Annual Report 2020 Annual Report 2020 (Form 56-REIT2)
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Annual Report 2020 Annual Report 2020 (Form 56-REIT2) Annual Report For the financial year ended 30 September 2020 Thailand Future Fund (TFFIF) “Investors can study additional information of TFFIF from the Annual Registration Statement (Form 56-1) available at www.sec.or.th or www.tffif.com” Thailand Future Fund 1 Annual Report 2020 (Form 56-REIT2) TABLE OF CONTENTS PAGE Part 1 Material Information of TFFIF 3 Part 2 Operations of TFFIF 1. Information of TFFIF 11 2. Policy, Business Overview, and Procurement of Benefits 12 3. Overview of the Industrial Situation 26 4. Risk Factors 47 5. Legal Disputes 60 6. Other Material Information 60 Part 3 Management and Corporate Governance 7. Information on Investment Units, Securities and TFFIF’s issued instrument 61 8. Managerial Structure 66 9. Corporate Governance 93 10. Corporate Social Responsibilities 106 11. Internal Control and Risk Management 109 12. Prevention of Conflict of Interest 110 Part 4 Financial Results and Position 13. Material Financial Information 114 14. Management Companies’ Discussion and Analysis 119 15. Fund Supervisor’s Opinion 123 Schedule 1 Auditor’s Report and Financial Statements Schedule 2 Material Details of the Fund Scheme Thailand Future Fund 2 Annual Report 2020 (Form 56-REIT2) Part 1 Material Information of TFFIF (Warning: the main assets of TFFIF have limited life. If there is no capital increase, the value of the main assets of TFFIF will gradually decrease to nil at the expiry of the Revenue Transfer Agreement on 28 October 2048) Fund Name (Thai) กองทุนรวมโครงสร้างพื้นฐานเพื่ออนาคตประเทศไทย Fund Name (English) Thailand Future Fund Abbreviated Name of TFFIF TFFIF Management Companies Krungthai Asset Management Public Company Limited MFC Asset Management Public Company Limited Fund Supervisor Kasikornbank Public Company Limited Auditor EY Office Limited Fund Establishment Date 24 November 2016 Market Cap 45,014,500,000 Closing price on last business day of the year 9.85 Number of units 4,570,000,000 Net Asset Value 53,696,116,367 NAV/Unit 11.7497 Registered Capital 45,700,000,000 Par /Unit 9.9569 Approval date for establishment 24/11/2559 Price/NAV 0.84 times Weighted average remaining life - Investment Ratio Asset Type 100 % Direct 0 % Indirect Investment via Infrastructure Assets 0% Investment Shareholding Revenue Transfer Agreement 100% Right to the Transfer Revenue Transfer Revenue for 30 years Agreement 100% 100% Capital Structure of TFFIF Total Assets 53,708,434,414 Retained earnings/loss 8,193,083,367 Revenue Structure Total Liabilities 12,318,047 Borrowings ratio - Interest Capital from 45,503,033,000 Credit Rating -N/A- Income Unitholders 0.43% Major Unitholders (Book Closure as of 31 August 2020) Unitholders’ Names No. Units % Ministry of Finance 457,000,000 10.00 Revenue from Investment in Revenue Transfer Agreement, Muang Thai Life Assurance Public Company Limited 182,385,300 3.99 99.57% AIA COMPANY LIMITED-EQDP-D FUND 1 125,158,300 2.74 Krungthai-AXA Life Insurance Public Company Limited 113,398,800 2.48 Mahidol University 110,898,300 2.43 Foreign Limit 49% Current Foreign Holding 5.44% Thailand Future Fund 3 Annual Report 2020 (Form 56-REIT2) Major Investments Value According to Main Appraiser Appraisal Approach The right to receive 45 per cent of the net toll revenue collected from the 15 Business Advisory existing two routes of the EXAT expressways for the remaining term of 28 Limited years The Chalongrat Expressway 26,779 The Burapha Withi Expressway 26,128 Total 52,907 Dividend Policy: Historical and cumulative information on TFFIF’s distributions to unitholders THB/ Unit 2017 2018 2019** 2020 Since TFFIF’s Establishment Dividend distributions at least twice a Dividends - - 0.3926 0.3980 0.7906 year* Not less than 90% of adjusted net Reductions of - - 0.0431 - 0.0431 profit Paid-in Capital * TFFIF pays dividends quarterly. ** TFFIF invested in the right to the Transfer Revenue since 29 October 2018. Therefore, dividends are made as from 29 October 2018 until 30 September 2019 Projected short-term distributions rate for the financial year from 1 Oct 2018 to 30 Sept 2019 If TFFIF’s capital raising does not exceed THB 41,000 - 45,700 million Based on projections reviewed by an auditor2 Dividend yield from normal operations 4.02 – 4.49 per cent Dividend from support of distributions/1 - Capital decrease 0.73-0.81 per cent Total distributions to unitholders 4.75 – 5.30 per cent / 1no support for distributions /2 As disclosed in the prospectus for the offering of Thailand Future Fund Projected long-term return of TFFIF ** Based on offering price Material assumptions used in IRR calculation at investment THB 10 /unit** Expected IRR price - Cash flow calculated from appraisal report as of 30/09/2020 Excluding support for 7.50 % distributions - Expenses at the level of TFFIF based on the agreement (% Average 2.35%* Including support for N/A per total revenue) distribution* - Borrowing ratio (if any) N/A - Assumption of interest rate for loans (if any) N/A *Average 30-year expenses at the level of TFFIF based on the Revenue Transfer Agreement Remark: These projections are prepared for inclusion as part of this report based on future scenarios which may not necessarily materialise. Therefore, users of the data must exercise careful caution in assessing TFFIF’s operating results. These projections may not be suitable for other circumstances. Actual outcomes may materially differ from the projections because other expected incidents do not materialise. Management Companies cannot assure that the projections could be feasible. The auditor has not reviewed these projections. Thailand Future Fund 4 Annual Report 2020 (Form 56-REIT2) Details of Parties to the Revenue Transfer Agreement EXAT is a state enterprise under the Ministry of Transport and the Expressway Authority of Thailand Act. EXAT currently operates eight expressways with a total distance of 224.6 EXAT operations and revenue sharing kilometres including three expressway links. payable to TFFIF Infrastructure assets of TFFIF include the right to 45 per cent of the Net Toll Revenue collected from the two existing routes of the Initial 4,538 4,722 Expressways comprising the Chalong Rat Expressway and the Burapha Withi Expressway 2,042 1,909 for a 30-year period from the Transfer Date in 29 Oct 18 -30 Sept 19 1 Oct 19 - 30 Sept 20 accordance with the terms and conditions of the Revenue Transfer Agreement (on 29 October Revenue Sharing of the Fund Total Revenue of Parties 2018) EXAT operates day-to-day management In THB million of the expressways in accordance with the law. Operating Results Revenue from Investment Average Daily Traffic (Car) Profit (Loss) from Investment (THB million) (THB million) 300,000 2,000 10,000 1,500 200,000 8,000 1,000 6,000 100,000 500 4,000 2,000 0 0 0 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Chalong Rat Burapha Withi Chalong Rat Burapha Withi Remark: TFFIF’s first investment was on 29 October 2018. Important Financials 2018 2019 2020 Revenue (M.THB) - 2,042.18 1,909.03 Other Income (M.THB) 10.28 11.82 8.18 Subsidies (M.THB) - - - EBITDA (M.THB) 8.86 1,969.56 1,820.41 Net Profit (M.THB) 8.00 10,054.22 1,266.54 EPU (THB) 0.08 2.20 0.27 DPU (THB) - 0.3926 0.3980 Capital Reduction (M.THB) - 196.97 - Debt/Net Asset Value (Times) - - - Thailand Future Fund 5 Annual Report 2020 (Form 56-REIT2) Important Financials 2018 2019 2020 Interest Cost (%) - - - Operating Cash Flow 124.44 (42,458.84) 1,938.16 Investing Cash Flow - - - Financing Cash Flow (7.82) 42,394.03 (1,901.57) Net Cash Flow 116.62 (64.81) 36.60 NAV (THB) 1,021.96 54,331.15 53,696.12 P/NAV (Times) Na. 1.09 0.84 Dividend Yield (%) with support of distributions - - - Dividend Yield (%) without support of distributions* - 3.27% 4.04% Market Cap (M.THB) - 59,410.00 45,014.50 Closing Price (M.THB) - 13.00 9.85 *Annualised based on market price as of year end Management Discussion and Analysis of Operations and Financial Positions Summary of Borrowing For 2020, TFFIF’s net investment income is THB 1,525 million or 79.56 per cent of the N/A total revenue or 6.67 per cent decrease from 2019. The decrease is due to the decrease in income from investment in the Revenue Transfer Agreement, which is in turn caused by the impact of the COVID-19 pandemic and the government’s lockdown measures including the government’s policy to exempt toll collection for the Burapha Withi expressway for the public during substitution holidays for the 2020 New Year and Songkran. As of 30 September 2020, TFFIF had fair value of its investments in the Revenue Transfer Agreement assessed by an independent appraiser who readjusted the fair value to THB 52,907 million. This resulted in unrealised loss of THB 259 million and an increase in net assets from 2019 operation of THB 1,267 million. As of 30 September 2020, TFFIF’s net asset is THB 53,696 million or a net asset value/ unit of THB 11.7497 per unit. TFFIF’s retained earnings are THB 8,193 million. Type of Most Recent Auditor’s Report Unqualified Other Thailand Future Fund 6 Annual Report 2020 (Form 56-REIT2) Fees collected from TFFIF for 2020 Total fees and expenses Actual Collection % of Net Investment (THB in million) Income for 2020 Management Fee 46.35 3.03 Fund Supervisor Fee 7.53 0.49 Registrar Fee 4.61 0.30 Financial Advisor’s Fee -N/A- -N/A- Underwriting Fee Property Management Fee -N/A- -N/A- Asset Maintenance Expenses -N/A- -N/A- Property Management Expenses -N/A- -N/A- Insurance premium 21.68 1.42 Advertisement and Public Relation Expenses 0.15 0.01 Any other expenses that are more than 0.01 per 294.67/3 19.33 cent of NAV Other expenses 17.01/4 1.12 /3 Amortisation of deferred units issuance costs /4 Auditor’s fees, appraisal fees, costs of uniholders’ meetings, costs of book closure, and others Summary of Key Risk Factors 1.