MACQUARIE SHINHAN INFRASTRUCTURE MANAGEMENT KOREAN ROAD INFRASTRUCTURE FUND INTERIM REPORT FOR THE PERIOD ENDED JUNE 30, 2004 Disclaimer MSIM is the manager of KRIF. MSIM is owned by a Macquarie Bank Limited subsidiary, Macquarie Internationale Holdings Ltd, Shinhan Bank and Shinhan Capital Co., Ltd (“Shinhan”). Investments in KRIF are not deposits with or liabilities of Macquarie Bank Limited, or any member in the Macquarie Bank Group (“Macquarie”) and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither MSIM, nor Macquarie guarantees the performance of KRIF, the repayment of capital or the payment of a particular rate of return on KRIF securities. This interim report is only for information purposes and will not override the various reports produced as required under legislation which should be the prevailing documents for legal reporting purposes. Advice warning This interim report is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in KRIF, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary. Management fees MSIM is entitled to fees for acting as manager of KRIF. Financial statements The financial statements have been prepared by Abrain Fund Services, KRIF’s fund administrator, to enable KRIF to comply with its obligations under the Securities Investment Company Act and satisfy the requirements of Korean generally accepted accounting standards. This interim report includes the financial statements and audit report for KRIF for the period ended June 30, 2004. Directory Macquarie Shinhan Infrastructure Management Co., Ltd. 9th Floor, Hanwha Building 110 Sokong-Dong, Chung-Ku Seoul, 100-755, Korea Telephone (Korea) 02 3705 8500 Telephone (int’l) 822 3705 8500 Facsimile 02 3705 8596 Email: [email protected]Website: http://www.macquarie.com/kr/en/krif/index.html KRIF INTERIM REPORT 02 Representative Director’s Report 04 Half Year In Review 06 New Acquisitions Baekyang Tunnel 07 Machang Bridge 08 Portfolio Review Kwangju 2nd Beltway, Section 1 Daegu-Busan Expressway 09 Incheon International Airport Expressway Woomyunsan Tunnel 10 Asset Locations 11 Portfolio Summary Asset Weightings Asset Profiles 12 Net Asset Value Analysis Net Asset Value Growth Net Asset Value Summary 13 Statutory Auditor Report / Financial Statements
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KOREAN R
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DisclaimerMSIM is the manager of KRIF. MSIM is owned by a Macquarie Bank Limitedsubsidiary, Macquarie Internationale Holdings Ltd, Shinhan Bank and ShinhanCapital Co., Ltd (“Shinhan”).
Investments in KRIF are not deposits with or liabilities of Macquarie BankLimited, or any member in the Macquarie Bank Group (“Macquarie”) and aresubject to investment risk, including possible delays in repayment and loss ofincome and capital invested. Neither MSIM, nor Macquarie guarantees theperformance of KRIF, the repayment of capital or the payment of a particularrate of return on KRIF securities.
This interim report is only for information purposes and will not override thevarious reports produced as required under legislation which should be theprevailing documents for legal reporting purposes.
Advice warningThis interim report is not an offer or invitation for subscription or purchase of ora recommendation of securities. It does not take into account the investmentobjectives, financial situation and particular needs of the investor.
Before making an investment in KRIF, the investor or prospective investorshould consider whether such an investment is appropriate to their particularinvestment needs, objectives and financial circumstances and consult aninvestment adviser if necessary.
Management feesMSIM is entitled to fees for acting as manager of KRIF.
Financial statementsThe financial statements have been prepared by Abrain FundServices, KRIF’s fund administrator, to enable KRIF to complywith its obligations under the Securities Investment CompanyAct and satisfy the requirements of Korean generally acceptedaccounting standards.
This interim report includes the financial statements and auditreport for KRIF for the period ended June 30, 2004.
MSIM DevelopmentsMr Richard Timbs of Macquarie Bank in
Sydney has been supporting MSIM as
Head of Investments. Mr Timbs has
worked in Macquarie Bank’s
infrastructure team since 1997. He
brings a strong track record of having
completed deals in Korea and globally.
MSIM and KRIF are fortunate to have
him committed to securing and executing
more toll road investment transactions.
OutlookIn the period to December 31, 2004,
KRIF will be particularly focussed on:
�Completing the fourth fund raising
program scheduled to close in July.
�Completing new investments into
additional PPI concessions in Korea
to broaden and strengthen KRIF’s
existing portfolio.
�Ensuring the best possible
operational and financial
management of KRIF’s existing
interests.
�Enhancing revenue growth through
review of traffic and implementation
of technology upgrades; and
�Appointing a new Independent
Director to KRIF to further enhance
the culture of strong and independent
corporate governance.
The Boards of KRIF and MSIM are
confident of KRIF’s ability to maintain its
strategy of growth in the Korean market
and performance in relation to its
existing portfolio of infrastructure
assets.
On behalf of the Board of Directors of
KRIF, I would like to thank the
shareholders for their continuing
support.
Yours faithfully,
Nick van Gelder
Representative Director
Korean Road Infrastructure Fund
Kwangju Beltway Investment Co., Ltd(“KBICL”) completed and funded theremaining ancillary works on the Kwangju 2ndBeltway, Section 1 that started in the secondhalf of 2003. Replacement of cables,improvements to CCTV camera coverage,slope stability works and improvements to
outdoor structures were all undertaken and successfullycompleted.
On March 10, KRIF completed the acquisition of 99.2% ofthe equity in and subordinated debt of Baekyang TunnelLtd, the concessionaire of the Baekyang Tunnel, in Busan.KRW 125.4 billion was invested by KRIF into this projectwith a mix of shareholder’s loans (predominant) andequity.
On March 10, KRIF held a GSM to approve the financialstatements and the payment of dividends in relation to thefiscal period ended December 31, 2003.
On March 12, KRIF signed the financing documents toprovide 49% of the equity and all of the subordinated debtrequired to fund the development of the Machang Bridge project.
After receiving approval from shareholders at the GSM held in March, dividends amounting toKRW 3.2 billion in relation to the fiscal period ending December 31, 2003 were paid to KRIFshareholders on March 19, 2004.
46
KRIF held its 2004 seminar in Miyazaki, Japan during
the third and fourth weekends of April. Investors
participated in discussion sessions and presentations
along with MSIM staff. Investors provided important
comments during the various sessions that will be
applied in KRIF’s future business endeavours.
On April 15, MCB Co., Ltd. (“MCB”), the concessionaire
of Machang Bridge, officially commenced construction
of the project.
The first drawdown from Machang Bridge equity and
debt providers was successfully completed on June 1,
with MSIM working closely with MCB and the lenders
to ensure that the conditions precedent were
completed on time.
On June 23, NAHC, the concessionaire of the Incheon
International Airport Expressway, received a payment of
KRW 105 billion from the Ministry of Construction and
Transportation for the revenue shortfall experienced
during 2003.
12
3
Construction progress of the Daegu-Busan Expressway reached the milestone ofbeing 60% complete. The cost and construction programmes were both in linewith the project’s schedule. The Expressway is expected to be completed byFebruary 2006.
On February 28, KRIF signed an exclusive sale and purchase agreement for theacquisition of the Cheonan-Nonsan Expressway, an 81 km toll road that has beenoperating since 2002. There are several outstanding conditions precedent to thistransaction in KRIF’s favour and KRIF’s Investment Committee will be providedwith full details of this investment in due course.
Asset DataOn March 10, 2004 KRIF purchased a 99.2 % interest in the
equity and subordinated debt of Baekyang Tunnel Co., Ltd.
(“BTL”), the owner of the concession right to the Baekyang
Tunnel in Busan.
cash compensation on terms to be agreed.
BTL has also begun to review how it can make its tolling
operations more efficient and more advanced. Transtoll Co.,
Ltd of Australia, an expert company in tolling technology,
reviewed BTL’s operations in April and has made several
recommendations that are to be implemented. Electronic
tolling is also being evaluated in consideration of Korea
Highway Corporation’s national roll out of its own system.
DistributionsAs anticipated at the time of investment into BTL, distributions to
KRIF have begun with interest payments in relation to KRIF’s
loan to BTL. As of June 30, 2004 KRIF has received KRW 4.07
billion in interest payments from BTL.
ValuationThe valuation of KRIF’s investment in BTL on June 30, 2004 is
KRW 125.4 billion. The valuation is at cost, and does not reflect
any revaluation or capitalised investment costs.
OutlookTraffic is expected to continue to grow throughout 2004. The
Tunnel is heavily patronised by regular commuter traffic.
Given the relatively fixed nature of operating costs, traffic and
revenue increases have resulted in a strong operating margin
and based on future traffic growth, this should continue to
improve. Looking forward, the Tunnel is expected to benefit from
the opening of the Daegu-Busan Expressway in early 2006.
New Acquisitions
2004 PerformanceSince being acquired by KRIF in March 2004, Baekyang
Tunnel’s operations have continued smoothly. Monthly revenue
for 2004, up to June 30, has been steady and is slightly above
the cumulative revenue collected during the first half of 2003.
In accordance with the concession agreement, BTL is
performing above the revenue guarantee level and is not
expected to receive any government support. The Tunnel is
one of the strongest performing private toll road assets in Korea.
Operation and maintenance costs are fixed with a contract
between BTL and Daewoo Engineering and Construction,
which is back-to-back sub-contracted to Korea Road
Management, a Daewoo subsidiary.
Business InitiativesManagement’s focus since acquisition has been on developing
key relationships, particularly with Busan Metropolitan City
(“BMC”). Following joint discussions, BMC is expected to
approve BTL’s request to receive compensation payments for
the applicable toll rates that have not been increased for the
2004 period. This is expected to take the form of BTL receiving
2004 ProgressThe Machang Bridge project commenced construction on April15, 2004. As of June 30, 2004, two drawdowns have beencompleted with KRW 999 million in equity funding and KRW1.35 billion in subordinated loans being provided. Thisrepresents approximately 2.95% of KRIF’s equity andsubordinated debt commitments throughout the constructionperiod.
KRIF and the senior lenders to the Machang Bridge projecthave retained the services of an independent engineer to reviewthe progress, work schedules, bills of quantities and quality ofconstruction throughout the construction period of 50 months.
DistributionsDuring the construction period, MCB is scheduled to makepayment of 50% of the interest bearing on the subordinateddebt facility provided by KRIF. These interest payments are tobe made in quarterly instalments. As of June 30, 2004, KRIFhas not received any distributions from MCB. The firstpayment of subordinated debt interest is expected onSeptember 1, 2004.
On June 2, 2004 MCB made an underwriting fee payment toKRIF of KRW 3.5 billion in relation to the subordinated debtfacility provided by KRIF for this project.
ValuationThe total valuation of the equity held by KRIF and subordinateddebt extended to MCB on June 30, 2004 is KRW 2.353 billion.The valuation is at cost, and does not reflect any revaluation.
2004 OutlookStage 1 of construction of the project progresses in line withexpectations and project completion is expected by February2008. Stage 2 design has been approved by the designsupervisor and has been reviewed by the independentengineer. The design was submitted to the relevant authority,Gyungsangnam-do Provincial Government in July 2004.
KRIF will look to increase its holding in MCB through furtheracquisitions of equity from current sponsors upon completion ofconstruction.
Asset DataOn March 12, 2004, KRIF signed the credit facilities agreement,which signalled the successful completion of financing for theMachang Bridge project. KRIF is both an equity investor and asubordinated lender to MCB (the concessionaire) for KRW 27.85billion and KRW 51.26 billion respectively. KRIF’s investmentinto the Machang Bridge project will be drawn down over the 50month construction period.Date Purchased by KRIF
Asset Class, Location
% equity owned by KRIF
Investment cost (including transaction costs)
Project Enterprise Value
KRIF Investment (Equity & Sub-debt)
Toll Revenue (from January 1 - June 30, 2004)
Relevant Authority
Toll tunnel, Busan
99.2 %
KRW 128.8 billion
KRW 126.4 billion
KRW 125.4 billion
KRW 8.28 billion
Busan Metropolitan City Government
March 10, 2004
Baekyang Tunnel Machang Bridge
Date of Investment Commitment by KRIF
Asset Class, Location
Nature of KRIF Investment
Investment cost (total commitment up to completion and including sponsor takeout and investment costs)
Project Enterprise Value (upon completion)
Senior Debt (including stand-by facility)
Subordinated Debt
Equity (Sponsors 51%, KRIF 49%)
Government subsidy
Total Contract cost (incl. Construction, Design)
2004 Revenue
Revelant Authority
March 12, 2004
Toll bridge, Masan Bay, Gyungsangnam-do
Equity and Subordinated Debt
KRW 58.2 billion
KRW 330.8 billion
KRW 222.0 billion
KRW 51.26 billion
KRW 56.83 billion
KRW 63.45 billion
KRW 230.4 billion
Expected completion and commencement of operation in 2008
Gyungsangnam-do Provincial Government
The transaction is still under escrow as finalconcession agreement terms are yet to befinalised between SMC and the sellers. Prior toopening, SMC increased the toll rate to KRW2,000 for all vehicles which has caused traffic todrop considerably below original base caseexpectations.
KRIF continues to participate in and monitor theconcession agreement negotiations. KRIF’sacquisition of Woomyunsan DevelopmentCompany (the concessionaire) shares fromsellers will be completed upon KRIF beingsatisfied with the revised terms, which isanticipated to be reached early in the nextfinancial period.
2004 started well with January revenueup 11% from 2003, however periodicinclement weekend weather (weekendsare generally peak days) combined withongoing construction work at theHyoduk IC and macro-economicinfluences dampened toll revenueduring the first half of 2004. Tollrevenue collected at the end of June 30is at the same level as one year ago,with annual revenue guaranteed eachyear by the Kwangju City Governmentfor the duration of the concession.
The construction work at the Hyoduk IC,which is at the entrance to the feedingroad to Section 1, continues to hampertraffic throughput. The constructionrelates to Section 3 of the Kwangju 2ndBeltway, which will link to Section 1.The completion of this connectinginfrastructure is expected to increase
Daegu-Busan Expressway is still underconstruction. Progress continues in linewith work schedules and completion isstill expected by February 2006.Construction was 65.37% complete asof June 7, 2004.
The net interest accrued on KRIF’sconverting bonds as of June 30, 2004 isKRW 2.14 billion.
KRIF plans to schedule a site visit andreview by an independent engineer inthe next financial period. ParsonsBrinckerhoff conducted the originalphysical due diligence when KRIFacquired the converting bonds in DBEC
The Ministry of Construction and Transportation (“MOCT”)is still processing the approval of the share transfer forKRIF’s purchase of 25 % of the equity in NAHC, theconcessionaire to the Incheon International AirportExpressway.
On June 23, 2004, NAHC received a revenue guaranteepayment of KRW 105 billion from MOCT for the revenueshortfall of the 2003 financial year. This was significantlyhigher than the amount forecasted at acquisition, due toconservative assumptions, and has improved the project’sreturn profile for KRIF. For the period from January 1 toJune 30, 2004, NAHC collected approximately KRW50.02 billion in toll revenue.
At the end of April 2004, KRIF received KRW 1.8 billion forthe first quarter interest payment on the subordinated debtfacility extended to NAHC. Despite the MOCT having stillnot technically approved KRIF’s purchase of NAHCshares from Korea Teachers Credit Union (“KTCU”), KRIFcontinues to enjoy the benefits of its shareholding throughthe conditions and terms as set out in the sale andpurchase agreement with KTCU.
traffic on Section 1.
KRIF has been engaged in longnegotiations with KMC in regards to therevenue support that KBICL is entitledto for the revenue shortfall of the 2002fiscal year. Newly revised guidelines inregards to private participation ininfrastructure in Korea have placed new
discussion items in front of the parties,although substantial progress hasrecently been made. KRIF is veryconfident that negotiations will becompleted in the next financial periodand this will be accompanied with aclear structure and process for futurerevenue support payment mechanisms.
and they will re-visit the various worksites along the alignment to reviewconstruction completion and check workand cost schedules.
Kwangju 2nd Beltway, Section 1 Incheon International Airport Expressway
Woomyunsan TunnelDaegu-Busan Expressway
Incheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport ExpresswayIncheon International Airport Expressway
Ulsan
Busan
Sunch'on
MasanMasanMasan
NaesoKaya ChaChang-Wng-WononChang-Won
Chinhae
Kimhae
Daegu
KwangnyosanMountain
Express Bus Terminal
Incheo
n Interna
tional A
irport Ex
pressway
Ulsan
Busan
Sunch'on
Masan
Chang-Won
Kimhae
Daegu
Express Bus Terminal
Incheo
n Interna
tional A
irport Ex
pressway
Ulsan
Busan
Sunch'on
Masan
Chang-Won
Kimhae
Daegu
Kwach'onAnyang
Express BusTerminal
ExprExpress Bus Tess Bus TerminalerminalExpress Bus Terminal
Notes1. Enterprise value forecast following capital injection to finance payment of 2nd instalment (March 2005).2. Enterprise value forecast upon expected construction completion (February 2006).3. Enterprise value on date of prepayment. Acquisition subject to government approvals and satisfaction of purchase terms and conditions precedent.4. Enterprise value on date of prepayment. Acquisition subject to government approvals.5. Enterprise value forecast upon expected construction completion (June 2008).
*KRIF currently holds converting bonds which will, subject to the satisfaction of conditions precedent, convert into equity in 2008, representing a 6.5%stake in DBEC.**As at June 30, 2004. Equity stake to be increased throughout construction period to 49% upon completion.
Asset
Kwangju 2nd Beltway, Section 1
Daegu-Busan Expressway
Woomyunsan Tunnel
Incheon International AirportExpressway
Baekyang Tunnel
Machang Bridge
Location
Kwangju,Chollanam-do
Daegu-Busan,Gyeongsangnam- do
Seoul
Seoul-Incheon
Busan
Masan Bay,Gyungsangnam-do
Description
Operatingtoll road
Underconstruction
Operatingtoll tunnel
Operatingtoll road
Operatingtoll tunnel
Underconstruction
Enterprise value(KRW billion) Notes KRIF’s
stake
191
1,817
180
1,465
126.4
330.8
1
2
3
4
5
100%
6.5%*
36%
25%
99.2%
4%**
Asset Weightingsas at June 30, 2004
31%
6%9% 9%
10%
1%
34%Kwangju 2nd Beltway, Section 1
Daegu-Busan Expressway
Woomyunsan Tunnel
Incheon International Airport Expressway
Baekyang Tunnel
Machang Bridge
Cash and Other
Ulsan
Busan
Sunch'on
Masan
Chang-Won
Kimhae
Daegu
Kimpo
Buch'on
Incheon AnyangIncheon InternationalAirport
Express Bus Terminal
Incheo
n Interna
tional A
irport Ex
pressway
Incheo
n Interna
tional A
irport Ex
pressway
Kyongin Expressway
Seoul Beltway
2nd Kyongin Expressway
KangbyonHighway88
Olympic Expressway
Kimch'on
Pohang
UlsaUlsanUlsan
BusaBusanBusan
Sunch'on
Masan
Chang-Won
Masan
ChinjuKimhaeKimhaeKimhae
DaeguaeguDaegu
Milyang
Kum
aExpressway
Na
mhae
Expressway
KyongbuExpressway
Chung-angExp
ressway
Express Bus Terminal
Incheo
n Interna
tional A
irport Ex
pressway
Net Asset Value Analysis
Net Asset Value Summary
January 1, 2004 to June 30, 2004
Opening Net Asset Value
Acquisition and Related Costs
Increase in Cash Balance
Accrued Income
Increase in Borrowings & Other Liabilities
Distribution
Closing Net Asset Value
KRW
193,742,580,888
133,348,123,449
19,698,122,282
7,523,763,091
(3,819,359,237)
(3,221,838,762)
347,271,391,711
*Net asset value per share calculated as at the end date of each fiscal period
4th fiscal period: From January 1, 2004 to June 30, 2004
3rd fiscal period: From July 1, 2003 to December 31, 2003
Macquarie Shinhan Infrastructure Management Co., Ltd. is the manager of Korean Road Infrastructure Fund (the “Fund”). No member of the Macquarie Bank Groupguarantees the performance of the Fund, the repayment of capital or the payment of a particular rate of return on the shares of the Fund. This report is not an offer orinvitation for subscription or purchase, or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs ofthe investor. Before making an investment in the Fund, the investor or prospective investor should consider whether such an investment is appropriate to their particularinvestment needs, objectives and financial circumstances and consult an investment adviser if necessary. Macquarie Shinhan Infrastructure Management Co., Ltd., asmanager of the Fund, is entitled to fees for so acting. Macquarie Bank Limited and its related corporations, together with their officers and directors, may hold shares in theFund from time to time.
This report is an English translated version of the original audited financial statements prepared in Korean by Abrain Fund Services, KRIF’s fund administrator, to assist thereader in their review and is prepared in accordance with auditing standards generally accepted in the Republic of Korea. Accordingly, the following audit report and theaccompanying financial statements are for use by readers who are knowledgeable of Korean accounting principles or auditing standards and their application in practice.
KOREAN ROAD INFRASTRUCTURE FUND KOREAN ROAD INFRASTRUCTURE FUND
Statutory Auditor Report Balance Sheet4th Fiscal Period: as at June 30, 20043rd Fiscal Period: as at December 31, 2003
KRIF (Unit: KRW)
To the shareholders and Directors of the Korean Road Infrastructure Fund (“KRIF”).
As the statutory auditor of KRIF, I have audited the financial statements for the 4th fiscal year from January 1, 2004 to June 30,2004 in compliance with the Securities Investment Company Act, Article 52 and applicable Presidential Decree Article 28.
1. Summary of Audit ProceduresThe audit procedures included examination of accounting records and related documents, financial statements andsupplementary schedules to the financial statements. Generally accepted auditing procedures were adopted, includingcomparison, investigation and enquiry as was deemed necessary.
To audit the management of the business, appropriate procedures were performed by reviewing and conducting a detailedexamination of the Board of Directors’ Meeting Minutes and documents in relation to significant business issues.
Note that in the course of conducting this audit no limitations or impediments were encountered whilst performing the necessaryaudit procedures of comparison, investigation and enquiry to the accounting records.
2. Accounting RecordsThe entries in the accounting records are presented fairly and in conformity with applicable regulations and the Articles ofIncorporation. Furthermore, the balance sheet and profit and loss are in agreement with the accounting book entries.
3. Financial Statements There were no changes to accounting policies adopted in preparing the current fiscal period financial statements. The financialstatements correctly represent KRIF’s asset position and profit and loss position in accordance with applicable regulations andthe Articles of Incorporation.
4. Directors’ Duties No irregular practices were identified in relation to the Board of Directors performing their duties, during the audit of themanagement of the business.
August 20, 2004 Korean Road Infrastructure Fund
Byung Ik Kim, Statutory Auditor
Accounts4th Fiscal Period
Amount3rd Fiscal Period
Amount
Assets
Ⅰ. Invested assets
1. Cash & cash equivalents
2. Loan
3. Stocks
4. Bonds
Ⅱ. Others
1. Interest receivable
2. Receivables
3. Prepayments
4. Prepaid expenses
Total Assets
Liabilities
1. Borrowings
2. Payables
3. Deposits
4. Custodian fee payable (Note 3)
5. Sales agent fee payable (Note 3)
6. Manager fee payable (Note 3)
7. Administrator fee payable (Note 3)
8. Other expenses payable
9. Interest payable
Total Liabilities
Shareholders’Equity
1. Issued capital (Note 1)
(No. of shares as at the end of the 4th fiscal period:
65,290,905 )
2. Accumulated profit before disposal
Net profit for 4th Fiscal Period: KRW 13,754,746,935
Net profit for 3rd Fiscal Period: KRW 3,528,366,068
Total Shareholders’’Equity
Total Liabilities & Shareholders’’Equity
263,552,251,079 65,544,334,517
16,706,877,037 230,593,517
212,625,742,000 33,263,741,000
2,219,632,042 50,000,000
32,000,000,000 32,000,000,000
105,763,773,361 146,423,519,863
5,243,259,103 1,004,003,215
8,658,554,418 5,374,047,215
84,909,870,644 137,780,478,058
6,952,089,196 2,264,991,375
369,316,024,440 211,967,854,380
13,241,632,395 12,671,521,095
6,680,342,931 5,189,793,425
696,804,535 3,118
38,354,388 9,050,109
7,982,064 1,736,390
1,213,092,397 313,669,578
39,702,378 10,055,677
121,373,746 15,389,560
5,347,895 14,054,540
22,044,632,729 18,225,273,492
333,383,837,504 190,520,742,126
13,887,554,207 3,221,838,762
347,271,391,711 193,742,580,888
369,316,024,440 211,967,854,380
The accompanying notes form part of these financial statements.
KOREAN ROAD INFRASTRUCTURE FUND KOREAN ROAD INFRASTRUCTURE FUND
2. Liability Holdings 3. FeesPursuant to relevant service provider agreements, KRIF pays custodian fees, management fees, fund administrator fees and sales agent fees.The details are as follows.(1) Management Fee: Manager receives 1.30% per annum (net of VAT) of invested capital (comprising funds invested in company assets or firmly committed
to be invested in company assets in relation to infrastructure business) less service provider fees, inflation adjusted from the date of acquisition orcommitment of each company asset and paid quarterly in arrears. Current fiscal period movements in invested capital are shown below.
(2) Custodian: 0.045% per annum of the average balance of the Net Asset Value is paid in arrears on a quarterly basis.(3) Fund administrator: 0.03% ~ 0.05% p.a. of the average balance of the Net Asset Value. Paid quarterly in arrears.(4) Sales agent fee: 0.01% p.a. of the average balance of the Net Asset Value attributable to its sales ratio. Paid quarterly in arrears.
4. Other expenses (1) Details of other expenses of KRW 846,347,020 accrued for the 4th fiscal period are as follows. (Unit: KRW ’000s)
5. Related Party Transactions Current period related party transaction details and relevant closing liabilities are shown below. (Unit: KRW ’000s)
6. Earnings per Share(1) Number of ordinary shares issued
Calculation Methodology:Weighted average number of shares = Total accumulated shares/number of days
(2) Net Profit: KRW 13,754,746,935 (3) Earnings Per Share: KRW 13,754,746,935/56,403,907.71 shares = KRW 243.86
Notes to the Financial Statements4th Fiscal Period: January 1, 2004 to June 30, 2004
1. General(1) KRIF was incorporated on December 12, 2002 under the Securities Investment Company Act (“SICA”). As at June 30, 2004 the share capital is
KRW 333,384 million and the total number of shares issued is 65,290,905
Discount on new shares issued from 2nd Fiscal Period (Note)
Share issuance
Share issuance
Share issuance
2004.01.19
2004.02.26
2004.03.08
37,696,321
3,010,990
3,186,216
21,397,378
5,147.46
5,177.61
5,187.55
(132,807,272)
15,498,950,584
16,496,983,823
110,999,968,243
190,520,742,126
190,387,934,854
205,886,885,438
222,383,869,261
333,383,837,504
(2) Changes to Share Capital during the current period
(Note): Share capital in the 2nd fiscal period was reported at the original issue price rather than the net asset value(“NAV”). As a result, this overstatement in share capitalcaused a decrease in retained earnings by the amount of discount on new shares. This period an adjustment is made to share capital so that it is reported at the NAV andretained earnings reflects the actual accumulated retained earnings for the period.
2. Significant Accounting Policies KRIF’s financial statements are prepared in accordance with SICA and Korean Generally Accepted Accounting Principles. The following significantaccounting policies have been adopted in the preparation of the financial statements: (1) Securities: As at the end of this fiscal period, all shares held are unlisted shares and are valued at acquisition price plus any related transaction costs. (2) Bond: As at the end of this fiscal period, bonds held are convertible bonds in Daegu-Busan Expressway Co., Ltd and are valued at acquisition price.(3) Prepaid Expenses: Transaction costs related to asset acquisitions are classified as prepaid expenses and are amortised proportionally over the
expected life of the asset. (4) Interest Income: KRIF’s interest income is recognised on an accrual basis.(5) Dividend: Dividend amount is paid upon shareholders’ approving the issuance of the dividend at the General Shareholders’ Meeting. Before the
approval of the dividend payment, the amount is reflected in retained earnings.
VAT on Management Fee
Amortized prepaid expenses
-Daegu-Busan Expressway
-Baekyang Tunnel
-Machang Bridge
Legal advisory fee
Tax advisory fee
Entertainment
Salary
Advertisement
Other administration expenses
Total
Macquarie Shinhan Infrastructure Management
Acquisition related costs
Acquisition related costs
Acquisition related costs
Shin & Kim, Kim & Chang
PwC
KRIF seminar
Includes investment Committee transportation fee
Publication of fiscal year end report, public notice of financial statement in newspaper, etc
Miscellaneous expenses
270,587
54,964
5,527
200,355
331,078
244,295
13,640
31,362
11,916
8,135
5,566
846,347
Items Sub Total Amount Remarks
SMFA
SMFA
SMFA
MSIM
Goodmorning Shinhan Securities
Shinhan Bank
Shinhan Bank
Advisory fee (Woomyunsan Tunnel)
Advisory fee (Incheon Expressway)
Advisory fee (Baekyang Tunnel)
Management fee (VAT included)
Sales agent fee
Custodian fee
Interest on borrowings
3,032,722
2,203,901
13,580
65,549
411,405
951,962
2,388,754
3,032,722
-
-
-
5,348
-
-
-
1,334,402
7,982
38,354
-
Counterparties TransactionClosing Liabilities
Expenses payable Fees payable
Amount incurred thisperiod
(Unit: KRW ’000s)
ItemsStart date of fee
calculation
Amount applicable to current period management fee calculation