Opinion of the Independent Financial Advisor regarding Fairness of Stream of Annual Leasehold Payment Key Financial Figure Amount Meaning, Interpretation and Calculation (Millions of Baht) A. Total sum of annual 16,178.32 1.Being the total sum of annual leasehold payment leasehold payment that CPN as the throughout the term of sub-lessee is obligated to make to the New Sub-Lease CID as the sub-lessor throughout Agreement the term of the New Sub-Lease Agreement; 2.Annual leasehold payment to be made by CPN to CID throughout the term of the New Sub-Lease Agreement is specified, fixed and included as a part of the New Sub-Lease Agreement; 3.Total sum of annual leasehold payment to be made by CPN to CID over the term of the New Sub-Lease Agreement is the simple sum (without discounting) of annual leasehold payment. B. The leasehold value of 11,580 1.Being the sum of the appraised the Central Plaza leasehold value of each main asset of Ladprao Project as the Central Plaza Ladprao Project. appraised by the Main assets of the Central Plaza independent asset Ladprao Project consist of: appraisers of the SRT 1) Shopping Complex and Plaza (included car parking) to be sub- leased by CPN; 2) Office Building to be sub-leased by CPN; 3) Hotel to be sub-leased by another sub-lessee; 4) Department Store to be sub-leased by another sub-lessee; 2.The leasehold value of each main asset was appraised using the income approach, taking into account each main asset's ability to generate Net Operating Income (NOI) over the term of the New Sub-Lease Agreement; 3.The appraised leasehold value of the Central Plaza Ladprao Project is the sum of the appraised leasehold value of each main asset. In other words, the appraised leasehold value of the Central Plaza Ladprao Project is the sum of the appraised leasehold value of 1), 2), 3) and 4) in 1; 4.The sum of the appraised leasehold values of the Shopping Complex and Plaza (including car parking) and the Office Building, both of which are the assets that CPN will sub-lease from CID in accordance with the New Sub-Lease Agreement,accounts for approximately 72 % of the total appraised leasehold value of the Central Plaza Ladprao Project. In other words, the sum of the appraised leasehold values of 1) and 2) in 1. accounts for 72 % of the sum of the appraised leasehold values of 1), 2), 3) and 4) in 1. The Independent Financial Advisor considered and evaluated set of financial assumptions employed by the independent asset appraisers employed by the SRT for appraising the leasehold value of the Central Plaza Ladprao Project. It is found that the independent asset appraisers employed by the SRT and the Independent Asset Appraiser of CPN used the income approach in appraising the leasehold value of the subject real properties. It is the opinion of the Independent Financial Advisor that the income approach is appropriate for measuring the leasehold value of income-generating real property like the Central Plaza Ladprao Project as the income approach aims to measure the property's ability to generate income in the form of Net Operating Income (NOI). NOI is the key measure of leasehold value of income- generating real property. In regard to set of financial assumptions as used by the independent asset appraisers employed by the SRT to determine NOI in each year of the Central Plaza Ladprao Project, the Independent Financial Advisor found that by overall there is no significant difference between such set of financial assumptions and set of financial assumptions as used by the Independent Asset Appraiser of CPN to determine NOI as generated by the Sub-Leased Assets in each year. C.The appraised 9,185 1.Details of the Sub-Leased Assets are leasehold value of the showed in Table 2; Sub-Leased Assets 2.The leasehold value of the Sub-Leased Assets is appraised by Brooke Real Estate Co.,Ltd.,the Independent Asset Appraiser of CPN; 3.Brooke Real Estate Co.,Ltd.uses the income approach to appraise the value of the Sub-Leased Assets, taking into account their abilities to generate income over the term of the New Sub-Lease Agreement. D.The leasehold value to 8,900 1.The leasehold value to be used as the be used as the basis for basis for determining annual determining annual leasehold payment to be made by CPN leasehold payment to to CID is determined on the be made by CPN cost plus basis. It is the sum of: 1)The leasehold value of the Central Plaza Ladprao Project as appraised by the independent asset appraisers of the SRT,standing at Baht 11,580 million (See details in B.); 2)Leasehold right registration fee equal to 1 % of the sum of annual leasehold payment to be made by CID to the SRT throughout the term of the New Main Lease Agreement; 3)A profit margin of 5 % of the sum of 1) and 2) 2.72 % of the sum of 1), 2) and 3) in 1.shall be allocated as the leasehold value to be used as the basis for determining annual leasehold payment to be made by CPN to CID. Such 72 % figure is the proportion of the appraised leasehold value of the Sub-Leased Assets to the appraised leasehold value of the entire Central Plaza Ladprao Project. E.CPN's cost of long- 5.0 %-5.7 % Consider from term debt financing 1.CPN's weighted average cost of interest for the Years 2006, 2007 and for the first 9 months of 2008 that falls in the range between 5.0% and 5.6 %; 2.Average yield of debentures with term of more than 5 years issued by firms with the credit rating of A+ (the same credit rating as that of CPN) that is approximately 5.70 % F.Cost of financing 5.62 % 1.The discount rate that when used to associated with stream discount stream of annual leasehold of annual leasehold payment that CPN as the sub-lessee payment (Implied is obligated to make to CID as the Interest Rate) sub-lessor will make the sum of the discounted annual leasehold payment equal to Baht 9,185 million. Such figure of Baht 9,185 million is the appraised leasehold value of the Sub-Leased Assets. 4.3.2 Reasonableness of Stream of Annual Leasehold Payment to be Made by CPN to CID 4.3.2.1 Opinion of the Independent Financial Advisor regarding the Basis for Determining Annual Leasehold Payment For the whole term of the New Sub-Lease Agreement from December 19, 2008 to December 18, 2028, CPN is obligated to make total sum of annual leasehold payment of Baht 16,178.32 million to CID. Details regarding scheduled annual leasehold payment are as follows: Table 4 Scheduled Annual Leasehold Payment to be Made by CPN to CID throughout the Term of the New Sub-Lease Agreement Period of Making Annual Leasehold Payment Period of Making Annual Leasehold Annual Leasehold (Millions of Baht) Annual Leasehold Payment Payment Payment (Millions of Baht) Date of Signing the New 638.26 December 2018 777.68 Sub-Lease Agreement (Including upfront payment of Baht 551.41 million) December 2009 460.31 December 2019 824.34 (Including upfront payment of Baht 368.24 million) December 2010 487.93 December 2020 873.81 (Including upfront payment of Baht 390.34 million) December 2011 517.20 December 2021 926.23 (Including upfront payment of Baht 413.76 million) December 2012 548.24 December 2022 981.81 (Including upfront payment of Baht 438.58 million) December 2013 581.13 December 2023 1,040.72 December 2014 616.00 December 2024 1,103.16 December 2015 652.96 December 2025 1,169.35 December 2016 692.14 December 2026 1,239.51 December 2017 733.66 December 2027 1,313.88 Note: After CPN makes annual leasehold payment to CID, CID will make annual leasehold payment to the SRT using the money it will collect from CPN and other sub-lessees including CENTEL and HCDS within 2 business days from the day next to the day it obtains money from lessees. Source: Central Pattana Public Company Limited From schedule of annual leasehold payment to be made by CID to CPN as showed in Table 4 above (with total sum of annual leasehold payment to be made throughout the New Sub-Lease Agreement of Baht 16,178.32 million) and information regarding cost of acquiring leasehold right of the Central Plaza Ladprao Shopping Complex consisting of 1. Scheduled annual leasehold payment to be made by CID to the SRT in accordance with the New Main Lease Agreement; and 2. Leasehold right registration fee equal to 1 % of the sum of scheduled annual leasehold payment to be made by CID to the SRT throughout the lease term The Independent Financial Advisor found that the annual leasehold payment to be made by CPN to CID is determined on the cost plus basis. That is the annual leasehold payment to be made by CPN to CID is determined based on the sum of the cost of acquiring leasehold right of the Central Plaza Ladprao Shopping Complex as actually incurred by CID and an appropriate profit margin.Scheduled annual leasehold payment to be made by CID to the SRT that is clearly specified and in the New Main Lease Agreement dated December 9, 2008 entered into between CID and the SRT is determined based on the leasehold value of the Central Plaza Ladprao Project as appraised by two independent asset appraisers employed by the SRT.Those independent asset appraisers appraised the leasehold value of each main asset of the Central Plaza Ladprao Project (consisting the Shopping Complex and Plaza (including car parking), the Department Store, the Office Building and the Hotel) and determined the appraised leasehold value of the entire Central Plaza Ladprao Project by summing the appraised leasehold value of each asset. It is noted that the leasehold value of the Sub-Leased Assets as appraised using the income approach accounts for approximately 72 % of the leasehold value of the entire Central Plaza Ladprao Project appraised using the income approach as well. Thus,the Independent Financial Advisor found that the stream of annual leasehold payment to be made by CPN to CID will be determined based on the sum of the cost of acquiring leasehold right of the Central Plaza Ladprao Project as actually incurred by CID and an appropriate profit margin of 5 % of the cost of acquiring leasehold right, and 72 % of the sum is allocated as annual leasehold payment to be made by CPN to CID for the Sub-Leased Assets. Such 72 % figure is the proportion of the appraised leasehold value of the Sub-Leased Assets to the appraised leasehold value of the entire Central Plaza Plaza Ladprao Project.For simplicity, below is the illustration of the basis for determining the stream of annual leasehold payment to be made by CPN to CID: Figure 1 Illustration of the basis for determining annual leasehold payment to be made by CPN to CID. -- Please see in PDF file -- From the figure as showed above, it is of the opinion of the Independent Financial Advisor that the basis used to determine the stream of annual leasehold payment to be made by CPN to CID is reasonable as it takes into account the cost of acquiring leasehold right of the Central Plaza Ladprao Project as actually incurred by CID plus an appropriate profit margin: 1. The actual cost of acquiring the leasehold right of the Central Plaza Ladprao Project was fairly determined.Such cost consisting of annual leasehold payment to be made by CID to the SRT that is specified and fixed in the New Main Lease Agreement entered into between the SRT and CID in December 2008 and leasehold right registration fee equal to 1 % of the sum of annual leasehold payment to be made by CID to the SRT throughout the term of the New Main Lease Agreement is actually incurred expenditure. Annual leasehold payment to be made by CID to the SRT was determined based on the leasehold value of the entire Central Plaza Ladprao Project as appraised by two independent asset appraisers employed by the SRT using the income approach. 2. A profit margin of approximately 5 % of the total cost of leasehold right acquisition is fair as it is the compensation for CID as: -CID plays an important role in initiating and negotiating with the SRT for extension of the Main Lease Agreement for the purpose of running the Central Plaza Ladprao Project; -CID is the holder of the first right to negotiate with the SRT for extending the Main Lease Agreement for the purpose of running the Central Plaza Ladprao Project; -CID as the lessee directly enters into the New Main Lease Agreement with the SRT as the lessor.Although responsibilities and obligations under the New Main Lease Agreement will be assigned to each sub-lessee via the New Sub-Lease Agreement each of them will enter into with CID, CID as the direct counter party to the SRT under the New Main Lease Agreement is still obligated to fully comply with the terms and conditions and fulfill its responsibilities under such agreement. In case any of the sub-lessee fails to comply with the terms and conditions under the New Sub-Lease Agreement,thus resulting in breach of terms and conditions under the New Main Lease Agreement, CID is obligated to bear all costs and damages incurred as a result of such non-compliance by sub-lessee and make required compensation to the SRT. -CID incurred some costs and expenses necessary for acquiring leasehold right of the Central Plaza Ladprao Project such as legal, financial advisory and asset appraisal fee and etc. 3. Annual leasehold payment to be made by CPN to CID accounts for approximately 72 % of the sum of the cost of acquiring leasehold right of the Central Plaza Ladprao Project as actually incurred by CID and a profit margin of approximately 5% of the cost of acquiring leasehold right. This is fair as such proportion of 72 % is determined based upon the proportion of the appraised leasehold value of the Sub-Leased Assets to the total leasehold value of the Central Plaza Ladprao Project as appraised by two independent asset appraisers employed by the SRT. 4.3.2.2 Opinion of the Independent Financial Advisor regarding Reasonableness of the Stream of Annual Leasehold Payment In providing the opinion regarding reasonableness and fairness of the stream of annual leasehold payment to be made by CPN to CID, the Independent Financial Advisor will not use conventional project analysis techniques such as NPV and IRR. The main purpose of this opinion report is to evaluate fairness of the stream of annual leasehold payment to be made by CPN, not to evaluate financial feasibility in investing in the Central Plaza Ladprao Shopping Complex. As the New Sub-Lease Agreement to be entered into between CPN and CID is a long-term lease agreement in which CPN as the sub-lessee is obligated to make annual leasehold payment to CID as the sub-lessor on an installment basis (more)