2016, pledging not to engage in any business or perform any act or invest in more than 10 % of the total capital of any business which is in competition with the Company or its subsidiaries or constitute any other interest which may be in conflict with the best interest of the Company or its subsidiaries, either directly or indirectly as well as to prevent persons implied under Section 258 of the Securities and Exchange Act B.E. 2535 (as amended) from performing such acts. The Company has in place a monitoring measure, having assigned Internal Audit to verify as to whether Dr. Satit Viddayakorn strictly abides by the non-compete agreement.


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2) There are expenditures and time burdens concerning disclosure and execution of connected transaction requirements.

As VMSD, which would like to purchase all the BG ordinary shares, is a connected person of the Company and the value of the transaction of investment in BG ordinary shares is greater than 20 Million Baht and greater than the value of the Company’s net tangible assets based on the Company’s consolidated financial statements which have been reviewed as at March 31, 2019, the Company is therefore required to disclose information to the Stock Exchange of Thailand, to request approval from the Board of Directors and to request approval for entry into the connected transaction from the Shareholders’ Meeting with no less than three-fourths of the total votes of shareholders and proxies (if any) attending the meeting and having voting right, excluding interested shareholders’ equity. The Company is required to send a notice to the shareholders to attend the Shareholders’ Meeting no less than 14 days prior to the date of the Shareholders’ Meeting and to specify the names and numbers of shares of the shareholders who have no right to vote in the notice to attend the Shareholders’ Meeting. In addition, the Company is required to have an independent financial advisor to give an opinion regarding reasonableness and fairness of the price and conditions of the transaction to present to the shareholders, in accordance with the Notification of the Board of Governors of the Stock Exchange of Thailand No. BorJor/Por.22-01 entitled Disclosure of Information and Act of Listed Company Concerning the Connected Transactions, 2003. Fulfilling such requirements causes the Company to incur additional expenditure and consideration time is required to entry into the transaction.

2.3 Risks in Entering and not Entering into the Transaction

2.3.1 Risks in Entering into the Transaction 1) A risk in the event VMSD cannot find money to pay for the assets

In entering into the transaction of disposition of BG ordinary shares, VMSD and VB made a Sale and Purchase Agreement on June 14, 2019, with VMSD making a payment of a 10-Million Baht tender guarantee on May 15, 2019 and a payment of a deposit for entering into the Sale and Purchase Agreement at the rate of 20 % of the selling price less the tender guarantee, amounting to 255,800,000 Million Baht, on June 14, 2019. The balance which VMSD has to pay on the day of the sale and purchase and asset transfer is 1,063,200,000 Baht. This constitutes a risk if it cannot find money to pay for the BG ordinary shares.


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2.3.2 Risks in not Entering into the Transaction 1) Disposition of the assets may be delayed and the opportunity to use the proceeds received to

invest or repay debts may be lost. In the disposition of BG ordinary shares, the Company has, since February 11, 2019, contracted

CBRE (Thailand) Co., Ltd., which has no connection with the Company, to act as the sole agent for sale by formal tender of all the ordinary shares of BG or land and buildings located at Number 503 Soi Sukhumvit 29, Khlongtoei Nua, Wattana, Bangkok, which are BG’s assets. The Agent in the sale of the assets conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media. The Agent in the sale of the assets revealed that there were three other parties interested in bidding for the purchase of the land and buildings, most of whom made their initial price ranges known to the Agent in the sale of the assets but they did not formally submit a bid. VMSD was the only bidder who formally submitted a tender, with a bid price of 1,329.00 Million Baht. As can be seen, disposition of BG ordinary shares or land and buildings which are its main assets takes time. If VB does not sell BG ordinary shares this time, there is a risk that disposition of BG ordinary shares or land and buildings which are its main assets may be delayed, and the opportunity to use the proceeds in repaying borrowings from financial institutions to lessen the financial burden of the Company and/or the subsidiaries may be lost.


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In consideration of appropriateness of the price in this transaction, the Independent Financial Advisor

used various approaches which are academically accepted and suitable for BG’s businesses in order to come up with the fair value of BG ordinary shares; namely:

1. Book Value Approach 2. Adjusted Book Value Approach 3. Discounted Cash Flow Approach In addition, the Independent Financial Advisor considered the Market Comparable Approach, which is

another method popularly used in appraising the fair price of ordinary shares. It was found, however, that this approach is not suitable for use in appraising the fair value of BG ordinary shares as the company’s current core business is renting out property (land and buildings), which is different from business features of listed companies. Also, BG’s assets are at only one location and the value of assets is relatively small in comparison with listed companies. Hence, comparable companies with similar business features and a suitable size listed on the stock market cannot be found. The Independent Financial Advisor chose the three approaches listed above to appraise the price of BG shares. Details of each of the three approaches are described below:

3.1 Book Value Approach

The Book Value Approach is a valuation method which does not take into account the business’ future profitability and does not reflect the actual market value of the assets. It shows the value in the book at a certain point of time. Valuation using this method is based on appraisal of the book value of net assets, calculated by subtracting total assets with total liabilities, the result of which is equal to shareholders’ equity. Based on BG’s financial statements for the period ended December 31, 2018, which has been audited by the CPA, the value of its shares is calculated as follows:

Item Unit Amount Issued and paid-up capital as at December 31, 2018 Million Baht 998.60 Retained earnings (deficits) Million Baht 24.70 BG equity Million Baht 1,023.30 BG ordinary shares Shares 9,986,000 Value per BG share Baht 102.47

Part 3. Appropriateness of the Price and Conditions of the Connected Transaction


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Valuation of the share value based on the Book Value Approach in the table above shows the value of BG shares at 1,023.30 Million Baht, or 102.47 Million Baht. Compared to the bid price of 1,329.00 Million Baht, or 133.09 Baht per share, the value is 305.70 Million Baht lower than the bid price, or 30.61 Baht lower per share.

As the valuation based on the Book Value Approach reflects the book value of net assets in accordance with BG’s audited financial statements for the period ended December 31, 2018, the Independent Financial Advisor is of the opinion that the valuation based on the Book Value Approach does not reflect the true market value of BG assets and does not reflect future obligations and liabilities. Hence, the Book Value Approach is not a method suitable for valuation of BG shares.

3.2 Adjusted Book Value Approach

Valuation of shares by the approach is done through adjusting the book value of BG shares based on the financial statements for the period ended December 31, 2018 which have been audited by the CPA, with future obligations and liabilities, including increments or deductions of the prices of fixed assets as appraised by the Independent Appraiser, in order to reflect the book value of the shares which is closest to the present and best reflects the true value. In this regard, the Independent Financial Advisor has considered the significant financial entries, such as adjustment of the land value which may have been booked at historical price to market price and lease agreement obligations.

In the consideration of the value of BG assets, the Independent Financial Advisor has adjusted the value with the value of assets as appraised by Year Appraisal Co., Ltd., (“YEAR”), which is an independent appraiser on the Approved Appraiser Lists of the Thai Valuers Association and the Office of the SEC. YEAR conducted the appraisal on March 4, 2019, using the cost approach, income approach and land residual approach. YEAR chose to use the land residual approach in finding the market value of the assets. Details and the assumptions used in the appraisal by the Independent Appraiser are in Attachment 2: Summary of the Appraisal Report for

the Value of the Property of Bangkok Management Co., Ltd., summarized below:


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Summary of results of property appraisal by YEAR Item Details

Property features Land with buildings for operation of a hotel named RetrOasis Size of land Total land area 1-2-51 rai (651.0 square wah) Land ownership document Nine title deeds Buildings One three-story hotel building, one two-story hotel building and one unit of three-

story shop house and three units of two-story shop houses Property location Soi Sukhumvit 29, Sukhumvit Road, Khlongtoei Nua, Wattana, Bangkok, Registered obligations Not mortgaged Appraisal objectives To find the market value of the property Report use objective For public disclosure Appraisal approach Land residual approach Appraised price (Baht) 1,204,350,000

The Independent Financial Advisor adjusted the value of new assets to reflect the value indicated in the property appraisal report, with the asset value adjustment entry derived from the difference in the value in YEAR’s appraisal report, 1,204.35 Million Baht, which is greater than the book value of net investment property and equipment in BG’s audited financial statements for the period ended December 31, 2019, which was 1,033.17 Million Baht, arriving at an asset value adjustment entry of 171.18 Million Baht. There was also adjustment of liabilities which may arise in the future out of lease agreement obligations, the value of which was 0.45 Million Baht. Details of the appraisal of share value using the Adjusted Book Value Approach are shown below:

Item Unit Amount Shareholders’ equity as at December 31 Million

Baht 1,023.30

Plus Adjusted entries from asset values Million Baht

171.18

Less Adjusted entries from lease agreement obligations Million Baht

(0.45)

BG shareholders’ equity Million Baht

1,194.03

BG ordinary shares Shares 9,986,000 Value per BG share Million

Baht 119.57


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Valuation of the shares using the Adjusted Book Value Approach in the table above shows the value of BG shares at 1,194.03 Million Baht, or 119.57 Baht per share, which is 134.97 Million Baht lower than the bid price, or 13.52 lower per share. Based on an analysis and adjustment of the book value to reflect the market value of the property and possible future liabilities, the Independent Financial Advisor is of the opinion that the Adjusted Book Value Approach is suitable for appraising the fair value of BG shares. 3.3 Discounted Cash Flow Approach

Valuation of share value by using the Discounted Cash Flow Approach reflects the value based on the company’s fundamentals. The method involves a projection of net cash flows in the future and uses an appropriate discount rate to find the present value. It shows long-term operation capabilities. Assumptions have to be set to develop financial projections. In the event the economic conditions and other exogenous factors change significantly from the set assumptions, the value of the company will change significantly from the valuation result as well.

In conducting valuation using the Discounted Cash Flow Approach, the Independent Financial Advisor made financial projections on the assumptions that BG will continue its commercial building leasing on a going concern basis, and that it will operate the hotel business with its own assets itself, in order to best reflect its current operation capabilities. The reason for the Independent Financial Advisor to perform the valuation as if BG operated the hotel business itself is because BG presently operates a business of leasing the hotel and the buildings, having a total income of 9.03 Million Baht in 2018, which might not have reflected the highest and best use of the property. The Discounted Cash Flow Approach is merely a method used for value comparison, as the hotel business operation which is used by the Independent Financial Advisor as BG’s core business in finding a fair value. BG does not operate the business. It is simply a landlord renting out the property to the current tenant to operate a hotel business. Moreover, the hotel business is not in line with PRINC’s policy to concentrate on expanding the hospital business and to stop expanding its property development business. The Independent Financial Advisor developed financial projection for a period of four years and seven months, and conducted terminal value appraisal (for 2023). The assumptions were set based on the highest and best use of the assets in order to reflect their market value. The Independent Financial Advisor therefore set an assumption that BG will liquidate the assets using the value as indicated in the property appraisal report of the Independent Appraiser as the determinant of the terminal value.

The major assumptions used in developing the financial projections, such as income, costs, selling and administrative expenses, financial costs, corporate income taxes, working capital and the business expansion plan, were based on information in the financial statements, major documents and agreements, the property


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appraisal report of the Independent Appraiser and interviews with executives. Such information was adjusted by the Independent Financial Advisor, taking into consideration possibility and reasonableness based on comparison with past information, for use as the basis of development of the financial projections. The following are key assumptions of the projections:

3.3.1 Projection assumptions 1. Income

- Income from the hotel business Income from the hotel business comprises income from rooms and income from food and beverages. Details of the assumption are as follows: Features of the assets for hotel business operation It is a two-star hotel, relatively old, with 63 rooms. The Independent Financial Advisor reviewed the occupancy rate and the average daily rate (ADR) based on the property appraisal report and information about the hotel operation in the past three years derived from VMS’ internal information and financial statements and found that the occupancy rates and ADR’s were roughly equal (i.e., there were no material differences). The Independent Financial Advisor therefore used 62 % as the projected average occupancy rate and 1,200 Baht per room as the projected ADR, which are consistent with the property appraisal report. As for the ADR growth rate, a projection rate of 0.67 % per annum was used, which was the same rate as three-year average inflation based on the Bank of Thailand’s Monetary Policy Report (source: www.bot.or.th). As for income from food and beverages, the Independent Financial Advisor assumed that it varied with income from rooms and accounted for 3.50 % of income from rooms, based on the property appraisal report.

- Income from building leases Income from building leases comprises income received from two companies, namely: a) Income from the lease agreement and the leasehold rights compensation agreement for the

lease of two units of two-story shop houses to a company not connected with the company. The agreement term is three years and the agreement will terminate on September 30, 2019. The lessee company has notified the company that it will not renew the contract, having paid the rent and the compensation, including the withholding tax at the rate of 162,631.58 Baht per month. BG has progressively recognized the rent and the compensation throughout the agreement term;


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As the assets are located adjacent to Sukhumvit Road in Asoke – Phrom Pong area, which is a major CBD in Bangkok, the Independent Financial Advisor made a projection of income from the lease of the two units of two-story shop houses, assuming that they are continuously leased throughout the time of the projection and based on the rental and compensation rates in the lease agreement and a 10 % increase every three years throughout the lease agreement.

b) Income from the leasehold rights compensation agreement for the lease of part of the area on the ground floor of the hotel buildings to Wiwatta Clinic Co., Ltd., which is a connected person of the Company for a term of three years, from September 1, 2015 to August 31, 2018. (Presently, BG allows the lessee to continue the lease after agreement termination without issuing a written renewal notice). Wiwatta Clinic Co., Ltd., has agreed to pay a rent at 1,000 Baht per month. However, to reflect highest and best use of the assets, the Independent Financial Advisor set an assumption that BG allows another person to lease the area at a rate comparable to nearby areas where rental rates for shop houses are approximately 400 Baht per square meter. The total leased area is 100 square meters. The rent is therefore 40,000 Baht per month, with a growth rate of the rent at 10 % every three years.

c) The adjustment entry from deferred income from the lease of the hotel building to VMS, which is a connected person, as VMS invested in the buildings and improvements of the hotel buildings which are BG’s assets. The Auditor therefore treated the value of the investment as part of the value of BG’s investment property and recognized it as deferred income from customers booked as BG’s non-current assets. To make an adjustment for the deferred income, BG recognized 526, 232.13 Baht per month as deferred income from May 1, 2015 to June 30, 2020. The deferred income does not affect BG’ cash flows as it was merely an adjusting entry which is accounting income recognition.

Comparison of assumed income and actual operating result A comparison is made between income from the operating result and the actual operating results for

2016- 2018 of VMS’ hotel business, based on internal financial statements (Management Account) and the assumptions used in the valuation. The comparison is summarized in the table below:

Item Unit Operating result Year of the projection

2016 2017 2018 2019/1 2020 2021 2022 2023 - Number of rooms rooms 63 63 63 63 63 63 63 63 - Average occupancy rate % 69.33 63.75 61.58 62.00 62.00 62.00 62.00 62.00


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Item Unit Operating result Year of the projection

2016 2017 2018 2019/1 2020 2021 2022 2023 - ADR Baht 1,027 1,220 1,202 1,200 1,208 1,216 1,224 1,232 Service income from rooms Million

Baht 16.38 17.89 17.02 17.11 17.22 17.34 17.45 17.57

Income from food and beverages (as a percentage of service income from rooms)

% 7.84 3.14 0.34 3.50 3.50 3.50 3.50 3.50

Income from food and beverages Million Baht

1.28 0.56 0.06 0.60 0.60 0.61 0.61 0.61

Total income from the hotel business

Million Baht

17.66 18.45 17.08 17.71 17.83 17.94 18.06 18.18

Total income from building leases

Million Baht

8.28 8.28 8.24 8.75 5.65 2.49 2.54 2.61

Total Income Million Baht

25.90 26.73 25.34 26.45 23.48 20.44 20. 20.79

Note: /1 Assumed income for Projection Year 2019, showing full year income for comparison exclusively in this table. However, the development of financial projections for valuation of shares based on the Discounted Cash Flow Approach covers four years and seven months, from June 1, 2019 to December 31, 2023.

2. Costs - Costs of provision of services in the hotel business

Most of the costs of provision of services for hotel rooms are low and vary with income from the services. These costs comprise laundering, cleaning, maintenance and guest supplies etc. The Independent Financial Advisor made a projection of the cost of services for the rooms at 10 % of the income from the rooms as derived from information taken from the property appraisal report and the costs of providing services for the rooms incurred by VMS in the past. As the costs of food and beverages vary with income from food and beverages, the Independent Financial Advisor set a projection of the costs of food and beverages at 30 % of income from food and beverages, based on information taken from the property appraisal report and the costs of providing services for the rooms incurred by VMS in the past, which is not significantly different.


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Table showing a comparison of cost assumptions and actual operation results The Independent Financial Advisor made a comparison of actual costs incurred during 2016 – 2018 by

VMS in hotel business operation based on internal financial statements for executives (Management Account) with the assumptions used in the valuation the summary of which is shown in the table below:

Item Actual operating results Projection year

2016 2017 2018 2019 2020 2021 2022 2023

Costs related to provision of services for hotel rooms (as a percentage of income from services for the rooms) (%)

6.75 5.73 7.64 10.00 10.00 10.00 10.00 10.00

Costs of food and beverages (as a percentage of income from food and beverages (%)

35.91 40.74 24.91 30.00 30.00 30.00 30.00 30.00

3. Selling and administrative expenses Selling and administrative expenses are divided into selling and administrative expenses of the hotel business and administrative expenses of the building lease business, except for the property tax and the house and building tax, which are BG’s selling expenses, and for which there is no need to be classified by business type. For these tax expenses, the Independent Financial Advisor had made a projection of the property tax for 2019 in accordance with the Building and Land Tax Act B.E. 2475 in the amount equal to BG’s actual payments of the property tax in the past. A projection has also been made for the land and building taxes for 2020-2023 in accordance with the Land and Buildings Tax Act BE 2562 which will come into force and replace the Building and Land Tax Act B.E. 2475 on January 1, 2020. The Land and Buildings Tax Act BE 2562 prescribes that calculation of the capital valuation of land and the capital valuation of buildings shall be based on the Land Code. The Independent Financial Advisor therefore decided that the Department of Lands’ appraisal price for land and the net values of buildings, as at March 4, 2019, based on the property appraisal report, are to be used in the calculation of the tax rates for collection of land tax and tax on commercial buildings. - Selling and administrative expenses of the hotel business

Selling and administrative expenses of the hotel business comprise administrative expenses, sales and marketing expenses, utilities, repair and maintenance, insurance and other expenses. The Independent Financial Advisor has made a projection of selling and administrative


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expenses of the hotel business, comparing expenses taken from the property appraisal report and the operating results of the hotel over the past three years. Some items are consistent. However, operating the hotel business is merely an assumption for testing. In the event BG operated the hotel business itself, some expense items might be different from the expenses actually incurred by VMS. The Independent Financial Advisor has therefore come up with projections for selling and administrative expense items based on the property appraisal report, details of which are as follows: - Administrative expenses: 20 % of income from the hotel business - Sales and marketing expenses: 3 % of income from the hotel business - Utilities: 12 % of income from the hotel business - Repair and maintenance: 2 % of income from the hotel business - Insurance: 0.20 % of income from the hotel business - Other expenses: 3 % of income from the hotel business

Comparison of cost assumptions and selling and administrative expenses with actual operating results The Independent Financial Advisor conducted a comparison between actual VMS hotel business selling

and administrative expenses during 2016 – 2018, based on internal financial statements for executives (Management Account) and the assumptions used in the valuation, a summary of which is shown in the table below:


2016 2017 2018 2019 2020 2021 2022 2023

Selling and administrative expenses of the hotel business (as a percentage of income from the hotel business) (%)

- Proportion of administrative expenses

35.58 39.42 36.43 20.00 20.00 20.00 20.00 20.00

- Proportion of sales and marketing

6.83 7.74 6.72 3.00 3.00 3.00 3.00 3.00

- Proportion of utilities expenses 13.29 12.09 12.19 12.00 12.00 12.00 12.00 12.00 -Proportion of repair and 0.20 - - 2.00 2.00 2.00 2.00 2.00


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2016 2017 2018 2019 2020 2021 2022 2023

maintenance - Proportion of insurance expenses

0.28 0.28 0.45 0.20 0.20 0.20 0.20 0.20

- Proportion of other expenses 11.09 5.69 4.69 3.00 3.00 3.00 3.00 3.00

- Administrative expenses of the commercial building lease business Administrative expenses of the commercial building lease business comprise management fees, auditing fees, bank charges and other fees, duty stamp expenses and other expenses. These expenses do not vary with income from the operation and tend to be unchanged. As the assumption used is that BG’s building lease transactions during the projection period remain the same, the Independent Financial Advisor decided that administrative expenses to be used are equal to BG’s average value of the past one year, with no growth during the entire projection period.

4. Financial costs As BG issues promissory notes in the amount of 3.50 Million Baht with a maturity of six months and a 2.375 % per annum interest rate to VB on May 30, 2019, financial costs will be incurred in projection year 2019. BG has no plan for additional investment, therefore, there is no financial cost burden throughout the remaining time of the projection period.

5. Corporate income tax Corporate income tax accounts for 20 % of BG’s profit before tax throughout the projection period.

6. Working capital BG’s current assets and current liabilities comprise trade receivables, inventory, other current assets, trade and other payables, and deferred income. The collection period, the inventory period and the payment period were fixed at 5, 24 and 27 days, respectively, throughout the projection period, based on the three-year averages of the respective periods of the VMS hotel business.

7. Capital investment Based on discussions with BG executives and PRINC’s policy to concentrate on the hospital business and to stop expanding the property development business, no additional investment plans are expected during the projection years.


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8. Terminal Value BG's operating results based on the major assumptions above indicate that, presently, BG’s land has not been used at the highest and best level because the cash flows after the projection period, as calculated from the cash flows in 2023 - the last year of the projection period - are considerably less than the market value of the assets. The Independent Financial Advisor has therefore set the terminal value of the projection equal to the value of the assets in the property appraisal report prepared by the Appraiser.

3.3.2 Discount Rate The discount rate used in calculating the present value of BG’s net present value of cash flows is derived from calculation of the Weighted Average Cost of Capital, or “WACC”, based on BG’s capital structure. The Independent Financial Advisor calculated the WACC from BG’s Weighted Average Cost of Capital (Kd) and the cost of equity (Ke). The following explains details of the discount rate projection.

WACC = Kd x (1-T) x [D/(D+E)] + Ke x [E/(D+E)]

Where: WACC = Weighted Average Cost of Capital Kd = Cost of debt or the interest rate of BG borrowings as at

March 31, 2019 (Reviewed BG information for preparation of the company’s consolidated financial statements) BG has no interest bearing debts.

T = The corporate income tax rate (20 % of profit before corporate income tax)

D = BG’s interest bearing debts as at March 31, 2019 equaled 0 Baht (Reviewed BG information for preparation of the company’s consolidated financial statements)

E = Shareholders’ equity as at March 31, 2019 equals 1,023.45 Million Baht (Reviewed BG information for preparation of the company’s consolidated financial statements)

Ke = The cost of shareholders’ equity or return on equity, (can be calculated using the Capital Asset Pricing Model (CAPM) below):

Ke = Rf + βL x (Rm – Rf)


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Where: Rf = Risk Free Rate It is based on the rate of return on government bonds with five-year remaining maturity, consistent with the projection period, equal to 1.78 % per annum (source: ThaiBMA as at July 5, 2019).

Rm = Market Return It is the rate of return of the Stock Exchange of Thailand from the first day of trading, April 30, 1975, to June 30, 2019, which is equal to 14.36 % per annum (source: calculation by the Independent Financial Advisor).

βL = Beta, which is the volatility of the share price in relation to the changes of the Stock Market. However, as BG shares are not presently traded on the Stock Exchange of Thailand, projection of BG beta is done through averaging the betas of companies of which shares are traded on the Stock Exchange of Thailand, with the core business of operating hotels and commercial space rental, to be consistent with the BG business assumptions; namely, 1. Dusit Thani Public Company Limited. (“DTC”) 2. The Erawan Group Public Company Limited (“ERW”) 3. OHTL Public Company Limited (“OHTL”) 4. Royal Orchid Hotel (Thailand) Public Company Limited

(“ROH”) and, 5. Shangri-La Hotel Public Company Limited (“SHANG”)

The average weekly betas in the previous three years, from July 6, 2016 to July 5, 2019, from Bloomberg were used. The betas from Bloomberg were leveraged betas of which average equals 0.64. The values needed to be adjusted with the effect of the respective companies’ financial structure to

arrive at unleveraged betas (βU) first, and find the average value of the unleveraged betas. The result is equal to 0.34. This is adjusted with BG’s own financial structure for use as its leveraged beta.


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Based on information above, calculation of the return on equity and the Weighted Average Cost of Capital yields results of 6.06 % and 6.06 % per annum, respectively. As BG has no plan for additional investment, there are no borrowing burdens throughout the projection period, causing no change in the D/E ratio in each projection year. 3.3.3 Summary of financial projections Based on the assumptions listed above, BG’s cash inflows and cash outflows are summarized in the table below:

(Million Baht) ((7 months) 2019

2020 2021 2022 2023

Total income 15.45 23.48 20.44 20.60 20.79 Total expenses (11.37) (16.76) (13.67) (13.74) (13.83) EBIT after Tax 4.08 6.72 6.77 6.86 6.96 Plus depreciation and amortization 4.12 3.91 0.74 0.73 0.73 Minus Capital expenditure - - - - - Plus/minus Net working capital (7.38) (3.26) 0.04 (0.00) (0.00) Free cash flow to the firm (FCFF) 0.82 7.36 7.55 7.59 7.69 Present value of cash flows 0.79 6.71 6.49 6.15 5.88 Terminal value 1,204.35 Present value of the terminal value 919.80 Total present value of net cash flows

945.81

Plus cash and cash equivalents as at May 31, 2019

5.06

Minus interest bearing debts and share payables as at May 31, 2019

(16.50)

Value of shareholders’ equity 934.37

3.4 Value appraised by using the Discounted Cash Flow Approach From the table above, the value of BG ordinary shares appraised by using the present value of cash flow approach is equal to 934.37 Million Baht, or 93.57 Baht per share, which is 394.63 Million Baht lower than the bid price, or 39.52 Baht lower per share.


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The Independent Financial Advisor has also conducted a sensitivity analysis of the appraisal of share prices using the WACC, the Average Occupancy Rate and the ADR used in the projection, arriving at the values of ordinary shares as shown in the table below:

1. WACC = 7.06 % Share value (Million Baht)

Average daily room rate (Baht per room) 1,080 1,140 1,200 1,260 1,320

Average occupancy rate (%)

72% 896.14 897.69 899.24 900.78 902.33 67% 894.20 895.64 897.08 898.53 899.97 62% 892.27 893.60 894.93 896.27 897.60 57% 890.33 891.56 892.78 894.01 895.23 52% 888.39 889.51 890.63 891.75 892.87




72% 915.61 917.18 918.75 920.32 921.89 67% 913.65 915.11 916.57 918.03 919.49 62% 911.69 913.04 914.39 915.74 917.09 57% 909.73 910.97 912.21 913.46 914.70 52% 907.77 908.90 910.04 911.17 912.30




72% 935.60 937.19 938.78 940.37 941.95 67% 933.62 935.10 936.57 938.05 939.53 62% 931.63 933.00 934.37 935.73 937.10 57% 929.65 930.90 932.16 933.42 934.68 52% 927.66 928.81 929.96 931.10 932.25


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72% 956.12 957.73 959.34 960.95 962.56 67% 954.11 955.61 957.11 958.60 960.10 62% 952.10 953.49 954.87 956.26 957.64 57% 950.09 951.37 952.64 953.91 955.19 52% 948.08 949.24 950.40 951.57 952.73




72% 977.19 978.82 980.45 982.08 983.71 67% 975.16 976.67 978.19 979.70 981.22 62% 973.12 974.52 975.92 977.33 978.73 57% 971.08 972.37 973.66 974.95 976.24 52% 969.05 970.22 971.40 972.58 973.75

The sensitivity analysis indicates that the calculated value of the shares fall between 888.39 and 983.71

Million Baht. However, as the valuation using the Discounted Cash Flow Approach is a method used to make a comparison of values, with an assumption that BG operates a hotel business which is presently its assets, which is not in line with the policy of the Company to concentrate on expanding the hospital business and to stop expanding the property development for sale, without additional property development projects. The Independent Financial Advisor is therefore of the opinion that appraisal of share values by using the Discounted Cash Flow Approach is not suitable for appraisal of BG shares.

3.4 Appropriateness of the Price for the Entry into the Transaction

The results of the appraisal of the value of investment in BG ordinary shares for the particular transaction, using various approaches, are summarized in the following table:


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1. Book Value Approach 1,023.30 1,329.00 The value of the transaction is 305.70 Baht higher than the value from this approach or is higher than the appraisal value by 23 % of the transaction value.

2. Adjusted Book Value Approach

1,194.03 1,329.00 The value of the transaction is 134.97 Baht higher than the value from this approach or is higher than the appraisal value by 10.16 % of the transaction value.

3. Discounted Cash Flow Approach /1

934.37 1,329.00 The value of the transaction is 394.63 Baht higher than the value from this approach or is higher than the appraisal value by 29.69 % of the transaction value.

4. Market Comparable Approach

Not selected - The Independent Financial Advisor did not select the Approach for appraising the value of BG ordinary shares./2

Notes: / 1 The Discounted Cash Flow Approach is a method used to make a comparison of values, with an assumption that BG operates a hotel business which is presently its assets, which is not in line with the policy of the Company to concentrate on expanding the hospital business and to stop expanding the property development for sale, without additional property development projects.

/2 The Independent Financial Advisor did not choose the Market Comparable Approach for appraising the value of BG ordinary shares because presently BG is engaged in the business of leasing property (mainly its land and buildings). The nature of its business is different from listed companies on the stock market. Also, it holds assets for lease at only one location and, compared to listed companies, the size of its assets is quite small. Listed companies with similar business nature and appropriate sizes cannot be found for comparison.


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The Independent Financial Advisor considered the approaches for appraising the fair value of the assets and is of the opinion that the Adjusted Book Value Approach is suitable for appraising the value of BG ordinary shares as it takes into consideration the cost of assets which BG has acquired, adjusted to current market prices with the difference between the book value and the fair value based on the property appraisal report prepared by the Independent Appraiser. The price to be used in the disposition of all BG ordinary shares is 1,329 Million Baht. In comparison with the value appraised by using the Adjusted Book Value Approach, the transaction value is 134.97 Million Baht higher than the appraised fair value, or 10.16 % of the value of the Company’s transaction. For the reasons cited above, the Independent Financial Advisor is of the opinion that the price, 1,329 Baht, for the entry into transaction for the disposition of BG ordinary shares to VMSD, which is a connected person, is appropriate.

3.5 Appropriateness of the Conditions of the Entry into the Transaction

The Independent Financial Advisor has considered the appropriateness of the conditions of the entry into the Transaction of making a Sale and Purchase Agreement for BG ordinary shares between VB (“the Selling Party” and VMSD (“the Buying Party”), dated June 14, 2019. The major points of the conditions of the entry into the transaction are as follows:

1. Payment conditions:First payment 10 Million Baht tender guarantee on May 15, 2019

Second payment A deposit at 20 % of the asset selling price less the tender guarantee, amounting to 255,800,000 Baht on the Effective Date of the Agreement Third payment Payment of the balance, amounting to 1,063,200,000 Baht, to be made on the date of asset selling, buying and transfer. To date, VMSD has made a 10- Million Baht payment for the tender guarantee and a 255,800,000 Million Baht payment for the deposit to VB.

2. The Selling Party is obliged to sell and transfer the shares to the Buying Party subject to obtaining approval from the Board of Directors’ Meeting and the Shareholders’ Meeting, which must be convened by October 31, 2019.The two Parties will conduct the selling/buying by October 31, 2019.The Buying Party agrees to make a payment for the balance amount of the asset selling price for the purchase of BG ordinary shares to the Selling Party on the asset selling/buying/transfer day.The Selling Party agrees to transfer ownership in BG ordinary shares to the Buying Party after receiving the payment for the balance amount of the asset selling price from the Buying Party. In the event the Board of Directors’ Meeting and/or the Shareholders’ Meeting resolves not to approve the agenda item related to the BG share sale and purchase, the Selling Party agrees to return the tender


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guarantee and the deposit with no interest to the Buying Party within seven days of the day on which the Board of Directors’ Meeting and/or the Shareholders’ Meeting resolves not to grant approval. In the event the Selling Party returns the tender guarantee and the deposit after the lapse of the said period, the Selling Party agrees to pay interest at the rate of 7.5 % per annum.

3. The Selling and Buying Parties will assume the responsibility for expenses and taxes arising out of this Sale and Purchase Agreement in according with their respective roles and duties.

The Independent Financial Advisor has considered the conditions relevant to the entry into the transaction and found them to be general conditions of asset selling and buying by tender. The conditions require the bidders to make a payment as tender guarantee for persons submitting a bid and require the buying party to make a deposit payment upon the making of the Sale and Purchase Agreement. There are conditions obligating the selling party to sell and transfer the shares strictly subject to receiving approval from the Board of Directors’ Meeting and the Shareholders’ Meeting. The conditions are suitable for the Company which is listed on the Stock Exchange. Hence, the Independent Financial Advisor is of the opinion that the conditions are appropriate.


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The Independent Financial Advisor is of the opinion that entering into the transaction of

disposition of all the shares of Bangkok Management Co., Ltd. (“BG”), which is a subsidiary, held indirectly by the Company through V Brilliant Group Holding Co., Ltd. (“VB”), altogether 9,985,998 shares, constituting 99.99 percent, valued at 1,328,999,733.83 Baht, or 133.08632 Baht per share, to VMS Development Co., Ltd. (“VMSD”) was in line with the policy of the Company to concentrate on expanding the hospital business and to stop expanding the property development for sale business with no further property development projects from the existing ones. The Company can use proceeds from the asset disposition to invest in the healthcare service in accordance with the policy, or to repay debts or to choose other investment options yielding better returns. In addition, the Company has contracted CBRE (Thailand) Co., Ltd., which has no connection with the Company, to act as the sole agent for sale by formal tender. CBRE conducted publicizing activities for the sale of the assets both by directly dealing with potential buyers and by publicizing the sale via various media. Although VMSD was the only bidder, the Agent in the sale of the assets revealed that there were three other parties interested in bidding for the purchase of the lands and buildings but they did not formally submit a bid. However, the initial prices which the three parties made known to the Agent in the sale of the assets were lower than the VMSD bid price.

In terms of appropriateness of the price, the Independent Financial Advisor is of the opinion that the price for the entry into the transaction is appropriate as the fair price of all the BG ordinary shares held by the Company through VB was 1,194.03 Million Baht, 134.97 Million Baht lower than VMSD’s bid price of 1,329 Million Baht. The conditions for entering into the transaction are general conditions for buying and selling assets by tender. The conditions require the buying party to make a guarantee payment for parties bidding by tender, and to make a deposit payment when the sale and purchase agreement is made. There is also a precondition that the selling party is obliged to sell and transfer the shares to the buying party only upon receiving approval from the Company’s Board of Directors and Shareholders’ Meeting, which is a condition suitable for a listed company.

Besides, VMSD, which would like to purchase all the ordinary shares of BG, is a connected person of the Company as VMSD’s major shareholder and director, Dr. Satit Viddayakorn (Dr. Satit) , is a major shareholder and Director of the Company. In addition, Dr.Satit (1) is a son of Dr. Pongsak Viddayakorn, Chairman of the Board of Directors of the Company (2) is the father of Ms. Tanatorn Viddayakorn, who is a shareholder and Director of the Company (3) is the father and concert party of Miss Satita Viddayakorn, a major shareholder of the Company, with UBS AG HONG KONG BRANCH as the Custodian (4 ) is a brother of Miss Pallapa Viddayakorn, who is a shareholder of the Company and (5) is a concert party of Peak Development Holdings Ltd., a shareholder of the Company Hence, disposition of BG’s ordinary shares of which main assets are land and buildings in the

Part 4. Summary of the Independent Financial Advisor’s Opinion


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categories of hotel and shop houses, currently operated by VMS, which is a connected person of the Company in the name of RetrOasis Hotel, to VMSD may constitute a conflict of interest between the Company and the connected person as presently the Company still operates a hotel and a serviced apartment businesses: 1) Marriott Executive Apartment Sathorn Vista– Bangkok and 2) Somerset Ekamai Project. However, the hotel and the serviced apartment projects operated by the Company and the subsidiary have daily room rates which are higher than the rates of RetrOasis Hotel which is operated by V Management Services Co., Ltd. (“VMS”) which is a connected person of the Company as the hotel and serviced apartment projects operated by the Company and the subsidiary target customers with higher purchasing power than RetrOasis Hotel and RetrOasis Hotel is relatively old. It is therefore not in direct competition with the hotel and serviced apartment projects operated by the Company and the subsidiary. In addition, Dr. Satit Viddayakorn, who is an authorized director and major shareholder of VMSD has signed a non-compete agreement for the Company since 2016, pledging not to engage in any business or perform any act or invest in more than 10 % of the total capital of any business which is in competition with the Company or its subsidiaries or constitute any other interest which may be in conflict with the best interest of the Company or its subsidiaries, either directly or indirectly as well as to prevent persons implied under Section 258 of the Securities and Exchange Act B.E. 2535 (as amended) from performing such acts. The Company has in place a monitoring measure, having assigned Internal Audit to verify as to whether Dr. Satit Viddayakorn strictly abides by the non-compete agreement.

After considering the advantages and disadvantages of entering and not entering into the transaction and the advantages and disadvantages of entering into a transaction with the connected person and an outside party, as well as risks involved with entering into the transaction and VMSD‘s bid price, the Independent Financial Advisor is of the opinion that the shareholders should consider granting approval for the Company’s entry into the

transaction. However, the shareholders may consider the information and opinions about various points presented by

the Independent Financial Advisor in making a decision to approve or not to approve the Company’s request to enter into the transaction. The decision rests with the shareholders’ judgment.

The Independent Financial Advisor hereby certifies that the opinions towards the entry into the transaction were presented as a result of careful consideration based on professional standards, with importance placed on appropriateness, reasonableness and shareholders’ interest.


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Respectfully Sage Capital Limited

-Signature-

-Signature- (Mr. Thanathip Vidhayasirinun) (Mrs.Saranya Krasaesian)

Chief Executive Officer. Managing Director

-Signature- ( Mr. Sita Tansiri)

Compliance


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Attachment 1

Profile of Principal Capital Public Company Limited (Source: information from the Company)

1. Basic Information

Company name : Principal Capital Public Company Limited. Business categories : Property Development, private hospital and hospital

management business Corporate registration number : 0107547000869 Company address : 23rd Floor, Bangkok Business Center Building, 29 Sukhumvit

63 Road, Klongtan Nua, Wattana, Bangkok 10100 Registered capital : Baht 3,240,638,433.00 with a par value of Baht 1 per share Issued and paid-up capital : Baht 3,240,087,520.00 with a par value of Baht 1 per share Website : http://www.principalcapital.co.th

2. Nature of Business Principal Capital Public Company Limited (“the Company”) was incorporated in 2000 under the name

“Metrostar Property Company Limited” to engage in property development business. Later, in 2005, the Company was listed on the Stock Exchange of Thailand. In 2013, there was a change in the shareholding structure and the Company was renamed as Principal Capital Public Company Limited.

In 2017, the Company expanded its business scope by acquiring shares of Principal Healthcare Co., Ltd (formerly Alliance Medical Asia Co., Ltd.) which was operating four private hospitals; namely, Sahavej Hospital, Paknampo Hospital, Paknampo 2 Hospital and Phitsanuvej Hospital. In 2018, the Company acquired another hospital – Princ Hospital Suvarnabhumi (formerly Piyamin Hospital). With this acquisition, the Company’s core business became private hospital and private hospital management businesses, and the Company’s shares are now listed under the Health Care Services Sector on the Stock Exchange of Thailand.

Apart from the private hospital and private hospital management businesses which are presently the

Company’ core businesses, the company is also engaged in property development, package software servicing, consultancy, installation and design, IT maintenance and investment advisory services directly by the Company or through the subsidiaries. The operations of the Company and the subsidiaries can be categorized into four groups as follows:

1. Private hospital and private hospital management businesses As of March 31, 2019, the Company has eight hospitals in seven provinces in Thailand in the group; namely,


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1) Princ Hospital Suvarnabhumi in Samut Prakan Province 2) Pitsanuvej Hospital in Phitsanulok Province 3) Sahavej Hospital in Phichit Province 4) Paknampo Hospital in Nakhon Sawan Province 5) Paknampo Hospital 2 in Nakhon Sawan Province 6) Pitsanuvej Uttaradit Hospital in Uttaradit Province (opened in the first quarter of 2019) 7) Princ Hospital Uthai Thani (under renovation – completion expected in Q3/2019) 8) Sirivej Lamphun Hospital in Lamphun Province (Business transfer was completed on March 1,

2019) 2. Property development for rent business The property for rent is in the categories of hotel and

serviced apartment and office building. 1) Marriott Executive Apartment Sa horn Vista 2) Somerset Ekamai Bangkok 3) Bangkok Business Center Building

3. Information Technology Business, providing services in software systems design 4. Business Advisory Service, providing business consultation ( The operation has been suspended)

3. Company structure The diagram below shows the shareholding structure of the Company and the subsidiaries as at June 30,

2019


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4. Shareholding structure The Company has a registered capital of 3,240,638,433 Baht, 3,240,087,520 Baht of which has been

paid up, comprising 3,240,087,520 ordinary shares, with a par value of 1.00 Baht per share. The 10 largest shareholders as at July 15, 2019 (the Record Date) are as follows:

Name od shareholder No. of shares %

1. Viddayakorn group 2,797,690,443 86.35 - UBS AG HONG KONG BRANCH/1 1,262,060,526 38.95 - Dr. Satit Viddayakorn 806,728,800 24.90 - Ms.Satita Viddayakorn 498,054,588 15.37 - Peak Development Holdings Ltd./2 157,737,029 4.87 - Ms. Pallapa Viddayakorn 50,124,400 1.55 - Ms. Tanatorn Viddayakorn 22,985,100 0.71

2. Ms. Sirinya Apimonbutra 100,000,000 3.09 3. Mrs. Payao Chalacheep 27,511,900 0.85 4. Mr. Sueksit Phetchampa 15,947,400 0.49 5. Mr. Soontorn Sritha 15,149,000 0.47


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Name od shareholder No. of shares % 6. Ms. Somsamorn Putphan 14,124,500 0.44 7. Ms. Peechaya Krimwongrat 13,756,600 0.42 8. Mrs. Achara Ratanaphunsri 10,120,000 0.31 9. Mr. Veera Srichanachaichok 10,000,000 0.31 10. OCBC SECURITIES PRIVATE LIMITED 9,930,000 0.31

Other shareholders 225,857,677 6.97 รวม 3,240,087,520 100.00

5. The Board of Directors As at June 30, 2019, the Board of Directors consisted of nine Directors as follows:

Name Position 1. Dr. Pongsak Viddayakorn, M.D. Chairman of the Board of Directors 2. Mr. Yarnsak Manomaiphiboon Chairman of the Audit Committee/Independent Director 3. Dr. Satit Viddayakorn, Ph.D. Director/ Chairman of the Executive Committee/ Chairman

of Risk Management Committee 4. Miss Aranya Chalermpornvarodom Audit Committee Member/ Independent Director 5. Dr. Jutamas Ingpochai Ph. D Audit Committee Member/ Independent Director 6. Mr. Veera Srichanachaichok Director/ Executive Committee Member/Member of Risk

Management Committee 7. Dr. Soontorn Sritha, M.D. Director/ Executive Committee Member/Member of Risk

Management Committee 8. Mr. John Lee Kohshun Director 9. Ms. Tanatorn Viddayakorn Director

6. Management As at June 30, 2019, Management lf the Company consisted of nine Directors as follows:

Name Position 1. Mr. Veera Srichanachaichok Corporate Chief Executive Officer - Corporate 2. Dr. Soontorn Sritha, M.D. Chief Executive Officer - Healthcare 3. Mr. Sirichai Towiriyawate Director of Risk Management and Investment 4. Ms. Preeyaporn Aphiwathwitthaya Director of Accounting Services 5. Ms. Thiranan Sangphungtham Assistant Director of Legal & Government Relations 6. Ms. Ritima Jirasuradate Corporate Secretary


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7. Summary of financial position and operating results Statement of Financial Position

Item

December 31, 2016 December 31, 2017 December 31, 2018 March 31, 2019 (Restated) Audited Audited Reviewed

Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Assets Current assets Cash and cash equivalents 274.10 1.90 371.92 2.84 449.32 3.14 499.13 3.40 Short-term investments 110.72 0.77 647.92 4.95 6.06 0.04 5.59 0.04 Restricted bank deposits at a financial institution 5.93 0.04 5.45 0.04 5.45 0.04 5.45 0.04 Trade and other receivables -net 267.24 1.85 199.96 1.53 267.62 1.87 265.90 1.81 Inventories - net 47.49 0.33 49.98 0.38 49.57 0.35 52.93 0.32 Work in progress under services contracts 3.28 0.02 12.94 0.10 - - - - Other current assets 109.47 0.76 85.29 0.65 96.60 0.67 99.76 0.68 Total current assets 818.23 5.66 1,373.45 10.49 874.62 6.11 928.76 6.32 Non-current assets Restricted deposits at financial institutions 12.35 0.09 13.60 0.10 12.17 0.08 12.17 0.08 Investment in subsidiaries - - - - - - - - Long-term investments 0.56 0.00 - - 0.33 0.00 0.33 0.00 Investment property - net 5,210.72 36.06 2,754.03 21.04 2,719.90 19.00 2,704.84 18.41 Property, plant and equipment – net 6,672.40 46.18 7,187.43 54.92 8,942.75 62.46 9,249.95 62.94 Intangible assets – net 69.37 0.48 77.06 0.59 69.63 0.49 83.26 0.57


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Item


Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Leasehold rights 10.39 0.07 22.42 0.17 25.22 0.18 26.51 0.18 Goodwill 1,648.64 11.41 1,648.64 12.60 1,648.64 11.51 1,661.73 11.31 Deferred tax assets 2.95 0.02 5.30 0.04 4.60 0.03 5.26 0.04 Non-current assets 4.21 0.03 6.28 0.05 20.22 0.14 22.69 0.15 Total Non-Current Assets 13,631.58 94.34 11,714.76 89.51 13,443.46 93.89 13,766.74 93.68 Total Assets 14,449.81 100.00 13,088.21 100.00 14,318.08 100.00 14,695.50 100.00 Liabilities and shareholders’ equity Current Liabilities Overdraft - - 1.45 0.01 7.41 0.05 7.11 0.05 Short-term loan - - 30.00 0.23 1,030.40 7.20 1,029.55 7.01 Trade and other payables 339.57 2.35 1,370.90 10.47 463.55 3.24 539.00 3.67 Advanced received from customer-current 18.55 0.13 23.71 0.18 24.50 0.17 32.39 0.22 Short-term loan from a related party 34.06 0.24 445.62 3.40 461.89 3.23 667.64 4.54 Current portion of financial lease 11.68 0.08 8.71 0.07 26.44 0.18 29.96 0.20 Current portion of long-term loan 222.88 1.54 138.20 1.06 184.00 1.29 194.04 1.32 Current portion of long-term loan from related party - - - - 530.40 3.70 532.61 3.62 Income tax payable 19.35 0.13 71.78 0.55 18.94 0.13 28.26 0.19 Deposits received from customers – current 22.92 0.16 49.05 0.37 30.67 0.21 35.43 0.24 Other current liabilities 66.94 0.46 75.60 0.58 75.22 0.53 54.25 0.37 Total current liabilities 735.94 5.09 2,215.01 16.92 2,853.44 19.93 3,150.24 21.44


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Item


Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Non-current liabilities Financial lease 18.03 0.12 11.06 0.08 74.64 0.52 84.59 0.58 Long-term borrowing from a financial institution 1,550.42 10.73 1,102.41 8.42 2,063.84 14.41 2,086.89 14.20 Advances received from customers 15.95 0.11 9.63 0.07 3.32 0.02 1.74 0.01 Deposits received from customers 20.75 0.14 19.68 0.15 19.19 0.13 13.20 0.09 Long-term promissory note from related party 512.54 3.55 521.47 3.98 - - - - Deferred tax liabilities 171.63 1.19 171.40 1.31 333.15 2.33 347.15 2.36 Employee benefit obligations 64.53 0.45 71.01 0.54 85.16 0.59 92.88 0.63 Other non-current liabilities 64.37 0.45 42.44 0.32 43.71 0.31 49.36 0.34 Total non-current liabilities 2,418.20 16.74 1,949.10 14.89 2,623.02 18.32 2,675.82 18.21 Total liabilities 3,154.14 21.83 4,164.11 31.82 5,476.46 38.25 5,826.06 39.65 Equity Registered capital 3,240.64 22.43 3,240.64 24.76 3,240.64 22.63 3,240.64 22.05 Issued and paid up capital - net 3,240.09 24.76 3,240.09 24.76 3,240.09 22.63 3,240.09 22.05 Premium on share capital 4,476.77 30.98 4,476.77 34.20 4,476.77 31.27 4,476.77 30.46 : Retained earnings Appropriated – legal reserve 39.38 0.27 44.20 0.34 44.20 0.31 44.20 0.30 Unappropriated 69.10 0.48 (278.90) (2.13) (447.62) (3.13) (521.19) (3.55) Other components of equity - - 764.13 5.84 764.13 5.34 764.32 5.20 Equity attributable to owners of the parent 7,825.34 54.16 8,246.29 63.01 8,077.56 56.42 8,004.18 54.47


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Item


Million Baht

% Million Baht

% Million Baht

% Million Baht

%

Non-controlling interests 3,470.33 24.02 677.81 5.18 764.06 5.34 865.26 5.89 Total equity 11,295.67 78.17 8,924.10 68.18 8,841.62 61.75 8,869.44 60.35 Total liabilities and equity 14,449.81 100.00 13,088.21 100.00 14,318.08 100.00 14,695.50 100.00

Statement of Comprehensive Income

Item

For the year ended December 31, December The first three months of 2016 2017 1018 2018 2019

Million Baht

Percent Million Baht



Million Baht

Percent

Revenue from hospital business

1,716.82 82.87 1,690.42 75.54 2,084.63 76.56 471.69 73.61 548.39 78.10

Revenue from sale and services

354.85 17.13 547.35 24.46 638.07 23.44 169.10 26.39 153.73 21.90

รวมรายได้ Total revenue 2,071.67 100.00 2,237.77 100.00 2,722.71 100.00 640.79 100.00 702.12 100.00 Cost of hospital business (1,184.91) (57.20) (1,274.46) (56.95) (1,577.36) (57.93) (370.20) (57.77) (422.04) (60.11) Costs of sales and services (252.52) (12.19) (453.26) (20.25) (451.28) (16.57) (124.41) (19.41) (102.23) (14.56) Gross profit (loss) 634.24 30.61 510.05 22.79 694.07 25.49 146.18 22.81 177.84 25.33 Other income 44.80 2.16 166.52 7.44 51.25 1.88 9.90 1.54 10.49 1.49 Gain from asset acquisition - - - - 82.54 3.03 82.54 12.88 - -


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Item


Million Baht




Million Baht

Percent

at lower fair value Selling expenses (30.05) (1.45) (45.39) (2.03) (60.30) (2.21) (15.69) (2.45) (14.69) (2.09) Administrative expenses (576.53) (27.83) (761.05) (34.01) (746.49) (27.42) (168.44) (26.29) (191.04) (27.21) Other expenses - - (8.32) (0.37) (16.58) (0.61) (3.60) (0.56) (3.72) (0.53) Finance costs (29.31) (1.41) (69.12) (3.09) (126.11) (4.63) (18.73) (2.92) (38.22) (5.44) Profit (loss) before income tax expenses

43.16 2.08 (207.31) (9.26) (121.63) (4.47) 32.15 5.02 (59.34) (8.45)

(Income tax (expense) income

(24.37) (1.18) (164.31) (7.34) (31.02) (1.14) (4.59) (0.72) (9.57) (1.36)

Net Profit (loss) 18.79 0.91 (371.61) (16.61) (152.64) (5.61) 27.57 4.30 (68.91) (9.81)

Net profit (loss) attribution Profit (loss) attributable to Owner of the parent

(53.66) (2.59) (345.10) (15.42) (173.40) (6.37) 21.24 3.31 (73.57) (10.48)

Non-controlling interests 72.44 3.50 (26.52) (1.19) 20.75 0.76 6.33 0.99 4.66 0.66 Other comprehensive incomes

Remeasurements of employee benefit obligations

15.61 0.75 11.49 0.51 4.70 0.17 - - - -

Deferred income tax on (3.12) (0.15) (2.30) (0.10) (0.94) (0.03) - - - -


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Item


Million Baht




Million Baht

Percent

Remeasurements of employee benefit obligations Total items that will not be reclassified subsequently to profit or loss

12.49 0.60 9.20 0.41 3.76 0.14 - - - -

Net profit (loss)

31.28 1.51 (362.42) (16.20) (148.88) (5.47) 27.57 4.30 (68.91) (9.81)

Total comprehensive income (expense) attributable to

Owner of the parent (53.66) (2.59) (343.18) (15.34) (168.73) (6.20) 21.24 3.31 (73.57) (10.48) Non-controlling interests 84.93 4.10 (19.24) (0.86) 19.85 0.73 6.33 0.99 4.66 0.66


of Principal Capital Public Company Limited

Page 86

Statement of Cash Flows

Item 2016 2017 2018

First three months of

2019 Million Baht Million Baht Million Baht Million Baht

Cash flows from operating activities Profit (loss) before income tax 43.16 (207.31) (121.63) (59.34) Adjustment to reconcile net income to net cash provided by (used of) operating activities

Depreciation 216.58 395.67 421.55 107.90 Adjustments (for reversing entries) - doubtful accounts - trade and other receivables

5.34 (6.23) (1.74) (0.10)

- obsolete inventories - - (0.21) - Write-offs withholding tax receivables 0.22 1.73 4.83 - Realized gains on sales of trading securities

(4.31) (2.67) (1.39) -

Unrealized gains on changes in fair values of trading securities

(0.11) (1.17) (0.00) (0.00)

Gain on bargain purchase - - (82.54) - Gain on disposals of investment property

- (104.40) (0.12) -

(Gain) loss on disposals of equipment 3.99 - 1.16 - Loss on write-offs of equipment and intangible assets

- 5.07 0.47 0.02

Employee benefit expenses 8.57 18.86 18.01 5.53 Interest income (3.24) (11.59) (1.48) (0.06) Finance costs 9.31 69.12 126.11 38.22 Profit from operating activities before changes in operating assets and liabilities

279.51 157.07 363.02 92.17



Page 87

Item 2016 2017 2018



Trade and other receivables 19.89 34.23 (71.92) 9.05 Inventories (4.02) (2.49) 8.30 (0.96) Work in progress under service contracts

(3.28) (9.65) 12.94 -

Other current assets (0.19) 3.34 1.93 1.93 Other non-current assets 3.05 19.96 (11.80) (1.69) Trade and other payables 60.30 96.82 (17.26) 63.11 Advances received from customers (2.82) (1.15) (25.95) 2.50 Deposits received from customers 9.62 25.06 (18.86) (1.23) Other current liabilities 11.15 (9.62) (0.37) (20.97) Employee benefits paid (1.10) (0.88) (2.10) (0.38) Long-term provisions (1.44) - - - Other non-current liabilities 3.74 (15.02) 1.27 5.65 Cash generated from (used in) operations

374.40 297.66 239.18 149.17

Interest paid (75.14) (66.28) (106.71) (33.35) Income tax paid (27.23) (119.06) (117.01) (8.09) Net cash generated from (used in) operating activities

272.04 112.33 15.46 107.73

Cash flows from investing activities Proceeds from disposals of short-term investments

920.01 3,638.84 947.71 0.47

Purchases of short-term investments (629.34) (4,165.62) (304.42) - Decrease (increase) in restricted deposits at a financial institution

(1.41) (0.77) 1.43 -

Cash received from purchases of subsidiaries

4.80 - - -

Payments for investments in subsidiaries

- (1,000.00) (1,000.00) -



Page 88

Item 2016 2017 2018



Payments for entire business transfer - - (900.00) (96.00) Cash received from interest income 3.03 6.07 1.44 0.06 Proceeds from disposals of investment property

- 2,500.00 - -

Proceeds from disposals of equipment 0.19 - 0.64 - Purchases of investment property - - (26.76) - Purchases of property, plant and equipment and intangible assets

(957.59) (868.67) (718.54) (262.19)

Payments for leasehold rights (10.39) (12.04) (2.80) (1.29) Net cash generated from (used in) investing activities

(670.70) 97.82 (2,001.30) (358.95)

Cash flows from financing activities Increase (Decrease) in overdrafts from a financial institution

(0.00) - - -

Payments for financing fee - - (4.66) (1.50) Proceeds from borrowings from financial institutions

388.11 380.92 2,189.22 1,305.57

Repayments of borrowings from financial institutions

(73.84) (882.62) (181.31) (1,271.61)

Proceeds from borrowings from related parties

- 441.50 - 200.00

Repayments of borrowings from related parties

(696.77) (33.50) - -

Cash repayments of loans from related businesses

(262.04) - - -

Payments of finance lease liabilities - (9.94) (12.38) (7.12) Dividends paid (1.74) (28.40) (23.60) - Proceeds from ordinary shares issued of 585.79 18.26 90.00 60.00



Page 89

Item 2016 2017 2018



a subsidiary Proceeds from partial disposals of investments in subsidiaries

- - - 16.00

Net cash generated from (used in) financing activities

(60.49) (113.77) 2,057.27 301.34

Net increase in cash and cash equivalents

(459.15) 96.37 71.43 50.12

Cash and cash equivalents at the beginning of the period

733.25 274.10 370.47 441.90

Cash and cash equivalents at the end of the period

274.10 370.47 441.90 492.03

Significant Financial Ratios Significant Financial Ratios

2016 2017 2018 First three months of

2019 Liquidity Ratio Liquidity Ratio (times) 1.11 0.62 0.31 0.29 Quick Ratio (times) 0.89 0.55 0.25 0.24 Accounts Receivables turnover (times) 21.44 15.70 21.46 19.06 Average collection period (days) 16.79 22.93 16.78 18.89 Accounts payable turnover (times) 19.02 10.12 12.83 17.09 Average payment period (days) 18.93 35.56 28.07 21.07 Inventory turnover (times) 31.61 35.45 40.75 40.92 Average selling period (days) 11.39 10.16 8.83 8.80 Cash cycle (days) 9.25 (2.48) (2.46) 6.63 Profitability Ratio Gross profit margin (%) 30.61 22.79 25.49 25.33 Net profit margin (%) (2.54) (14.35) (6.07) (10.32)



Page 90

Significant Financial Ratios 2016 2017 2018


2019 Return on equity (%) (1.09) (4.29) (2.12) (3.66) Return on assets (%) 0.18 (2.70) (1.11) (1.90) Financial Policy Ratios Debt to equity ratio (times) 0.40 0.50 0.68 0.73 Interest coverage ratio (times) 12.77 4.31 1.90 3.90



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Revenue structure The following provides details of the Company’s revenue structure classified by business group over a three-year period ended December 31, 2016,

December 31, 2017, December 31, 2018 and the first quarter of 2019.

Revenue Category 2016 2017 2018

First quarter of 2019

Million Baht % Million Baht

% Million Baht % Million Baht %

Revenues from hospital operations

1,716.82 82.87 1,690.42 75.54 2,084.63 76.57 548.39 78.11

Revenues from property rental business

286.84 13.85 476.38 21.29 574.24 21.09 152.09 21.66

Other businesses 68.01 3.28 70.97 3.17 63.83 2.34 1.64 0.23 Total revenues 2,071.67 100.00 2,237.77 100.00 2,722.71 100.00 702.12 100.00



Page 92

8. Management Discussion and Analysis Overview of past operation Principal Capital Public Company Limited (“Company” or “PRINC”) operates private hospital businesses,

which include hospital management and rental property development. Over the past period, the Company’s hospital business group has been expanded through adoption of merger and acquisition strategy which has effectively enhanced its revenue generating capability, as witnessed by the total revenues of 2,071.67 Million Baht, 2,237.77 Million Baht, 2,722.71 Million Baht and 702.12 Million Baht in 2016, 2017, 2018 and the first quarter of 2019, respectively. The following describes the operation of the Company:

Revenues from sales and services

The Company’s revenue from sales and services in 2017 totaled 2,237.77 Million Baht , increasing from 2016 by 166.10 Million Baht, or 8.02 %. Of this, 1,690.42 Million Baht, or 75.54 % came from the hospital business, 476.38 Million Baht, or 21.29 % from property development and rental, and 70.97 Million Baht, or 3.17 %, from other businesses. The revenue from the hospital business decreased because (1) the rise in revenues from the hospital business was induced by the influenza spread in 2016, leading to high medical expenses but the whole industry saw a slowdown in revenue in the first half of 2017 and (2) the in-patient building of Paknampo Hospital was partially closed for renovation and the hospital could not fully meet the demands of patients. The property development and rental business, on the other hand, enjoyed a revenue increase due to (1) all the three buildings of the Somerset Ekamai Bangkok Project were completed and available for service, with the occupancy rate of 65%, raising the revenues by116.89 Million Baht and (2) the increase of revenues from the building management business by 93.84 million Baht from 2016, along with the increase of the occupancy rate from 79.10 % in 2016 to 88.07 % in 2017, and (3) the rise of revenue from Marriott Executive Apartments Sathorn Vista, Bangkok by 13.69 Million Baht as the occupancy rate climbed up from 86.92 % in 2016 to 89.55 % in 2017.

For 2018, the Company’s total revenues from sales and services reached 2,722.71 Million Baht, or 484.93 Million Baht higher, representing 21.67 %. This is broken down into 2,084.63 Million Baht from the hospital business (76.57 %) , 574.24 Million Baht from property development and rental (21.09 %) and 63.83 Million Baht from other businesses (2.34 %). The rise of the revenues from the hospital business is attributed to (1) revues from Princ hospital Suvarnabhumi, acquired in early 2018118, totaling 206.95 Million Baht – which was not a revenue item in 2017, (2) the increase in the combined revenues of the three existing hospitals (Pitsanuvej Hospital, Paknampo Hospital and Sahavej Hospital) by 164.13 Million Baht due to the increases in the numbers of inpatients and outpatients. Renovations taking place at some of the hospitals in 2018 led to reduction of the numbers of patients, however. The main reasons from the increase in revenues from the property development



Page 93

and rental were: (1) The Somerset Ekamai Bangkok Project’s revenues increased by 79.36 Million Baht, thanks to the increase of the occupancy rate from 82.00 % in 2017 to 85.74 % in 2018 and the increase of the average daily rate (ADR) from 2,447 to 2,546 Baht. 2018 was the first year in which all the buildings were available for services for the whole year; (2) Bangkok Business Center Building yielded an increase of 13.46 million Baht increase in revenue despite the more or less unchanged occupancy rate (87.93 % in 2018 and 88.07 % in 2017). The average room rate (ARR) rose from 553 to 572 Baht per square meter, with new tenants charged at an average rate of 600 Baht per square meter; (3) Marriott Executive Apartments Sathorn Vista, Bangkok, meanwhile, generated revenues slightly lower than the previous year (228.56 Million Baht in 2018 as against 230.07 Million Baht in 2017) due to the fall of the number of Chinese tourists in the middle of the year.

The first quarter of 2019 saw an increase in revenues from sales and services of 702.12 Million Baht, an

increase of 61.33 Million Baht or 9.57 % from the corresponding period of the previous year. Revenues from the hospital business totaled 548.39 Million Baht, or 78.11 of the revenues from sales and services and property development and rental generated 152.09 Million Baht, or 21.66 %. Revenues totaling 1.64 were generated from other businesses, representing 0.23 % of the revenues from sales and services. The increase of revenues from the hospital services as due to the following: (1) Recognition of revenues totaling 34.12 Million Baht generated by Princ Hospital Suvarnabhumi for the whole of quarter 1 of 2019. The business was acquired in early 2017 and only its revenues in March were recognized. (2) There was an additional revenue of 0.53 Million Baht from Sirivej Lamphun Hospital in March 2019 and another 0.53 Million Baht from Pitsanuvej Uttaradit Hospital which was opened on March 29, 2019. (3) The revenues of each of the three existing hospitals (Pitsanuvej Hospital, Paknampo Hospital and Sahavej Hospital) increased from the first quarter of 2018 due to the rise of the number of inpatients and outpatients. Meanwhile, the increase of the revenues from the property development and rental business was due mainly to (1) the increase in the occupancy rate at Somerset Ekamai Bangkok from 81.90 % in the first quarter of 2018 to 83.98 % in the first quarter of 2019 and the rise of the ADR from 2,551 to 2,590 Baht and (2) Bangkok Business Center’s revenue increasing by 1.56 Million Baht as the ARR rose from 554 to 573 Baht.

Other revenues

Other revenues generated in 2017 were 121.72 Million Baht higher than 2016, comprising 8.36 Million Baht of interest received and 104.40 Million Baht of gain on disposals of investment property. No such gain was generated in 2016.



Page 94

Other revenues of 2018 were 32.73 Million Baht lower than 2017, with interest received of 10.11 Million Baht. Gain on disposals of investment property in 2017 amounted to 104.40 Million Baht while in 2018, there was 82.54 Million Baht gain on bargain purchase.

Other revenues in the first quarter of 2019 were 81.96 Million Baht lower than the corresponding period of 2018, when there was gain of 82.54 Million Baht on bargain purchase of Princ hospital Suvarnabhumi.

Gross profit and gross profit margin The Company’s total costs in 2016, 2017, 2018 and the first quarter of 2019 were 1,437.43 Million Baht,

1,727.72 Million Baht, 2,028.64 Million Baht and 524.28 Million Baht, representing 69.39 %ม 77.21 %, 74.51%, and 74.67% of revenues from sales and services, respectively. Gross profits for 2016, 2017, 2018 and the first quarter of 2019 therefore stood at 634.24 Million Baht, 510.05 Million Baht, 694.07 Million Baht and 177.84 Million Baht, or 30.61%, 22.79, 25.49 % and 25.33 %, respectively.

The Company’s costs of sales and services in 2017 totaled 1,727.72 Million Baht, increasing from 2016 by 290.29 Million Baht, due to the rise of the costs of the property development and rental business from the previous year by 204.12 Million Baht. The major reasons were the increase in depreciation as all the three buildings of the Somerset Ekamai Bangkok Project were opened for service from June 2017 and the cost of the Bangkok Business Center Building rose from the previous year by 54.96 Million Baht, In addition, the costs of the hospital business increased by 87.77 Million Baht as a result of the increase in the number of employees necessitated by business expansion, as well as the need to accommodate patients’ requirements. Investment in modern and sophisticated medical supplies led to asset hire-purchases and thus to greater depreciation. The Company’s gross profit totaled 510.05 Million Baht, representing 22.79 % of the revenues from sales and services.

As for 2018, the Company’s costs of sales and services amounted to 2,028.64 Million Baht, an increase of 300.92 Million Baht from the previous year. The major reasons for the increase were acquisition of Princ Hospital Suvarnabhumi in early 2018 and opening of all the buildings of the Somerset Ekamai Bangkok Project in 2018. The Company’s gross profit totaled 694.07 Million Baht, representing 25.49 % of the revenues from sales and services.

For the first quarter of 2019, the Company’s costs of sales and services amounted to 524.28 Million Baht, an increase of 29.67 Million Baht from the previous year. The major reasons for the increase were recognition of the cost of Princ Hospital Suvarnabhumi for the full first quarter of 2019 and the opening of Sirivej Lamphun Hospital and Pitsanuvej Uttaradit Hospital in March 2019. The Company’s gross profit totaled 177.84 Million Baht, representing 25.33 % of the revenues from sales and services.



Page 95

Selling and Administrative expenses

The Company’s selling and administrative expenses in 2016, 2017, 2018 and the first quarter of 2019 amounted to 606.58 Million Baht, 814.76 Million Baht, 823.37 Million Baht and 209.45 Million Baht, or 29.28 %, 36.41 %, 30.24 % and 29.83 % of the revenues from sales and services, respectively.

The selling and administrative expenses in 2017 were 208.19 Million Baht higher than 2016 because (1) the expenses of managing the five subsidiaries of the property development and rental business increased by 51.21 Baht as only 8.42 Million Baht was counted towards the financial statement (October 10 – December 31, 2016). There was another amount of expenses of transfers and Specific Business Tax for disposals of investment property, 96.70 Million Baht.

The Company’s selling and administrative expenses in 2018 were 8.61 Million Baht higher than 2017, mainly because of the expenses of Princ Hospital Suvarnabhumi which were additional items in 2018 and other expense increases of the hospital business.

As for the first quarter of 2019, the Company’s selling and administrative expenses amounted to 209.45 Million Baht, 21.72 Million Baht higher than the same period of the previous year due to opening of new hospitals during the quarter. Also, some hospitals were undergoing renovation and offered services, leading to higher expenses.

Financial expenses The Company’s financial expenses in 2016, 2017, 2018 and the first quarter of 2019 amounted to 29.31 Million Baht, 69.12 Million Baht, 126.11 Million Baht, and 38.22 Million Baht, or 1.41 %, 3.09 %, 4.63 % and 5.44 % of the revenues from sales and services, respectively. Financial expenses in the first quarter of 2019 were 19.48 Million Baht higher than the corresponding period of the previous year. Financial expenses in 2018 were 56.99 Million Baht higher than 2017. And, financial expenses in 2017 were 39.81 Million Baht higher than 2016. The increases were due to borrowings from financial institutions for use in hospital business expansion through investing in modernizing hospitals to cater to customer requirements. Net profit (loss)

The Company incurred a loss amounting to 152.64 Million Baht. Compared to the loss of 371.61 Million Baht incurred in 2017, the net loss decreased from the previous year by 58.92 % due to the increase in revenues, the higher gross profit and the decrease of selling and administrative expenses as well as tax expenses.



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As for the first quarter of 2019, the Company incurred a loss of 68.91 Million Baht, a negative change from the corresponding period of 2018 which saw a net profit of 27.57 Million Baht. This was due to the opening of new hospitals in the first quarter of 2019 and re-launching of services of renovated ones, which required launching expenses, including those for marketing, PR and other activities. The selling and administrative expenses were therefore higher. These expenses did not generate revenues in the current quarter but would result in greater revenues in the second. In addition, during the first quarter of 2018, the Company had a gain of 82.54 Million Baht from bargain purchase. If such gain is not included in the comparison, the operating results of the two quarters were not so different.

Financial position Assets As at December 31, 2016, 2017, and 2018 and as at March 31, 2019, the Company’s assets totaled 14,449.81 Million Baht, 13,088.21 Million Baht, 14,318.08 Million Baht, and 14,695.50 Million Baht, respectively The Company’s assets in 2017, totaling 13,088.21 Million Baht, represented a decrease of 1,361.60 Million Baht, or 9.42 %, from total assets as at December 31, 2016, mainly because of the subsidiaries’ disposal of investment property amounting to 2,395.60 Million Baht. Although there were increases in current assets, non-current assets, property, plants and equipment, intangible assets and leasehold rights, their values were smaller than the disposal of investment property.

As for 2018, the Company’s assets totaled 14,318.08 Million Baht, increasing by 1,229.87 Million Baht, or 9.40 % from total assets as at December 31, 2017 due to the increase in property, plants and equipment belonging to Princ Hospital Suvarnabhumi which had been acquired. There were also increases in cash and cash equivalents and trade and other receivables, in line with the revenue growth; while short-term investment decreased by 641.86 Million Baht.

As for the first quarter of 2019, the Company’s total assets stood at 14,695.50 Million Baht, increasing from total assets as at December 31, 2018 by 377.42 Million Baht, or 2.64 %. The increase was due to the increment in property, plants and equipment resulting from the new and renovated hospitals. Cash and cash equivalents also increased by 49.82 Million Baht.

Liabilities

The Company’s liabilities as at December 31, 2016, 2017, and 2018 and as at March 31, 2019 totaled 3,154.14 Million Baht, 4,164.11 Million Baht, 5,476.46 Million Baht and 5,826.06 Million Baht, respectively.

The Company’s liabilities in 2017, totaling 4,164.11 liabilities, represented an increase of 1,009.97 Million Baht, or 32.02 %, from total liabilities as at December 31, 2016 due to an increase of 1,000 liabilities of share



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payables and an increase of 411.56 Million Baht of long-term loan from a related party while long-term borrowings from a financial institution decreased by 532.68 Million Baht.

As for 2018, the Company’s liabilities totaled 5,476.46 Million Baht, increasing by 1,312.35 Million Baht, or 31.52 % from total liabilities as at December 31, 2017 due to an increase by 2,007.63 Million Baht in borrowings from a financial institution, an increase of liabilities of 81.31 Million Baht from financial lease while trade and other payables dropped by 907.35 Million Baht following payment of outstanding share payables.

As for the first quarter of 2019, the Company’s total liabilities stood at 5,826.06 Million Baht, increasing from total liabilities as at December 31, 2018 by 349.60 Million Baht, or 6.38 %. The increase was due to the subsidiaries’ short-term loans from a related party which increased by 205.74 Million Baht, trade and other payables which increased by 75.45 Million Baht and an increase of short-term and long-term borrowings from financial institutions, amounting to 32.25 Million Baht.

Shareholders’ equity

As at December 31, 2016, 2017, and 2018 and as at March 31, 2019, equity attributable to owners of the parent amounted to 7,825.34 Million Baht, 8,246.29 Million Baht, 8,077.56 Million Baht, and 8,004.18 Million Baht, respectively.

For 2017, equity attributable to owners of the parent amounted to 8,246.28 Million Baht, increasing by 420.95 Million Baht, which represented the difference between business combination under common control (764.13 Million Baht) and the loss incurred in 2017 (343.18 Million Baht).

For 2018, equity attributable to owners of the parent amounted to 8,077.56 Million Baht, decreasing by 168.73 Million Baht from the previous period due to the loss incurred during 2018.

For the first quarter of 2019, equity attributable to owners of the parent amounted to 8,004.18 Million Baht, decreasing by 73.38 Million Baht from the previous period due to due to the loss incurred during the period.

Debt to equity Ratio

As at December 31, 2016, 2017, and 2018 and as at March 31, 2019, the Company’s debt to equity ratios were 0.40 time, 0.50 time, 0.68 time, and 0.73 time, respectively. The ratio has being increasing, which was in line with the increases of the Company’s borrowings from financial institutions for use in expanding the hospital business.



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Cash flows The Company’s cash flows in 2016, 2017, 2018 and the first quarter of 2019 decreased by 459.15 Million

Baht, increased by 96.37 Million Baht, increased by 71.43 Million Baht and increased by 50.12 Million Baht, respectively.

For 2017, the Company had 112.33 Million Baht cash flows from operating activities, net cash flows of 97.82 Million Baht from investing activities, with cash flows of 3,638.84 Million Baht cash received from disposal of short-term investments, 2,500.00 Million Baht cash received from disposal of investment property, 4,165.62 Million Baht cash payments for short-term investments and 1,000.00 Million Baht investment in subsidiaries. Another 868.67 Million Baht was used in purchases of plants and equipment and intangible assets. In addition, 113.77 cash flows were used in financing activities, mainly resulting from repayment of borrowings from financial institutions.

As for 2018, There Company had cash flows of 15.46 operating activities Million Baht, a reduction from 2017, due to increases in interest payments, while there were cash flows totaling 2,001.30 Million Baht used in making payment for acquisition of a subsidiary and cash payment for entire business transfer, with net cash of 2,057.27 Million Baht from financing activities and 2,189.22 Million Baht cash received from borrowings from financial institutions.

For the first quarter of 2019, the Company had 107.73 Million Baht from operating activities as a result of its operation. Net cash of 358.95 Million Baht was used in investing activities, 262.19 Million Baht of which was for purchases of property, plants and equipment and 96.00 Million Baht was used in payment for transfer of the entire business of Lamphun Ruamphat Company Limited. There was net cash of 301.34 Million Baht from financing activities, 1,305.57 Million Baht cash received from borrowings from financial institutions, 200.00 Million Baht cash received from borrowings from related parties and 1,271.61 Million Baht cash repayment of borrowings from financial institutions.

9. Industry review

Overview of the Thai economy Thailand’s economy in 2018 continued to grow at 4.1% (as against 4% in 2017. This highest growth rate

in six years was driven by consumption and investment in the private sector as well as government spending and investment. Growth was also seen in the agricultural and manufacturing sectors, wholesales, retails, repair and maintenance, hotels and restaurants as well as transportation. Exports slowed down from the previous year, in line with the economic growth directions of the trading partners and global trading which has been affected by the trade war between the United States and China. There were also impacts of trade restriction measures



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imposed by the United States against certain export items and the cyclical slowdown of electronic goods. The number of tourists continued to grow despite the fall of Chinese tourist arrivals following the boat capsize in July 2018 which shook Chinese tourists’ confidence in safety.

During the first quarter of 2019, the Thai economy grew at a rate of 2.8 %, down from 3.6% recorded for the fourth quarter of 2018. Major drivers continued to be private sector consumption and investment and increasing government spending. Exports, meanwhile, decreased. Accelerated growth was seen in agricultural, electricity and gas production. The sectors slowing down were manufacturing, transportation, retail, hotel, food services and construction.

2019 Economic outlook

(YoY) 2017 Whole year

2018 Whole year

2018 Q3

2018 Q4

2019 Q1

2019 Whole year

(f) GDP (CVM) 4.0 4.1 3.2 3.6 2.8 3.3-3.8 Gross investment/1

1.8 3.8 3.9 4.2 3.2 4.5

Private sector

2.9 3.9 3.8 5.5 4.4 4.5

Public sector -1.2 3.3 4.2 -0.1 -0.1 4.5 Private sector consumption

3.0 4.6 5.2 5.4 4.6 4.2

Public Sector consumption

0.1 1.8 1.9 1.4 3.3 2.2

Export value 9.8 7.2 2.8 2.3 -3.6 2.2 Export volume

6.0 3.6 -0.2 0.7 -3.9 1.2

Import value 13.2 14.3 17.0 7.5 -2.9 3.5 Import volume

7.2 8.2 10.2 4.6 -3.0 2.0

Current 11.0 6.9 3.7 5.5 10.9 5.9



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(YoY) 2017 Whole year

2018 Whole year

2018 Q3

2018 Q4

2019 Q1

2019 Whole year

(f) account balance (% of GDP) Inflation 0. 1.1 1.5 0.8 0.7 0.7-1.2 Notes: 1/ Gross investment means gross fixed capital formation 2/ Bank of Thailand Balance of Payment Database

The Thai economy is expected to grow at economy is expected to grow at.3.3 - 3.8 % in 2019, with the

major drivers being: 1. The fairly favorable growth tendency of domestic demands in terms of both expenditure and

investment of the private and public sectors 2. Gradually improving export conditions in the second half of the year along with the reduction of

inventories in major economies, the decrease in intensity of the shortage of computer processors in the world market and greater clarity of trade directions as dictated by trade restriction measures.

3. The positive trend of adjustment of key drivers of the tourism sector The value of Thai exports is expected to grow by 2.2 %. Private sector consumption and gross

investment are expected to grow by 4.2 and 4.5 %, respectively. Headline inflation is expected between 0.7 and 1.2 % and the current account surplus around 5.9% of GDP. (Sources: Bank of Thailand, Thailand's Economic Conditions in 2018, NESDB, Macroeconomic Strategy and Planning Bureau, Thailand's Economic Conditions in Q4 and the Whole Year of 2018 and Trends in 2019)

a. Medical service business

There are presently 38,512 sanatoriums in Thailand, 34.7 % of which are state-owned (e.g., public health offices, health centers, community hospitals and general hospitals) and 65.3% are privately owned (private hospitals and clinics) (Source: Bureau of Policy and Strategy, Office of Permanent Secretary, Ministry of Public Health: Notification on Medical Facility Information as of April 4, 2017). There are a relatively large number of government sanatoriums and the government has health welfare schemes, namely:

https://www.bot.or.th/English/MonetaryPolicy/EconomicConditions/AnnualReport/AnnualReport/annual_2016_V2.pdf



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1. Welfare for government and state enterprise employees, which provide medical coverage for government officials and state enterprise employees at government hospitals. The welfare, supervised by the Comptroller General's Department, also covers the spouse, parents and children who have not become sui juris.

2. The social security system provides welfare for private sector employees in a formal system, covering medical expenses, illnesses, disability, childbirth and childcare expenses, unemployment and funeral expenses.

3. Universal Health Coverage provides coverage for all Thai citizens who are not entitled to other social welfare health benefits for medical services provided at government hospitals or any sanatoriums registered under the program, widely known as the “30 Baht covering All Illnesses Program”, administered by the National Health Security Office(NHSO). (Source: 3rd National Human Rights Plan (2014 – 2018), Rights and Liberties Protection Department)

However, the welfare systems are not sufficient for Thailand’s domestic medical needs for various reasons. (1) In terms of bed occupancy rate, government hospitals in some province have this rate close to 100%; e.g.,Satun (103%), Loei (98), Phuket, Mukdahan and Surat Thani (96%) and Udon Thani and Pathum Thani (94) (Source: The 2017 Survey on Health and Welfare, the National Statistical Office, National Health Security Office) (2) The outpatient waiting time is still very long. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research). Besides, Thailand still has shortages of healthcare workers. According to statistics of the World Health Organization, Thailand’s ratio of doctors to patients is lower than that of other Asian nations. For every 10,000 patients, Thailand has only 8.1 doctors while Singapore has 23.1, Malaysia 15.1, Vietnam 8.2 and Brunei 17.7. Meanwhile, revenues of the medical service industry in Thailand have grown at an average rate of 7.46% per year during 2014 – 2017. (Source: Business Analysis: “Hospital and Sanatorium Business”, March 2019 by the Department of Business Development). These have led to a growing demand for private healthcare services. The private hospital industry tends to grow at an average rate of 10-13 % during 2019 – 2021. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research

Growth potential of the healthcare service business

• Moving towards an ageing society This is a compelling factor for the demand for more medical services and more sophisticated technologies. The number of elderly people in proportion to the country’s population has been continuously on an increase. In 2018, Thailand had 10.7 million elderly citizens, accounting for 16.1 5 of the population. (Source: Department of Provincial Administration, Ministry of



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Interior). The National Economic and Social Development Board has forecast that the number of elderly citizens will reach 13.1 million - 19.8 % of the population – in 2021. In addition, the Ministry of Public Health has estimated that healthcare expenses for the elderly will climb up to 228 Billion Baht – 2.8 % of the GDP – in 2022, a significant increase from 630 Billion Baht – 2.1 % of the GDP – in 2010. (Source: 12th National Health Development Plan, 2017-2021)

Million 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 F 2020F 2021F 2022F

Number of elderly people in Thailand

(Source: Department of Provincial Administration, Ministry of Interior and the National Economic and Social Development Board)

• The rise of the Thai middle class signifies stronger purchasing power. According to Euromonitor International’s forecast, the size of the middle class population in Thailand will continue to grow, with six million households having incomes exceeding US$ 15,000 in 2020, or 41 % of the population in that year. The larger size of the middle-income population will increase the demand for private hospital services. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).



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• Urbanization According to the United Nations’ forecast, Thailand’s urbanization rate will increase from 50.4 % in 2015 to 60.4 % in 2025. This, coupled with various government policies, such as investments in infrastructure projects, establishment of special economic zones and the Eastern Economic Corridor (EEC) Project, will enhance the opportunity for private hospital business operators to expand into the provinces to better accommodate the needs of local patients, as well as expatriates working in Thailand. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

• Higher illness and death rates caused by serious diseases among Thai people Thailand has higher rates of people suffering and dying from non-communicable diseases – NCDs (such as diabetes, heart disease and stroke and cancer than international levels and the rates are on an increasing trend.(Source: ThaiHealth). The factors causing this are behavioral risks. The rates of tobacco use and use of alcohol of people over 15 years of age are 19.1 and 28.4 %, respectively. (Source: the Smoking and Drinking Behavior Survey 2017, National Statistical office). In addition, it was found in 2016 that Thai people consumed 108 grams of sugar a day – five times the amount recommended by the World Health Organization. (Source: Department of Health).

Patients in Thailand classified by symptom (Source: Ministry of Public Health)

• Growth of the health insurance business According to 2014 – 2017 statistics, health premiums of life insurance companies constantly grew every year at an average rate of 11.31 % per year. During the period January – June 2018, health premiums of the insurers totaled 41,100 Billion Baht, with 36100 Billion Baht, or 87.8 %, going to life insurers. (Source: Prachachart Thurakit) Moreover, the Thai General



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Insurance Association predicts a growth rate of 7.75 % for the health insurance market. With such expansion of the health insurance business, the insureds are more likely to undergo treatment at hospitals when they become ill due to both critical and non-critical diseases.

• Trade liberalization and the Asean Economic Community – AEC The study on “Progress of Universal Health Coverage in Asean” reveals that coverage in CLMV countries is still low (15% in Laos, 24% in Cambodia, 65% in Vietnam and N/A for Myanmar). In other words, healthcare infrastructure in CLMV countries is still inadequate and big gaps still exist. Cooperation under free trade area agreements and establishment of the Asean Economic Community or AEC, as well as freer border crossing will be conducive to access to healthcare services in Thailand by CLMV patients, thus offering important opportunities to hospitals in Thailand.

• Comprehensive healthcare has been specified as one of the ten target industries of the country, particularly with regard to investments under the Eastern Economic Corridor (EEC) Project. Various privileges will be offered, including tax reduction to incentivize investors to invest in the healthcare industry, such as by establishing research bases, manufacturing medicines, and introducing innovations. Private hospitals can benefit from reduced costs of production and enhanced competitiveness in foreign markets. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

• Support from the Government to make Thailand an Asian medical hub The government has mapped out and implemented the Plan to make Thailand a medical hub and several measures have been taken. Examples are 1) extension of the stay for medical treatment for people of CLMV countries and China from 30 to 90 days. 2) extension of the long-stay visa for people from 14 countries from one to ten years and 3) offering of dental and medical check-ups for foreigners, which has resulted in continued growth of medical tourism. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

• Standardizing hospital quality and keeping hospital expenses lower than foreign countries Thailand has been recognized and one of the centers for medical tourism of the world due to advancement of Thai hospitals and availability of specialized medical center, especially for treatment of chronic diseases, such as heart disease, bone diseases and cancer. This also includes elderly patient care. Private hospitals in Thailand are also recognized for treatment quality, services and expenses which are lower than other countries. As many as 66 hospitals have been certified for Joint Commission International. Accreditation Standards (JCI), the largest number in the region.



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(Source: Joint Commission International)

Healthcare expenses in Thailand are lower than other countries with the same standards. There are also natural tourist destinations suitable for recuperation. The International Healthcare Research Center (IHRC) ranked Thailand sixth, after India, Colombo, Mexico, Canada and Dominican Republic. The country also enjoys the largest number of medical tourists, accounting for 38% of Asia’s total. The Medical Travel Quality Alliance placed a Thai hospital among the world’s top five hospitals for medical tourism. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

Table showing a comparison of healthcare expenses, 2019

(Source: medicaltourism.com)



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• The proportion of Thai people’s healthcare expenses is still lower than the average Comparison of health-related expenses of the public and private sectors shows Thailand’s proportion of 6.53 %, lower than the world’s average, which is at 6.78 %. The government policy is aimed at providing people with greater access to public health services. The health consciousness trend also plays an important role in raising health-related expenses in the future. Thailand is considered one of the leading countries in Asean with regard to healthcare service business. Negative factors which may affect the growth of the healthcare service business

• Shortage of healthcare workers According to the World Health Organization statistics, Thailand’s ratio of doctors to patients is lower than other Asian countries. For every 10,000 patients, Thailand has only 8.1 doctors while Singapore has 23.1, Malaysia 15.1, Vietnam 8.2 and Brunei 17.7. Expansion of the private hospital business will lead to poaching of doctors and medical personnel, which will in turn increase costs. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

• The government’s price control on medicines, medical supplies and medical services In June, 2019, the cabinet approved addition of medicines and medical supplies as well as medical services to the list of goods subject to control under the Price of Goods and Services Act, B.E. 2542(1999). However, the measures to be taken to enforce the law (e.g., requirements for declaration of costs, specification of price differences for medicines and medical supplies, as well as services will need to be further discussed by the subcommittee to be set up with representatives of the public and private sector as well as the civic sector. These will include representatives of the Department of Internal Trade, the Ministry of Public Health, the Foundation for Consumers, the Thai Life Assurance Association, the Private Hospital Association and the National Health Commission Office. The aim is to determine prices for fairness. Such price control may adversely affect the revenues of private hospitals, particularly in view of the fact that revenues from medicines account for 35.2% of total revenues, the largest component, followed by revenues from medical services (20.2 %), analyses of laboratory test and x-ray results (13.7), patient room (8.5 %) and others (22.6 %). (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research). Intense competition from both domestic and foreign competitors Domestic competitors are not limited to those already in the same industry. Several other business groups have also adjusted their business models to enter the hospital business. Examples are Pruksa Holding (Vimutti Hospital is expected to the



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open in 2020), RSU International Hospital will also be opened in 2020, C.P. Group and TCC Group. Because the hospital business has low risks and has potential to general long-term secure revenues, and because consumers have become more health conscious, the number of hospitals and the number of beds have increased. The number of beds is expected to increase by not less than 1,000 by 2021 from 40,000 2018. This will lead to more intense competition among private hospital operators in terms of price, service and employee poaching. In addition, private hospitals also have to compete against certain government hospitals and special medical clinics rendering more or less the same standards as private hospitals, as well as hospital under medical schools, such as Siriraj Piyamaharajkarun Hospital under Siriraj Hospital and Somdech Phra Debaratana Medical Center of Ramathibodi Hospital, which have advantages in terms of recognition, medical technologies and medical specialists. (Source: Industry Outlook 2019-2021, “Private Hospital Industry”, June 2019, Krungsri Research).

There is also competition from foreign countries, particularly several in Asia which have ALSO positioned themselves as medical centers or have the same customer targets as Thailand, such as Singapore, Malaysia, India and China (which plans to turn its Hainan Province into a medical tourism hub to attach Chinese patients who like to undergo medical treatment abroad. In addition, Singapore’s Parkway Pantai has announced a plan to establish a 250-bed hospital in Myanmar, expected to be operational in 2020. Countries in the Middle East, which are main customers of leading Thai hospitals, are also making moves. For example, Qatar has opened a 559-bed Medical City, valued at 23 Billion Baht in late 2017. Kuwait has opened a 1,168-bedHospital Complex with a value of 35 Billion Baht. The government of United Arab Emirates has changed its health insurance terms to focus more on domestic treatment, rather than overseas treatment. Such competition may somewhat affect profitability of private hospitals as some customers and market shares may be taken.

b. Serviced apartment and hotel business The serviced apartment and hotel business is closely linked with the tourism industry as some of the customers are tourists. In 2018, the foreign tourist market grew by 7.1 %, with 38.1 tourists. Although there was a slowdown in the second half of the year, recovery of the number of foreign tourists occurred in the last two months when the tourist season began and to the government’s policy for visa on arrival fee exemption granted to tourists from 21 countries until April 30, 2019.



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(Sources: Department of Tourism, Ministry of Tourism and Sports, Outlook of

Thailand’s tourism industry 2019 by KResearch)

In 2019, the tourism industry is expected to grow from 2018 by 2.1 – 4.1 %, which is translated into 39.0 – 39.8 tourists, and 2.16 – 2.20 Trillion Baht is expected to be generated, representing an increase of ละ 6.9 – 8.9 % from 2018. (Source: Outlook of Thailand’s tourism industry 2019, KResearch)

Broken down by nationality, Chinese visitors constituted the largest number of inbound tourists in 2018, accounting for 27.5 % of all tourists, followed by Malaysians (10.7 %) and South Koreans (4.7 %). The top three nationalities remained unchanged. (Source: Outlook of Thailand’s tourism industry 2019, KResearch)

Number of tourists Revenue (Trillion Baht)



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Breakdown of foreign tourists in Thailand by nationality 2018

(Source: Department of Tourism, Ministry of Tourism and Sports)

Overview of the serviced apartment business in Bangkok

Although the number of foreigners working in Bangkok has been increasing every quarter, the serviced apartment business has to compete intensely against condominiums and high-end apartments, Foreigners therefore have abundant choices of accommodation, resulting in not so much availability of serviced apartments over the past 1-3 years and rental as well as occupancy rates remain close to the 2017 levels. In Q2/2018, 84 % of serviced apartment areas was located in inner Bangkok, particularly along Sukhumvit Road, where 56 % of serviced apartments are located.



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Serviced apartment supply in Bangkok as of Q2/2018

(Source: Research team, Colliers International Thailand)

As of Q4/2018, 95,033 expats were granted work permits. The number has been on the rise over the past several years. However, they do not chose to live in serviced apartment as luxurious condominiums and apartments are available along the BTS route at rates about 10 % lower than serviced apartments in the same neighborhood. 56 units of serviced apartments were completed in Q4/2018, bringing the total number of units to 20,372. Another 4,689 units are under construction and are expected to be completed during 2019 – 2021. The occupancy rate of serviced apartment in all area is over 74 % and some projects have over 90 %. CBD’s and areas along Sukhumvit Road remain the most popular among expats working in Bangkok. The occupancy rates in these areas are approximately 80 % on average, thanks to convenient traveling by BTS and numerous facilities available. As the majority of serviced apartment customers are expats working in Thailand who wish to stay long-term, rental rates in 2018 tended to be higher than 2017. During Q4/2018, average rental rates were 840 Baht/square meter/month, practically unchanged from the previous quarter, except in areas south of Bangkok and on Rama 3 where rates were 640 Baht /square meter/month on average. Rental rates in CBD and Lumpini areas were highest, over 1,200 Baht/square meter/month. Although there has been little indication of growth of the serviced apartment business over the past few years, there have been some favorable factors for future market growth, such as the increase in foreign investment and relatively stable political situation over the past-4 years. (Source: Market analysis report on serviced apartments in Bangkok for Q$/2018 by, Colliers International Thailand).

Other areas

Outskirt (South)

Lumpini Park

CBD

Areas near the beginning of Sukhumvit Road 43%

Areas towards the end of Sukhumvit Road

13%

Areas along Sukhumvit Road 56%



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Competition Competition in the serviced apartment business is relatively intense. Apart from competing among themselves, operators of the business also have to compete against other businesses, such as hotels, high-end apartments and condominiums. Most serviced apartments in Bangkok also offer short-term stays. Many operators set per-night rental rates at more or less the same levels in view of the increase in the number of new 3-4 star hotels. Besides, the Thai Hotels Association has been pressing the government to require serviced apartments to also obtain a Hotel business license. Also, some luxurious condominiums have adjusted their business model and partly offer services similar to serviced apartments, at lower rental rates. Both factors make it harder for increasing serviced apartment rental rates.

c. Overview of the office building rental business As of Q1/2018, total office space in Bangkok stood at 8,618,862 square meters, increasing from the

previous quarter by 47,720 square meters. Within 2018, another 185,310 square meters was scheduled for completion. (Source: Market Analysis Report for Q1/2018 by Colliers International Thailand). During 2019 – 2014, approximately another 956,775 square meters in Bangkok has been scheduled for completion, as follows:

Office Building Rental space (square meters)

Completed/ to be completed in

Spring Tower 27,518 2562 C.P.Tower 4 48,091 2562 Samyan Mitrtown 45,000 2562 The Park 71,000 2562 Total rental space to be completed in 2019 191,609 Magnolias Project 20,000 2563 Vanissa Building 22,185 2563 Phayathai Complex 100,000 2563 Poem Tower 25,000 2564 Ploenchit Embassy 60,000 2564 Kronos Sathorn Tower 22,481 2564 One Bangkok 225,000 2565 The Forestias 100,000 2565 Sriboonruang 56,500 2565 The Super Tower 94,000 2566



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Office Building Rental space (square meters)

Completed/ to be completed in

Chuvit Garden 20,000 2566 Dusit Thani 20,000 2567 Total rental space to be completed in 2020 - 2024

765,166

(Source: Office Building Market Report, Q4/2018, by Knight Frank Thailand)

Demand for office space in Bangkok has been increasing by 200,000 – 250,000 square meters each year. The demand has been reinforced by investment promotion under the Eastern Economic Corridor and the Thailand 4.0 policy aimed at turning Thailand into a digital hub in Southeast Asia. The policy has attracted investments from large multi-national corporations and Thailand’s start-ups, thus inducing demand for more office space in Bangkok. In Q4/2018, the occupancy rate was at 91.57 %, dropping from the previous quarter but increasing by 0.25 year-on-year. (Source: Overview of the Office Building Market in Bangkok Q4/2018 by Knight Frank Thailand). The occupancy rates of new office buildings are expected to increase on a continuous basis due to the country’s economic growth, establishment of companies, as well as foreign investment and the Thai business growth. However, emergence of new office buildings in the future may result in reduction of occupancy rates due to increasing supply. (Source: Nexus Real Estate Advisory, Q3/2018.

Average office space rental rates continued to increase in 2018 as a result of strong demand which had

been continuing over the past few years and not so much new space entered the market. Rental rates increased remarkably during Q4/2018, from 745 to 765 Baht/square meter/month, or an increase of 2.6 % from the previous quarter and 6.8 % from the previous year. Grade A office buildings had the highest rate of increase of average rental rate, 4.7 % from the previous quarter and 8.2 % from the previous year, at 1,083 Baht/square meter/month, with the highest rate being at 1,120 Baht/square meter/month in Wireless Road area where the rate of rental rate was the highest at 27.1 % from the previous year. Outside the CBDs, the lowest rental rate was in Bangna, at 532 Bht/square meter/month. For areas other than Wireless Road, the highest increase rate was in Asoke-Petchburi, at 13.3 % from the previous year. (Source: Office Building Market Report, Q4/2018, by Knight Frank Thailand).



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Office space rental rates, classified by grade (Baht/square meter/month)

(Source: Office Building Market Report, Q4/2018, by Knight Frank Thailand)

d. Overview of the technology and information business

Growth of the software industry is related to economic growth and IT spending of organizations, particularly ones in the service sector where there is intensive use of IT, e.g., finance, insurance, healthcare and public health and retailing. The Software Industry Promotion Agency (Public Organization) – SIPA, revealed that the value of software consumption and services in 2017 was at 78,818 Million Baht. It was estimated that the market for software consumption and services would grow by 15.19 % in 2018 and 17.5 % in 2019 as software-related IT business operators enjoy significant supportive factors from both e the public and private sectors, as follows:

1. Digital transformation of business as a result of the Thailand 4.0 policy of the government 2. Adjustments aimed at exploiting opportunities offered by new technologies such as Cloud, Big

Data, AI, Blockchain and IoT 3. Efforts to create own software or platforms, and 4. Emergence of new businesses and new entrepreneurs. Although they are still small, they show

a good sign. Besides, software market survey results show that there has been behavioral change in the use of

applications, turning more to SaaS (Software as a Service) and cloud technology, which has led to business model adjustment, relying more on cloud applications as against software installed on computers.



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Trends of technological changes Gartner, a technology research company, identifies the Top 10 Strategic Technology Trends for the

future as follows:

1. Autonomous Things 2. Augmented Analytics 3. AI Driven Development 4. Digital Twin 5. Cloud to the Edge 6. Smart Spaces 7. Immersive Experience 8. Blockchain 9. Digital Ethnics and Privacy 10. Quantum Computing

(Source: https://www.techtalkthai.com/gartner-10-technology-trends-for-2019/) With the future trend above, and the expansion of the digital economy in Thailand, the Thai software

industry can be further expanded and the value of the software market can be further increased.

Competition The Company handles this business as a project, focusing on laying down package software for

application in the organization and provision of services to users on a continuous basis. With skills and experience in installing and developing hospital information systems, accounting and finance systems, inventory management systems and procurement systems (Oracle PeopleSoft Enterprise Financial & Supply Chain Management), human resources management systems (Oracle PeopleSoft Enterprise Human Capital Management) and data analytics (QlikView Business Intelligence). Also included is capability to install and develop complete systems for hotel business.

As for installation and development of complete systems for hotel business, competition in this market is not so intense and most hospitals are in need of software upgrades to cater to technological changes. There are abundant opportunities for market expansion in this business.

As regards installation and development of complete package software for general businesses, market competition is heating up although there are not so many competitors of the same size and the demand for HR package software as each company now tries upgrade its IT system in preparation for entering the Asean

https://www.techtalkthai.com/gartner-10-technology-trends-for-2019/



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Economic Community (AEC), which not only will bring about massive inflows of foreign capital but will also intensify competition at the regional level. It is therefore possible to see more merger of IT businesses in order to leap forward and enhance business potential.

Competition among higher education institutes is also quite intense. With drastic technological changes (big data, Internet of Things – IoT, AI and machine learning) becoming prominent trends of competition within the education industry, accentuated by the declining numbers of students, universities need to adapt to cater to expected more intense future competition. They now need efficient systems for precise, speedy and complete operations. SAP is a system which has been used by large universities such as Chulalongkorn and has proved very effective for organization administration.



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Attachment 2

Summary of the Appraisal Report for the Value of the Property of Bangkok Management Co., Ltd. (Source: Property Appraisal Report)

Year Appraisal Co., Ltd. (“YEAR”) conducted property appraisal on March 4, 2019, using altogether

three approaches: cost approach, income approach and Residual Approach. The following provides details of each approach.

Cost approach This approach is used in appraising all types of property comprising land and buildings. It is divided into two parts: appraisal of the land value and appraisal of the buildings. The results of the parts are then added together to come up with the total value of the property. In appraising the value of land, appraisal is carried out as though the land is vacant. Market prices are used for comparison to reflect the land’s market value. As for appraisal of the building, calculation is based on assuming that it is reconstructed or the cost of replacement with property of similar characteristics and usage, less depreciation. The result is the net value of the building, to reflect physical and functional depreciation of the property. Land value appraisal Year conducted a survey of prices of land near the location of the subject and used the weighted quality score in making comparisons with adjustments for divergent features. Comparisons are made, taking into consideration various factors to analyze the value of the land, details as follows:

Detail Information of comparable property 1

Information of comparable property 2




Poperty nature Vacant land Vacant land Vacant land Vacant land Vacant land Location On Sukhumvit

Road On Sukhumvit

Road On Asoke

Montri Road On Soi

Sukhumvit 12 Soi Sukhumvit

2 Total area of land (Square Wah)

1,789.00 355.40 520.00 534.00 585.00

Shape of land Almost rectangular

Polygonal Almost rectangular

Rectangular Rectangular



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Frontage (meter) 70 14 39 48 52 No. of sides adjacent to a road

2 1 1 1 1

Land level Same level as the road

Same level as the road




Utilities Electricity, water supply, telephones, drain pipe

Electricity, water supply, telephones, drain pipe




Front road Six-lane asphalt road,

18 meters wide 30-meter

road boundaries

. Six-lane asphalt road,


road boundaries

Six-lane asphalt road,


road boundaries

Two-lane asphalt road,

six meters wide eight-meter

road boundaries

Two-lane asphalt road,

six meters wide eight-meter

road boundaries

Area color code Brown Brown red red Brown Other legal restrictions None None None None None Highest and best use Commercial –

hotel, condominium,

offices

Commercial – hotel,

condominium, offices







Offer price or selling price

Offer price Offer price Offer price Offer price Offer price

Offer date or selling date March 2019 March 2019 Selling (late 2017)

March 2019 March 2019

Offer price (Baht/square wah)

2,100,000 3,500,000 2,000,000 1,200,000 1,500,000

Bargain price (Baht -563,535,000 -186,585,000 - -96,120,000 -131,625,000 Initial adjusted price 1,785,000 2,975,000 2,000,000 1,020,000 1,275,000



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(Baht/square wah) Weighted Quality Score 7.05 6.35 6.70 5.75 5.65 Value per score unit 253.191 468,504 298,507 177,391 225,664 Appraisal weighting 10.00% 10.00% 50.00% 15.00% 15.00% Based on weighted value appraisal, value from weighting (Baht/score unit)

25,319 46,850 149,254 26,609 33,850

Total weight Value (Baht/score unit)

281,882

Score of appraised property (score units)

6.55

Value of property based on the score unit (Baht/square wah)

1,846,327

Appraised value (rounded) (Baht/square wah)

1,850,000

Land value (Baht) 1,204,350,000 Building value appraisal YEAR appraised the value of the buildings using the cost approach, starting from calculating the cost of reconstructing the buildings on the day of the appraisal, placing importance to quality of the building, and subtract it with depreciation, at the annual rate which varies with the age of the buildings. The appraised values of the buildings are as follows:



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Number Item Area (sq.m.)

Replacement cost Age (years)

depreciation Value after depreciation

(Baht) Baht/unit Total

(Baht) Total% Total (Baht)

Main buildings and structure

1 Three-story hotel building

1,440 18,000 25,920,000 42/1 63%/2 16,329,600 9,590,400

2 Two-story hotel building

2,490 18,000 44,820,000 42/1 63%/2 28,236,600 16,583,400

3 Two two-story and three-story shop houses

236 12,000 2,832,000 42/1 63%/2 1,784,160 1,047,840

4 Two two-story shop houses

216 12,000 2,592,000 42/1 63%/2 1,632,960 959,040

Total value of main building and structure 28,180,680 Other improvements

5 Swimming pool and path around the pool

300 16,000 4,800,000 42/1 63%/2 3,024,000 1,776,000

Total value of improvements 1,776,000 Total value of buildings and improvements 29,956,680 Notes: /1 Fixing the age of the buildings and improvements at 42 years is assumed by YEAR. The age is derived from the period from the start of the area rental from the old owner for hotel business operation as specified in the title deeds. /2 As YEAR had conducted appraisal of this property in 2016. In that appraisal, YEAR referred to the Thai Appraisal Foundation which set a depreciation rate of 2 % per annum until the value comes down to 40% ( 60% depreciation). Then, in 2017, YEAR performed another appraisal, using a1.50 % depreciation rate for the age of 42 years and the buildings are well maintained.

Using the cost approach, YEAR appraised the value of the BG land and buildings and came up with 1,234,306,680 Baht.

Income Approach This approach is used with income generating property and is suitable for price appraisal for investment purposes. It can be done by two methods: direct capitalization and discounted cash flow. YEAR used direct capitalization for this appraisal job because the subject id located on Sukhumvit Road, between Asoke and



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Thonglor, which is one of Bangkok’s important CBD’s, hence very high land prices. Presently, the main buildings on the land are an old hotel operated for temporary benefits, being a two-star hotel with 63 rooms. YEAR used the income approach to confirm that the income received does not reflect highest and best use of the land, based on the following appraisal assumptions:

Assumptions used in the appraisal Item Amount/rate used Source

Appraisal approach Direct Capitalization For verification only Capitalization Rate 7% Thai Appraisal Foundation Sources of income Number of rooms 63 Hotel information Number of business days per year 365 Hotel information Average room rate 1,200 Baht/night Hotel information and based on

comparison with hotels of the same class

Approximate average occupancy rate 62% Income from food and beverage sales and other income

3.5% of income from rooms

Expenses Room-related costs 10% of income from rooms Costs of selling food and others 30% of income from selling

food and others Administrative expenses 20% of total income Sales and marketing expenses 3% of total income Utility expenses 12% of total income Repair and maintenance 2% of total income Property tax 2% of total income Insurance expenses 0.2% of total income Provisions for maintenance 3% of total income Summary of value appraisal using the Direct Capitalization approach based on the assumptions



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Value appraisal using the direct capitalization approach based on the assumptions above Item Baht

Total income 17,707,070 Total direct cost (1,890,465) Gross profit 15,816,605 Total expenses (7,472,383) EBIT 8,344,221 7.00% Property value at 7 % rate of return 119,203,163 Approximate value of property 119,200,000

YEAR took into account details of the subject and relevant data within the framework of the appraisal criteria, limitations and assumptions cited above and came up with an income-approach appraised value of 119,200,000 Baht. Residual Approach This approach involves an analysis net residual income expected from land development. YEAR conducted the appraisal of income from project development subtracted by the direct and indirect development costs. The resultant value is the value of the land. In appraising property value by this approach, assumptions are made on the category and size of the development project, keeping in mind the highest and best use of the land. The sales prices of the project are determined, expenses involved estimated and property value calculated, by subtracting the income with the land residual value, based on the following appraisal assumptions: Assumptions used in the appraisal

1. Determining the category and size of the land development project The appraiser is of the opinion that the highest and best use of the property is developing it into a condominium for sale, based on the following assumptions: Total area 651 square wah or 2,604 square meters Floor area ratio (F.A.R) 8 : 1 20,832 square meters Less common area (approx. 30%) 6,250 square meters Remaining saleable area 70% 14,582 square meters Average area per unit: approx. 40 square meters Approx.364 units



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2. Fixing project prices YEAR made comparisons with similar development projects in nearby areas, namely: 1) Noble BE33 Sukhumvit 33ม Unit size: 35 square meters approx. sale price: 230,000 Baht/ square

meter 2) Ashton Asoke Sukhumvit 21, Unit size: 46 square meters approx. sale price 240,000 Baht/ square

meter 3) The Crest Sukhumvit 34, Unit size: 31 square meters approx. sale price 250,000 Baht/ square meter 4) Celesasoke, Unit size: 34.70 square meters (or larger) Approx. sale price 255,000 Baht/ square

meter The appraiser has made comparisons with nearby projects and is of the opinion that the appropriate average sale price is 240,000 Baht/ square meter.

3. Estimates of profits and expenses Item Amount/rate used

Sales and commission expenses 3% of income Specific business tax 3.3% of income Transfer fee 2% of income Profit and provision for risks (Profit of the operator)

15 of income

Costs of construction and systems 40,000 Baht/square meter Architectural and engineering design fees 3% of construction costs Construction Supervision & Management fees

2% of construction costs

Reserve 1% of construction costs Marketing/advertising expenses 3% of income Management, administration, ownership document preparation and other expenses

3% of income

Interest on operating costs 7% per annum borrowing accounting for approx. 60% of operating cost

Interest on land holding 7% per annum borrowing accounting for approx. 60% of land holding costs

Total duration of operation time, project development time and project sales time

Approx. 48 months



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Value appraisal by the land residual approach based on the assumptions above Item Baht

Total revenue from sales/1 3,499,680,000 Sales and commission expenses, specific business tax and transfer fees

290,473,440

Profit and provision for risks 524,952,000 Total operation and project development costs 1,285,550,679 Interest on land holding 194,449,384 Residual value of land (Baht) 1,204,263,497 Average residual value of land (Baht/square wah) 1,849,867 Approximate residual value of land (Baht) 1,204,350,000 Approximate average residual value of land (Baht/square wah)

1,850,000

Note: /1 Total revenue from sale is calculated by multiplying sales area (14,582 sq.m) with the selling price (240,000 Baht per sq.m)

YEAR took into account details of the subject and relevant data within the framework of the appraisal criteria, limitations and assumptions cited above and came up with a residual approach appraised value of 1,204,350,000 Baht. Based on analysis and consideration of the details of the subject, as well as various factors affecting the appraisal, focusing on highest and best use of land, YEAR is of the opinion that the land residual approach should be chosen. The appraiser presented a view that the current use of the land and buildings thereon does not represent the highest and best use. The market value of the subject is therefore the value of land alone. The holder of land or the buying party can develop it in other ways for highest and best use. Hence, based on the result of the appraisal by the land residual approach, BG‘s land is valued at 1,204,350,000 Baht. Opinion of the Independent Financial Advisor

YEAR, the Independent Appraiser, chose to use the land residual approach to appraise the value of the property. The Independent Financial Advisor views that the approach is appropriate as the existing buildings do not constitute the highest and best use of land. YEAR made assumptions based on developing the subject into a condominium for sale, making comparisons with four other condominium projects with comparable features (e.g., location, surrounding, utilities, interior decoration, customer target groups and price range. YEAR conducted a



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survey of locations, features, and sizes of condominium units available for sale and approximate prices of the project used in the comparisons. Assumptions were also made regarding estimates of costs of sales, construction and other expenses related to development of the project. A survey was also conducted on the use of land, with reference made to the required Floor Area Ratio (FAR) in accordance with the Ministerial Decree Enforcing the Land Use Regulation under the Bangkok Comprehensive City Plan B.E.2549. Based on these assumptions, the value of BG property appraised by YEAR using the residual approach is 1,204.35 Million Baht.

The Independent Financial Advisor is of the opinion that the land residual approach is suitable for appraising the value of the property as it is carried out by making comparisons development of land into a condominium for sale project in order to reflect the highest and best use of the land. Assumptions on price were made from comparisons with prices per area unit of other projects with similar features. Reasonable assumptions on cost and expense estimates were also made. The assumption for a major cost item made by the appraiser was for the costs of construction and systems, set at 40,000 Baht/square meter, which is higher than the standard unit price for construction of buildings set by the Valuers Association of Thailand in 2017. The appraiser explained that the costs of construction and systems assumption was to reflect the use of premium construction materials, with first-class decoration of the common areas and individual units. The approach used therefore appropriately reflects the value of BG property.

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