Max Metal Public : Clarification of the information disclosed in the Financial Statements for the year 2020, requested by SET (revise Headline)

No. 27/2022

16 June 2022

Subject: Clarification of the information disclosed in the Financial Statements for the year 2020

To:	President
	The Stock Exchange of Thailand
Re:	SET's letter no. BorJor. 161/2565 dated 5 April 2022, regarding to clarify the information disclosed in the
	Financial Statements for the year 2020

Pursuant to the Stock Exchange of Thailand ("SET") has sent the referred letter to Max Metal Corporation Public Company Limited (the "Company"), asking for the Company's clarification on the information disclosed in the Financial Statements for the year 2020 and disclosure of such clarification through the SET's system.

Therefore, for investors to be informed of the Company's important information to make investment decisions, the Stock Exchange of Thailand requesting the Company to clarify additional information and disseminate the said information through the SET system. The Company would like to clarify the following issues as follows.

1. Impairment loss on investment and assets, and payment to other persons who were not the party to the Agreement

The 2020 Financial Statements disclosed that the Company had impairment loss on investment and assets in short-term (within 1 year of the investment), detailed summary as follows:

Substantial Information	Value	Impairment loss on assets
Acquiring the shares in The Master Real Estate Co.,	838 MB.	Q3/20 : loss on goodwill	123	MB.
Ltd. ("MASTER": subsidiary 100%), approved by the		Q4/20 : loss on investment	285	MB.
resolution of the shareholders' meeting on 19 June
2020)		total	408	MB.
		representing 49% of the investment asset
Acquiring the shares in Ariya Estate Co., Ltd.	200 MB.	Q4/20 : loss on investment	156	MB.
("ARIYA": subsidiary 100%), for developing Wisdom		representing 78% of the investment amount.
Hotel Projects, approved by the resolution of the
shareholders' meeting on 19 June 2020)

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SET requires the additional information is as below.

1.1 The causes in recognizing such impairment loss on investment in the substantial amount within short period. Where the Company had a due diligence process prior to the investment and how. The opinion of the Board of Directors and the Audit Committees on the sufficiency of the information of the impairment loss on assets.

Answer With respect of the investment in MASTER and ARIYA, the said transaction were passed the approval resolution of the Company's Board of Directors No. 5/2020 held on 7 May 2020 under the opinion of the Company's legal advisory, advised that the legal risks of MASTER and ARIYA which may materially cause a low negative result to the transaction. The legal consultant had coordinated with the professional in aerial photograph of Military Map Regiment and it was found the aerial photograph made by the official authority, of which the evidences of living or possession of those lands of MASTER was appeared for a period of time prior to be declared as the government's lands.

For the investment in ARIYA, the Company's made an agreement under the valuation of fair value of the ARIYA's ordinary shares based on Discounted Cash Flow Approach method, which could reflect of business plan, profit possibility and growth ration. The Company determined the fair value of ARIYA's by (1) the current value of the hotel in negotiating the purchase price and (2) the hotel value under the renovation and the management by the chained brand hotel. Based on the determination of the asset value with the aforesaid assessment of the fair value of the shareholders equity and the condition precedent in processing the debt restructuring of the debt with the interests not more than 50,000,000 baht, the Company had an opinion that the purchase price of 200,000,000 baht was sensible. Besides the condition of engaging the management by the chained brand hotel and placing the collateral for the performance of the agreement was the upside of this investment.

The Company's Board of Directors' meeting no. 5/2020 held on 7 May 2020 approved to enter into the transaction by the opinion that this transaction of purchase of MASTER's and ARIYA's shares at 100% of total shares would greatly benefit to the Company. The opinion of the Board of Directors and Audit Committee on the impairment loss on assets was the independent opinion made by the independent auditor based on the professional and accounting standard without any doubt of the Board of Directors and the Audit Committee. The Board of Directors and Audit Committee had further opinion on the purchase of 100% of the shares, by carefully and strictly determining the assumption of the price assessment and considering the relevant legal issues, that the investment in MASTER and ARIYA would benefit the Company in particular to the MASTER's lands which had evidences of the living for a period of time prior to be declared as the government's lands, and the Department of Lands had legally issued the title deed of the ownership and possession right to MASTER so that the transaction was sensible and made for the Company's benefit under the reasonable conditions.

1.2 From the auditor report stated that the MASTER's land was located in the restricted area according the Royal Decree Prescribing Restricted Area B.E. 2492 (1949) and under the effect of the National Reserved Forest Act B.E. 2507 (1964) and the independent appraiser has stated an observation regarding the

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limitation in acquiring any legal deed under the legal procedure as well as the dismissal of the existing deed which may be taken place in the future, and the Company determined the fair value of those lands by comparing the purchase price defined by the Seller which is higher the fair value if comparing by such limitation.

Please clarity the opinion of the Board of Directors and the Audit Committees on the sensibility in the case that the Company did not determine those limitations in investing in MASTER's shares but comparing by the Seller's purchase price as doubted in the auditor report.

AnswerThe Board of Directors and the Audit Committee had an opinion that the transaction was sensible based on suggestion by the Company's director who was the land professional and the valuation of lands which were the MASTER's core assets in determining value and sensibility of the investment in MASTER's shares. The Company appointed 2 independent appraisal approved by SET, Fast and Fair Valuation Co., Ltd. (FFV) and Justice Property and Appraisal Co., Ltd. (JPA) made valuation by the Market Approach method. FFV determined the land price at 80,000 baht per square wah or totaling 884,000,000 baht and JPA determined the land price at 82,000 baht per square wah or totaling 906,510,000 baht

1.3 On 21 May 2021, the Company's Board of Directors approved ARIYA to enter into three long- term lease agreements for lands, hotel buildings, and common area with other person in accordance with the Wisdom Hotel Management Agreement, for a period of 50 years at the value of 251 million Baht whereas Shining Sun Holding Co., Ltd., the Seller of ARIYA's shares, at that time, failed to place the guarantees to the Company under the Shares Sale and Purchase Agreement.

Please clarity the opinion of the Board of Directors and the Audit Committees on the sensibility in the case that ARIYA had additional expenses of 251 million Baht in entering the above mentioned agreements, and the Shareholders' meeting did not approve the said additional expenses, which its value is higher than the value of ARIYA's Shares, whereas the Seller had still failed to perform the Shares Sale and Purchase Agreement in placing the guarantees to the Company. Also, please update the progress of the guarantees placement and obtaining the Chained Brand Hotel management and if the status of such progress is in compliance with the Agreements' terms and condition or not, and how.

AnswerIn entering into three long-term lease of lands, hotel's buildings and common area with other parties, the Board of Directors and the Audit Committee had opinion that the reason as to why the Company does not specify satisfactory result of due diligence on ARIYA by IHG is one of the condition precedents is Ariya Estate will continue to lease the 2 hotel buildings and the land parcels including the common facilities area since ARIYA should have control on operation of Wisdom Hotel project at its sole discretion, based on discussions of the Company and ARIYA with the chained-brand hotel operators as part of the selection of the chained-brand

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hotel operators. This is for the best interest of ARIYA in operation of hotel business and engagement of chained- brand hotel operator. In this regards, ARIYA will continue to lease such land parcels and the land parcels including the common facilities area and search for another chained-brand hotel operator to operate the 3 hotel buildings, in case the due diligence result is not satisfactory to IHG. With respect of the placement of collateral, the Company's managements had made the demand letter to the Seller of ARIYA's shares and the Company will further inform again if there is any update. The updated status of the chained brand hotel is now in the process of due diligence by the chained brand hotel in considering the possibility of Wisdom Hotel's management.

1.4 Besides the Company recognized impairment loss on the above mentioned asset, under the 2020 Financial Statements, the Company recognized impairment loss on land and golf field in additional. At Quarter 4 of the year 2020, the Company had impairment loss on land at 167 million Baht, representing 32% of the lands' value (the lands' value is 526 million Baht) which is substance amount, and had impairment loss on golf field at 39 million Baht, representing 27% of the golf field's value (the golf field's value is 145 million Baht) so that pleas clarify the causes in recognizing of impairment loss on such asset with the opinion of the Board of Directors and the Audit Committee on the sensibility of such impairment loss on asset.

AnswerThe Company recognized loss on impairment amount 205 million Baht since year 2019. Before investing, the Board of Directors assessed the risk that it is low risk investment because the Company has assessed the value of the property to be invested to know the market price or fair price and we invest at the rate that is quite large discounts, to reduce the risk in the event that the business performance does not meet the target and if having to sell out in the future. As well as we made the shares repurchase agreements to prevent the risk if the performance does not meet the target. As for the risk assessment, if Hua Hin Pattana will not comply with the conditions for the repurchase of Majestic shares. As mentioned above, the Board of Directors considered the overall risk in all aspects before deciding to approve the investment such as appraising the asset price before considering investment, a bargain with a large discount for the reserve in case the business performance does not meet the target, including requesting the Company to be able to resell the shares back to the seller as well. In general shares trading, the sellers often do not give rights to such purchasers because they will have obligations and duties in the future. In agreement, the Company has negotiated more conditions than previously agreed by the seller to give the right to favor the Company and to create more confidence for the company and ultimately, the company considered the financial status and capability of Hua Hin Pattana Company as well.

As for the appraiser's appraised value in 2016 (the Company invested year), the income approach method is used as the main assessment, which is different from the appraiser on March 15, 2019 by N&A Appraisal Company Limited that uses the Cost Approach method and the market comparison including

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considering the location of the land, the environment, as well as limiting the use of land-primarily. But the appraiser in 2016 did not consider the details of the assets including the depreciation values of the assets in consideration. Therefore, the evaluation price is quite different because the methods used by independent evaluators differently so making the appraised price is very different. The objective of this land evaluation, the Company hired a financial advisor that the SEC approved to evaluate Majestic shares to know the current value of Majestic's shares, compared to the price the Company will use to sell back. To make the Board of Directors can proceed to select the guideline that is most beneficial to the Company. In evaluating the share price of financial advisors need land valuation information and one method of valuation of shares is the Adjusted Book Value Method. In the share valuation report requires the reference land valuation price. But for the land appraised value that uses Income Approach Method, the land appraiser considers that it is an inappropriate method because if calculated according to the currently Income Approach, the Company currently has more debt obligations to pay than the cash flows received from the operations. So making the cash flow from operations at present is not enough to repay the debt. Therefore, the current income approach method is not suitable for the current land valuation.

2. Non-submission of 2020 Financial Statements of HNC Power Co., Ltd.

Pursuant to the auditor did not express an opinion on the 2020 Financial Statements since the auditors has not been able to obtain sufficient appropriate evidence in the case that the directors of HNC Power Co., Ltd. (HNC: subsidiary 60%) did not submit the financial statements to the Company and did not allow to send personnel to gather accounting and financial information and related documents for the preparation of HNC's financial statements. Therefore, the Company's consolidated financial statements were not in compliance with Thai Financial Reporting Standards and unable to determine the return value, fair value, and loss in credit of such subsidiary's assets which may have change.

The Company's board of directors and executives is required to control the Company and its subsidiaries by their responsibility and careful. Therefore, SET requires the Company and its Board of Directors additionally clarify as follows.

2.1 How the Company control or manage HNC, as the Company's subsidiary and process to obtain HNC information and financial statements in order to prepare the consolidated financial statements in accordance with Thai Financial Reporting Standards.

AnswerIn control of manage HNC, even the Company had held 60% of HNC's total shares and appointed 2 directors but the control and manage of the business in particular to prepare the financial statement and reports is the authority of the directors and executives appointed by the minor shareholders. The Company

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