19 สิงหาคม 2548

would mean the additional supply of retail space and the higher competition in the acquisition of tenants. 1.4 Risk Relating to Tenants' Ability to Pay Rental The ability to operate their business of the tenants will affect their rental payment, lease renewal or early termination of the lease. All these factors will have direct impact on the income of the Fund. Nonetheless, since most of the lease agreements have a term of 3 years, the Property Manager will be able to make adjustments to the shops in the Shopping Complexes. The deposit equivalent to 3-6 months rental, which is required in the execution of every lease agreement, can also be used as compensation for income of the Fund in case that rental cannot be collected from the tenant. 1.5 Risk of Loss of Anchor Tenants The presences of anchor tenants, such as department store, theater or bowling alley, are also a factor to attract customers to shop in the Shopping Complexes. The loss of these tenants may diminish the attractiveness of the Shopping Complexes and the quality of shoppers, and thus affect the ability to preserve other tenants and maintain the rental income of the Shopping Complexes. However, most of the lease agreements with anchor tenants will be on a long-term basis or have a term not less than 10 years. 1.6 Risk of Change of Consumer Lifestyle The Shopping Complexes to be invested in by the Fund may suffer from an impact of the constantly changing consumer lifestyle which is linked with the demand for goods or the selection of merchandise and may affect the number of customers to use services in the Shopping Complexes if the Shopping Complexes fail to improve or change shop styles or alter their appearance to keep pace with consumer trends. For a shopping complex to be successful on a long-term basis, its management must be highly conscious of consumer lifestyle and the shifts in the shopping complex business as well as retail market, and must carry out renovation or refurbishment of the shopping complex to keep pace with that constantly changing lifestyle. 1.7 Risk of Natural Disaster, Accident and Terrorism The chance of natural disaster, accident and terrorism is small. However, if any of such acts occurs in the area of the real property of the Fund, it could cause not only damage to the property of the Fund but also incalculable loss of life and property of tenants and customers. The Property Manager has prepared rigorous measures for preventing natural disasters, accident and terrorist acts. All relevant staff have been trained and provided with knowledge, understanding and skill in evacuating people. In addition, in order to prevent financial risk, the Fund has procured insurance coverage against damage caused by natural disasters, accident and terrorist acts for its real properties. 2. Risk Arising From Operation of the Fund Before investing in the real properties, the Management Company thoroughly studied the details of the properties through the conduct of due diligence of related documents as well as review of appraisal and engineering reports of the real properties. However, such act does not warrant that the real properties are free of damage or defect that may require expenditure to improve or repair greater than what is disclosed in the Prospectus. The Appraisal Reports and engineering reports of those real properties that the Management Company has used as its basis for appraisal and inspection of the real properties may consist of some inaccuracies because certain defects of the real properties may not be easily found or cannot be discovered due to restrictions in the inspection, including technique in the inspection and other factors that may restrict the inspection conducted by the Appraisers and the engineers. Moreover, the real properties may be prejudiced by the violation of relevant rules and regulations not covered in the conduct of legal due diligence by the Fund Manager, which may cause the Fund to incur expense or commitments relating to such violation. 2.1 Risk Relating to Non-Compliance with Sublease Agreement by Sub-Lessor of Land and Lease of Buildings The investment in real properties by the Fund as described above will be in the form of investment in or possession of subleasehold rights and leasehold rights in real properties. Although the Fund will register the long-term leasehold rights for its investment in such sublease rights and leasehold rights with competent officers, there is a potential risk because the sublease agreements and/or lease agreements of those real properties could be terminated and, as a result, the Fund would lose the right to receive income therefrom and the rate of returns of unitholders will eventually be affected. In order to reduce such potential risk, the Fund has taken the following steps: a) The Fund has sought the consent and prescribed conditions in the sublease of land with the landowner under the lease agreement between Central Pattana Rama II Co., Ltd. and the landowners, and will procure protection against the risk that may arise from the termination of such land lease agreement by obtaining right from the landowners to take assignment of the right under the land lease agreements replacing Central Pattana Rama II Co, Ltd. b) The Fund requires Central Pattana Rama III Co., Ltd. to mortgage the land and structure comprising of the land where the Central Plaza Ratchada- Rama III Shopping Complex is located and the Central Plaza Ratchada-Rama III Shopping Complex as security for the performance under the lease agreement and damages that may arise as a result of its breach of the lease agreement of the Central Plaza Ratchada-Rama III Shopping Complex Project. 2.2 Risk from the Fact that the Fund does not have the right over the space of Central Department Store at Central Plaza Ratchada-Rama III Shopping Complex The Central Department Store, at Central Plaza Ratchada-Rama III Shopping Complex, is not a tenant of Central Plaza Ratchada-Rama III Shopping Complex, and accordingly may sell or sublease its land and spaces to any person whereby the Fund will have no right of objection. Such act may affect the management of the Shopping Complex and the results of the Fund operation. 2.3 Risk Relating to Non-Renewal of Lease Agreement for Central Ratchada-Rama III Shopping Complex in the 30th and 60th Years The lease agreement for Central Plaza Ratchada-Rama II between the Fund and Central Pattana Rama III Co., Ltd. will be made for 30-year period with the promise from Central Pattana Rama III Co., Ltd. that the Fund has the right to renew the lease agreement twice for a term of 30 years each. Although the Fund has the right as stated, the Fund may not be able to renew the lease agreement due to several reasons, such as a breach of the lease agreement by Central Pattana Rama III Co., Ltd. or future changes in laws and regulations relating to lease agreement or the third party transferee of the property may refuse to honor the promise, or in case that Central Pattana Rama III Co., Ltd. undergoes bankruptcy proceedings or enters into a rehabilitation process. In order to mitigate the risk stated above, the Fund has included conditions in the lease agreement to require Central Pattana Rama III Co., Ltd. to warrant that it will not sell or transfer ownership on the leased properties to any third parties to maintain the status as the lessor under the lease agreement. In addition, Central Pattana Rama III Co., Ltd. will give the Fund the right to purchase the leased property, in case that Central Pattana Rama III Co., Ltd. unable to arrange for the Fund to renew the leases agreement as promised. Furthermore, Central Pattana Public Company Limited, as a controlling shareholder of Central Pattana Rama III Co., Ltd., will agree to ensure that Central Pattana Rama III Co., Ltd. will strictly comply with provisions of the lease agreement. Moreover, the Fund has also required Central Pattana Rama III Co., Ltd. to mortgage the leased property as collateral to ensure its performance under the lease agreement and to compensate any damages incurred by the Fund as it is unable to utilize the leased property pursuant to the lease agreement. However, the foregoing arrangement may not remedy all of the damages that could be incurred by the Fund. 2.4 Risk Relating to Conflict of Interest between the Fund and Property Manager (Central Pattana Public Company Limited) and Central Pattana Group Companies The Property Manager may have conflict of interest in procuring tenants for the Shopping Complexes of the Fund or spaces under development by Central Pattana Group Companies, which could cause the reduction in occupancy rate of spaces in the Shopping Complex of the Fund or reduction of collectible rental or inability to increase the rentals. Nonetheless, the chance for conflict of interest to arise is small since the lease of spaces is depending to demands of each tenant to select premises and depending on the location of the Shopping Complexes and size of spaces 2.5 Risk from the Change in Accounting Standard Financial report of the Fund could be affected from the issuance of new accounting standard or amendment of the accounting standard. While the details of the amendment to accounting standard cannot be predicted, the Fund Manager would not be able to assess the impact fro such amendment nor could it guarantee that the amendment would not affect the financial report of the Fund or the Fund operating result. 2.6 Risk Relating to Ability to Pay Dividends of the Fund The dividend payment of the Fund will be determined by its operating results which are dependent upon various factors, such as the domestic and international economic condition, the management ability of the Property Manager, the cost of management of real properties, the operating expenses, the competition from other shopping complexes, the change in regulations and law relating to real properties, etc. 2.7 Risk from the Fact that Insurance Proceeds May not Cover Actual Damages The Fund may suffer a financial loss because the insurance proceeds may not fully cover the damage and there are certain risks for which insurance coverage cannot be procured. In case of non-covered damages or damages which exceeds the insured amount, or in case that the Fund cannot claim compensation in full according to the insurance policy, the Fund could incur additional expenditure, which could cause the future income of the real property to deviate from the projection. Nonetheless, the Fund has procured several kinds of insurance by taking into account the comprehensiveness and appropriateness in accordance with the nature of business operation of shopping complexes and the nature of management which a property manager should procure. In addition, the insurance proceeds will be utilized for restoring or repairing the properties for delivery to tenants. 2.8 Risk from the Fact that Actual Results of Operation and Assets of the Fund May be Different from Specified Estimates The projections, such as the income and expense projection of the Fund, may or may not actually occur as they depend on several assumptions that are subject to change and are uncertain and beyond the control of the Fund; for instance, the decrease in occupancy rate and rental rate, the default of rental payment by tenants, etc. These factors may affect the operation of the Fund. Nonetheless, the projection has been reviewed by Price Waterhouse Coopers ABAS Ltd. 2.9 Risk from Possible Change in Unit Value after the Initial Offering The investment units will be listed as listed securities and traded on the Stock Exchange of Thailand, and may be traded at a price lower or higher than the initial offering price depending upon several factors, such as the results of the Fund operation, the fluctuation in the Stock Exchange, the demand to buy or sell investment units of the investors, etc. 2.10 Fund Invests in Leasehold Right on Real Properties Since the Properties to be invested in by the Fund are leasehold rights, the value of leasehold right will be reduced due to the reduction of lease term, the appraisal of leasehold right value or changes in rental rate, etc. These factors may affect the value of the investment units of the Fund, which may cause the value of the investment units to increase or decrease. Fees and Expenses Collected from Subscribers or Unitholders and the Fund 1. Fees Collected from Subscribers or Unitholders (1) Fee for sale of Investment Units - At the initial offering: none - In the case of capital increase: none (2) Fee for redemption of Investment Units: none (3) Fee for switching of Investment Units: none (4) Fee for funds transfer: as actually incurred by deducting from the amount transferred into such account. (5) Fee for transfer of Investment Units: not more than 0.5% of the transferred value of Investment Units (exclusive of value added tax, specific business tax or any other similar tax). (6) Fee for issuance of document of right in Investment Units: not more than Baht 100 per transaction (exclusive of value added tax, specific business tax or any other similar tax). (7) Others: none 2. Fees and Expenses Collected from the Fund (1) Annual management fee: The Management Company is entitled to receive a monthly management fee from the Fund at a rate not exceeding 1.00% per annum (exclusive of value added tax, specific business tax or any other similar tax) of the net asset value of the Fund as calculated by the Management Company and verified by the Trustee. (2) Annual fee of the Trustee: The Trustee is entitled to receive a monthly remuneration at a rate not exceeding 0.05% per annum (exclusive of value added tax, specific business tax or any other similar tax) of the net asset value of the Fund as calculated by the Management Company and verified by the Trustee. The foregoing does not include other expenses as actually incurred such as the expenses for the inspection of assets of the Fund. (3) Annual fee of the Investment Unit Registrar: The expenses for the work of the Investment Unit Registrar shall be at a rate not exceeding than 0.05% per annum (exclusive of value added tax, specific business tax or any other similar tax) of the net asset value of the Fund as calculated by the Management Company and verified by the Trustee. (4) Fees for the advisors of the Fund: none (5) Fee for underwriting of the Investment Units: not exceeding 3.0% of the underwritten value for the initial offering (6) Expenses in advertising, public relations and sales promotion: not exceeding than 0.50% per annum of the net asset value as at the end of the preceding accounting year (exclusive of value added tax, specific business tax or any other similar tax). At the Initial offering, such expenses are fixed at no more than Baht 10,000,000 (Baht ten million). (7) Others: (7.1) Fee for establishment of the Fund: Baht 50,000 (exclusive of value added tax, specific business tax or any other similar tax). (7.2) Auditor's fee and expenses shall be payable at a rate prescribed jointly by the Management Company and the auditor. (7.3) Fees of other service providers including other advisors such as investment advisors, financial advisors, legal advisors, and lawyers, shall be payable at the rates prescribed jointly by the Management Company and such service providers. (7.4) Fees and expenses of the Property Manager shall be payable to the Property Manager on a monthly basis according to the Property Management Agreement between the Management Company and the Property Manager. The details can be summarized as follows. 1. Fee for rental collection on behalf of the Management Company at the rate not exceeding 3% of Net Rental and Service Income. Net Rental and Service Income means revenues from lease agreements and public utility service agreements before deducting any expenses, including revenue from promotion area and direct or indirect revenue from shopping complexes' operations, and excluding compensations or reimbursements from leased or subleased tenants, such as property tax expenses and insurance premiums reimbursed from tenants, and deducting the rental discount rate. 2. Leasing Commission for procuring tenants and management of all tenants of the Fund upon entering into new lease agreements with new tenants or renewal of lease agreements with the following details: Leasing Commission (based on rental rate of particular tenant) 1. For renewal lease with existing tenants 0.5 month 2. For entering into new lease agreements, 3 rate depending on terms of lease agreements - Less than 1 year term 0.5 month - 1-3 years term 1.0 month - Over 3 years term 1.5 months 3. Base the Property Manager's fee at the rate not exceeding 0.30% of Net Asset Value of the Fund calculated as at the last business day of each month. 4. Incentive fee for the Property Manager at the rate of not exceeding 2.35% of Net Property Income. Net Property Income means net revenue from property deducted by property costs and expenses from procuring benefits from the properties, but excluding the Fund's revenues and expenses such as the Property Manager's Fee and Annual Fund Management Fee. 5. The Property Manager shall receive a fee for each transaction of purchase and sale of property at the rate of 1.50% of the asset's acquisition value and 0.75% of asset's disposal value. The fees above are exclusive of Value Added Tax, Specific Business Tax, and other similar taxes. (7.5) Fee of the Appraisal Firms shall be payable at a rate prescribed jointly by the Management Company and such person. (7.6) Taxes, fees, stamp duties and brokerage fees concerning the trading of securities or real property: as actually paid. (7.7) Insurance premium for insurance against loss (if any) and any other insurance premium pertinent to the Fund. (7.8) Fees for registration of a pool of assets as the Fund, fee for listing the Investment Units as listed securities on the Stock Exchange, including lawyer's professional fee. (7.9) Annual fees and expenses for maintaining the status of listed securities on the Stock Exchange. (7.10) Expenses for preparation of subscription forms, confirmations, receipts, tax invoices and other forms related to the Fund, including the costs for preparation, printing, translation of the prospectus, application for establishment of the Fund, various documents related to the Fund and expenses for preparation and delivery of those documents. (7.11) Expenses for the preparation, printing and issuance of investment unit certificates and passbooks. (7.12) Expenses for the investment unit register, documents for recording the account of the Fund, as well as other expenses related to preparation of the register of unitholders of the Fund. (7.13) Expenses for the preparation and printing of notices, advertisements or announcements as prescribed by the Office of SEC. (7.14) Expenses for the preparation of translation and delivery of reports and letters such as annual reports, reports for unitholders etc. for the unitholders of the Fund. (7.15) Fees for analysis, feasibility and suitability studies on a purchase, lease or disposal of real property, transfer or acceptance of transfer of leasehold rights in real properties. (7.16) Fee or expenses for the procurement, acquisition, disposal, payment, transfer of assets or securities of the Fund such as a brokerage fee for the purchase, lease or disposal of real property, transfer or acceptance of transfer of leasehold rights in real property and securities of the Fund. (7.17) Expenses for additional construction required to complete the Project (in case of real property under construction). (7.18) Operational expenses for managing the real properties of the Fund such as the expenses for the preparation of a real property management system, service fees, maintenance fees, costs of repair, improvements, addition, public utilities, brokerage fee for the procurement of lessee of real property, expenses for marketing and public relations and other similar expenses. (7.19) Expenses for taking legal action (if any) such as expenses incurred from demand, notice or any lawsuit filed in order to enforce debts or retrieve assets for the Fund, court's costs, lawyer's fees, damages or expenses. (7.20) Other expenses may be incurred and fees duly created by the Management Company or the Trustee in carrying out their duties for the benefits of the unitholders of the Fund upon receiving instructions from the Office of SEC. (7.21) Expenses for the inspection of real properties of the Fund. (7.22) Expenses in connection with the receipt of subscription payments for Investment Units, expenses in the payment in case of capital decrease and/ (more)