QHOP: Annual Report 2010 EN

TRANSLATION

This Annual Report is executed in a text using the Thai language which shall be the governing language.

AAANNNNNNUUUAAALLL RRREEEPPPOOORRRTTT 1 JANUARY 2010 – 31 DECEMBER 2010

QQUUAALLIITTYY HHOOSSPPIITTAALLIITTYY LLEEAASSEEHHOOLLDD PPRROOPPEERRTTYY FFUUNNDD

Annual Report

For the Period of January 1, 2010 – December 31, 2010

Quality Hospitality Leasehold Property Fund

Table of Contents Page

Statement from the Asset Management Company 1

Quality Hospitality Leasehold Property Fund 2

Portfolio Valuation 5

Details of Property Invested by the Fund 6

Details of Purchasing and Leasing of Properties 8

Property Disposal or Leasehold Rights Transfer 8

Comparison of rental income received under the Sublease Agreement

and guaranteed under the Undertaking Agreement 9

Details of the performance of the income guarantor pursuant to the

Undertaking Agreement during the 2010 (B.E. 2553) accounting period 10

The Management Company’s comments on the income guarantor’s capability to

perform in accordance with the Undertaking Agreement in the next accounting period 11

Market Outlook 12

Total Expenses as called from Property Fund 13

Name List of Fund Manager 14

List of Related Persons having transactions with the Funds

managed by ING Funds (Thailand) Company Limited 14

Details of the Return on Investment Receipt 15

Supervisor Report 18

Auditor Report 19

ING Funds (Thailand) Co., Ltd.

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2



Abbreviation as "QHOP”

The Asset Management Company

ING Funds (Thailand) Co., Ltd

Type of the Fund Project

Closed-end Property fund

Project Life

Not Specified

Objectives

The Project will mobilize fund from general investors. The mobilized fund will be utilized in

purchasing and/or taking lease the property, including to benefit the immoveable property, to

improve, change, improve potential and/or to distribute various properties invested or

acquired by the Fund regardless whether or not for leasing out, sub-leasing, and/or disposing

or to manage in any other manner for the benefit of the property in order to generate income

and return for the Fund and the unitholders including any other interest by mean of any

method according to the laws on securities and/or any other relevant laws.

Investment of the Fund

Initial Investment:

The Management Company shall make an investment by leasing a hotel project, namely the

Amari Boulevard Hotel Project, for a period of 30 years.

General Information and Location of the Amari Boulevard Hotel

The Amari Boulevard Hotel is a four-star hotel accredited by the Ministry of Tourism and

Sports. It offers a total of 315 superior, deluxe and suite rooms, as well as amenities and

services such as restaurants, fitness center, banquet rooms, laundry services, 24-hour

business center with internet connection, and retail shops, etc.

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The Amari Boulevard Hotel comprises two connected buildings which are:

(1) The Siam Wing, a 14-storey building; and

(2) The Krungthep Wing, a 27-storey building with 178 parking spaces.

Situated on a land area of 2 Rai and 57.9 square Wah, the two buildings have a total of 315

rooms and an estimated usable area of 30,315 square meters.

The Amari Boulevard Hotel is located at No. 2, Soi 5, Sukhumvit Road (Lerdsin 1), North

Klongtoey, Wattana, Bangkok. Sukhumvit Road is considered one of the major business roads

in Bangkok with office buildings, shopping centers, restaurants, movie theaters, banks and

numerous shops. Furthermore, it is complete with efficient utility and transportation systems,

with easy access to the BTS light rail and underground train stations and the Sukhumvit

Highway.

(Please see the details of “Investment Policy” in the Prospectus)

Dividend Payment Policy

The Fund Project pays dividend to unitholders at least once a year.

(1) If the Fund reports a net profit in any accounting period, the Management Company

shall pay dividend to unitholders at the rate of no less than 90 percent of the net profit

not including unrealized profit from appraisal or reviewed appraisal of real estate or

leasehold rights to real estate for the said accounting period.

(2) If the Fund reports retained earnings in any accounting period, the Management

Company may also pay to unitholders dividend from the said retained earnings.

Provided that dividend payment under (1) shall not increase the Fund’s accumulated loss for

the accounting period when dividend is paid.

Dividend payment under (1) and (2) by the Management Company shall be completed within

90 days of the end of the accounting period when dividend is paid. In the event that the

Management Company is unable to make payment by the time specified above, the

Management Company shall inform unitholders and the Office of the SEC in writing.

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4


In consideration of dividend payment, if the dividend per investment unit to be paid during a

fiscal year period is lower than or equal to Baht 0.10, the Management Company reserves the

right not to pay such dividend for that period whereby such dividend shall be carried forward

for payment at the end of the fiscal year period.

(Please see the details of “Terms, Policy, and Procedures for Paying Dividends to

Unitholders” in the Prospectus)

Project Capital : Baht 1,913 Million

Number of Units : 191.30 Million units

Type of Investment units : Holder name specified

Trustee : The Hongkong and Shanghai Banking Corp Ltd.

Investment Units Registrar : ING Funds (Thailand) Co., Ltd.

Fund Advisor : -None-

Property Manager : -None-

List of Fund Manager :

The Asset Management Company has prepared and gathered information on the Fund, e.g., prospectus, general information of the

funds, properties invested by the Fund, performance results, press releases and dividend payments record, etc., for dissemination

to investors. More information can be viewed at www.ingfunds.co.th. Any expenses for preparation and dissemination of said

information will be collected from the Fund.

Annual Report


5



PORTFOLIO VALUATION

As at December 31, 2010

ASSETS Market Value (Baht)

% of Total Asset

1. BANK DEPOSIT 6,826,512.20 0.34%

2. P/N, B/E, T-BILL AND BOND

PROMISSORY NOTES AND BILLS OF EXCHANGE - DIRECT

ISSUE - 0.00%

PROMISSORY NOTES AND BILLS OF EXCHANGE - AVAL - 0.00%

BOND - 0.00%

TREASURY BILL - 0.00%

TOTAL - 0.00%

3. INVESTMENT IN PROPERTY

PROPERTY - 0.00%

LEASEHOLD RIGHTS 1,894,000,000.00 94.45%

TOTAL 1,894,000,000.00 94.45%

4. OTHER ASSETS

RECEIVABLES FROM RENTAL 81,482,058.67 4.06%

ACCRUED INTEREST 37,444.64 0.00%

DEFERRED CHARGES 23,399,620.75 1.17%

OTHER ASSETS 918,314.63 0.05%

TOTAL 105,837,438.69 5.28%

TOTAL ASSETS 2,006,663,950.89 100.07%

5. LIABILITIES

ACCRUED FEES AND EXPENSES (1,094,496.03) -0.05%

OTHER LIABILITIES (271,003.91) -0.02%

TOTAL LIABILITIES (1,365,499.94) -0.07%

TOTAL NET ASSET VALUE 2,005,298,450.95 100.00%

NO OF UNITS 191,300,000.0000 UNITS NET ASSET VALUE PER UNIT 10.4824 BAHT

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6



Details of Property Invested by the Fund As of December 31, 2010

The Fund invested in certain leasehold rights of Amari Boulevard Hotel,

Total area about 30,315 square meters

Project Location

No. 2, Soi Sukhumvit 5 (Lerdsin 1), North Klongtoey, Wattana, Bangkok

Project Feature

Leasehold right over land and buildings of the Amari Boulevard Hotel comprising of two

connected buildings which are (1) The Siam Wing, a 14-storey building; and (2) The Krungthep

Wing, a 27-storey building with 178 parking spaces. The two buildings have a total of 315 rooms.

Land Land under Title Deeds No. 10023, 10038, 191276-191283, 192788-192795, total 18 Title

Deeds having area of 2 rai 57.9 square wahs

Purpose of Use

Hotel

Project Area and Area Invested by the Fund

Detail Number of Rooms

Area (square meters)

Ratio to Total Rental

Space (%)

1. Room Area 315 10,516 34.69

Superior Rooms 127 28

Deluxe Rooms 138 32

DeluxeTerrace Rooms 16 40

Deluxe Corner Rooms 20 49

Suites 14 66

2. Common Area* 10,149.50 33.48

3. Parking Spaces 6,612 21.81

4. Machine rooms and other areas**

2,452.50 8.09

5. Outdoor Area 585 1.93

Total 30,315 100.00

Remarks :

* Common area includes meeting rooms, banquet rooms, lobby, fitness center,

swimming pool, retail shops and the back office.

** Machine rooms and other areas include rooms for air conditioners, boiler room,

employees’ cafeteria and dressing room and rooftop water tank area, etc.

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Lease Period

From March 18, 2008 to March 17, 2038 (30 Years)

Investment in Properties Cost of leasehold right 1,780,000,000 Baht

Cost of furniture and fixture 61,983,212 Baht

Related cost on right acquisition 20,115,000 Baht

Total 1,862,098,212 Baht

Appraisal Value 1,894,000,000 Baht by N&A Appraisal Co., Ltd.

Valuation Date : November 30, 2010 - Income Approach method

Income per Year

Rental income during January 1, 2010 to December 31, 2010 : 176.357 Million Baht

Additional rental income as per Undertaking Agreement for year 2008-2009 : 20.822 Million

Baht

Obligation

None

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Details of Purchasing and Leasing of Properties

For the Period from January 1, 2010 – December 31, 2010

- None -


Property Disposal or Leasehold Rights Transfer

For the period from January 1, 2010 – December 31, 2010

- None -

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Quality Hospitality Leasehold Property Fund For the period from January 1, 2010 – December 31, 2010

Comparison of rental income received under the Sublease Agreement and guaranteed under the Undertaking Agreement

Rental income received under the Sublease Agreement (Baht)

Fixed rental income 124,345,008.00

Variable rental income 13,913,269.41

Total (1) 138,258,277.41

Rental income guaranteed under the Undertaking Agreement* (Baht)

Guaranteed annual rental income - Portion 1 165,470,857.44



Total (2) 176,357,013.40

Additional rental income generated through the rental guarantee (2) - (1) 38,098,735.99

* The rental income which the Fund is entitled to receive

Annual Report


10


Details of the performance of the income guarantor (comprising Mr. Kirin Narula and Mr. Narin Narula, hereinafter collectively referred to as the “Promisor”) pursuant to the Undertaking Agreement during the 2010 (B.E. 2553) accounting period

1. Proportion of investment unit holding in the Fund

Provision : The Promisor shall procure that, throughout the one-year period following the first day of

trading of the Fund’s investment units on the Stock Exchange, Quality Inn Co., Ltd. shall

maintain the proportion of its investment unit holding as was allocated to it through the initial

offering without disposing of, transferring, or creating any encumbrance on such investment

units (not including a pledge of the investment units with a financial institution lending to

Quality Inn Co., Ltd. as security against default).

Performance : In compliance with the Undertaking Agreement

2. Proportion of shareholding in Boulevard Hotel Co., Ltd.

Provision : The Promisor shall have, and shall procure Mr. Warin Narula, Mr. Surin Narula, Mr. Amarin

Narula, Mr. Lak Narula, and Mr. Rachawin Narula to have, their total shareholding in

Boulevard Hotel Co., Ltd. at not less than 99.99%. The Promisor shall not dispose of,

transfer, or create any encumbrance on the shares, whether in whole or in part, and shall not

do otherwise to cause the shares of Boulevard Hotel Co., Ltd. and/or the managerial or

administrative powers over Boulevard Hotel Co., Ltd. to be transferred to other persons.


3. Compliance with the relevant agreements

Provision : The Promisor shall procure, and perform any necessary preventive and remedial act to

ensure, that Quality Inn Co., Ltd. and Boulevard Hotel Co., Ltd. and counterparties of the

Fund under the relevant agreements fully comply with the terms and conditions thereof.


Under the Sublease Agreement, Boulevard Hotel Co., Ltd. shall not incur a debt or

encumbrance in the amount exceeding Baht 20 million. However, during the year 2010,

Boulevard Hotel Co., Ltd. incurred a debt exceeding Baht 20 million. The Promisor, thus,

procured that Boulevard Hotel Co., Ltd. increased the capital and, with the capital increase

funds, paid off a portion of the loan, thereby reducing the debt amount to the level stipulated

by the Sublease Agreement.

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4. Placement of a bank guarantee with the Fund

Provision : The Promisor shall procure that a letter of guarantee in the amount of Baht 100 million, issued

by a domestic commercial bank and naming the Fund the beneficiary, is placed with the

Fund as a guarantee of rental payment under the Sublease Agreement for a period of five

years. The Fund is entitled to enforce the bank guarantee to collect the guaranteed rental

and/or any damages under the Sublease Agreement and other relevant agreements.


5. Annual rental guarantee under the Sublease Agreement

Provision : The Promisor warrants that the rental payable by Boulevard Hotel Co., Ltd. to the Fund under

the Sublease Agreement shall not be lower than the guaranteed annual rental, which totaled

Baht 176.36 million in 2010.


In 2010, Boulevard Hotel Co., Ltd. paid to the Fund rental of Baht 138.26 million under the

Sublease Agreement (comprising fixed rental of Baht 124.35 million and variable rental of

Baht 13.91 million), which was Baht 38.10 million less than the guaranteed rental under the

Undertaking Agreement. Therefore, the Promisor was obligated to procure that Boulevard

Hotel Co., Ltd. paid to the Fund the difference of Baht 38.10 million under the guarantee.

However, by a resolution of the Fund’s unitholders, a deferment of the said amount has been

granted. Under the deferment, the guaranteed annual rental - Portion 1 will be due on June

30, 2011, and the guaranteed annual rental - Portion 2 and Portion 3, totaling Baht 10.89

million, will be due on January 30, 2013. Presently, these payments have not been due as

deferred. The Management Company’s comments on the income guarantor’s capability to perform in accordance with the Undertaking Agreement in the next accounting period

No comment was made.

Annual Report


12



Property Market Outlook

Demand

The number of hotel guests in Bangkok in 2010 stood at 10,731,172 persons, decreased by 13.4% compared

to 2009 due to political turmoil in downtown area during May-June. However, after the said incident coupled with

the cooperation among all relevant parties, the confidence of foreign tourists improved which resulted in recovery

of number of guests in the second half.

Supply

At the end of Q4 2010, the total number of rooms of mid-range hotels (average room rate at 2,500 – 4,500

Baht per room per night) in downtown area was 13,739, increased by 5.2% from the previous year. This comprised

of 9,507 keys in Ploenchit and Sukhumvit area, 3,033 keys in Silom and Sathorn area and 1,199 keys in the

Riverside area. In 2011, it is expected that the total mid-range hotel rooms in downtown area will increase by 1,368

rooms or 10%.

Ploenchit and Sukhumvit area remains as the popular area for businesses and individual travelers due to

conveniences accessibility to the mass transit system and good proximities to numbers of attractive places. Most

of the mid-range hotel stocks are located within this area which accounted for approximately 59.3% of mid-range

hotels in Bangkok, followed by Silom and Sathorn areas at 23.3% and the Riverside areas at 17.3%.

Average Room Rates and Average Occupancy Rate

The average room rate of the mid-range hotels for the first three quarters was 2,481 Baht per room per night

or 8% decreased while the average occupancy rate was 51.4%, increased by 0.7%. Consequently, the average

revenue per available room (RevPar) dropped to 1,275 Baht per room per night or decreased by 6.7% compared

to the same period last year.

Future Outlook

The overall tourism situation is expected to return to normal as a result of global economic recovery. The

Tourism Authority of Thailand (TAT) has set the target of 16.4 million foreign tourists, the growth of 3.8% per annum,

with targeted revenue of 620 billion baht. Given normal domestic political situation and/or no severe natural

disaster, foreign tourists are expected to expand by 6.3% per annum which is higher than 4-5% average of global

tourism growth estimated by World Tourism Organization (UNWTO), subsequently generating income for the

country of 655 billion baht.

Annual Report


13



Total Expenses as called from Property Fund

For the period from January 1, 2010 – December 31, 2010

Fund's Direct Expense Amount

(Thousand Baht) % of

Net Assets Value

Management Fee1 6,337.81 0.31

Trustee Fee1 422.52 0.02

Registrar Fee1 1,056.30 0.05

Auditing Fee1 722.36 0.04

Fund's Setting Up Expenses - Written Off1 10,636.19 0.54

Listing Fee -Written Off1 107.00 0.01

Asset Appraisal Fee1 128.40 0.01

Advertising Expense1,2 149.48 0.01

Other Expenses1 183.53 0.01

Total Expenses 19,743.59 1.00

Remark 1. Included VAT

2. Included the preparation and dissemination of information via the website of asset

management company

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Quality Hospitality Leasehold Property Fund Name List of Fund Manager

For the Period from 1 January 2010 to 31 December 2010

No. Name List of Fund Manager

Property Fund Manager

1 Ms. Siriphen Wangdumrongves

2 Mr. Suttipan Kreemaha

3 Mr. Ruchtana Ruchtidhum *

4 Ms. Wannapat Nomklom

Mutual Fund Manager (Liquidity Portion)

1 Mr. Jaruwat Preepreamkul

2 Ms. Siripun Sutharoj

3 Ms. Monchaya Rachatakul

4 Ms. Linda Ubolriabroy

5 Ms. Patcharapa Mahattanakul

6 Mr. Tara Vanalabpattana

7 Mr. Verayuth Halilamien

8 Mr. Arunsak Charoonwongniramol

* Termination Date : 15 February 2011

List of Related Persons having transactions with the Funds managed by ING Funds (Thailand) Company Limited For the period from 1 January 2010 to 31 December 2010

No. List of Related Persons having transactions with Mutual Funds

1 Other management companies where there are shareholders of ING Funds exceeding 5 % of

total sold shares

“The investor can inspect the transactions entered into with the related persons of the mutual fund at the management

company directly or at the website of the management company (www.ingfunds.co.th) and

the Office of SEC (www.sec.or.th)”

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Details of the Return on Investment Receipt

Research paper including in-depth report of listed company, industry analysis, trend and outlook, economic

and political situation both in domestic and foreign those influence the investment decision.

Specific inquiry including the information further than the released research paper that support the investment

decision

Conference call direct to analyst

Pay a visit to present the remarkable issue

Report issue or concern of the market and securities during trade hour

Organize seminar, related to the remarkable company. In addition, issue and concern situation at that

moment, hosted by direct officers including lawyer, government representatives, or management. They all

would provide in-depth information in order to make further investment decision.

Arrange company visit as request in order to follow the progress of operation or any change that alter the

fundamental. The company management would provide the latest information of business and the

development of industry.

List of the person who provides Soft Commission for the Fund

Securities Companies

Country Group Securities Public Company Ltd.

Asia Plus Securities Public Company Ltd.

Ayudhya Securities Public Company Ltd.

Bualuang Securities Public Company Ltd.

CLSA Securities (Thailand) Ltd.

Capital Nomura Securities Public Company Ltd.

DBS Vickers Securities (Thailand) Company Ltd.

TMB Macquarie Securities (Thailand) Ltd.

KGI Securities (Thailand) Public Company Ltd.

Credit Suisse Securities (Thailand) Ltd.

Kim Eng Securities (Thailand) Public Company Ltd.

Thanachart Securities Public Company Ltd.

TISCO Securities Company Ltd.

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16


Trinity Securities Company Ltd.

Phatra Securities Public Company Ltd.

SCB Securities Company Ltd.

Finansia Syrus Securities Public Company Ltd.

UBS Securities (Thailand) Ltd.

KT ZMICO Securities Public Company Ltd.

Siam City Securities Company Ltd.

Citicorp Securities Thailand Ltd.

TSFC Securities Ltd.

Finansa Securities Ltd.

BT Securities Company Ltd.

United Securities Public Company Ltd.

Barclays Capital Securities (Thailand) Ltd.

Commercial Banks - Domestic

Bank of Ayudhya Public Company Ltd.

Bangkok Bank Public Company Ltd.

CIMB Public Company Ltd.

Kasikorn Bank Public Company Ltd.

Kiatnakin Bank Public Company Ltd.

Krung Thai Bank Public Company Ltd.

Thanachart Bank Public Company Ltd.

Land and Houses Retail Bank Public Company Ltd.

Siam Commercial Bank Public Company Ltd.

Standard Chartered Bank (Thai) Public Company Ltd.

Tisco Bank Public Company Ltd.

TMB Bank Public Company Ltd.

United Overseas Bank (Thai) Public Company Ltd.

Commercial Banks – Foreign Branches

ABN-AMRO Bank N.V.

Annual Report


17


JPMORGAN Chase Bank, N.A.

Oversea-Chinese Banking Corp., Ltd.

The Bank of Tokyo-Mitsubishi Ufj, Ltd.

Citibank, N.A - Bangkok

Credit Agricole Corporate and Investment Bank - Bangkok

The Hongkong and Shanghai Banking Corp., Ltd.

Mizuho Corporate Bank, Ltd.

Sumitomo Mitsui Banking Corporation

BNP Paribas

The Bank of Nova Scotia

Others Companies

Thanachart Capital Public Company Limited

Annual Report



ING FUNDS (THAILAND) COMPANY LIMITED

Background

The Asset Management Company was registered on November 4, 1996 with a fully paid-

up registered capital of Baht 100 million. It was granted a license to operate asset

management business from the Ministry of Finance under the license number 011/2539

dated January 2,1997. After ING group, a financial services conglomerate with Dutch

origin, became the major shareholder; the name of the Asset Management Company was

changed to “ING Mutual Funds Management (Thailand) Co., Ltd.” in April 1999 and to

“ING Funds (Thailand) Co., Ltd.” in May 2003.

At present, ING Funds (Thailand) Co., Ltd. is a member of the ING Group of Netherlands

Network - a global banking, insurance, and investment management business operator.

Location of the Office

ING Funds (Thailand) Co., Ltd.

is located at 130-132 Sindhorn Building Tower 1, G Floor and

Sindhorn Building Tower 3,15th and 17th Floor,

Wireless Road, Lumpini, Patumwan, Bangkok 10330.

Tel: (02) 688-7777 Fax: (02) 688-7707-8

www. ingfunds.co.th

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