scheme booklet registered with australian securities and ... · mantra group limited domestique...

P +61 (0)7 5631 2500 F +61 (0)7 5631 2995 Level 15, 50 Cavill Avenue Surfers Paradise QLD 4217 PO Box 8016 Gold Coast MC QLD 9726 www.mantragroup.com.au Mantra Group Limited ACN 137 639 395 ABN 69 137 639 395

ASX Release

5 April 2018

Scheme Booklet registered with Australian Securities and Investment Commission Mantra Group Limited (ASX:MTR) ("Mantra") is pleased to announce that the Australian Securities and Investments Commission ("ASIC") has registered the Scheme Booklet in relation to the proposed Scheme of Arrangement (“Scheme”), under which all Mantra shares will be acquired by AAPC Limited (a subsidiary of Accor S.A.) ("AccorHotels"). A full copy of the Scheme Booklet, which includes the Independent Expert’s Report and Notice of Scheme Meeting for the Scheme Meeting, is attached to this announcement. Copies of the Scheme Booklet and proxy form will be sent to Mantra shareholders on or around Wednesday, 11 April 2018 (and those shareholders who have previously nominated an electronic means of notification to Mantra's share registry will receive an email where they can download the Scheme Booklet and lodge their proxy online). The Mantra Board continues to unanimously recommend that Mantra shareholders vote in favour of the Scheme at the Scheme Meeting to be held on 18 May 2018. For further information contact: Investors Media

Fiona van Wyk Lauren Thompson Mantra Group Limited Domestique Consulting +61 7 5631 2552 +61 2 9119 3078 [email protected] +61 438 954 729

mailto:[email protected]

This is an important document and requires your immediate attention.

You should read this document carefully and in its entirety before deciding whether or not to vote in favour of the resolution to approve the Scheme. If you are in doubt as to what you should do, you should consult your legal, financial or other professional adviser. If, after reading this Scheme Booklet, you have any questions about the Scheme or the number of Mantra Shares you hold or how to vote, please call the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) Monday to Friday between 8:30am and 5:30pm (Sydney time).

Financial Adviser Legal Advisers

SCHEME BOOKLETMantra Group Limited ACN 137 639 395

For a scheme of arrangement relating to the proposed acquisition of all of the ordinary shares in Mantra Group Limited by AAPC Limited, a subsidiary of Accor S.A., at a cash price of $3.96 per share.

Your Directors unanimously recommend that you vote in favour of the Scheme in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme to be in the best interests of Mantra Shareholders.

VOTE IN FAVOUR

DEFINED TERMSCapitalised terms used in this Scheme Booklet are defined in the Glossary in Section 8 of this Scheme Booklet.

NATURE OF THIS SCHEME BOOKLETThis Scheme Booklet provides Mantra Shareholders with information about the proposed acquisition of Mantra Group by AAPC by way of a scheme of arrangement between Mantra Group and Mantra Shareholders. A copy of the proposed Scheme is set out in Annexure C to this Scheme Booklet.

If you have sold all of your Mantra Shares, please disregard this document.

This Scheme Booklet includes the explanatory statement required to be sent to Mantra Shareholders for the Scheme Meeting in relation to the Scheme under Part 5.1 of the Corporations Act. A copy of the Notice of Scheme Meeting is set out in Annexure B.

You should read this Scheme Booklet carefully and in its entirety before making a decision as to how to vote on the resolution to be considered at the Scheme Meeting. If you are in doubt as to what you should do, you should consult your legal, financial or other professional adviser.

RESPONSIBILITY FOR INFORMATIONExcept as provided below, the information in this Scheme Booklet has been provided by Mantra Group and is the responsibility of Mantra Group. Mantra Group’s directors, officers and advisers do not assume any responsibility for the accuracy or completeness of any such information.

a. AAPC has provided and is responsible for the AAPC Information. Mantra Group and its directors, officers and advisers do not assume any responsibility for the accuracy or completeness of the AAPC Information.

b. The Independent Expert, Grant Thornton, has provided and is responsible for the information contained in the Independent Expert’s Report in Annexure A of this Scheme Booklet. Mantra Group, its directors, officers and advisers do not assume any responsibility for the accuracy or completeness of the information contained in Annexure A except in relation to information given by it to the Independent Expert. The Independent Expert does not assume any responsibility for the accuracy or completeness of the information contained in this Scheme Booklet other than that contained in Annexure A.

Mantra’s Share Registry, Link, has had no involvement in the preparation of any part of this Scheme Booklet other than being named as Mantra’s Share Registry. Link has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of this Scheme Booklet.

INVESTMENT DECISIONSThe information in this Scheme Booklet does not constitute financial product advice. This Scheme Booklet has been prepared without reference to the investment objectives, financial situation or particular needs of any Mantra Shareholder or any other person. This Scheme Booklet should not be relied on as the sole basis for any investment decision. Independent legal, financial and taxation advice should be sought before making any investment decision in relation to your Mantra Shares.

NOT AN OFFERThis Scheme Booklet does not constitute or contain an offer to Mantra Shareholders or a solicitation of an offer from Mantra Shareholders, in any jurisdiction.

REGULATORY INFORMATIONThis document is the explanatory statement for the scheme of arrangement between Mantra Group and the holders of Mantra Shares as at the Scheme Record Date for the purposes of section 412(1) of the Corporations Act. A copy of the proposed Scheme is included in this Scheme Booklet as Annexure C.

A copy of this Scheme Booklet (including the Independent Expert’s Report) has been lodged with, and registered by, ASIC for the purposes of section 412(6) of the Corporations Act.

ASIC has been requested to provide a statement in accordance with section 411(17)(b) of the Corporations Act stating that it has no objection to the Scheme. If ASIC provides that statement, then it will be produced to the Court at the time of the Court hearing to approve the Scheme.

Neither ASIC nor any of its officers take any responsibility for the contents of this Scheme Booklet.

A copy of this Scheme Booklet has been lodged with ASX. Neither ASX nor any of its officers take any responsibility for the contents of this Scheme Booklet.

IMPORTANT NOTICE ASSOCIATED WITH COURT ORDER UNDER SUBSECTION 411(1) OF THE CORPORATIONS ACTThe fact that under subsection 411(1) of the Corporations Act the Court has

ordered that a meeting be convened and has approved the explanatory statement required to accompany the notice of the meeting does not mean that the Court:

a. has formed any view as to the merits of the proposed Scheme or as to how members should vote; or

b. has prepared, or is responsible for the content of, the explanatory statement.

NOTICE REGARDING SECOND COURT HEARING AND IF A MANTRA SHAREHOLDER WISHES TO OPPOSE THE SCHEMEThe date of the Second Court Hearing to approve the Scheme is Wednesday, 23 May 2018. The hearing will be at 10.15am (Sydney time) at the Federal Court of Australia at Law Courts Building, 184 Phillip Street, Sydney NSW 2000.

Each Mantra Shareholder has the right to appear and be heard at the Second Court Hearing and if desired, oppose the approval of the Scheme at the Second Court Hearing. If you wish to oppose in this manner, you must file and serve on Mantra Group a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Mantra Group at its address for service at least one day before Wednesday, 23 May 2018. The address for service for Mantra Group is:

C/– Baker McKenzieTower One – International Towers SydneyLevel 46, 100 Barangaroo AvenueBarangaroo NSW 2000

Attention: Maria O’Brien

Maria.O’[email protected]

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTSThis Scheme Booklet contains both historical and forward-looking statements.

The forward-looking statements in this Scheme Booklet are not based on historical facts, but rather reflect the current views held only as at the date of this Scheme Booklet concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipated”, “intending”, “foreseeing”, “likely”, “should”, “planned”, “may”, “estimated”, “potential”, or other similar words and phrases. Similarly, statements that describe objectives, plans, goals or expectations are or may be forward-looking statements.

The statements in this Scheme Booklet about the impact that the Scheme may have

MANTRA GROUP SCHEME BOOKLET

IMPORTANT NOTICES

on the results of Mantra Group’s operations, and the advantages and disadvantages anticipated to result from the Scheme, are also forward-looking statements.

Mantra Group believes that any other forward-looking statements included in Section 3 of this Scheme Booklet have been made on reasonable grounds. Although Mantra Group believes that the views reflected in those forward-looking statements have been made on a reasonable basis, no assurance can be given that such views will prove to have been correct.

AAPC believes that any forward-looking statements included in the AAPC Information in Section 4 of this Scheme Booklet have been made on reasonable grounds. Although AAPC believes that the views reflected in those forward-looking statements have been made on a reasonable basis, no assurance can be given that such views will prove to have been correct.

These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause Mantra Group’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed, projected or implied by these forward-looking statements. Deviations as to future results, performance and achievements are both normal and to be expected, Mantra Shareholders should note that the historical financial performance of Mantra Group is no assurance of future financial performance of Mantra Group (whether the Scheme is implemented or not). Mantra Shareholders should carefully review all of the information included in this Scheme Booklet. The forward-looking statements included in this Scheme Booklet are made only as of the date of this Scheme Booklet. Neither Mantra Group, AccorHotels Group, nor their respective directors, officers or advisers give any representation, assurance or guarantee to Mantra Shareholders that any forward-looking statements will actually occur or be achieved. Mantra Shareholders are cautioned not to place undue reliance on such forward-looking statements.

Subject to any continuing obligations under law or the ASX Listing Rules, neither Mantra Group or AccorHotels Group give any undertaking to update or revise any forward-looking statements after the date of this Scheme Booklet to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any such statement is based.

PRIVACY AND PERSONAL INFORMATIONMantra Group may collect personal information to implement the Scheme. The personal information may include the names, contact details and details of holdings of Mantra Shareholders, plus contact details of individuals appointed by Mantra Shareholders as proxies, corporate representatives or attorneys at the Scheme Meeting. The collection of some of this information is required or authorised by the Corporations Act.

Link advises that personal information it holds about you (including your name, address, and details of your financial assets) is collected by Link organisations to administer your investment. Personal information is held on the public register in accordance with Chapter 2C of the Corporations Act. Some or all of your personal information may be disclosed to contracted third parties, or related Link companies in Australia and overseas. Your information may also be disclosed to Australian government agencies, law enforcement agencies and regulators, or as required under other Australian law, contract, and court or tribunal order. For further details about Link’s personal information handling practices, including how you may access and correct your personal information and raise privacy concerns, visit Link’s website at www.linkmarketservices.com.au for a copy of the Link condensed privacy statement, or contact Link by phone on +61 1800 502 355 (free call within Australia) 9.00 am to 5.00 pm (Sydney time) Monday to Friday (excluding public holidays) to request a copy of Link’s complete privacy policy.

The information may be disclosed to print and mail service providers, and to Mantra Group and AccorHotels Group and their related bodies corporate and advisers to the extent necessary to effect the Scheme. If the information outlined above is not collected, Mantra Group may be hindered in, or prevented from, conducting the Scheme Meeting or implementing the Scheme effectively or at all. Mantra Shareholders who appoint an individual as their proxy, corporate representative or attorney to vote at the Scheme Meeting should inform that individual of the matters outlined above.

NOTICE TO PERSONS OUTSIDE AUSTRALIAThe release, publication or distribution of this Scheme Booklet in jurisdictions other than Australia may be restricted by law or

regulation in such other jurisdictions and persons outside of Australia who come into possession of this Scheme Booklet should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations.

This Scheme Booklet has been prepared in accordance with Australian law and the information contained in this Scheme Booklet may not be the same as that which would have been disclosed if the Scheme Booklet had been prepared in accordance with the laws and regulations outside Australia.

This Scheme Booklet and the Scheme are subject to Australian disclosure requirements, which may be different from the requirements applicable in other jurisdictions. The financial information included in this document is based on financial statements that have been prepared in accordance with Australian equivalents to International Financial Reporting Standards, which may differ from generally accepted accounting principles in other jurisdictions.

This Scheme Booklet and the Scheme do not in any way constitute an offer of securities in any place in which, or to any person to whom, it would not be lawful to make such an offer.

EFFECT OF ROUNDINGA number of figures, amounts, percentages, estimates, calculations of value and fractions in this Scheme Booklet are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this Scheme Booklet.

TIMES AND DATESUnless otherwise stated, all times referred to in this Scheme Booklet are times in Sydney, Australia. All dates following the date of the Scheme Meeting are indicative only and are subject to the Court approval process and the satisfaction or, where applicable, waiver of the conditions precedent to the implementation of the Scheme (see Section 1 of this Scheme Booklet).

CURRENCYThe financial amounts in this Scheme Booklet are expressed in Australian currency unless otherwise stated. A reference to $ and cents is to Australian currency, unless otherwise stated.

DATEThis Scheme Booklet is dated 4 April 2018.

SCHEME BOOKLET MANTRA GROUP 1

KEY DATES 3

CHAIRMAN’S LETTER 4

HOW TO VOTE 8

FREQUENTLY ASKED QUESTIONS 10

1. SUMMARY OF THE SCHEME 16

2. KEY CONSIDERATIONS RELEVANT TO YOUR VOTE 25

3. INFORMATION ON MANTRA GROUP 30

4. AAPC INFORMATION 41

5. RISKS ASSOCIATED WITH MANTRA GROUP 46

6. TAXATION IMPLICATIONS 50

7. ADDITIONAL INFORMATION 54

8. GLOSSARY 59

ANNEXURE A. INDEPENDENT EXPERT’S REPORT 66

ANNEXURE B. NOTICE OF SCHEME MEETING 149

ANNEXURE C. SCHEME OF ARRANGEMENT 153

ANNEXURE D. SCHEME DEED POLL 165

CORPORATE DIRECTORY IBC

2 MANTRA GROUP SCHEME BOOKLET

CONTENTS


KEY DATES

EVENT1 TIME/DATE

First Court Date 4 April 2018

Date of this Scheme Booklet 4 April 2018

Scheme Meeting proxies – the last date by which proxy forms for the Scheme Meeting must be received by the Share Registry.

10.00am (Sydney time) on 16 May 2018

Voting Record Date – the date and time for determining who can vote at the Scheme Meeting. 7.00pm (Sydney time) on 16 May 2018

Date of Scheme Meeting – to be held at Tower One – International Towers Sydney, Level 46, 100 Barangaroo Avenue, Sydney NSW 2000.

10.00am (Sydney time) on 18 May 2018

IF THE SCHEME IS APPROVED BY MANTRA SHAREHOLDERS AT THE SCHEME MEETING:

Second Court Date to approve the Scheme 23 May 2018

Effective Date – the date on which the Scheme comes into effect and is binding on Mantra Shareholders. The Court order will be lodged with ASIC and announced on the ASX. Mantra Shares will be suspended from trading at the close of trading on the Effective Date. If the Scheme proceeds, this will be the last day that Mantra Shares will trade on the ASX.

23 May 2018

Special Dividend Record Date 7.00pm (Sydney time) on 25 May 2018

Scheme Record Date – all Mantra Shareholders who hold Mantra Shares on the Scheme Record Date will be entitled to receive the Scheme Consideration.

7.00pm (Sydney time) on 28 May 2018

Special Dividend Payment Date 30 May 2018

Implementation Date – all Scheme Shareholders will be paid the Scheme Consideration to which they are entitled on this date.

31 May 2018

1. All dates following the date of the Scheme Meeting are indicative only and are subject to the Court approval process and the satisfaction or, where applicable, waiver of the conditions precedent to the implementation of the Scheme (see Section 1 of this Scheme Booklet). All dates and times, unless otherwise indicated, refer to the date and time in Sydney, Australia. Any changes to the above timetable will be announced to ASX and notified on Mantra Group’s website at www.mantragroup.com.au.

CHAIRMAN’S LETTER

Dear Mantra Shareholder,

On behalf of the Mantra Board, I am pleased to provide you with this Scheme Booklet, which contains information relating to the proposed acquisition of Mantra Group by AAPC Limited (a subsidiary of Accor S.A.).

On 12 October 2017, Mantra Group announced that it had entered into a binding Scheme Implementation Agreement under which AAPC Limited (a subsidiary of Accor S.A.) agreed to acquire all Mantra Shares under a scheme of arrangement1. Implementation of the Scheme is subject to the satisfaction of customary conditions including obtaining the approval of Mantra Shareholders. All regulatory approvals required in relation to the Scheme (including ACCC and FIRB) have been obtained.

If the Scheme is approved, Mantra Shareholders will receive an aggregate cash payment of $3.96 per Mantra Share, which will comprise:

• a fully franked special dividend of $0.16 per Mantra Share held on the Special Dividend Record Date, payable by Mantra Group; and

• the Scheme Consideration of $3.80 per Mantra Share held on the Scheme Record Date, payable by AAPC.

The Mantra Board believes that the offer from AAPC represents an attractive opportunity for Mantra Shareholders. The Total Cash Consideration of $3.96 represents a cash premium of:

• 22.6% over the previous closing price of Mantra Shares on 6 October 2017, the last trading day prior to confirmation that Mantra Group had received an indicative and non-binding proposal from AAPC2;

• 29.2% over the 30 day VWAP of Mantra Shares up to and including 6 October 20173; and

• 33.1% over the 90 day VWAP of Mantra Shares up to and including 6 October 20174.

The Total Cash Consideration equates to an underlying FY2017 P/E multiple5 of 23.7x and an underlying FY2017 EV/EBITDA multiple of 12.4x, both of which are considered by the Mantra Board to be attractive, when compared to the transaction multiples of comparable companies referenced by the Independent Expert’s Report and the trading multiples of Mantra Shares up to and including 6 October 2017.

For those Mantra Shareholders who are able to realise the full benefit of franking credits, the total value received is $4.03 per Mantra Share, which represents a 31.4% premium to the 30 day volume weighted average price6. Whether you will be able to realise the full benefit of the franking credits will depend on your individual tax circumstances.

DIRECTORS’ RECOMMENDATION

Your Directors unanimously recommend that Mantra Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme to be in the best interests of Mantra Shareholders.

Subject to the same qualifications, each of your Directors intends to vote, or cause to be voted, all the Mantra Shares held or controlled by them in favour of the Scheme at the Scheme Meeting.

Your Directors, having regard to multiple factors including the dynamics of the industry within which Mantra Group operates and the cash premium available to Mantra Shareholders compared to recent share trading results, believe that the Scheme is in the best interests of Mantra Shareholders for the following reasons:

• the Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, in the best interests of Mantra Shareholders in the absence of a Superior Proposal;

• the Total Cash Consideration, and the premium which it represents, provides an attractive and compelling opportunity for Mantra Shareholders to realise immediate and certain value; and

• as at the date of this Scheme Booklet, a Superior Proposal has not been put forward since the receipt of the proposal from AAPC.

1. A scheme of arrangement is a commonly used legal procedure in Australia to undertake the acquisition of a publicly listed company.

2. Last closing price of $3.23 on 6 October 2017.

3. Volume weighted average price of $3.07 adjusted for the FY2017 final dividend of $0.06 per share.


5. Based on NPATA (net profit after tax adjusted to add back expense relating to amortisation of lease rights).

6. Volume weighted average price up to and including 6 October 2017 of $3.07 adjusted for the FY2017 final dividend of $0.06 per share.


For more details on the recommendation given by the Mantra Board, please consider Section 2 of this Scheme Booklet.

Although the Board’s unanimous recommendation to Mantra Shareholders is to vote in favour of the Scheme, you may disagree that the Scheme is in your best interests and instead prefer to retain your Mantra Shares. Some of the reasons you may wish to vote against the Scheme would be because you wish to continue to participate in the future financial performance of Mantra Group and maintain your existing investment profile. You may also believe that there is potential for a Superior Proposal to be made in relation to Mantra Group.

INDEPENDENT EXPERT

Your Directors appointed Grant Thornton as the Independent Expert to assess the merits of the Scheme. The Independent Expert has concluded that the Total Cash Consideration is fair and reasonable and, therefore, in the best interests of Mantra Shareholders, in the absence of a Superior Proposal.

The Independent Expert has assessed the full underlying value of Mantra Group at between $3.86 and $4.53 per Mantra Share. The Total Cash Consideration of $3.96 per Mantra Share is within this range. Moreover, Mantra Group’s intention to pay a fully franked Special Dividend of $0.16 per Mantra Share (as part of the Total Cash Consideration) will deliver additional value of up to $0.07 per Mantra Share for Mantra Shareholders who are able to realise the full benefit of franking credits, reinforcing the Independent Expert’s conclusion.

A complete copy of the Independent Expert’s Report is included in Annexure A of this Scheme Booklet.

HOW TO VOTE

Your vote is important. In order for the Scheme to be implemented, the Scheme Resolution must be approved by the required majorities of Mantra Shareholders at the Scheme Meeting. The Scheme Meeting will be held at 10.00am (Sydney time) on 18 May 2018 at Tower One – International Towers Sydney, Level 46, 100 Barangaroo Avenue, Sydney NSW 2000.

For this reason, your Directors encourage you to vote by attending the Scheme Meeting – if you are unable to attend the Scheme Meeting, the Mantra Directors urge you to complete and return, in the enclosed reply paid envelope, the personalised proxy form that accompanies this Scheme Booklet or lodge your proxy form online at the Mantra Share Registry’s website (www.linkmarketservices.com.au) in accordance with the instructions given on the proxy form.

If you wish for the Scheme to proceed, it is important that you vote in favour of the Scheme.

ADDITIONAL INFORMATION

Your Directors encourage you to read this Scheme Booklet carefully and in its entirety, as it contains important information that will need to be considered before you vote on the Scheme Resolution. Your directors also encourage you to seek independent financial, legal and taxation advice before making any investment decision in relation to your Mantra Shares.

If you require further information or have questions in relation to the Scheme or this Scheme Booklet, please contact the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) Monday to Friday between 8.30am and 5.30pm (Sydney time).

I would like to thank you for your ongoing support of Mantra Group.

Yours sincerely,

Peter Bush

Chairman of the Board


REASONS TO VOTE IN FAVOUR OF THE SCHEME


The Mantra Directors unanimously recommend that Mantra Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider that the Scheme is in the best interests of Mantra Shareholders.

The Independent Expert has concluded that the Scheme is fair and reasonable, and in the best interests of Mantra Shareholders, in the absence of a Superior Proposal.

The Total Cash Consideration represents attractive value for Mantra Shareholders.

Mantra Shareholders will receive certain total value of $3.96 cash per Mantra Share for their investment in Mantra Group.

Mantra Group’s share price is likely to fall (at least in the short term) if the Scheme does not proceed and no Superior Proposal emerges.

No Superior Proposal has been received since the announcement of the Scheme.

If the Scheme does not proceed, Mantra Shareholders will continue to be exposed to risks associated with Mantra Group’s business rather than realising certain value for their Mantra Shares in a certain timeframe.

Mantra Shareholders will not incur any stamp duty or brokerage charges if the Scheme proceeds.

For more information about the reasons to vote in favour of the Scheme, please see Section 2.1 of this Scheme Booklet which Mantra Shareholders should read carefully and in its entirety.

REASONS NOT TO VOTE IN FAVOUR OF THE SCHEME


You may disagree with the Mantra Directors’ unanimous recommendation and the Independent Expert’s conclusion and believe that the Scheme is not in your best interests.

You may prefer to participate in the future financial performance of Mantra Group’s business.

You may wish to maintain your current investment profile.

The tax consequences of the Scheme may not suit your current financial position.

You may believe that there is potential for a Superior Proposal to be made in the foreseeable future.

For more information about the reasons to vote against the Scheme, please see Section 2.2 of this Scheme Booklet which Mantra Shareholders should read carefully and in its entirety.

HOW TO VOTE


WHO IS ENTITLED TO VOTE AT THE SCHEME MEETING?

If you are on the Register as a Mantra Shareholder at 7.00pm (Sydney time) on 16 May 2018, then you will be entitled to attend and vote at the Scheme Meeting.

JOINT HOLDERS

In the case of Mantra Shares held by joint holders, only one of the joint holders is entitled to vote. If more than one shareholder votes in respect of jointly held Mantra Shares, only the vote of the Mantra Shareholder whose name appears first in the Register will be counted.

YOUR VOTE IS IMPORTANT

In order for the Scheme to be implemented, the Scheme Resolution must be approved by the required majority of Mantra Shareholders at the Scheme Meeting.

For this reason the Mantra Directors unanimously recommend that you vote in favour of the Scheme Resolution in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Mantra Shareholders.

If you are unable to attend the Scheme Meeting, the Mantra Directors urge you to complete and return, in the enclosed reply paid envelope, the personalised proxy form that accompanies this Scheme Booklet or lodge your proxy form online at Link’s website (www.linkmarketservices.com.au) in accordance with the instructions given therein.

LOCATION AND DETAILS OF SCHEME MEETING

The details of the Scheme Meeting are as follows:

Location: Tower One, International Towers Sydney Level 46, 100 Barangaroo Avenue Barangaroo NSW 2000

Date: 18 May 2018

Time: 10.00am (Sydney time)

SCHEME MEETING

A copy of the Notice of Scheme Meeting is set out in Annexure B of this Scheme Booklet.

Section 1 of this Scheme Booklet provides details of the Scheme Resolution and the voting majorities that are required for the Scheme Resolution.


VOTING IN PERSON, BY ATTORNEY OR CORPORATE REPRESENTATIVE

If you wish to vote in person, you must attend the Scheme Meeting.

If you cannot attend the Scheme Meeting, you may vote by proxy by completing the proxy form accompanying this Scheme Booklet.

Attorneys who have been authorised to attend and vote at the Scheme Meeting must provide a copy of the power of attorney and any authority under which the power of attorney was granted, to the Registry by no later than 10.00am (Sydney time) on 16 May 2018 and should bring with them the original or a certified copy of the power of attorney and authority under which they have been authorised to attend and vote at the Scheme Meeting.

Please ensure that any power of attorney or authority which you intend to post or deliver is received by 10.00am (Sydney Time) on 16 May 2018. Mantra Group will accept copies of your power of attorney or authority received before 10.00am (Sydney time) on 16 May 2018.

A body corporate which is a Mantra Shareholder may appoint an individual to act as its corporate representative. The appointment must comply with the requirements of sections 250D and 253B of the Corporations Act. The representative should bring to the Scheme Meeting evidence of his or her appointment, including any authority under which it is signed.

VOTING BY PROXY

If you wish to appoint a proxy to attend and vote at the Scheme Meeting on your behalf, please complete and sign the personalised proxy form accompanying this Scheme Booklet in accordance with the instructions set out on the proxy form or lodge your proxy vote online at Link’s website (www.linkmarketservices.com.au).

TO BE VALID, PROXY FORMS FOR THE SCHEME MEETING MUST BE RECEIVED BY THE SHARE REGISTRY NO LATER THAN 10.00AM (SYDNEY TIME) ON 16 MAY 2018.

Proxy forms, duly completed in accordance with the instructions set out on the proxy form, may be returned to Mantra’s Share Registry, Link:

• by posting them in the reply paid envelope provided;

• by delivering them to Link Market Services Limited at Level 12, 680 George Street, Sydney NSW 2000;

• by faxing them to 02 9287 0309 (within Australia) or +61 2 9287 0309 (outside Australia);

• by posting them to Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235; or

• online: www.linkmarketservices.com.au

Login to the Link website using the details as shown on the proxy form. Select Voting and follow the prompts to lodge your proxy. To use the online proxy facility, Mantra Shareholders will need their “Holder Identifier” (Securityholder Reference Number (SRN) or Holder Identification Number (HIN) as shown on the front of the proxy form).

Please ensure that any proxy form which you intend to post or deliver is received by 10.00am (Sydney Time) on 16 May 2018. Mantra Group will accept proxies received by fax before 10.00am (Sydney time) on 16 May 2018.

FREQUENTLY ASKED QUESTIONS

Question Answer More information

AN OVERVIEW OF THE SCHEME

Why have I received this Scheme Booklet?

You have received this Scheme Booklet because you are a Mantra Shareholder. Mantra Shareholders are being asked to vote on a Scheme under which AAPC would acquire all Mantra Shares for a Total Cash Consideration of $3.96 per Mantra Share, which comprises:

• a fully franked special dividend of $0.16 per Mantra Share held by a Mantra Shareholder on the Special Dividend Record Date, payable by Mantra Group; and

• the Scheme Consideration of $3.80 per Mantra Share held by a Mantra Shareholder on the Scheme Record Date, payable by AAPC.

This Scheme Booklet is intended to assist you in deciding how to vote on the Scheme Resolution which needs to be passed at the Scheme Meeting and, if passed by the required majority, the Scheme will proceed.

N/A

What is the Scheme?

The Scheme is a scheme of arrangement between Mantra Group and Mantra Shareholders. A scheme of arrangement is a statutory procedure which is commonly used in Australia to undertake an acquisition of a publicly listed company.

On 12 October 2017, Mantra Group announced the proposed Scheme to ASX. If the Scheme is approved and implemented, Mantra Shareholders who hold Mantra Shares on both the Scheme Record Date and Special Dividend Record Date will receive Total Cash Consideration of $3.96 cash for each Mantra Share they own.

Section 1 of this Scheme Booklet.

Who is AccorHotels Group?

Accor S.A. is a French company, acting as the holding company of the AccorHotels Group. Its shares are listed on the Euronext Paris Stock Exchange and are included in the CAC 40 index under ISIN code FR0000120404.

AAPC is an Australian public company, incorporated in Australia and ultimately controlled by Accor S.A.

AAPC trades in Australia as AccorHotels, and its business is the management and operation of hotels and resorts in Australia.

AccorHotels Group is a global travel and lifestyle group and digital innovator offering unique experiences in more than 4,200 hotels, resorts and residences around the world. Benefiting from dual expertise as an investor and operator, AccorHotels operates in 99 countries.

Its portfolio includes internationally renowned luxury brands such as Raffles, Sofitel Legend, SO Sofitel, Sofitel, Fairmont, Onefinestay, MGallery by Sofitel, Pullman and Swissôtel; the mid-range boutique hotel brands such as Novotel, Mercure, Mama Shelter and Adagio; and very popular budget brands such as JO&JOE, Ibis, Ibis Styles and Ibis budget, as well as the regional brands such as Grand Mercure, The Sebel and hotelF1.

AccorHotels also provides concierge services through its acquisition of John Paul.

There are currently over 200 hotels and over 27,000 rooms in Australia operating under AccorHotels Group’s brands with hotel businesses either owned or managed by AAPC and its subsidiaries or operated under a franchise arrangement.

For more information on AAPC and AccorHotels Group, please refer to Section 4 of this Scheme Booklet.




How will the Scheme be implemented?

In order for the Scheme to be implemented, all conditions precedent under the Scheme Implementation Agreement must be satisfied or waived (where capable of waiver), including that the Scheme Resolution must be approved by Mantra Shareholders at the Scheme Meeting and the Scheme must be approved by the Court.

Details of this Scheme Resolution and the majorities required to approve the resolution are set out in Section 1 of this Scheme Booklet.

Will I receive any further dividends from Mantra Group?

Subject to the Scheme becoming effective, Mantra Group will pay a fully franked Special Dividend of $0.16 per Mantra Share held by a Mantra Shareholder on the Special Dividend Record Date. The Special Dividend forms part of the Total Cash Consideration of $3.96 per Mantra Share.

Mantra Group has applied to the ATO requesting a class ruling to confirm the key taxation implications of the Scheme and the Special Dividend (Class Ruling). See Section 6 for further information.

No further dividends will be paid if the Scheme is implemented.


What is the Special Dividend and will any franking credits attach to the Special Dividend?

The Special Dividend is a dividend that will be paid by Mantra Group if the Scheme becomes Effective.

The Special Dividend will be $0.16 per Mantra Share, fully franked and has a record date of 7.00pm (Sydney Time) on 25 May 2018. It will be paid on the Special Dividend Payment Date of 30 May 2018.

Those Mantra Shareholders who are able to realise the full benefit of franking credits will receive additional value of up to $0.07 per Mantra Share.

Whether a Mantra Shareholder will be able to realise the full benefit of the franking credits, will depend on their personal tax circumstances.


What do the Mantra Directors recommend?

The Mantra Directors unanimously recommend that you vote in favour of the Scheme Resolution to approve the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Mantra Shareholders.


How are the Mantra Directors intending to vote?

Each of the Mantra Directors intends to vote, or cause to be voted, in favour of the Scheme in respect of all the Mantra Shares they control, in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme to be in the best interests of Mantra Shareholders.


What is the Independent Expert’s opinion of the Scheme?

The Independent Expert concluded that the Scheme is in the best interests of Mantra Shareholders, in the absence of a Superior Proposal. The Independent Expert, in arriving at this opinion, assessed whether the Scheme was fair and reasonable to the Mantra Shareholders.

The Independent Expert has estimated the full underlying value of Mantra Group to be in the range of $3.86 to $4.53 per share.

The Mantra Directors recommend that you read the Independent Expert’s Report carefully and in its entirety.

The Independent Expert’s Report is included in Annexure A of this Scheme Booklet.




What will happen if a Superior Proposal emerges?

If Mantra Group receives a Competing Proposal from a third party, there are certain steps that must be taken by Mantra Group in respect of that proposal, including providing AAPC with the opportunity to make a matching or superior proposal.

Since the announcement of the Scheme on 12 October 2017 and up to the date of this Scheme Booklet, no Superior Proposal has been received.

Details of these provisions and other provisions in the Scheme Implementation Agreement are set out in Section 1 of this Scheme Booklet.

What are the risks and benefits associated with an investment in Mantra Group if the Scheme does not become Effective?

If the Scheme does not proceed, and no Superior Proposal is received, then Mantra Group’s share price is likely to fall or trade at a price below the Total Cash Consideration of $3.96 per Mantra Share, at least in the near term.

You will continue to be a Mantra Shareholder and participate in the future financial performance of Mantra Group’s business, and continue to be subject to the specific risks associated with Mantra Group’s business and other general risks.

Sections 2.2 and 5.2 of this Scheme Booklet.

AN OVERVIEW OF THE TOTAL CASH CONSIDERATION

What is the Total Cash Consideration?

If the Scheme becomes effective, Mantra Shareholders will receive a Total Cash Consideration of $3.96 for each Mantra Share they hold, provided they are registered in the Register on both the Scheme Record Date and Special Dividend Record Date.

Section 1.3 of this Scheme Booklet.

What is the premium of the Total Cash Consideration to Mantra Group’s Share price?

The Total Cash Consideration of $3.96 cash per share represents a premium of:

• 22.6% over the previous closing price of Mantra Shares on 6 October 20171, the last trading day prior to confirmation that Mantra Group received an indicative and non-binding proposal from AAPC;

• 29.2% over the 30 day VWAP of Mantra Shares up to and including 6 October 20172; and

• 33.1% over the 90 day VWAP of Mantra Shares up to and including 6 October 20173.


How is AAPC funding the Scheme Consideration?

Accor S.A. and AAPC intend to fund the Scheme Consideration using either or both cash and cash equivalent investments on hand (including cash proceeds which may be received from any business or asset sales undertaken by the AccorHotels Group prior to the Implementation Date) or debt facilities.

Accor S.A. has put in place a €900,000,000.00 bridge financing arrangement to fund part or all of the Scheme Consideration, if necessary. In any event, Accor S.A. has in place a €1,800,000,000.00 Multi-Currency Revolving Credit Facility Agreement with undrawn borrowing capacity well in excess of the total Scheme Consideration. The availability of funds under the revolving credit facility is not subject to any conditions to borrowing which are outside the control of Accor S.A. The revolving credit facility is provided by a syndicate of lenders comprising various financial institutions, including Société Générale as Facility Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Commerzbank Aktiengesellschaft, Crédit Agricole Corporate and Investment Bank as Coordinators and 18 French and International Bank Institutions as Mandated Lead Arrangers and Bookrunners.

Section 4.6 of this Scheme Booklet.






Who is entitled to participate in the Scheme?

Persons who hold Mantra Shares on the Scheme Record Date will participate in the Scheme and, if the Scheme is approved and implemented, those persons will receive the Total Cash Consideration of $3.96 cash in respect of each Mantra Share held both on the Special Dividend Record Date and on the Scheme Record Date.


When will I be paid?

Payment of the Scheme Consideration is expected to be made on 31 May 2018, and payment of the Special Dividend is expected to be made on 30 May 2018.


How will I be paid?

All payments (including the Special Dividend) will be made by direct deposit into your nominated bank account, as advised to the Registry. If you have not nominated a bank account, payments will be made by cheque.


What are the tax implications of the Scheme for you?

The tax implications for Scheme Shareholders if the Scheme is approved and implemented will depend on the specific taxation circumstances of each Scheme Shareholder.

General information about the likely Australian tax consequences of the Scheme is set out in Section 6 of this Scheme Booklet. You should not rely on this general information as advice for your own affairs.

For information about your individual financial or taxation circumstances please consult your financial, legal, taxation or other professional adviser.


Will I have to pay brokerage or stamp duty?

No, you will not have to pay brokerage or stamp duty if your Mantra Shares are acquired under the Scheme.


SCHEME, VOTING AND APPROVALS

Are there any conditions that must be satisfied or waived in order for the Scheme to be implemented?

There are a number of conditions that must either be satisfied or waived (where capable of waiver) in order for the Scheme to be implemented. In summary, as at the date of this Scheme Booklet, the outstanding conditions include:

• approval by Mantra Shareholders of the Scheme at the Scheme Meeting;

• Court approval of the Scheme and a copy of the Court approval is lodged with ASIC;

• no prohibitive orders that have the effect of preventing or materially restricting the Scheme are in effect as at the Second Court Date;

• all necessary and outstanding regulatory consents are obtained or deemed obtained on terms that AAPC considers acceptable before 8:00 am on the Second Court Date;

• no Mantra Prescribed Event having occurred;

• there has been no Mantra Material Adverse Change;

• each of the Mantra Warranties are true and correct;

• each of the AAPC Warranties are true and correct; and

• the Independent Expert does not change or publicly withdraw their opinion that the Scheme is in the best interests of Mantra Shareholders.

In addition, the existing regulatory consents obtained or deemed obtained under the Scheme Implementation Agreement (including in respect of FIRB and ACCC) must not have been withdrawn, cancelled or revoked before 8.00am on the Second Court Date. The NZCC regulatory consent which formed part of the conditions under the Scheme Implementation Agreement was formally waived on 10 November 2017.

The conditions of the Scheme are summarised in further detail in Section 1 of this Scheme Booklet.





Are there any conditions that must be satisfied or waived in order for the Scheme to be implemented?continued

Mantra Shareholders should also be aware that the Scheme Implementation Agreement may be terminated in certain circumstances (details of which are summarised in Section 1 of this Scheme Booklet). If the Scheme Implementation Agreement is terminated, the Scheme will not proceed.

As at the date of this Scheme Booklet, the Mantra Directors are not aware of any reason why these conditions should not be satisfied or waived.

Mantra Group intends to announce on ASX the satisfaction (or waiver) of the conditions to the Scheme.


What happens if these conditions are not satisfied or the Scheme Implementation Deed is terminated?

If the Scheme conditions are not satisfied or waived or the Scheme Implementation Agreement is terminated then the Scheme will not be implemented and, as set out in Section 1 of this Scheme Booklet:

• you will retain your Mantra Shares and they will not be acquired by AAPC;

• you will not receive the Scheme Consideration or the Special Dividend; and

• Mantra Group will continue to operate as a stand-alone company listed on ASX.

Depending on the reasons for the Scheme not proceeding, Mantra Group may be liable to pay the Reimbursement Fee to AAPC, or AAPC may be required to pay the Reimbursement Fee to Mantra Group. No Reimbursement Fee is payable merely because Mantra Group Shareholders do not approve the Scheme.


What happens if the Scheme is approved, all conditions are satisfied and it is implemented?

If the Scheme becomes Effective and you remain a Mantra Shareholder as at the Scheme Record Date for the Scheme, all of your Mantra Shares will be transferred to AAPC under the Scheme, and you will receive the Total Cash Consideration of $3.96 cash for each Mantra Share you hold both the Special Dividend Record Date and the Scheme Record Date, comprising:

• a fully franked special dividend of $0.16 per Mantra Share payable by Mantra on the Special Dividend Payment Date; and

• the Scheme Consideration of $3.80 per Mantra Share payable by AAPC on the Scheme Record Date.


Am I entitled to vote at the Scheme Meeting?

If you are registered as a Mantra Shareholder on the Register at 7.00pm (Sydney time) on 16 May 2018, then you will be entitled to attend and vote at the Scheme Meeting.

Details of the Scheme Meeting and voting are on pages 8–9 and 17–19.

How do I vote? Voting at the Scheme Meeting may be in person, by attorney, by proxy or, in the case of a corporation, by corporate representative.


When and where will the Scheme Meeting be held?

The Scheme Meeting will be held at 10.00am (Sydney time) on 18 May 2018 at Tower One – International Towers Sydney, Level 46, 100 Barangaroo Avenue, Sydney NSW 2000.


Is voting compulsory?

Voting is not compulsory. However, the Scheme will only be successful if it is approved by the required majorities of Mantra Shareholders and therefore voting is important and Mantra Directors encourage you to vote. If the Scheme is approved, you will be bound by the Scheme whether or not you voted and whether or not you voted in favour of it.




What vote is required to approve the Scheme?

For the Scheme to proceed, the Scheme Resolution must be passed by:

• a majority in number (more than 50%) of Mantra Shareholders present in person or by proxy and voting (whether in person or by proxy) on the Scheme Resolution; and

• at least 75% of the votes cast on the Scheme Resolution.


What happens if I do not vote or if I vote against the Scheme?

If you do not vote, or vote against the Scheme, the Scheme may not be approved at the Scheme Meeting by the required majorities of Mantra Shareholders. If this occurs then the Scheme will not proceed, you will not receive the Total Cash Consideration and you will remain a Mantra Shareholder.

However, if the Scheme is approved by the required majorities and the Scheme is implemented, you will receive the Scheme Consideration for each Mantra Share you hold on the Scheme Record Date whether or not you voted in favour of the Scheme and your Mantra Shares will be transferred to AAPC under the Scheme.


Can I keep my shares in Mantra Group?

If the Scheme is implemented, your Mantra Shares will be transferred to AAPC. This is so even if you did not vote at all or you voted against the Scheme Resolution at the Scheme Meeting.

Section 1 of this Scheme Booklet

When will the results of the Scheme Meeting be available?

The results of the Scheme Meeting will be available shortly after the conclusion of the Scheme Meeting and will be announced to the ASX. Even if the Scheme Resolution is passed at the Scheme Meeting, the Scheme will only proceed if Court approval of the Scheme is obtained and all of the other conditions precedent are satisfied or waived.


What do I do if I oppose the Scheme?

If you, as a Mantra Shareholder, oppose the Scheme, you should:

• attend the Scheme Meeting either in person or by proxy and vote against the Scheme Resolution; and/or

• if Mantra Shareholders pass the Scheme Resolution at the Scheme Meeting and you wish to appear and be heard at the Second Court Hearing and if so advised, oppose the approval of the Scheme at the Second Court Hearing, you must lodge a notice of intention to appear at the Second Court Hearing, attend the hearing and indicate opposition to the Scheme.


Can I sell my Mantra Shares now?

You can sell your Mantra Shares on market at any time before close of trading on ASX on the Effective Date at the then prevailing market price (which may vary from the Scheme Consideration).

Mantra Group intends to apply to ASX for Mantra Shares to be suspended from official quotation on ASX from close of trading on the Effective Date (which is currently expected to be 23 May 2018). You will not be able to sell your Mantra Shares on market after this time. If you sell your Shares before the Special Dividend Record Date, being 7.00pm (Sydney Time) 25 May 2018, then you will not receive the Special Dividend and the additional value of franking credits related to the Special Dividend of up to an additional $0.07 value per Mantra Share that may be available depending on your individual tax circumstances.

N/A

FURTHER INFORMATION

What if I want further information?

If you have any questions about the Scheme or you would like additional copies of this Scheme Booklet, please contact the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) Monday to Friday between 8.30am and 5.30pm (Sydney time).

For information about your individual financial or taxation circumstances please consult your financial, legal, taxation or other professional adviser.



SECTION 1SUMMARY OF THE SCHEME


1.1 BACKGROUND

On 12 October 2017, Mantra Group announced a proposal for AAPC to acquire 100% of the shares in Mantra Group by way of a scheme of arrangement. The announcement was made immediately after Mantra Group and AAPC signed the Scheme Implementation Agreement containing the key terms and conditions of the proposed transaction.

If the Scheme is approved and implemented, all Mantra Shares will be transferred to AAPC, and Mantra Group will become a wholly-owned subsidiary of AAPC. Following implementation of the Scheme, Mantra Group will apply to be de-listed from ASX.

This Scheme Booklet contains important information that you should consider before voting on the Scheme. The Mantra Directors encourage you to read this Scheme Booklet in its entirety and recommend that you vote in favour of the Scheme, in the absence of a Superior Proposal. A copy of the Scheme is set out in full in Annexure C.

1.2 OVERVIEW OF SCHEME IMPLEMENTATION STEPS AND PAYMENT OF SPECIAL DIVIDEND

The key steps to implement the Scheme are:

1. Mantra Shareholders will have an opportunity to vote to approve the Scheme at the Scheme Meeting.

2. If Mantra Shareholders approve the Scheme, and all conditions to the Scheme (other than Court approval) have been satisfied or waived, Mantra Group will apply to the Court for approval of the Scheme.

3. If the Court approves the Scheme, Mantra Group will lodge with ASIC a copy of the court orders approving the Scheme. The date on which this occurs will be the Effective Date for the Scheme and will be the last day for trading of Mantra Shares on ASX.

4. Subject to the Scheme becoming effective, the Special Dividend will be paid to Mantra Shareholders who hold Mantra Shares on the Special Dividend Record Date.

5. On the Implementation Date, AAPC will acquire all of the Mantra Shares and will provide the Scheme Consideration.

6. After the Scheme becomes Effective, Mantra Group will apply for suspension of trading in Mantra Shares, followed by removal of Mantra Group from the official list of ASX.

1.3 SCHEME CONSIDERATION

If the Scheme is approved and implemented, Mantra Shareholders will receive Total Cash Consideration of $3.96 per Mantra Share, comprising:

• a fully franked Special Dividend of $0.16 in cash per Mantra Share held by a Mantra Shareholder on the Special Dividend Record Date, payable by Mantra; and

• Scheme Consideration of $3.80 in cash per Mantra Share held by a Mantra Shareholder on the Scheme Record Date, payable by AAPC.

Those Mantra Shareholders who are able to realise the full benefit of franking credits will receive up to an additional $0.07 value per Mantra Share. Whether a Mantra Shareholder will be able to realise the full benefit of the franking credits will depend on their individual tax circumstances.

1.4 SCHEME MEETING

On 4 April 2018, the Court ordered that Mantra Group convene the Scheme Meeting in accordance with the Notice of Scheme Meeting and appointed Peter Bush to chair the meeting, with David Gibson as his alternate. The Court order does not constitute an endorsement of, or any other expression of opinion on, the Scheme or this Scheme Booklet.

The purpose of the Scheme Meeting is for Mantra Shareholders to consider whether to approve the Scheme. Mantra Shareholders who are registered on the Register at 7.00pm (Sydney time) on the Voting Record Date are entitled to vote at the Scheme Meeting.

Voting at the Scheme Meeting will be by poll. Instructions on how to attend and vote at the Scheme Meeting (in person or by proxy) are set out on pages 8–9 and in the Notice of Scheme Meeting in Annexure B.

1.5 APPROVALS REQUIRED FROM MANTRA SHAREHOLDERS AND THE COURT

The Scheme will only become Effective if it is approved by:

• the required majorities of Mantra Shareholders at the Scheme Meeting; and

• the Court on the Second Court Date.



The Scheme will be approved if Mantra Shareholders vote in favour of the Scheme Resolution by:

• a majority in number (more than 50%) of Mantra Shareholders present in person or by proxy and voting at the Scheme Meeting (whether in person or by proxy); and

• at least 75% of the total number of votes cast on the Scheme Resolution at the Scheme Meeting by Mantra Shareholders.

The Court has the power to waive the first requirement.

The Corporations Act and the relevant Court rules provide a procedure for Mantra Shareholders to oppose the approval of the Scheme by the Court. If you wish to oppose the approval of the Scheme at the Second Court Hearing you may do so by appearing at the Second Court Hearing and applying to raise any objections you may have at the hearing. You should notify Mantra Group in advance of an intention to object. The date for the Second Court Hearing is currently scheduled to be Wednesday, 23 May 2018. Any change to this date will be announced through the ASX on Mantra Group’s website.

1.6 RECOMMENDATION OF MANTRA DIRECTORS

The Mantra Directors consider that, in the absence of a Superior Proposal, the Scheme is in your best interests as a Mantra Shareholder and unanimously recommend that you vote in favour of the Scheme for the reasons set out in Section 2 of this Scheme Booklet. The Mantra Directors consider that the reasons for Mantra Shareholders to vote in favour of the Scheme outweigh the reasons to vote against the Scheme. As at the date of this Scheme Booklet, no Superior Proposal for Mantra Group has been received.

Each Mantra Director intends to vote in favour of the Scheme in respect of all Mantra Shares controlled or held by, or on behalf of, each of them (including any proxies placed at their discretion) in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme to be in the best interests of Mantra Shareholders.

In making their recommendation and determining how to vote on the Scheme, the Mantra Directors have considered the following:

• the reasons for Mantra Shareholders to vote in favour of the Scheme, as set out in Section 2.1;

• the reasons for Mantra Shareholders not to vote in favour the Scheme as set out in Section 2.2;

• the risks associated with the Scheme, as set out in Section 5; and

• the Independent Expert’s Report, which has concluded that the Scheme is fair and reasonable and, therefore, in the best interests of Mantra Shareholders, in the absence of a Superior Proposal, as set out in Annexure A.

Before making your decision in relation to the Scheme, the Mantra Directors encourage you to read this Scheme Booklet in its entirety, having regard to your investment objectives, financial situation, tax position or particular needs. If you have any questions in relation to this Scheme Booklet or the Scheme, you should call the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) Monday to Friday between 8.30am and 5.30pm (Sydney Time). Alternatively, you should contact your legal, financial or other professional adviser.

The interests of Mantra Directors are disclosed in Section 7.

1.7 INDEPENDENT EXPERT

The Mantra Directors have engaged Grant Thornton as Independent Expert to consider whether the Scheme is in the best interests of Mantra Shareholders and prepare a report with its findings and conclusions.

The Independent Expert has concluded that the Scheme is fair and reasonable, and therefore in the best interests of Mantra Shareholders, in the absence of a Superior Proposal.

The Independent Expert summarised its views on the likely advantages and disadvantages of the Scheme for Mantra Shareholders as follows:

Advantages

• The Total Cash Consideration represents a premium for control of Mantra Group which is unlikely to be available to Mantra Shareholders in the absence of the Scheme or an alternative proposal.

• In the absence of the Scheme or an alternative proposal, all other things being equal, it is likely that Mantra Shares will trade at prices below the Total Cash Consideration.

• Mantra Shareholders will avoid ongoing risks associated with the operations of Mantra Group and receive certain cash for their investment in Mantra Group.


• Franking credits are attached to the Special Dividend which could result in additional after tax value for certain categories of Mantra Shareholders.

• Mantra Shareholders will be able to realise their investment in Mantra Group without incurring any brokerage costs.

Disadvantages

• Mantra Shareholders will forgo the opportunity to participate in the potential future upside of Mantra Group.

• There is the potential of a superior offer (although no superior proposal has emerged to date).

• Implementation of the Scheme may crystallise a capital gains tax liability for Mantra Shareholders.

A copy of the Independent Expert’s Report (which sets out further details about the Independent Expert’s conclusions) is set out in Annexure A. Mantra Shareholders are encouraged to read this report in its entirety.

1.8 HOW TO VOTE

If you are registered as a Mantra Shareholder on the Register at 7.00pm (Sydney time) on the Voting Record Date of 16 May 2018, you are entitled to vote at the Scheme Meeting. Mantra Shareholders can vote by:

• attending the Scheme Meeting and voting in person, by attorney or by corporate representative if you are a corporate shareholder; or

• by appointing a proxy to attend and vote on your behalf.

See pages 8–9 of this Scheme Booklet for a summary on how to vote. For detailed information on voting procedure, see the Notice of Scheme Meeting set out in Annexure B.

1.9 WHAT HAPPENS IF THE SCHEME PROCEEDS?

If the Scheme is approved by Mantra Shareholders and by the Court at the Second Court Hearing, all Mantra Shareholders who hold Mantra Shares as at the Scheme Record Date, being Scheme Shareholders, will participate in the Scheme, regardless of their voting decision.

Once the Court approves the Scheme, Mantra Group will lodge with ASIC a copy of the Court orders approving the Scheme. On the date that this lodgement occurs (Effective Date), the Scheme will become Effective.

After the Scheme becomes Effective, a Scheme Shareholder must not dispose of or purport or agree to dispose of, any Scheme Shares or any interest in them after the Scheme Record Date. Mantra Group will disregard any such disposal and any attempt to do so will have no effect.

Mantra Group will notify ASX and apply for Mantra Shares to be suspended from trading from close of trading on the Effective Date. Following the Implementation Date, Mantra Group will apply for termination of the official quotation of Mantra Shares and removal from the official list of ASX.

If approved and implemented, the Scheme will result in:

• each Scheme Shareholder receiving the Total Cash Consideration;

• the transfer of all Mantra Shares to AAPC; and

• Mantra Group being delisted from ASX and becoming a wholly-owned subsidiary of AAPC.

1.10 DETERMINATION OF ENTITLEMENT TO SCHEME CONSIDERATION

For the purposes of establishing who are Scheme Shareholders, dealings in Mantra Shares will only be recognised if:

1. in the case of dealings of the type to be effected by CHESS, the transferee is registered in the Register as the holder of the relevant Mantra Shares on or before the Scheme Record Date; and

2. in all other cases, registrable transmission applications or transfers in respect of those dealings are received on or before the Scheme Record Date at the Mantra Share Registry.

Subject to the Corporations Act, ASX Listing Rules and Mantra Group’s constitution, Mantra Group must register transmission applications or transfers which it receives by the Scheme Record Date. Mantra Group will not accept for registration or recognise for any purpose any transmission application or transfer in respect of Mantra Shares received after the Scheme Record Date.



Mantra Group will, until the Scheme Consideration has been provided and AAPC has been entered in the Register as the holder of all Scheme Shares, maintain the Register on this basis and the Register in this form will solely determine entitlements to the Scheme Consideration.

With effect from the Scheme Record Date:

• all statements of holding in respect of Mantra Shares cease to have effect as documents of title in respect of such Mantra Shares; and

• each entry on the Register will cease to be of any effect other than as evidence of entitlement to Scheme Consideration.

1.11 PAYMENT OF TOTAL CASH CONSIDERATION

If the Scheme becomes Effective, AAPC will acquire all of the Mantra Shares. Mantra Shareholders will receive Total Cash Consideration of $3.96 per Mantra Share, comprising:

• a fully franked Special Dividend of $0.16 in cash per Mantra Share held by a Mantra Shareholder on the Special Dividend Record Date, payable by Mantra Group; and

• Scheme Consideration of $3.80 in cash per Mantra Share held by a Mantra Shareholder on the Scheme Record Date, payable by AAPC.

Payment of the Special Dividend will be made on the Special Dividend Payment Date, currently expected to be 30 May 2018. Payment of the Scheme Consideration will be made on the Implementation Date, currently expected to be 31 May 2018.

For the purposes of paying the Scheme Consideration, AAPC will deposit in cleared funds, by no later than the Business Day before the Implementation Date, an amount equal to the total Scheme Consideration into a trust account operated by Mantra Group to be held on trust for the Scheme Shareholders.

The Special Dividend and the Scheme Consideration will be paid in Australian currency by:

• making a deposit into the nominated Australian bank account of the relevant Mantra Shareholder recorded on the Register as at the Special Dividend Record Date (in the case of the Special Dividend) and the Scheme Record Date (in the case of the Scheme Consideration). If you have not previously notified the Mantra Share Registry of your nominated bank account or would like to change your existing nominated bank account, you should contact the Mantra Share Registry on 1300 554 474 (within Australia) or +61 1300 554 474 (outside Australia) prior to the Special Dividend Record Date; or

• if you have not notified the Mantra Share Registry of your nominated bank account, payment will be made by cheque drawn in your name posted to your address registered with the Mantra Share Registry as at the Scheme Record Date.

If the whereabouts of a Mantra Shareholder are unknown as at the Special Dividend Record Date or Scheme Record Date (as applicable), payments due to Mantra Shareholders will be paid into a separate bank account and held until claimed or applied under laws dealing with unclaimed moneys.

Mantra Group’s current dividend reinvestment plan will be suspended in order for the Special Dividend to be paid entirely in cash. You should carefully read Section 6 of this Scheme Booklet which contains details regarding the taxation treatment of the Special Dividend.

1.12 DEEMED WARRANTIES BY SCHEME SHAREHOLDERS

Under the terms of the Scheme, each Scheme Shareholder is deemed to have warranted to Mantra Group and AAPC that:

• as at the Implementation Date, all of their Scheme Shares (including all rights and entitlements attached to them) transferred to AAPC under the Scheme will, on the date of transfer, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests and other interests of third parties of any kind (whether legal or otherwise) and restrictions on transfer of any kind; and

• they have full power and capacity to sell and transfer their Scheme Shares (including all rights and entitlements attached to them) to AAPC.

Scheme Shareholders should be aware that, to the extent that this warranty is untrue and their Scheme Shares are not transferred under the Scheme free of third party interests, they may be liable to compensate AAPC for any damage caused to AAPC resulting from such an encumbrance.


1.13 WHAT HAPPENS IF THE SCHEME DOES NOT PROCEED?

If the Scheme is not approved at the Scheme Meeting or all of the conditions to the Scheme are not satisfied or waived, the Scheme will not proceed, and:

• Mantra Group will continue to operate as an independent entity listed on ASX;

• Mantra Shareholders will continue to hold their Mantra Shares and share in any benefits and risks of Mantra Group’s ongoing business; and

• Mantra Shareholders will not receive the Total Cash Consideration.

Depending on the reasons why the Scheme does not proceed, Mantra Group may be liable to pay a Reimbursement Fee to AAPC, or AAPC may be liable to pay a Reimbursement Fee to Mantra Group. See Section 1.14(c) for further information on the Reimbursement Fee.

If the Scheme is not implemented, and in absence of a Superior Proposal, Mantra Shares will likely trade below the price at which they have traded since announcement of the Scheme Implementation Agreement on 12 October 2017.

1.14 SCHEME IMPLEMENTATION AGREEMENT

Mantra Group and AAPC have entered into a Scheme Implementation Agreement as announced on 12 October 2017. A copy of the full Scheme Implementation Agreement is available on the ASX website and on Mantra Group’s website.

The Scheme Implementation Agreement sets out the rights and obligations of Mantra Group and AAPC in connection with the Scheme. The key terms of the Scheme Implementation Agreement are summarised below.

a. Conditions Precedent

The Scheme is subject to a number of conditions, some of which have already been satisfied. The conditions which have not yet been satisfied include:

• (Mantra Shareholder approval) the Scheme is approved by Mantra Shareholders at the Scheme Meeting;

• (Court approval) the Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act;

• (Order lodged with ASIC) a copy of the Court order approving the Scheme is lodged with ASIC as contemplated by section 411(1) of the Corporations Act;

• (No prohibitive orders) no law, statute, ordinance, regulation, rule, temporary restraining order, preliminary or permanent injunction or other judgment, order or decree issued by any Court of competent jurisdiction or Governmental Agency or other legal restraint or prohibition preventing or materially restricting the Scheme is in effect at 8.00am on the Second Court Date;

• (Regulatory Approvals) before 8.00am on the Second Court Date, all regulatory approvals or consents required from any Government Agency to implement the Scheme are obtained (or deemed obtained) on terms which AAPC (acting reasonably) considers acceptable;

• (No Mantra Group Prescribed Event) no Mantra Prescribed Event occurs between (and including) the date of the Scheme Implementation Agreement and 8.00am on the Second Court Date;

• (No Mantra Material Adverse Change) no Mantra Material Adverse Change occurs or otherwise becomes known to AAPC between (and including) the date of the Scheme Implementation Agreement and 8.00am on the Second Court Date;

• (Mantra Warranties) each of the Mantra Warranties being true and correct in all material respects on until 8.00am on the Second Court Date;

• (AAPC Warranties) each of the AAPC Warranties being true and correct in all material respects until 8.00am on the Second Court Date; and

• (Independent Expert’s Report) the Independent Expert does not change or publicly withdraw their opinion that the Scheme is in the best interests of Mantra Shareholders before 8.00am on the Second Court Date.

In addition, the Scheme is conditional on existing regulatory consents obtained or deemed obtained under the Scheme Implementation Agreement not having been withdrawn, cancelled or revoked before 8:00am on the Second Court Date.

If the conditions are not satisfied or waived then the Scheme will not proceed.



As at the date of this Scheme Booklet, each of ACCC and FIRB have provided (and have not withdrawn) their respective approvals for the purposes of the regulatory condition in the Scheme Implementation Agreement. The NZCC approval condition was waived on 10 November 2017.

See the Scheme Implementation Agreement and the Glossary for the meanings of the defined terms in this Section 1.14.

b. Exclusivity Provisions

Mantra Group has agreed to the following exclusivity provisions in the Scheme Implementation Agreement:

• No-shop: Mantra Group must not solicit, invite, encourage or initiate any inquiry, expression of interest, offer, proposal or discussion by any person in relation to, or which would reasonably be expected to encourage or lead to the making of, an actual, proposed or potential Competing Proposal or communicate to any person an intention to do any of these things;

• No-talk: Mantra Group must not:

– participate in or continue any negotiations or discussions with any third party in relation to, or which would reasonably be expected to lead to the making of, an actual, proposed or potential Competing Proposal;

– negotiate, accept or enter into, or offer or agree to negotiate, accept or enter into, any agreement, arrangement or understanding regarding an actual, proposed or potential Competing Proposal;

– disclose or otherwise provide any material non-public information about the business or affairs of Mantra Group to a third party with a view to obtaining, or which would reasonably be expected to encourage or lead to receipt of, an actual, proposed or potential Competing Proposal (including, without limitation, providing such information for the purposes of the conduct of due diligence investigations in respect of Mantra Group); or

– communicate to any person an intention to do anything referred to above.

However, this no-talk restriction does not prohibit or require any action or inaction by Mantra Group or any of its Representatives in relation to an actual, proposed or potential Competing Proposal to the extent that compliance with the no-talk restriction would, in the opinion of the Mantra Board, formed in good faith after receiving written advice from its external legal advisers, constitute, or would be likely to constitute, a breach of any of the fiduciary or statutory duties of the Mantra Directors, provided that the actual, proposed or potential Competing Proposal was not directly or indirectly brought about by, or facilitated by, a breach of the no-talk restriction (Fiduciary Exception).

• Notification of approaches: Mantra Group must as soon as possible, and in any event, within two Business Days of becoming aware of any of the matters set out below, notify AAPC of any:

– negotiations or discussions, approach or attempt to initiate any negotiations or discussions in respect of any inquiry, expression of interest, offer, proposal or discussion in relation to an actual, proposed or potential Competing Proposal;

– proposal made to Mantra Group or any of its Representatives, in connection with, or in respect of any exploration or completion of, a Competing Proposal; or

– provision by Mantra Group or any of its Representatives of any material non-public information concerning the business or operations of Mantra Group to a third party in connection with an actual, proposed or potential Competing Proposal,

whether direct or indirect, solicited or unsolicited, and in writing or otherwise. In giving such a notification, Mantra Group must disclose to AAPC the fact that the approach has been made, the nature of any Competing Proposal, all material details of the Competing Proposal and the identity of the third party making or proposing the relevant actual, proposed or potential Competing Proposal.

• AAPC’s right to respond to a Competing Proposal: Mantra Group must not enter into any legally binding agreement in relation to a Competing Proposal unless Mantra Group has first provided AAPC with the right (but not the obligation) at any time during the period of five Business Days after receiving the notification, to provide a matching or superior proposal to the terms of the Competing Proposal. If AAPC provides a counter proposal and the Mantra Board determines, acting reasonably and in good faith, that AAPC’s counter proposal would provide an equivalent or superior outcome for Mantra Shareholders as a whole compared with the Competing Proposal, then Mantra Group and AAPC must use their best endeavours to agree amendments to the Scheme Implementation Agreement that are reasonably necessary to reflect and implement AAPC’s counterproposal.

See clause 11 of the Scheme Implementation Agreement for detailed exclusivity provisions.


c. Reimbursement Fee

Under the terms of the Scheme Implementation Agreement, Mantra Group must pay a Reimbursement Fee to AAPC if:

• during the Exclusivity Period, any one or more members of the Mantra Board fails to recommend the Scheme, or withdraws, adversely revises or qualifies their support of the Scheme or the recommendation that Mantra Shareholders vote in favour of the Scheme (unless the Independent Expert concludes that the Scheme is not in the best interests of the Mantra Shareholders, or Mantra Group has a right to terminate under the Scheme Implementation Agreement in certain circumstances);

• during the Exclusivity Period, any one or more members of the Mantra Board recommends that Mantra Shareholders accept or vote in favour of, or otherwise supports or endorses a Competing Proposal that is announced during the Exclusivity Period;

• a Competing Proposal is announced by a third party during the Exclusivity Period and, within 9 months of the date of such announcement that third party (or associate) completes a Competing Proposal or enters into a Competing Proposal which is subsequently completed, or acquires (either alone or in aggregate) a Relevant Interest in more than 50% of Mantra Shares or Control of Mantra Group;

• a Mantra Prescribed Event occurs after the date of the Scheme Implementation Agreement; or

• AAPC terminates the Scheme Implementation Agreement because Mantra Group is in material breach of any term of the Scheme Implementation Agreement, or there has been a material breach of a representation or warranty given by Mantra Group before the Second Court Date.

AAPC must pay a Reimbursement Fee to Mantra Group if Mantra Group has terminated the Scheme Implementation Agreement because AAPC is in material breach of any term of the Scheme Implementation Agreement, or there has been a material breach of a representation or warranty given by AAPC before the Second Court Date.

See clause 12 of the Scheme Implementation Agreement for detailed provisions regarding the Reimbursement Fee.

d. Termination

Either party may terminate the Scheme Implementation Agreement at any time before 8.00am on the Second Court Date if:

• the other party is in material breach of any term of the Scheme Implementation Agreement, or there has been a material breach of a representation or warranty given by the other party under the Scheme Implementation Agreement, and the party in breach has not remedied the breach within five Business Days of being notified of the breach; or

• the Effective Date has not occurred, or will not occur, on or before the End Date.

AAPC may terminate the Scheme Implementation Agreement at any time before 8.00am on the Second Court Date if any member of the Mantra Board:

• fails to recommend the Scheme or withdraws, adversely revises or adversely qualifies his or her support of the Scheme or his or her recommendation that Mantra Shareholders vote in favour of the Scheme, or, having made such a recommendation, withdraws, adversely revises or adversely qualifies that recommendation for any reason; or

• recommends that Mantra Shareholders accept or vote in favour of, or otherwise supports or endorses a Competing Proposal that is announced during the Exclusivity Period.

e. End Date

If the parties become aware that a condition is not satisfied or has become incapable of being satisfied before the End Date (being 5.00pm (Sydney Time) on 30 June 2018) and neither of the following has occurred:

• the Independent Expert has opined to the effect that the Scheme is not in the best interests of Mantra Shareholders; or

• a Superior Proposal has been received,

then unless the relevant condition is waived, the parties must consult in good faith with a view to determining whether:

• the Scheme may proceed by way of alternative means or methods;

• to extend the relevant time or date for satisfaction of the conditions;

• to change or adjourn the Second Court Date to another date agreed by the parties; or

• to extend the End Date.



If the parties are unable to reach agreement within five Business Days of the date on which they both become aware that the relevant condition is not satisfied or has become incapable of being satisfied (or, if earlier, by 8.00am on the Second Court Date), then unless the relevant condition is waived, the party entitled to the benefit of that condition, or either party in the case of a condition which is for the benefit of both of them, may terminate the Scheme Implementation Agreement at any time prior to 8.00am on the Second Court Date.

1.15 DEED POLL

On 28 March 2018, AAPC executed the Deed Poll under which AAPC has effectively agreed to (among other things) provide the Scheme Consideration to each Scheme Shareholder, subject to the Scheme becoming Effective.

A copy of the Deed Poll is attached as Annexure D to this Scheme Booklet.

1.16 MANTRA PERFORMANCE RIGHTS

Mantra Group operates a Long Term Incentive Plan under which it made grants of Performance Rights which are subject to vesting conditions based on continuation of employment and performance criteria. As at 3 April 2018, being the last practicable day prior to the date of this Scheme Booklet, there were 1,106,061 outstanding Performance Rights issued under the Long Term Incentive Plan. Refer to Section 7.7 for further details of the Performance Rights on issue.

Mantra Group must take such action as is necessary on or after the date on which Mantra Shareholders approve the Scheme and prior to the Scheme Record Date to ensure that any Performance Rights which have not already vested, vest and convert into Mantra Shares, including by procuring that the Mantra Board:

• resolves that Mantra Shareholder Approval constitutes a ‘Change of Control Event’ (as defined in the Long Term Incentive Plan);

• resolves to waive unsatisfied vesting conditions and accelerate the exercise period such that all Mantra Performance Rights convert or are exercised prior to the Scheme Record Date; and

• notify holders of Mantra Performance Rights of the accelerated vesting of their Mantra Performance Rights prior to the Scheme Meeting.

Mantra Group must, prior to the Scheme Record Date, issue the number of Mantra Shares required under the terms of the vested Mantra Performance Rights so that former holders of Mantra Performance Rights may participate in the Scheme.

1.17 ANNOUNCEMENT OF FINANCIAL RESULTS

Mantra Group announced its full year results and annual report to 30 June 2017 on 29 August 2017, and its half year results to 31 December 2017 on 15 February 2018. The results are available on ASX and on its website at www.mantragroup.com.au.

1.18 OBTAINING FURTHER INFORMATION

If you have any questions or require further information about the Scheme, you should contact the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) on Business Days between 8.30am and 5.30pm (Sydney Time). You should seek independent financial, legal, taxation or other professional advice before making any decision regarding this Scheme.


SECTION 2KEY CONSIDERATIONS

RELEVANT TO YOUR VOTE


SECTION 2KEY CONSIDERATIONS RELEVANT TO YOUR VOTE

This Section sets out the reasons why the Mantra Directors consider that you should vote in favour of the Scheme.

The Mantra Directors acknowledge that there are reasons to vote against the Scheme (please refer to Section 2.2 of this Scheme Booklet), however, they believe that the reasons to vote in favour of the Scheme significantly outweigh the reasons to vote against the Scheme.

2.1 REASONS TO VOTE IN FAVOUR OF THE SCHEME

The Mantra Directors unanimously recommend that Mantra Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme is in the best interests of Mantra Shareholders

In reaching their recommendation, your Mantra Directors have assessed the Scheme having regard to the reasons to vote in favour of, or against, the Scheme, as set out in this Scheme Booklet.

In the absence of a Superior Proposal and subject to the Independent Expert continuing to consider the Scheme is in the best interests of Mantra Shareholders, each of the Mantra Directors intends to vote all Mantra Shares held or controlled by them in favour of the Scheme. The interests of Mantra Directors are set out in Section 7.

The Independent Expert has concluded that the Scheme is fair and reasonable, and in the best interests of Mantra Shareholders, in the absence of a Superior Proposal

Mantra Group appointed Grant Thornton as the Independent Expert to prepare an Independent Expert’s Report providing an opinion on whether the Scheme is in the best interests of Mantra Shareholders.

The Independent Expert has concluded that the Scheme is fair and reasonable and, therefore, is in the best interests of Mantra Shareholders, in the absence of a Superior Proposal.

The basis for this conclusion is that the Total Cash Consideration of $3.96 per Mantra Share is within the valuation (as concluded by the Independent Expert) of $3.86 to $4.53 per Mantra Share.

The Mantra Directors encourage you to read the Independent Expert’s Report in full. A copy of the Independent Expert’s Report which includes the reasons why the Independent Expert reached its conclusion is included in Annexure A.

The Total Cash Consideration represents attractive value for Mantra Shareholders

The Total Cash Consideration of $3.96 cash per Mantra Share, which will be paid to Mantra Shareholders if the Scheme is implemented, represents an attractive premium of:

a. 22.6% over the previous closing price of Mantra Shares on 6 October 2017, the last trading day prior to confirmation that Mantra received an indicative and non-binding proposal from AAPC1;

b. 29.2% over the 30 day VWAP of Mantra Shares up to and including 6 October 20172; and

c. 33.1% over the 90 day VWAP of Mantra Shares up to and including 6 October 20173.

Those Mantra Shareholders who are able to realise the full benefit of franking credits will receive up to an additional $0.07 value per Mantra Share. Whether a Mantra Shareholder will be able to realise the full benefit of the franking credits will depend on their individual tax circumstances.

Attractive multiple

The Board considers that the Total Cash Consideration represents an attractive multiple: the Total Cash Consideration of $3.96 cash per Mantra Share equates to an underlying FY17 P/E multiple4 of 23.7 times, and an underlying FY17 EV/EBITDAI multiple of 12.4 times, both of which are considered by the Board to be attractive when compared to the transaction multiples of comparable companies referenced by the Independent Expert’s Report and the trading multiples of Mantra Shares up to and including 6 October 2017.


2. VWAP of $3.07 adjusted for the FY2017 final dividend of $0.06 per Mantra Share.

3. VWAP of $2.98 adjusted for the FY2017 final dividend of $0.06 per Mantra Share.

4. Based on NPATA (net profit after tax adjusted to add back expense relating to amortisation of lease rights).


Limited conditionality

The Scheme is subject to limited conditions (as described in Section 1.14) and is not subject to further financing arrangements or due diligence.

Mantra Shareholders will receive certain value of $3.96 cash per Mantra Share for their investment in Mantra Group

If the Scheme is approved and implemented, Mantra Shareholders will receive the Total Cash Consideration of $3.96 per Mantra Share, which will include the Special Dividend (as set out in Section 1.2 of this Scheme Booklet).

By contrast, if the Scheme does not proceed, the amount which Mantra Shareholders will be able to realise for their investment in Mantra Shares will be uncertain. The Scheme removes this uncertainty for Mantra Shareholders. For details of risks relating to remaining a Mantra Shareholder in the event that the Scheme does not go ahead, please see Section 5.2.

Mantra Group’s share price is likely to fall, at least in the short term, if the Scheme does not proceed and no Superior Proposal emerges

If the Scheme is not implemented, and in the absence of a Superior Proposal, Mantra Shares are likely to trade below the price at which they have traded since announcement of the Scheme on 12 October 2017.

In addition, the future trading price of Mantra Shares will continue to be subject to market volatility compared to the certain value of $3.96 cash per Mantra Share available under the Scheme.

The chart below shows Mantra Group’s share price performance over the 12 month period immediately prior to the date of this Scheme Booklet, the last practicable trading day before the date of this Scheme Booklet.

The closing price of Mantra Shares on the ASX on 6 October 2017, being the last trading day prior to the announcement of the receipt of an indicative and non-binding offer from AAPC, was $3.23.

SHARE PRICE – LTM TO 29 MARCH 2018

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

$4.00

Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18

The closing price for Mantra Shares on the ASX on 29 March 2018, the last practicable trading day before the date of this Scheme Booklet, was $3.93.

No Superior Proposal has emerged since the announcement of the Scheme

Since the announcement of the Scheme Implementation Agreement on 12 October 2017 and up to the date of this Scheme Booklet, no Superior Proposal has emerged.

Your Mantra Directors are not aware, as at the date of this Scheme Booklet, of any superior or alternative proposal that is likely to emerge.


SECTION 2KEY CONSIDERATIONS RELEVANT TO YOUR VOTE

If the Scheme does not proceed, Mantra Shareholders will continue to be exposed to risks associated with Mantra Group’s business rather than realising certain value for their Mantra Shares in a certain timeframe

If the Scheme does not proceed, the amount which Mantra Shareholders will be able to realise in terms of price and future dividends will likely be uncertain and subject to a number of risks outlined in Section 5.2.

Among other things, this will be subject to the performance of Mantra Group’s business from time to time (in particular, the uncertainties associated with Mantra Group’s outlook as described in Section 5.2), general economic conditions and the movements in the share market.

The Scheme removes these risks and uncertainties for Mantra Shareholders and allows Mantra Shareholders to exit their investment in Mantra Group at a price that the Mantra Directors consider compelling. If the Scheme is approved and implemented, these risks and uncertainties will be assumed by AAPC, as the sole shareholder of Mantra Group following implementation of the Scheme.

Mantra Shareholders will not incur any stamp duty or brokerage charges if the Scheme proceeds

Mantra Shareholders will not incur any brokerage or stamp duty on the transfer of their Mantra Shares to AAPC under the Scheme.

2.2 REASONS WHY YOU MAY VOTE AGAINST THE SCHEME

You may disagree with the Mantra Directors’ unanimous recommendation and the Independent Expert’s conclusion and believe that the Scheme is not in your best interests

You may disagree with recommendation of the Mantra Directors, who have unanimously recommended that Mantra Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal.

In addition, you may disagree with the conclusion of the Independent Expert, who has concluded that the Scheme is in the best interests of Mantra Shareholders, in the absence of a Superior Proposal.

You may prefer to participate in the future financial performance of Mantra Group’s business

If the Scheme is implemented, you will no longer be a Mantra Shareholder. This will mean that you will not participate in the future performance, potential upside or future prospects of Mantra Group, including any benefits from being a Mantra Shareholder. However, as with all investments in securities, there can be no guarantee as to future performance of Mantra Group.

You may wish to maintain your current investment profile

You may wish to maintain your investment in Mantra Group in order to have an investment in a publicly listed company with the specific characteristics of Mantra Group in terms of industry, operational profile, size, capital structure and potential dividend stream.

Implementation of the Scheme may result in a disadvantage to those Shareholders who wish to maintain their current investment profile and who may incur transaction costs undertaking any new investment in relation to an investment with a similar profile to Mantra Group.

The tax consequences of the Scheme may not suit your current financial position

Implementation of the Scheme may trigger taxation consequences for Mantra Shareholders. A taxable gain may be realised from the disposal of your Mantra Shares.

Mantra Shareholders should read the general taxation considerations outlined in Section 6 of this Scheme Booklet and seek professional taxation advice with respect to their individual tax situation.


You may believe that there is potential for a Superior Proposal to be made in the foreseeable future

Since the execution of the Scheme Implementation Agreement on 12 October 2017 and as at the date of this Scheme Booklet, no Superior Proposal has emerged and the Mantra Directors are not aware, as at the date of this Scheme Booklet, of any superior or alternative proposal that is likely to emerge.

The Scheme Implementation Agreement prohibits Mantra Group from soliciting a Competing Proposal. However, Mantra Group is permitted to respond to any Competing Proposal should the Mantra Directors determine that failing to do so would likely constitute a breach of their fiduciary or statutory duties. Further details of the key terms in the Scheme Implementation Agreement are provided in Section 1 of the Scheme Booklet.

2.3 OTHER RELEVANT CONSIDERATIONS IN RELATION TO THE SCHEME

The Scheme may be implemented even if you vote against the Scheme or you do not vote at all

Even if you vote against the Scheme, or do not vote, the Scheme may still be implemented if it is approved by the required majorities of Mantra Shareholders and by the Court. If this happens, your Mantra Shares will be transferred to AAPC and you will receive the Scheme Consideration even though you voted against, or did not vote on, the Scheme.

Deemed warranties by Scheme Shareholders about their Scheme Shares

If the Scheme is implemented, each Scheme Shareholder will be deemed to have warranted to AAPC that:

• their Scheme Shares are transferred to AAPC on the Implementation Date free from all mortgages, charges, security interests, liens, encumbrances, pledges, security interests and other and interests of third parties of any kind (whether legal or otherwise), and restrictions on transfer of any kind; and

• they have full power and capacity to sell and transfer their Scheme Shares (including all the rights and entitlements attaching to them) to AAPC. See Section 1.12 for further detail.


SECTION 3INFORMATION ON MANTRA GROUP


3.1 OVERVIEW OF MANTRA GROUP

Mantra Group is one of the leading Australian-based hotel and resort operators. With a portfolio that spans more than 135 properties across Australia, New Zealand, Indonesia and Hawaii, Mantra Group has over 5,900 team members and accommodates over 2.5 million guests a year1.

The properties in Mantra Group’s portfolio are currently operated under four separate established brands: Art Series, Peppers, Mantra and BreakFree. These brands cater for a diverse cross-section of consumers in both the domestic and international visitor segments of the accommodation industry. In addition to providing accommodation through the properties in its portfolio, Mantra Group’s core services include management of guest relations and reception areas, restaurants and bars, conference and function centres, pool and entertainment facilities and offices.

In FY2017, the acquisition of 6 additional properties contributed to an approximate 10% increase in keys under management. The settlement of the Art Series Hotel Group in November 2017 further enhanced the portfolio with 7 unique properties in key CBD locations.

Company history

The group of companies comprising the Mantra Group was formed in early 2005 through the acquisition by Mantra Group Operations Pty Ltd (a subsidiary of Mantra Group) of the BreakFree and Peppers businesses, which operated approximately 3,500 rooms across Australia and New Zealand.

In 2009, following a consolidation of 10 brand offerings into its then three core brands, the Mantra Group was formed.

In June 2014, Mantra Group listed on the ASX and is currently included in the ASX 200.

Mantra Group continued to grow its portfolio through acquisitions in key CBD and leisure destinations, growing its portfolio from 113 properties on listing in 2014 to over 135 properties currently in its portfolio operating in Australia, New Zealand, Indonesia and USA (Hawaii).

The Art Series Hotel Group, a hotel group comprising a portfolio of seven 4-5 star hotels joined the portfolio on 22 November 2017.

Operating structures

Mantra Group does not hold material freehold ownership of the properties in its portfolio, other than in respect of certain areas of its properties (such as reception areas, lobby or conference facilities). Mantra Group operates the properties in its portfolio using the following operating structures:

• Lease rights;

• Management letting rights;

• Hotel management rights;

• Management agreements; and

• Marketing services agreements.

These operating structures allow Mantra Group operational flexibility of its business. Each structure provides varying degrees of exposure to the underlying accommodation business operated at the property.

1. Total number of guests per year is determined by multiplying the consolidated number of rooms sold by the total number of guests per room on an annual basis, divided by the average length of stay, which is a standard industry measure of total guests per annum.



3.2 BUSINESS DIVISIONS

Mantra Group has three core operating segments. These are supported by a corporate function, Mantra Group’s fourth segment. Details of the operating segments are as follows:

BUSINESS SEGMENT CBD RESORTSCENTRAL REVENUE AND DISTRIBUTION

SEGMENT DESCRIPTION

• Operates accommodation properties in capital cities throughout Australia targeted towards business travellers

• Utilises all Mantra Group’s brands

• Provides leisure retreats and resorts throughout Australia, New Zealand, Hawaii and Indonesia

• Utilises all Mantra Group’s brands

• Mantra Group’s in-house customer management, online booking service and digital marketing platforms

• Includes management agreements

KEY FEATURES • Relatively stable occupancy throughout economic cycles

• Benefits from cyclical upside in economy

• Higher margin

• Benefits from cyclical upside in the tourism sector as economic activity increases

• Systems are internationally scalable and best in class

OPERATING STRUCTURES

• Primarily leases • Primarily MLRs • Management agreements (revenue from this operating structure is recognised in this segment)

FY2017 REVENUE (’000)

$316,592 $316,210 $52,272

3.3 BOARD AND SENIOR MANAGEMENT

a. Mantra Directors

The Mantra Board comprises the following directors:

NAME POSITION

Peter Bush Independent Non-Executive Director and Chairman

Kerry Robert East (Bob East) Chief Executive Officer

Andrew Cummins Independent Non-Executive Director

David Gibson Independent Non-Executive Director

Melanie Willis Independent Non-Executive Director

Elizabeth Savage Independent Non-Executive Director


b. Mantra senior management

Members of Mantra Group’s senior management team are:

NAME POSITION

Kerry Robert East (Bob East) Chief Executive Officer

Stephen Hobson Chief Financial Officer

Tomas Johnsson Chief Operating Officer

Kevan Funnell Executive Director, Finance

Cherie McGill Executive Director, Human Resources

Luke Moran Executive Director, Sales Revenue and Distribution

Mark Hodge Executive Director, Operations

Michelle Lalli Executive Director, Asset Management

Garry Rich Executive Director, Information Technology

Kenneth St. John Lord General Counsel

Fiona van Wyk Group Company Secretary

3.4 MANTRA DIRECTORS’ INTENTIONS

If the Scheme becomes Effective, the Mantra Directors will resign and the Mantra Board will be reconstituted in accordance with instructions from AAPC after the Implementation Date (see Section 4.5).

Accordingly, it is not possible for the Mantra Directors to provide a statement of their intentions regarding:

a. the continuation of the business of Mantra Group or how Mantra Group’s existing business will be conducted;

b. any major changes to be made to the business of Mantra Group, including any redeployment of the fixed assets of Mantra Group; or

c. the future employment of the present employees of Mantra Group,

in each case, after the Scheme is implemented.

If the Scheme is implemented, AAPC will have 100% control of Mantra Group. The current intentions of AAPC with respect to these matters are set out in Section 4.5.

If the Scheme is not implemented, the Mantra Directors intend to operate the business of Mantra Group in the ordinary course and in line with existing key strategies, set out in Section 3.5 below.



3.5 STRATEGY AND INTENTIONS FOR MANTRA GROUP IF THE SCHEME DOES NOT PROCEED

Should the Scheme not proceed, Mantra Group will continue to operate on a stand-alone basis in accordance with its publicly stated strategy of delivering growth and increasing shareholder value, including through:

• growing room inventory by securing strategically aligned acquisitions in key destinations, with a focus on sizeable portfolio acquisitions;

• achieve significant growth – exploring diversified and sizeable asset acquisition opportunities, optimising on learnings and successes in key international regions and portfolio acquisitions;

• deliver quality room inventory and service – continuing to manage targeted refurbishment and service programs;

• enhancing customer satisfaction through product improvement and service delivery;

• the promotion of Mantra Group’s brands through focused campaigns such as the “my kind of wonderful” marketing campaign and the Mantra+ loyalty program;

• ongoing investor engagement;

• capitalising on the increased demand in domestic and international tourism – position Mantra Group to take advantage of increased domestic and international low cost airline capacity, proximity and desirability of location; and

• continuing investment in the team members at every level of the business of Mantra Group through training and leadership programs and improving the employee value proposition.

The points above should be considered in conjunction with the comments on certain Mantra Group risks outlined in Section 5.2 of this Scheme Booklet.

3.6 MANTRA GROUP’S ISSUED SECURITIES

Capital structure

The capital structure of Mantra Group as at the date of this Scheme Booklet is as follows:

Number of Mantra Shares 297,428,917

Number of Mantra Performance Rights2 1,106,061

Mantra Group does not anticipate that it will be required to issue any Mantra Shares before the Implementation Date, other than on vesting of the Mantra Performance Rights.

See Section 7.7 for further information on the number of Mantra Performance Rights on issue and the intended treatment of Mantra Performance Rights.

2. Issued in accordance with Mantra Group’s long term incentive plan, not quoted on the ASX.


3.7 MANTRA GROUP’S SUBSTANTIAL SHAREHOLDERS

The substantial holders of Mantra Shares as at the date of this Scheme Booklet, are as follows:

NAME NUMBER OF MANTRA SHARES PERCENTAGE OF ISSUED MANTRA SHARES

Credit Suisse Holdings (Australia) Limited 20,158,964 6.78%

Deutsche Bank AG 16,087,400 5.41%

Alpine Associates Management Inc. 15,775,892 5.30%

BT Investment Management 15,747,833 5.29%

Wilson Asset Management Group 15,328,700 5.15%

The shareholdings listed in this Section 3.7 are as disclosed to Mantra Group by the shareholders in substantial holding notices or otherwise. Information in regard to substantial holdings arising, changing or ceasing after the date of the substantial holding notices disclosed to Mantra Group, or in respect of which the relevant announcement is not available on the ASX website is not included above.

3.8 HISTORICAL FINANCIAL INFORMATION

This section sets out in summary financial information in relation to Mantra Group for the purpose of this Scheme Booklet in abbreviated form and does not contain all of the disclosures, statements or comparative information as required by Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and applicable to annual financial reports in accordance with the Corporations Act. Details of where to obtain the recent full statutory financial reports for Mantra Group, including all notes to those accounts, are set out in Section 3.11.

The historical financial information set out in this Section 3.8 has been extracted from Mantra Group’s interim financial statements for the half year ended 31 December 2017, and its audited financial statements for the financial years ended 30 June 2017 (FY2017) and 30 June 2016 (FY2016), and should be read in conjunction with the notes included in those financial reports.

Those reports have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australia Accounting Standards Board and the Corporations Act.



Historical financial information

a. Mantra Group consolidated statement of comprehensive income

The audited historical Consolidated Statement of Comprehensive Income for the years ended 30 June 2016 and 30 June 2017 and the reviewed historical Consolidated Statement of Comprehensive Income for the six months ended 31 December 2017 are summarised below.

Consolidated statement of comprehensive income

H1FY2018 $’000

FY2017 $’000

FY2016 $’000

Revenue from continuing operations 366,223 688,973 606,076

Other income 23 – 60

Employee benefits expense (125,335) (233,364) (196,568)

Operating expenses (111,279) (216,775) (192,803)

Occupancy and utilities expenses (64,917) (121,840) (113,932)

Depreciation and amortisation expense (14,607) (27,666) (23,299)

Transaction costs associated with business combinations (699) (1,749) (7,258)

Costs associated with proposed acquisition by AccorHotels (1,962) – –

Administration expenses (8,103) (15,784) (13,011)

Net impairment reversal – 1,445 2,129

Finance costs (net) (2,600) (4,658) (5,176)

PROFIT BEFORE INCOME TAX 36,744 68,582 56,218

Income tax expense (11,606) (22,985) (19,069)

PROFIT FOR THE FINANCIAL PERIOD 25,138 45,597 37,149

Other comprehensive income

Items that may be reclassified to profit or loss

Exchange differences on translation of foreign operations (1,769) (1,890) 803

Other comprehensive (loss)/income, net of tax (1,769) (1,890) 803

Total comprehensive income 23,369 43,707 37,952

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLETO THE OWNERS OF MANTRA GROUP LIMITED 23,369 43,707 37,952

CENTS CENTS CENTS

Earnings per share for profit attributable to the ordinary equity holders of Mantra Group Limited:

Earnings per share 8.5 15.3 13.8

Diluted earnings per share 8.4 15.3 13.7


b. Mantra Group consolidated statement of cash flows

The audited historical Consolidated Statement of Cash Flows for the years ended 30 June 2016 and 2017 and the reviewed Consolidated Statement of Cash Flows for the 6 months to 31 December 2017 are summarised below.

Consolidated statement of cash flows

H1FY2018$’000

FY2017$’000

FY2016$’000

Cash flows from operating activities

Receipts from customers (inclusive of goods and services tax) 383,905 738,797 655,629

Payments to suppliers and employees (inclusive of goods and services tax) (330,082) (646,386) (568,655)

53,823 92,411 86,974

Payments for business combinations transaction costs (699) (922) (5,313)

Interest paid (2,740) (5,062) (5,457)

Income taxes paid (14,404) (23,885) (22,521)

Interest received 432 779 731

NET CASH INFLOW FROM OPERATING ACTIVITIES 36,412 63,321 54,414

Cash flows from investing activities

Payments for property, plant and equipment (10,812) (14,117) (15,576)

Payments for intangible assets (8,272) (8,134) (5,690)

Proceeds from sale of property, plant and equipment 350 359 214

Payments of deposits for post year end business combinations – – (8,342)

Payments for business combination net of cash acquired (49,119) (67,582) (98,406)

Payments of deposits for other acquisitions (220) (8,010) –

Proceeds from sale of intangible assets 297 1,538

NET CASH (OUTFLOW) FROM INVESTING ACTIVITIES (68,073) (97,187) (126,262)

Cash flows from financing activities

Proceeds from issues of shares and other equity securities – 191 113,731

Proceeds from borrowings 51,000 15,000 55,000

Payment of share transaction costs – – (2,463)

Repayment of borrowings – (5,000) (35,000)

Borrowing costs (100) (153) (773)

Dividends paid to Mantra Group Limited shareholders (17,846) (29,441) (24,669)

NET CASH INFLOW/(OUTFLOW) FROM FINANCING ACTIVITIES 33,054 (19,403) 105,826

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,393 (53,269) 33,978

Cash and cash equivalents at the beginning of the financial period 62,923 117,091 85,059

Effects of exchange rate changes on cash and cash equivalents – (899) (1,946)

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 64,316 62,923 117,091



c. Mantra Group consolidated balance sheet

The audited Consolidated Balance Sheet as at 30 June 2016 and 30 June 2017 and the reviewed Consolidated Balance Sheet as at 31 December 2017 are summarised below.

Consolidated statement of financial position

AS AT 31 DEC 2017 $’000

AS AT 30 JUNE 2017 $’000

AS AT 30 JUNE 2016 $’000

Current assets

Cash and cash equivalents 64,316 62,923 117,091

Trade and other receivables 87,321 54,125 45,678

Inventories 3,527 3,099 2,826

Current tax assets 1,606 1,686 –

Other current assets 3,361 8,321 11,503

TOTAL CURRENT ASSETS 160,131 130,154 177,098

Non-current assets

Receivables 635 639 660

Other non-current assets 4,100 4,100 –

Property, plant and equipment 168,184 157,658 121,869

Intangible assets 571,833 513,352 469,397

Deferred tax assets 356 356 –

TOTAL NON-CURRENT ASSETS 745,108 676,105 591,926

TOTAL ASSETS 905,239 806,259 769,024

Current liabilities

Trade and other payables 64,953 52,595 44,785

Current tax liabilities – 2,348 2,260

Employee benefit obligations 16,370 16,554 16,968

Derivative financial instruments – 13 –

Advance deposits 43,689 26,103 25,329

TOTAL CURRENT LIABILITIES 125,011 97,613 89,342

Non-current liabilities

Borrowings 186,355 135,252 125,097

Deferred tax liabilities 104,789 91,930 87,844

Provisions 3,853 3,516 3,674

TOTAL NON-CURRENT LIABILITIES 294,997 230,698 216,615

TOTAL LIABILITIES 420,008 328,311 305,957

NET ASSETS 485,231 477,948 463,067

Equity

Share capital 414,252 414,252 412,321

Other reserves 228,611 228,620 230,085

Accumulated losses (157,632) (164,924) (179,339)

Capital and reserves attributable to owners of Mantra Group Limited

485,231 477,948 463,067

TOTAL EQUITY 485,231 477,948 463,067


3.9 MATERIAL CHANGES TO THE FINANCIAL POSITION OF MANTRA GROUP SINCE 31 DECEMBER 2017

The financial position of Mantra Group has not materially changed since 31 December 2017, being the date of Mantra Group’s HY2018 Financial Results.

3.10 RISKS RELATING TO MANTRA GROUP’S BUSINESS

There are existing risks relating to Mantra Group’s business which will continue to be relevant to Mantra Shareholders if the Scheme does not become effective. A summary of the key risks relating to Mantra Group’s business and an investment in Mantra Group is set out in Section 5.2.

3.11 PUBLICLY AVAILABLE INFORMATION

Mantra Group is a listed disclosing entity for the purposes of the Corporations Act and as such is subject to regular reporting and disclosure obligations. Specifically, as a company listed on the ASX, Mantra Group is subject to the ASX Listing Rules which require (subject to some exceptions) continuous disclosure of any information Mantra Group has that a reasonable person would expect to have a material effect on the price or value of Mantra Shares.

Information disclosed to ASX in relation to Mantra Group is available on ASX’s website at www.asx.com.au.

In addition, Mantra Group is required to lodge various documents with ASIC. Copies of documents lodged with ASIC by Mantra Group may be obtained from an ASIC office.

Mantra Shareholders may obtain a copy of:

• Mantra Group’s FY2016, FY2017 and HY2018 Financial Reports; and

• all announcements given to ASX to date,

on ASX’s website at www.asx.com.au.



All announcements made by Mantra Group to ASX from 29 August 2017 (being the date that Mantra Group’s 2017 Annual Report was lodged with ASX) to the date of this Scheme Booklet are listed below:

ANNOUNCEMENT3 DATE

First Court Approval 4 April 2018

FIRB Approval 20 March 2018

ACCC Decision 8 March 2018

HY2018 Results Media Release 15 February 2018

HY2018 Results Presentation 15 February 2018

Appendix 4D and HY2018 Financial Statements 15 February 2018

Notice of HY2018 Results Announcement 2 February 2018

Appendix 3Y – Kerry Robert East 8 December 2017

Appendix 3B 8 December 2017

Results of Meeting 22 November 2017

AGM presentation 22 November 2017

Chairman’s Address to Shareholders 22 November 2017

NZCC condition waived 10 November 2017

Notice of 2017 Annual General Meeting and Proxy Form 20 October 2017

Morgans Conference Presentation 13 October 2017

Scheme of Arrangement with AAPC 12 October 2017

Response to Media Speculation 9 October 2017

2017 AGM Date 22 September 2017

FY2017 Results Media Release 29 August 2017

Appendix 4G and Corporate Governance Statement 29 August 2017

FY2017 Results Presentation 29 August 2017

Dividend/Distribution – MTR 29 August 2017

Appendix 4E and FY 2017 Financial Statements 29 August 2017

A substantial amount of information about Mantra Group, including financial information and releases to ASX, is available in electronic form on Mantra’s website at https://www.mantragroup.com.au.

3. This excludes announcements relating to substantial holdings notices.


SECTION 4AAPC INFORMATION



4.1 INTRODUCTION

This Section 4 has been prepared by AAPC. The information concerning AccorHotels Group and the intentions, views and opinions contained in this Section 4 are the responsibility of AAPC.

4.2 OVERVIEW OF AAPC

a. Corporate overview

AAPC is an Australian public company, incorporated in Australia and ultimately controlled by Accor S.A.

b. Principal activities and operations

AAPC trades in Australia as “AccorHotels”, and its business is the management and operation of hotels and resorts in Australia.

c. Directors of AAPC

AAPC’s board of directors as at the date of this Scheme Booklet is comprised of the following members:

i. Michael Issenberg;

ii. Louise Maree Daley;

iii. Simon Roger McGrath;

iv. Philip Joseph Basha; and

v. Steven Lake (alternate for Michael Issenberg).

4.3 OVERVIEW OF ACCORHOTELS GROUP

a. Corporate overview

Accor S.A. is a French company, acting as the holding company of the AccorHotels Group. Its shares are listed on the Euronext Paris stock exchange and are included in the CAC 40 Index under ISIN code FR0000120404.

Accor S.A. is headquartered at 82 rue Henri Farman, in Issy-les-Moulineaux (92130), in France.

As at 29 December 2017, Accor S.A. had a market capitalisation of approximately €12.5 billion.

In the year ended 31 December 2017, AccorHotels Group reported revenue of €1,937 million and net profit after tax of €441 million. As at 31 December 2017, AccorHotels Group’s total assets were approximately €12,076 million, €4,824 million of which are classified as held for sale.

b. Principal activities and operations

AccorHotels Group is a global travel and lifestyle group and digital innovator offering unique experiences in more than 4,200 hotels, resorts and residences around the world. Benefiting from dual expertise as an investor and operator, AccorHotels operates in 99 countries.

Its portfolio includes internationally renowned luxury brands such as Raffles, Sofitel Legend, SO Sofitel, Sofitel, Fairmont, Onefinestay, MGallery by Sofitel, Pullman and Swissôtel; the mid-range boutique hotel brands such as Novotel, Mercure, Mama Shelter and Adagio; and very popular budget brands such as JO&JOE, Ibis, Ibis Styles and Ibis budget, as well as the regional brands such as Grand Mercure, The Sebel and hotelF1.

AccorHotels also provides concierge services through its acquisition of John Paul.

There are currently over 200 hotels and over 27,000 rooms in Australia operating under AccorHotels Group’s brands with hotel businesses either owned or managed by AAPC and its subsidiaries or operated under a franchise arrangement.


c. Directors of Accor S.A.

Accor S.A.’s board of directors as at the date of this Scheme Booklet is comprised of the following members:

i. Sébastien Bazin (Chairman and CEO)

ii. Iris Knobloch (Vice-Chairman – Lead Independent Director)

iii. Sheikh Nawaf Bin Jassim Bin Jabor Al-Thani

iv. Aziz Aluthman Fakhroo

v. Vivek Badrinath

vi. Jean-Paul Bailly (Independent Director)

vii. Iliane Dumas (Employee representative Director)

viii. Mercedes Erra (Independent Director)

ix. Sophie Gasperment (Independent Director)

x. Chantale Hoogstoel (Employee representative Director)

xi. Qionger Jiang (Independent Director)

xii. Bertrand Meheut (Independent Director)

xiii. Nicolas Sarkozy (Independent Director)

xiv. Patrick Sayer

xv. Isabelle Simon (Independent Director)

xvi. Natacha Valla (Independent Director)

xvii. Sarmad Zok

4.4 RATIONALE FOR ACCORHOTELS GROUP’S PROPOSED ACQUISITION OF MANTRA GROUP

The AccorHotels Group has a long track record as a participant and investor in the Australian tourism sector and places great importance on its history and presence in Australian communities.

Since entering into arrangements to manage the Novotel at Darling Harbour in 1991, AccorHotels Group has continued to invest in Australia through numerous developments and acquisitions.

The proposed acquisition of Mantra Group is consistent with AccorHotels Group’s long term strategic objective to expand its business globally. The proposed acquisition represents a highly complementary offering to AccorHotels Group’s current offering. In particular:

• Mantra Group’s presence in resort and leisure locations complements AccorHotels Group’s presence in major cities;

• Mantra Group’s presence in serviced apartments complements AccorHotels Group’s presence in hotels;

• Mantra Group’s domestic brands complement AccorHotels Group’s international brands; and

• Mantra Group’s capabilities in managing multiple strata owners and experience in MLRs complement AccorHotels Group’s experience in managing relationships with institutional and private owners. AccorHotels Group primarily operates properties under management and franchise agreements, while Mantra Group primarily operates MLRs and leases.



4.5 POST-ACQUISITION INTENTIONS OF AAPC

This Section 4 sets out AAPC’s present intentions on the basis of facts and information concerning Mantra Group and the general business environment which are known to AAPC at the time of preparation of this Scheme Booklet.

Final decisions on these matters will only be made by AAPC based on all material facts and circumstances at the relevant time.

Accordingly, the statements set out in this Section 4 are statements of current intention only and may change as new information becomes available or as circumstances change.

a. Mantra Group to be delisted

If the Scheme is implemented, AAPC will procure that Mantra Group applies to ASX to be removed from the official list of ASX after implementation of the Scheme.

b. Corporate structure

If the Scheme is implemented, AAPC will become the holder of all Mantra Shares and Accor S.A. will be the ultimate holding company of Mantra Group.

As part of business as usual planning following implementation of the Scheme, there may be changes in Mantra Group’s corporate and operating structure as part of integrating Mantra Group into the AccorHotels Group corporate and operating structure.

c. Board

If the Scheme is implemented, AAPC intends to reconstitute the boards of Mantra Group and its subsidiaries to comprise the following AccorHotels Group’s nominees:

i. Michael Issenberg

ii. Louise Maree Daley

iii. Simon Roger McGrath

iv. Philip Joseph Basha; and

v. Steven Lake (alternate for Michael Issenberg).

d. Business continuity, operations and major changes

AAPC currently intends that Mantra Group will continue to conduct its current business in substantially the same manner as it is currently operated. AAPC intends to utilise its expertise to improve and further develop Mantra Group’s business and to drive further performance and sustainable growth. AAPC does not currently intend to make any major changes to the business or the deployment of fixed assets of Mantra Group’s business.

After the Implementation Date, AAPC intends to undertake a detailed review of Mantra Group’s operations covering strategic, financial and commercial operating matters to determine the optimal manner of operating and managing the business.

Save as otherwise disclosed in this Scheme Booklet, final decisions on these matters will only be made by AAPC following the completion of the post-acquisition review process described above and will be based on all material facts and circumstances at the relevant time.

e. Management and employees

AAPC recognises the knowledge and experience of Mantra Group’s senior management team and employees and looks forward to working with them following implementation of the Scheme, with the aim of successfully integrating Mantra Group’s business and achieving the key strategies identified above.

The detailed review of Mantra Group’s operations noted in paragraph (d) above will also include specific considerations of staffing and organisational structure. Save as otherwise disclosed in this Scheme Booklet, final decisions on these matters (including any changes to the employment of the present employees of Mantra Group) will only be made by AAPC following the completion of the post-acquisition review process described above and will be based on all material facts and circumstances at the relevant time.


4.6 FUNDING OF THE AGGREGATE SCHEME CONSIDERATION

The Scheme Consideration is 100% cash.

If the Scheme is implemented, Scheme Shareholders will become entitled to receive the Scheme Consideration of $3.80 per Scheme Share, which will be payable by AAPC.

Under the terms of the Deed Poll, AAPC has undertaken in favour of each Scheme Shareholder to pay the Scheme Consideration into a trust account for the benefit of Scheme Shareholders no later than the Business Day before the Implementation Date, conditional upon the Scheme becoming Effective.

Based on Mantra Group’s total diluted share capital as at the date of this Scheme Booklet, the total amount of cash required to be paid by AAPC to Scheme Shareholders under the Scheme is $1,134,432,916.40

Accor S.A. and AAPC intend to fund the Scheme Consideration using either or both cash and cash equivalent investments on hand (including cash proceeds which may be received from any business or asset sales undertaken by the AccorHotels Group prior to the Implementation Date) or debt facilities. As at the date of this Scheme Booklet, the level of cash which Accor S.A. and AAPC will have on hand at the time of implementation is not known. However, as explained below, Accor S.A. has sufficient debt facilities in place to fund 100% of the Scheme Consideration – that is, the maximum amount of debt funding which would be required if the cash on hand was nil. So if the level of cash on hand at the time of implementation of the Scheme is less than the amount of the Scheme Consideration, the Scheme Consideration will be fully or partly funded from the debt facilities described below.

Accor S.A. has put in place a €900,000,000.00 bridge financing arrangement to fund part or all of the Scheme Consideration, if necessary. In any event, Accor S.A. has in place a €1,800,000,000.00 Multi-Currency Revolving Credit Facility Agreement with undrawn borrowing capacity well in excess of the total Scheme Consideration. The availability of funds under the revolving credit facility is not subject to any conditions to borrowing which are outside the control of Accor S.A. The revolving credit facility is provided by a syndicate of lenders comprising various financial institutions, including Société Générale as Facility Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., BNP Paribas, Commerzbank Aktiengesellschaft, Crédit Agricole Corporate And Investment Bank as Coordinators and 18 French and International Bank Institutions as Mandated Lead Arrangers and Bookrunners.

4.7 OTHER INFORMATION

a. Interests in Mantra Shares

As at the date of this Scheme Booklet, neither AAPC nor any of its Associates has any Relevant Interest or voting power in any Mantra Shares.

b. No dealings in Mantra Shares in the previous four months

Neither AAPC nor any of its Associates has provided or agreed to provide consideration for any Mantra Shares under any other transaction during the period of four months before the date of this Scheme Booklet.

c. Benefits to holders of Mantra Shares

During the four months before the date of this Scheme Booklet, neither AAPC nor any of its Associates has given or offered to give or agreed to give a benefit to another person where the benefit was likely to induce the other person, or an Associate, to:

i. vote in favour of the Scheme; or

ii. dispose of Mantra Shares,

where the benefit was not offered to all Mantra Shareholders.

d. Benefits to current Mantra Group officers

Save as otherwise disclosed in this Scheme Booklet, neither AAPC nor any of its Associates will be making any payment or giving any benefit to any current director, secretary or executive officer of Mantra Group as compensation or consideration for, or otherwise in connection with, their retirement from, their respective offices if the Scheme is implemented.


SECTION 5RISKS ASSOCIATED WITH MANTRA GROUP


5.1 INTRODUCTION

The Mantra Directors consider that it is appropriate for Mantra Shareholders, in considering the Scheme, to be aware that there are a number of risk factors which could materially adversely affect the future operating and financial performance of Mantra Group, as well as the value of Mantra Group, the Mantra Shares and its ability to pay dividends.

If the Scheme is implemented, you will receive the Total Cash Consideration, cease to be a Mantra Shareholder and also no longer be exposed to the risks set out below.

In making your decision to vote on the Scheme Resolution, you should read this Scheme Booklet carefully. This Section 5 is general in nature only and does not take into account your individual objectives, financial situation, taxation position or particular needs. You should carefully consider the risk factors outlined below and your individual circumstances.

This section outlines:

• general investment risks; and

• risks associated with your current investment in Mantra Shares.

This Section 5 is a summary only and does not purport to list every risk that may be associated with an investment in Mantra Group now or in the future.

5.2 RISKS ASSOCIATED WITH MANTRA GROUP IF THE SCHEME IS NOT IMPLEMENTED

The risks described below are not to be taken as exhaustive or listed in any order of importance. The risks described below as well as other risks not described below could, in the future, materially and adversely affect the financial performance of Mantra Group and the value of Mantra Shares.

a. Exposure to reduced demand in the tourism or travel industries

Mantra Group’s future business performance may be affected by general economic conditions in Australia and internationally. The performance of the accommodation industry is sensitive to changes in the broader economic climate. This is particularly the case in respect of the impact that overall economic conditions can have on business and consumer confidence and exchange rates. A substantial proportion of Mantra Group’s revenue is derived from domestic business and leisure travellers. There is a risk that where there is a downturn in overall economic conditions, the levels of domestic travel may reduce, and the demand for Mantra Group’s services may lessen. This could have a material adverse impact on Mantra Group’s operating and financial performance.

An appreciation in the Australian dollar could also lead to a reduction in travel to Australia, as Australian travellers may opt to travel overseas (to take advantage of relatively cheap costs abroad) and lower levels of international travellers visiting Australia (due to the relative increase in the cost of travelling in Australia). This could lead to a significant reduction in the level of demand for Mantra Group accommodation from both domestic and international travellers.

There are ongoing risks to Mantra Group’s business that a significant weather condition or political event could occur in a region within which Mantra Group operates, which could have a dramatic impact upon the tourism or travel industry and the demand for accommodation in that destination.

b. Loss of contractual rights to provide accommodation or other services at key properties

Mantra Group does not own the properties in its portfolio, and as such a significant proportion of its success is dependent upon its ability to preserve its contractual rights to provide accommodation and related services at the properties within its portfolio. As such, the quality of the contractual arrangements and relationships with property owners and other parties with whom Mantra Group is contracted, is instrumental to its business.

There is a risk that contractual arrangements may not be renewed by property owners at the expiration of their term, or that Mantra Group may be unable to renegotiate contractual arrangements on favourable terms. There is also a risk that the existing contractual arrangements may terminate prior to their expiry, either if Mantra Group defaults on its contractual obligations, or otherwise.

If these risks were to materialise, this could have a material impact upon Mantra Group’s future operating and financial performance, as well as the value of an investment in Mantra Shares.


SECTION 5RISKS ASSOCIATED WITH MANTRA GROUP

c. Operating structure risk

Mantra Group’s lease arrangements require it to pay significant rent or other fees to the property owner even if it does not receive sufficient income from customers. There is an additional risk that the lease arrangements may not be renewed upon reaching their expiry, either because the property owner or Mantra Group has chosen not to renew. This may have a substantial impact upon Mantra Group’s future revenues.

Mantra Group also uses management letting rights arrangements to operate a significant number of its key properties. There is a risk that individual apartment owners cease to use Mantra Group as their letting agent, and Mantra Group loses the fees that it would have received in relation to that apartment. In addition, there is a risk that the introduction of statutory restrictions may place a limit upon the duration of such arrangements, or provide “without cause” termination or forced sale rights for apartment owners.

d. Reputation risk

A reduction in overall customer satisfaction with Mantra Group’s services could adversely impact the reputation and value of Mantra Group’s brands and its business. Its own actions, or actions of its partners or third parties, could negatively impact on the general public’s trust or perception of Mantra Group and the value of its brands. Such actions could also affect customer loyalty, relationships with property owners, employee retention rates and the demand for Mantra Group’s services, all of which could adversely affect Mantra Group’s future performance.

e. Regulatory changes

Mantra Group may become subject to higher levels of government regulation (particularly strata laws, agency laws and building regulations) or become subject to new or amended codes or standards that impact the accommodation industry or companies generally (for example, changes to accounting standards). These changes could have a materially adverse effect on Mantra Group’s business. For example, through increasing Mantra Group’s compliance costs or capital expenditure requirements, including requirements to upgrade or refurbish properties.

Mantra Group is currently required to comply with various statutory requirements, including holding certain licences in order to operate its business. If the conditions of these licences are breached, Mantra Group’s business may be required to cease to operate in respect of a certain property, area or jurisdiction. Mantra Group could also be exposed to penalties or other claims, and a loss of reputation.

f. New developments or future acquisitions may not achieve forecasted returns

Mantra Group has a pipeline of new developments and acquisitions of management rights in properties which have not yet been finalised or completed with the property owners. Some of these properties may not materialise or may be subject to the satisfaction of certain conditions precedent by the property owners, which may or may not be within the control of Mantra Group and therefore Mantra Group may not ultimately finalise its right to operate a planned new development or property. There is also a risk that these planned new developments or properties (if finalised) may not perform to the level expected by Mantra Group. As a result, Mantra Group may not be able to achieve the returns forecast for new developments or future acquisitions.

g. Limited development options and reduced ability to respond to changing demand

Mantra Group may not be in a position in the future to grow its business because of a limited supply of new properties available in the accommodation industry in Australia or other jurisdictions.

Mantra Group may not have the flexibility to respond quickly to changes in geographical or sector-specific customer demand or competitive threats because it is unable to obtain new properties. Mantra Group may also face increased costs to secure new or existing properties in the future and experience reduced growth or competitiveness.

h. Increased competition from online travel agents or alternate accommodation providers

There is a risk that growth in the use of online technology will strengthen the competitive position of travel providers to operate across multiple markets (including the accommodation industry) by providing packages of products at competitive rates. This could result in increased competition for Mantra Group, a reduction in its market share for its own distribution channels, and increased costs for new marketing initiatives, all of which could impact Mantra Group’s profitability. There is a risk that the actions of an existing competitor or the entry of new competitors in a segment of the market in which Mantra Group operates may make it difficult for Mantra Group to grow or maintain its own channel revenues, which in turn may impact its revenues and profitability.


i. Responsiveness to changes in consumer behaviour and use of online technology

The accommodation industry is continuing to move away from traditional distribution channels to online technologies (for example, search engines and price comparison platforms). Consumers of accommodation are increasingly making transactions online and are more price conscious and sensitive to new technology.

If Mantra Group does not respond appropriately to changing consumer behaviour or technologies, there is a risk that it may experience a deterioration in its brand awareness, competitive position, the attractiveness of its business to new or existing consumers, or its effectiveness in reaching new or existing customers or making correct pricing decisions. As a result, Mantra Group could experience a reduction in its future revenue and profitability which may in turn reduce the value of an investment in shares.

j. Reduction in integrity or effectiveness of technology systems and distribution channels

The value and performance of Mantra Group’s business is dependent upon the maintenance, development and effective operation of its existing technology and any new technologies (in particular, its centralised MG-Res distribution platform).

Mantra Group’s technology could experience technical problems, or incur material expansion or other costs, which require significant additional investment from Mantra Group or reduce the effectiveness of Mantra Group’s distribution channels in reaching customers. Rapid online technology changes may make technology acquired or developed by Mantra Group obsolete and require further capital expenditure.

Any compromise of the security of Mantra Group’s customers making online bookings (including through third party online service providers) could have an undue adverse effect on Mantra Group’s business.

k. Loss of key management personnel and ability to access quality new staff

Mantra Group’s success depends to a significant extent on its key personnel, and its ability to attract and retain experienced and high performing personnel.

The loss of key management personnel, or any delay in their replacement, may therefore adversely affect Mantra Group’s ability to develop and implement its corporate strategies or increase the cost of obtaining appropriate personnel.

If Mantra Group is unable to find suitable replacements for departing staff members, or effectively access talent pools and attract new talent, it may be unable to appropriately grow its workforce as new properties are added to its portfolio without compromising the quality of services it provides. This could have a material adverse effect on the value of Mantra Group’s business and its financial and operational performance.

l. Price of Mantra Shares

The price at which Mantra Shares are quoted on the ASX may increase or decrease due to a number of factors. There is no assurance that the price of the Mantra Shares will increase, or remain the same, if the Scheme is not implemented. Factors which may affect the price of Mantra Shares include fluctuations in the domestic and international markets for listed stocks, general economic conditions, inclusion or removal from market indices, the nature of markets in which Mantra Group operates, and general operational and business risks.

Other factors which may adversely affect investor sentiment and specifically influence Mantra Group or the stock market more generally include acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, labour strikes, civil wars, natural disasters, outbreaks of disease, or other man-made or natural events.

m. Litigation risk

In the ordinary course of its business, Mantra Group is subject to the risk of litigation and other disputes with its employees, tenants, lessors, bodies corporate, regulators, partners, competitors or other third parties. Proceedings may result in high legal costs, adverse monetary judgments and/or damage to Mantra Group’s reputation, which may have an adverse effect on the financial performance of Mantra Group’s business.


SECTION 6TAXATION IMPLICATIONS


This Section 6 is a general outline of the Australian tax consequences for Australian tax resident Mantra Shareholders who receive the Special Dividend and dispose of their Mantra Shares under the Scheme.

This general outline reflects the current provisions of the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the Tax Law), and the regulations made under those Acts, and takes into account current tax rulings issued by the ATO and the current administrative practices of the ATO. This outline does not otherwise take into account or anticipate changes in the law, whether by way of judicial decision or legislative action.

This outline is of a general nature only. It does not constitute tax advice and should not be relied upon as such.

Mantra Shareholders are advised to consult their own independent tax adviser regarding the consequences of acquiring, holding or disposing of Mantra Shares and receiving the Special Dividend in light of the Tax Law and their particular circumstances.

This outline is relevant to those persons who hold Mantra Shares as at the Scheme Record Date as capital assets for Australian tax purposes. It does not apply to persons who:

• hold their Mantra Shares on revenue account (such as share trading entities) or as trading stock;

• are temporary residents of Australia for Australian taxation purposes;

• hold their Mantra Shares in connection with a business carried on through a permanent establishment outside of Australia;

• have received their Mantra Shares as a result of the participation in an incentive plan of Mantra Group (including the Long Term Incentive Plan); or

• are subject to the taxation of financial arrangements rules in Division 230 of the Income Tax Assessment Act 1997 (Cth) in relation to gains and losses on their Mantra Shares.

6.1 CLASS RULING REQUEST

Mantra Group has applied for an ATO Tax Ruling on behalf of Mantra Shareholders on certain matters discussed in this Section 6, including:

• whether the Special Dividend is assessable to Australian tax resident Mantra Shareholders;

• whether the Special Dividend constitutes a frankable distribution;

• whether Mantra Shareholders can claim a tax offset in respect of the Special Dividend;

• confirmation of the timing of the CGT disposal and confirmation that the capital proceeds received by Mantra Shareholders in relation to the CGT disposal will not include the Special Dividend paid by Mantra Group; and

• whether the Commissioner will make a determination to deny the imputation benefit received by Mantra Shareholders pursuant to the franking credit streaming provisions or other franking credit anti-avoidance provisions.

Mantra Group will make an ASX announcement when any of the Class Rulings have been issued in final form. The Class Rulings will also be available on the ATO website at www.ato.gov.au.

It is anticipated that the Commissioner of Taxation’s (the Commissioner) views to be expressed in the Class Rulings will be generally consistent with the income tax information in this summary (to the extent that this summary deals with the position of resident taxpayers).

However, it is possible that the Commissioner may reach different conclusions. Accordingly, it is important that this summary be read on the understanding that the Commissioner will issue final rulings after the Implementation Date for the Scheme.


SECTION 6TAXATION IMPLICATIONS

6.2 SPECIAL DIVIDEND

Assessability of the Special Dividend

On the basis that the Special Dividend will be an authorised distribution under Mantra Group’s Constitution, paid in accordance with section 254T of the Corporations Act, and will not be sourced, directly or indirectly, from Mantra Group’s share capital account, the Special Dividend will be a dividend, and a frankable distribution.

The Special Dividend paid will be included in an Australian tax resident Mantra Shareholder’s assessable income.

The Special Dividend will need to be “grossed-up” by the amount of the franking credits that are attached to the dividend. As a result, the amount of the Special Dividend, plus the amount of franking credits that are stated to attach to the dividend in the distribution statement received by the Mantra Shareholder in respect of that dividend, must be included in the Mantra Shareholder’s assessable income.

Franking tax offset

The amount of the franking credits that are stated to attach to the Special Dividend (as specified on the distribution statement) can, subject to the requirements set out below, be used to offset the amount of tax that the Mantra Shareholder is required to pay.

For a Mantra Shareholder to be entitled to a tax offset in relation to the franking credits, the Mantra Shareholder must satisfy the ‘45-day holding period’ rule. Broadly, the ‘holding period’ rule requires the Mantra Shareholder to hold the Mantra Share ‘at-risk’ for a specified continuous period of at least 45 days (not including the date of acquisition or the date of disposal) within a specific period.

The specific period for which Mantra Shareholders must hold their Mantra Shares ‘at-risk’ is dependent on whether there is a ‘related payment’ in relation to the dividend. This matter is part of the ATO Tax Ruling that has been applied for. The reduction in the consideration paid by AAPC to Scheme Shareholders under the Scheme is likely to be considered to be a ‘related payment’ in relation to the Special Dividend.

On this basis, the ATO Tax Ruling is expected to clarify that for a Mantra Shareholder to be entitled to a tax offset, the Mantra Shareholder will need to hold their Mantra Shares ‘at risk’ for a continuous 45 day period (not including the date of acquisition or the date of disposal) during the period from 11 April 2018 to 27 May 2018. The Mantra Shares cannot be held ‘at risk’ after 27 May 2018 (being the last day the Mantra Shares could be held ‘at risk’ if the Scheme Record Date is 28 May 2018). Any Mantra Shareholder that acquires their Mantra Shares on or after 13 April 2018 will not be entitled to a tax offset for the franking credits.

To hold shares ‘at risk’, a Mantra Shareholder must not have a materially diminished risk of loss or opportunity for gain in respect of the Mantra Shares. Whether a Mantra Shareholder holds their shares ‘at risk’ will depend on other arrangements they may have entered into in relation to their Mantra Shares (e.g. risk mitigation strategies such as put options etc.). Shares should be considered held ‘at risk’ if no other arrangements exist. Special rules apply, though, for certain taxpayers including discretionary trusts.

If Australian tax resident individuals or complying superannuation entities have an excess of franking credits in comparison to the tax they are required to pay, those Mantra Shareholders may be entitled to a refund from the ATO equal to that excess.

If Australian tax resident corporate Mantra Shareholders have an excess of franking credits in comparison to the tax they are required to pay, those Mantra Shareholders may be entitled to carry forward those credits (converted to carried forward tax losses) to later income tax years to offset future tax payable.

Imputation Integrity Measures

The availability of the franking credits attaching to the Special Dividend is subject to the application of certain integrity measures. It is considered that the integrity measures should not apply to deny or limit the availability of those credits to Mantra Shareholders who are entitled to receive the Special Dividend. This matter will be addressed in the ATO Tax Ruling and the comments in this Section assume a favourable ATO Tax Ruling will be obtained.


6.3 DISPOSAL OF MANTRA SHARES

If the Scheme is approved and implemented, AAPC will acquire 100% of the Mantra Shares on the Scheme Implementation Date.

The disposal of shares is a CGT event (i.e. CGT Event A1). It is expected to occur for all Mantra Shareholders when they dispose of their Mantra Shares under the Scheme. The time of the event is the Implementation Date.

As a result of this CGT event, Mantra Shareholders will realise:

a. a capital gain on the Implementation Date, if the capital proceeds from the disposal of their Mantra Shares exceeds the cost base of their Mantra Shares; or

b. a capital loss on the Implementation Date, if the capital proceeds from the disposal of their Mantra Shares is less than the reduced cost base of their Mantra Shares.

Capital gains and capital losses made by a Mantra Shareholder in an income year from all sources are aggregated to determine whether they make a net capital gain or net capital loss for that income year. The net capital gain should be included in the assessable income of the Mantra Shareholder.

Cost Base

The cost base (or reduced cost base) of the Mantra Shares should generally be the amount paid to acquire the Mantra Shares plus incidental costs of ownership (provided the costs have not previously been claimed as an income tax deduction).

Capital Proceeds

The capital proceeds are expected to be the cash component of the Scheme Consideration amount of $3.80 per Mantra Share.

CGT Discount

Mantra Shareholders who are individuals, complying superannuation entities, trustees of trusts or (in limited circumstances) life insurance companies may be entitled to reduce the amount of any capital gain made on the disposal of their Mantra Shares if they have held their Mantra Shares for at least 12 months before the Implementation Date (the reduction is referred to as the “CGT discount”). The CGT discount is applied only after available current year and carried forward capital losses have been applied to reduce the capital gain.

The CGT discount rate is 50% for individuals and trustees, and 33.3% for complying superannuation entities and life insurance companies.

6.4 GST

Mantra Shareholders should not be liable to GST in respect of a disposal of the Mantra Shares.

Mantra Shareholders may be charged GST on costs (such as adviser fees relating to their participation in the Scheme) that relate to the Scheme. Mantra Shareholders may be entitled to input tax credits or reduced input tax credits for such costs, but should seek independent advice in relation to their individual circumstances.


SECTION 7ADDITIONAL INFORMATION


7.1 INTERESTS OF MANTRA DIRECTORS IN MANTRA GROUP SECURITIES

Relevant interests of Mantra Directors in Mantra Group securities

The table below lists the Relevant Interests of Mantra Directors in Mantra Shares and Mantra Performance Rights as at the date of this Scheme Booklet.

MANTRA DIRECTOR POSITIONRELEVANT INTERESTS

IN MANTRA SHARES

RELEVANT INTERESTS IN MANTRA

PERFORMANCE RIGHTS

Peter Bush Independent Non-Executive Director and Chairman

30,000 –

Andrew Cummins Independent Non-Executive Director 1,551,727 –

David Gibson Independent Non-Executive Director 109,797 –

Melanie Willis Independent Non-Executive Director 28,718 –

Elizabeth Savage Independent Non-Executive Director 10,000 –

Kerry Robert East (Bob East) Chief Executive Officer 765,638 494,748

Mantra Directors who hold Mantra Shares will be entitled to vote at the Scheme Meeting and receive the same Total Cash Consideration as all other Mantra Shareholders.

7.2 INTERESTS HELD BY MANTRA DIRECTORS IN ACCORHOTELS GROUP

No Mantra Director holds any interest in the AccorHotels Group.

No Mantra Director acquired or disposed of a Relevant Interest in any shares in any member of the AccorHotels Group in the four month period ending on the date immediately before the date of this Scheme Booklet.

7.3 INTERESTS HELD BY MANTRA DIRECTORS IN CONTRACTS OF A MEMBER OF THE ACCORHOTELS GROUP

No Mantra Director has an interest in any contract entered into by AccorHotels Group.1

7.4 OTHER INTERESTS OF MANTRA DIRECTORS

Save as noted above and as set out in this Section 7, no Mantra Director has any other interest, whether as a director, member or creditor of Mantra Group or otherwise, which is material to the Scheme, other than in their capacity as a holder of Mantra Shares or Mantra Performance Rights.

7.5 AGREEMENTS OR ARRANGEMENTS WITH MANTRA DIRECTORS

As noted in Section 7.1, Bob East holds 494,748 Mantra Performance Rights that will be subject to the regime described in Section 7.7. Other than this and as disclosed in Section 7.6 below, there is no agreement or arrangement made between any Mantra Director and any other person, including an AccorHotels Group member, in connection with or conditional upon the outcome of the Scheme.

Under the terms of the Scheme Implementation Agreement, AAPC has agreed to indemnify each Mantra Director from and against all claims, liabilities and loss which any of the Mantra Directors may suffer or incur by reason of any breach of any of the AAPC Warranties by AAPC.

1. Mantra Directors may be directors of other entities that from time to time enter into contractual arrangements with members of the AccorHotels Group in the ordinary course of business. However, no Mantra Director currently derives any direct financial benefit, nor has any other personal interest, in any contract with a member of the AccorHotels Group.



7.6 PAYMENTS AND OTHER BENEFITS TO DIRECTORS, SECRETARIES OR EXECUTIVE OFFICERS OF MANTRA GROUP

Bob East (Chief Executive Officer) has entered into a settlement and release deed (“Deed”) under which he has agreed to depart from his current role at Mantra Group if the Scheme is implemented, with his departure effective from the Implementation Date. If the Scheme is not implemented, it is expected that Mr East will maintain his current role as the Chief Executive Officer of the Mantra Group.

Under the terms of the Deed, Mr East would receive a payment of $1,492,776.45 (subject to tax and other deductions) no later than five business days after the Implementation Date, in addition to standard benefits payable upon termination of employment (for example, accrued remuneration and untaken statutory leave entitlements). Cabana Group Pty Ltd (a company controlled by Mr East) has also entered into an advisory agreement under which it will provide advisory services to the Mantra Group for a period of 12 months from the Implementation Date, in exchange for a fee of $394,100 which is payable in monthly instalments during the term.

If the Scheme is implemented, other directors, executive officers and secretaries of the Mantra Group may receive payments or other benefits in connection with any departures from the Mantra Group.

Mantra Group has in place short term incentive arrangements under which executive officers and secretaries may be eligible to receive bonuses in accordance with the terms of their arrangements. Where such bonuses are paid to executive officers or secretaries, payment of those bonuses will not be paid before the Implementation Date and will not exceed $2.2 million in aggregate.

Save as noted above and in Section 7.5, no payment or other benefit is proposed to be made or given to a director, secretary or executive officer of Mantra Group (or any Related Body Corporate) as compensation for loss of, or as consideration for or in connection with their retirement from, office in Mantra Group (or any Related Body Corporate) up as a result of the Scheme.

7.7 PERFORMANCE RIGHTS

As detailed in Mantra Group’s annual report for the year ended 30 June 2017, Mantra Group operates a Long Term Incentive Plan under which Mantra Performance Rights are granted to senior executives as an incentive and reward.

The Mantra Performance Rights are subject to vesting conditions based on continuation of employment and performance criteria. As at 3 April 2018, being the last practicable day prior to the date of this Scheme Booklet, there were 1,106,061 outstanding Mantra Performance Rights issued under the Long Term Incentive Plan.

Under the terms of the Scheme Implementation Agreement, Mantra Group must take such action as is necessary on or after the date on which Mantra Shareholders approve the Scheme and prior to the Scheme Record Date to ensure that any Mantra Performance Rights which have not already vested, vest and convert into Mantra Shares. The Mantra Board has resolved, subject to Mantra Shareholders approving the Scheme, to waive unsatisfied vesting conditions and accelerate the exercise period such that all Mantra Performance Rights convert or are exercised prior to the Scheme Record Date and has notified holders of Mantra Performance Rights of the accelerated vesting of their Mantra Performance Rights. Mantra Shares issued on conversion or exercise of the Mantra Performance Rights will be entitled to participate in the Scheme and to receive the same Scheme Consideration as all other Scheme Shareholders.

7.8 ASX WAIVER AND ASIC RELIEF

a. ASX waiver

ASX has granted Mantra Group a waiver of ASX Listing Rule 6.23.2 to the extent necessary to allow for the treatment of the Mantra Performance Rights as set out in Section 7.7.

b. ASIC relief

Pursuant to rule 5.1.0.1(b) and clause 8302(h) of Schedule 8 of the Corporations Regulations, the explanatory statement is required for a Scheme to set out whether, within the knowledge of the directors of Mantra Group, the financial position of Mantra Group has materially changed since the date of the last balance sheet laid before the company in general meeting or sent to shareholders in accordance with sections 314 or 317 of the Corporations Act, as well as the full particulars of the changes.

ASIC has granted Mantra Group relief from this requirement so that this Scheme Booklet only need set out, within the knowledge of the Mantra Directors, that the financial position of Mantra Group has not materially changed since 31 December 2017 (being the last date of the period to which the financial statements for the half-year ended 31 December 2017 relate).


7.9 CONSENTS TO BE NAMED

The following parties have given, and have not withdrawn before the date of this Scheme Booklet, their consent to be named in this Scheme Booklet in the form and context in which they are named:

a. Highbury Partnership as financial adviser to Mantra Group;

b. Link as Mantra’s Share Registry; and

c. Baker McKenzie and Clifford Chance as legal advisers to Mantra Group in relation to the Scheme.

The Independent Expert has given and has not withdrawn its consent to be named in this Scheme Booklet and to the inclusion of the Independent Expert’s Report in Annexure A of this Scheme Booklet and to the references to the Independent Expert’s Report in this Scheme Booklet being made in the form and context in which each such reference is included.

AAPC has given and have not withdrawn their consent to be named in this Scheme Booklet and in relation to the inclusion of the AAPC Information in this Scheme Booklet in the form and context in which that information is included.

Each person named in this Section 7.9:

a. has not authorised or caused the issue of this Scheme Booklet;

b. does not make, or purport to make, any statement in this Scheme Booklet or any statement on which a statement in this Scheme Booklet is based, other than as specified in this Section 7.9; and

c. to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this Scheme Booklet, other than a reference to its name and the statement (if any) included in this Scheme Booklet with the consent of that party as specified in this Section 7.9.

7.10 TRANSACTION COSTS

Mantra Group estimates that it will incur approximately $8.9 million in external transaction costs related to the Scheme, which includes advisory fees, valuation fees, Court fees and registry, printing and mailing costs. Of this, approximately $2.8 million will be incurred regardless of whether the Scheme becomes Effective or not, including Independent Expert’s fees of $200,000 plus GST.

7.11 DOCUMENTS AVAILABLE

An electronic version of this Scheme Booklet including the Independent Expert’s Report and the Scheme Implementation Agreement are available for viewing and downloading online at Mantra Group’s website at https://www.mantragroup.com.au.

7.12 CONTINUOUS DISCLOSURE

Mantra Group is subject to regular reporting and disclosure obligations under the Corporations Act and ASX Listing Rules. Mantra Group has an obligation (subject to limited exceptions) to notify ASX immediately upon becoming aware of any information which a reasonable person would expect to have a material effect on the price or value of Mantra Shares. Copies of documents filed with ASX may be obtained from ASX’s website www.asx.com.au.

In addition, Mantra Group is also required to lodge various documents with ASIC. Copies of documents lodged with ASIC in relation to Mantra Group may be obtained from, or inspected at, an ASIC office.

Mantra Group’s 2017 Annual Report (being Mantra Group’s annual financial report for the year ended 30 June 2017) and financial report for the 6 months ended 31 December 2017 are available on Mantra Group’s website at https://www.mantragroup.com.au.

Mantra Group will also make copies of the 2017 Annual Report available, and financial report for the 6 months ended 31 December 2017 free of charge, to Mantra Shareholders. Requests can be made by contacting the Shareholder Information Line on 1300 795 998 (within Australia) or +61 1300 795 998 (outside Australia) between 8.30am and 5.30pm (Sydney time) Monday to Friday, prior to the Effective Date.



7.13 SUPPLEMENTARY INFORMATION

If Mantra Group becomes aware of any of the following between the date of lodgement of this Scheme Booklet for registration with ASIC and the Court Approval Date:

• a material statement in this Scheme Booklet is false or misleading or deceptive;

• a material omission from this Scheme Booklet;

• a significant change affecting a matter in this Scheme Booklet; or

• a significant new matter has arisen and it would have been required to be included in this Scheme Booklet if known about at the date of lodgement with ASIC,

depending on the nature and timing of the changed circumstances, and subject to obtaining any relevant approvals, Mantra Group may circulate and publish any supplementary document by:

• making an announcement to the ASX;

• posting the supplementary document to Mantra Shareholders at their registered address as shown in the Register; or

• posting a statement on Mantra Group’s website at https://www.mantragroup.com.au,

as Mantra Group in its absolute discretion considers appropriate.

7.14 NO UNACCEPTABLE CIRCUMSTANCES

Mantra Group’s Directors believe that the Scheme does not involve any circumstances in relation to the affairs of Mantra Group that could reasonably be characterised as constituting ‘unacceptable circumstances’ for the purposes of section 657A of the Corporations Act.

7.15 FOREIGN JURISDICTIONS

The distribution of this Scheme Booklet outside Australia may be restricted by law and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may contravene applicable securities laws. Mantra Group disclaims all liabilities to such persons.

Mantra Shareholders who are nominees, trustees or custodians are encouraged to seek independent advice as to how they should proceed.

No other action has been taken to register or qualify this Scheme Booklet or any aspect of the Scheme in any jurisdiction outside of Australia.

7.16 LODGEMENT OF SCHEME BOOKLET WITH ASIC

This Scheme Booklet was provided to ASIC on 16 March 2018 in accordance with section 411(2)(b) of the Corporations Act.

7.17 OTHER INFORMATION

Otherwise than as contained or referred to in this Scheme Booklet, including the Independent Expert’s Report and the information that is contained in the Annexures to this Scheme Booklet, there is no other information that is material to the making of a decision by a Mantra Shareholder whether or not to vote in favour of the Scheme Resolution to approve the Scheme, being information that is known to any Mantra Director at the time of lodging this Scheme Booklet with ASIC for registration and which has not previously been disclosed to Mantra Shareholders.


SECTION 8GLOSSARY


SECTION 8GLOSSARY

In this Scheme Booklet unless the context otherwise requires:

TERM MEANING

$ means Australian dollars unless otherwise stated.

AAPC means AAPC Limited ACN 009 175 820.

AAPC Warranties means the representations and warranties of AAPC set out in clause 10.5 of the Scheme Implementation Agreement.

ACCC means the Australian Competition and Consumer Commission.

AccorHotels Group means Accor S.A. and each of its controlled entities.

AAPC Information The information contained in:

a. Section 4; and

b. the paragraph commencing “AAPC believes that any forward-looking statements” in the subsection headed ‘Disclaimer regarding forward-looking statements’ in the Important Notices; and

c. the answer to the questions “Who is AccorHotels Group?” and “How is AAPC funding the Scheme Consideration” in the “Frequently asked questions” section of this Scheme Booklet.

ASIC means the Australian Securities and Investments Commission.

Associates has the meaning set out in section 12 of the Corporations Act.

ASX means ASX Limited ACN 008 624 691 or, as the context requires, the financial market operated by it.

ASX Listing Rules means the official listing rules, from time to time, of ASX.

ATO means the Australian Taxation Office.

Business Day means a day that is not a Saturday, Sunday or a public holiday or bank holiday in Sydney and Brisbane.

CHESS means the Clearing House Electronic Subregister System, which provides for electronic share transfers in Australia.

Class Ruling has the meaning given to it in the answer to the question “Will I receive any further dividends from Mantra Group” in the "Frequently asked questions" section of this Scheme Booklet.

Competing Proposal means a proposed transaction or arrangement which if entered into or completed would mean that a person or persons other than AAPC or its Related Bodies Corporate will:

a. acquire or become the holder of, or have a right to acquire or have economic or beneficial interest in or control of, directly or indirectly 20% or more of the business, assets, income or earnings of Mantra Group and its Subsidiaries, taken as a whole;

b. directly or indirectly acquire a Relevant Interest in, or have the right to acquire, a legal, beneficial, or economic interest in, or control of, 20% or more of the ordinary shares in Mantra Group;

c. acquire Control (within the meaning of section 50AA of the Corporations Act) of Mantra Group;

d. require Mantra Group to abandon, or otherwise not to proceed with, the Scheme; or

e. otherwise directly or indirectly acquire or merge with Mantra Group,

whether by way of takeover bid, members’ or creditors’ scheme of arrangement, shareholder approved acquisition, capital reduction, buy back, sale or purchase of shares, other securities or assets, assignment of assets and liabilities, incorporated or unincorporated joint venture, dual-listed company (or other synthetic merge), deed of company arrangement, any debt for equity arrangement or other transaction or arrangement.

Corporations Act means the Corporations Act 2001 (Cth).


TERM MEANING

Court means the Federal Court of Australia or such other court of competent jurisdiction under the Corporations Act agreed in writing by Mantra Group and AAPC.

Court Approval Date means the date when the Court grants its approval to the Scheme under section 411(4) of the Corporations Act.

Deed Poll means the deed poll in the form of Annexure D to this Scheme Booklet, executed by AAPC in favour of Scheme Shareholders, pursuant to which AAPC acknowledges and confirms its obligations under the Scheme.

EBITDAI means earnings before interest, tax, depreciation, amortisation and impairment.

Effective means the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) of the Corporations Act in relation to this Scheme.

Effective Date means the date on which the Scheme becomes Effective.

End Date means 5:00pm on 30 June 2018, or such other date and time agreed in writing between Mantra Group and AAPC.

EV means enterprise value.

Exclusivity Period means the period from and including the date of the Scheme Implementation Agreement to the earlier of:

a. the date of termination of the Scheme Implementation Agreement;

b. the End Date; and

c. the Effective Date.

FATA means Foreign Acquisitions and Takeovers Act 1975 (Cth).

FATR means Foreign Acquisitions and Takeovers Regulation 2015 (Cth).

Fiduciary Exception means the fiduciary exception as described in Section 1.14.

FIRB means the Foreign Investment Review Board.

FY2014 means the financial year ended 30 June 2014.




H1FY2018 means the six months financial period ended 31 December 2017.

Government Agency means a:

a. government, whether foreign, federal, state, territorial or local;

b. department, office or minister of a government (whether foreign, federal, state, territorial or local) acting in that capacity; or

c. commission, delegate, instrumentality, agency, board or other government, semi-government, judicial, administrative, monetary or fiscal authority, whether statutory or not and whether foreign, federal, state, territorial, or local,

and includes ASX, ASIC, the ACCC, FIRB, and the Takeovers Panel.

Grant Thornton means Grant Thornton Australia Limited (ACN 127 556 389).

GST means goods and services tax as defined in A New Tax Systems (Goods and Services Tax) Act 1999 (Cth), or any other like tax.

Highbury Partnership means Highbury Partnership Pty Ltd (ACN 162 169 502).

Implementation Date means the third Business Day after the Scheme Record Date.


SECTION 8GLOSSARY

TERM MEANING

Independent Expert means Grant Thornton.

Independent Expert’s Report means the report from the Independent Expert commissioned by Mantra Group for inclusion in this Scheme Booklet, set out at Annexure A of this Scheme Booklet.

Listing Rules means the listing rules of ASX as amended from time to time.

Link means Link Market Services Limited (ACN 083 214 537).

Long Term Incentive Plan means Mantra’s Long Term Incentive Plan dated November 2014 (as amended from time to time).

Mantra Board means the board of directors of Mantra Group as constituted from time to time.

Mantra Director or your Director

means a director of Mantra Group as at the date of this Scheme Booklet.

Mantra Group means Mantra Group Limited (ABN 69 137 639 395), and where the context requires refers collectively to Mantra Group Limited and each of its Related Bodies Corporate.

Mantra Material Adverse Change

means an event, change, condition, matter, circumstance or thing occurring before, on or after the date of the Scheme Implementation Agreement (each a Specified Event as defined in the Scheme Implementation Agreement) which, whether individually or when aggregated with all such events, changes, conditions, matters, circumstances or things of a like kind that have occurred or are reasonably likely to occur, has had or would be reasonably likely to occur, has had or would be reasonably likely to have:

a. a material adverse effect on the business, assets, liabilities, financial or trading position, profitability or prospects of the Mantra Group taken as a whole;

b. without limiting the generality of paragraph (a) above:

i. the effect of a diminution in the value of the consolidated net assets of the Mantra Group, taken as a whole, by at least $47 million against what it would reasonably have been expected to have been but for such Specified Event; or

ii. the effect of a diminution in the consolidated earnings before interest and tax of the Mantra Group, taken as a whole, by at least $10 million in any financial year against what they would reasonably have been expected to have been but for such Specified Event,

other than those events, changes, conditions matters, circumstances or things:

c. required or permitted by the Scheme Implementation Agreement, the Scheme, or the transactions contemplated by either;

d. that are fairly disclosed:

i. in information made available by Mantra Group to AAPC and its representatives during its due diligence investigations; or

ii. in publicly available ASX or ASIC filings by Mantra Group or any of its Subsidiaries since 19 June 2014;

e. relating to Mantra Group’s FY2017 final dividend and the Special Dividend;

f. done or not done at the written request or with the written approval of AAPC (which approval must not be unreasonably withheld or delayed) and any direct consequences arising out of such matters;

g. resulting from a change to legislation or regulation, any judicial administrative interpretation of the law or any practice or policy of a Government Agency (whether or not retrospective in effect);

h. resulting from changes in generally accepted accounting principles or the interpretation of them;

i. arising in consequence of an act of war, terrorism, or natural disaster; or

j. resulting from changes in general economic or political conditions or the securities market in general.


TERM MEANING

Mantra Performance Rights means a right granted under the Long Term Incentive Plan rules to acquire a Mantra Share subject to the terms of the Long Term Incentive Plan.

Mantra Prescribed Event means the occurrence of any of the following:

a. Mantra Group or any of its Subsidiaries converting all or any of its shares into a larger or smaller number of shares;

b. Mantra Group or any of its Subsidiaries resolving to reduce its share capital in any way or reclassifying, combining, splitting or redeeming or repurchasing directly or indirectly any of its shares;

c. Mantra Group or any of its Subsidiaries entering into a buy-back agreement, or resolving to approve the terms of a buy-back agreement under the Corporations Act;

d. Mantra Group or any of its Subsidiaries issuing shares, or granting an option over its shares, or agreeing to make such an issue or grant such an option;

e. Mantra Group or any of its Subsidiaries issuing or agreeing to issue securities or other instruments convertible into shares or debt securities;

f. Mantra Group or any of its Subsidiaries disposing, or agreeing to dispose, of the whole, or a substantial part, of its business or property;

g. Mantra Group or any of its Subsidiaries creating, or agreeing to create, any mortgage, charge, lien or other encumbrance over the whole, or a substantial part, of its business or property;

h. Mantra Group or any of its Subsidiaries resolving that it be wound up;

i. a liquidator, provisional liquidator or administrator of Mantra Group or any of its Subsidiaries being appointed;

j. the making of an order by a court for the winding up of Mantra Group or any of its Subsidiaries;

k. Mantra Group or any of its Subsidiaries executing a deed of company arrangement;

l. a receiver, or a receiver and manager, in relation to the whole, or a substantial part, of the property of Mantra Group or any of its Subsidiaries being appointed;

m. Mantra Group or any of its Subsidiaries making any material change or amendment to its constitution, articles of incorporation or comparable governing documents; or

n. Mantra Group or any of its Subsidiaries making any change to their accounting practices or policies, other than to comply with generally accepted Australian accounting standards or International Financial Reporting Standards as adopted in Australia,

however none of the above events will constitute a Mantra Prescribed Event where:

a. AAPC has approved the event (which approval must not be unreasonably withheld or delayed) in writing;

b. the event was fairly disclosed:

i. in information made available by Mantra Group to AAPC and its representatives during its due diligence investigations; or

ii. in publicly available ASX or ASIC filings by Mantra Group or any of its Subsidiaries since 19 June 2014;

c. Mantra Group or its Subsidiary (as the case may be) is required to undertake the event in connection with the Scheme or Scheme Implementation Agreement in accordance with the terms of the Scheme Implementation Agreement or Scheme;

d. the event is an issue of Mantra Shares on vesting (including accelerated or discretionary vesting) of Mantra Performance Rights, or the issue of Mantra Performance Rights under an employee incentive scheme in accordance with clause 8.3 of the Scheme Implementation Agreement;

e. the event is a winding up, dissolution or other Insolvency Event (as defined in the Scheme Implementation Agreement) in relation to a Mantra Group Member that is a dormant, unused or immaterial Subsidiary; or

f. it is required by law or by an order of a court or Government Agency.


SECTION 8GLOSSARY

TERM MEANING

Mantra Share means an issued fully paid ordinary share in Mantra Group.

Mantra Shareholder means each person who is registered in the Register as a holder of Mantra Shares.

Mantra Shareholder Approval means a Scheme Resolution passed by the required majorities of Mantra Shareholders.

Mantra’s Share Registry means Link.

Mantra Warranties means the representations and warranties of Mantra Group set out in clause 10.1 of the Scheme Implementation Agreement.

MLR means management letting rights.

Notice of Scheme Meeting means the notice convening the Scheme Meeting, a copy of which is set out in Annexure B of this Scheme Booklet.

NZCC means the New Zealand Commerce Commission.

P/E means price divided by net income.

Register means the register of Mantra Shareholders maintained in accordance with the Corporations Act and Registry means the manager from time to time of the Register.

Reimbursement Fee means a fee equal to $11,800,000.

Related Body Corporate has the meaning given in section 50 of the Corporations Act.

Relevant Interest has the meaning given in sections 608 and 609 of the Corporations Act.

Representative means, in relation to an entity, each of the entity’s Related Bodies Corporate and of the officers and advisers of the entity or any of its Related Bodies Corporate.

RMS means risk management solutions.

Scheme means a members’ scheme of arrangement pursuant to Part 5.1 of the Corporations Act between Mantra Group and Scheme Shareholders, on the terms described in the Scheme Implementation Agreement, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act.

Scheme Booklet means this scheme booklet in relation to the Scheme.

Scheme Consideration means $3.80 cash payable by AAPC for each Mantra Share held by a Scheme Shareholder on the Scheme Record Date.

Scheme Implementation Agreement

means the Scheme Implementation Deed dated 12 October 2017 between Mantra Group and AAPC, a copy of which is available on the ASX website and on Mantra Group’s website.

Scheme Meeting means the meeting of Mantra Shareholders ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act in relation to the Scheme.

Scheme Record Date means 7.00pm (Sydney time) on 28 May 2018, being the third Business Day after the date on which the Scheme becomes Effective, or such other Business Day as Mantra and AAPC agree in writing.

Scheme Resolution means a resolution of Mantra Shareholders to approve the Scheme, the form of which is set out in the Notice of Scheme Meeting in Annexure B of this Scheme Booklet.

Scheme Share means a Mantra Share as at the Scheme Record Date.

Scheme Shareholder means a holder of Mantra Shares as at the Scheme Record Date.

Second Court Date means the first day on which an application made to the Court for an order under section 411(4)(b) of the Corporations Act approving the Scheme is heard (or, if the application is adjourned or subject to appeal for any reason, the day on which the adjourned application is heard), with such hearing being the Second Court Hearing.


TERM MEANING

Special Dividend means a fully franked cash dividend of $0.16 per Mantra Share, that the Mantra Board has resolved for Mantra Group to pay, conditional on the Scheme becoming effective to shareholders registered on the Special Dividend Record Date.

Special Dividend Payment Date

means 30 May 2018.

Special Dividend Record Date

means 7.00pm (Sydney time) on 25 May 2018 or such other date as notified by Mantra Group to ASX.

Subsidiary has the meaning given to it in the Corporations Act.

Superior Proposal means a bona fide Competing Proposal of the kind referred to in paragraphs (c) or (e) of the definition of Competing Proposal (and not resulting from a breach by Mantra Group or any of its Representatives of any of its obligations under clause 11 of the Scheme Implementation Agreement) which the Mantra Board acting in good faith, and after receiving written legal advice from its legal advisor and written financial advice from its financial adviser, determines:

a. is reasonably capable of being valued taking into account all aspects of the Competing Proposal including any timing considerations, any conditions precedent and the identity of the proponent; and

b. would, if completed substantially in accordance with its terms, result in a transaction more favourable to Mantra Shareholders than the Scheme (as the Scheme may be amended or varied following application of the matching right set out in clause 11.6 of the Scheme Implementation Agreement), taking into account all terms and conditions of the Competing Proposal.

Takeovers Panel means the Takeovers Panel constituted under the Australian Securities and Investments Commission Act 2001 (Cth).

Total Cash Consideration means $3.96 per Mantra Share, comprising:

a. the Special Dividend, payable by Mantra Group; and

b. the Scheme Consideration, payable by AAPC.

Timetable means the indicative timetable set out on page 3 of this Scheme Booklet.

Voting Record Date means the date for determining who can vote at the Scheme Meeting, being, 16 May 2018.

VWAP means the volume weighted average price.


ANNEXURE AINDEPENDENT EXPERT’S REPORT


Mantra Group Limited Independent Expert’s Report and Financial Services Guide

29 March 2018



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Grant Thornton Corporate Finance Pty Ltd ABN 59 003 265 987 AFSL 247140 Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Office Sydney NSW 1230 T + 61 2 8297 2400 F + 61 2 9299 4445 E [email protected] W www.grantthornton.com.au

Dear Directors

Introduction

Mantra Group Limited (“Mantra” or “the Company”) is an Australian public company listed on the Australian Securities Exchange (“ASX”) since June 2014. The Company is one of Australia’s leading accommodation providers, and operates hotels, resorts and serviced apartments throughout Australia, New Zealand, Indonesia and USA (Hawaii). The Company manages and operates 136 properties and over 18,000 keys under management as at 31 December 2017 across the ‘Art Series’, ‘Peppers’, ‘Mantra’ and ‘BreakFree’ brands. As at 6 March 2018, Mantra had a market capitalisation of approximately A$1.15 billion1.

Accor S.A. (“Accor” or “the Buyer”) is a global hotel operator and accommodation solutions provider, and is a public company listed on the Euronext, Paris, operating in various countries and under various brand names including Sofitel, Novotel, ibis and Mercure. Accor is headquartered in France and has a strong presence in the Australian market.

On 12 October 20172, the Company announced that it had entered into a Scheme Implementation Agreement (“SIA”) under which AAPC Limited, a wholly owned subsidiary of Accor, will acquire all the issued shares of Mantra on a fully diluted basis (“Mantra Shares”) for a total cash consideration of $3.96 per share (“Total Cash Consideration”)3. The transaction will be implemented by way of Scheme of Arrangement (“Scheme” or the “Proposed Transaction”). The Total Cash Consideration will comprise the following:

A fully franked special dividend of A$ 0.16 per Mantra Share (“Special Dividend“); and

The scheme consideration of A$ 3.80 per Mantra Share (“Scheme Consideration”).

The Total Cash Consideration implies an equity value of A$1.18 billion4 and an enterprise value of A$1.30 billion5.

1 Based on a closing share price of A$3.87 on 6 March 2018 and 297,428,917 outstanding shares on issue. 2 We note that on 9 October 2017, Mantra announced that it had received an indicative and non-binding proposal from Accor at A$3.96 cash per share (on a fully diluted basis) (“Indicative Proposal”). 3 Being $4.02 per share less 6 cents final dividend for FY17 which was paid at the beginning of October 2017. 4 Based on 298,534,978 fully diluted shares outstanding, comprising 297,428,917 ordinary shares and 1,106,061 performance rights and the Offer Price of A$3.96 per share. 5 Based on net debt of A$122.0 million as at 31 December 2017.

Directors Mantra Group Limited Level 15, 50 Cavill Avenue Surfers Paradise QLD 4217

29 March 2018


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We understand that the Special Dividend above will be determined by the Board of Mantra and confirmed before the first court hearing and circulation of the Scheme booklet to Mantra Shareholders.

The Scheme is subject to customary conditions precedent as set out in Section 1 of this Independent Expert’s Report (“IER”). Regulatory approvals from the Australian Competition and Consumer Commission (“ACCC”) and the Foreign Investment Review Board (“FIRB”) have already been obtained.

Subject to no superior proposal emerging and an independent expert concluding that the Scheme is in the best interest of Mantra shareholders (“Mantra Shareholders”), the Directors have unanimously recommended that Mantra Shareholders vote in favour of the Scheme and have advised that each Director intends to vote all Mantra Shares held or controlled by them in favour of the Scheme.

Purpose of the report

Whilst there is no legal requirement for the preparation of an independent expert’s report in conjunction with the Scheme, the Directors of Mantra have commissioned this IER to assist the Mantra Shareholders in assessing the merits of the Scheme.

When preparing this IER, Grant Thornton Corporate Finance has had regard to the Australian Securities Investment Commission (“ASIC”) Regulatory Guide 111 Contents of expert reports (“RG 111”) and Regulatory Guide 112 Independence of experts (“RG 112”). The IER also includes other information and disclosures as required by ASIC.

Summary of opinion

Grant Thornton Corporate Finance has concluded that the Scheme is FAIR AND REASONABLE and hence in the BEST INTERESTS of Mantra Shareholders.

In forming our opinion, Grant Thornton Corporate Finance has considered whether the Scheme is fair and reasonable to Mantra Shareholders and other quantitative and qualitative considerations.

Fairness Assessment

Grant Thornton Corporate Finance has compared the value per Mantra Share before the Scheme (on a 100% and fully diluted basis) to the Total Cash Consideration of A$3.96 per Mantra Share.

The Total Cash Consideration includes a full franked Special Dividend of A$0.16 per share. In the fairness assessment of the Scheme, we have not grossed up the value of the Total Cash Consideration for the potential value of the franking credits attached to the Special Dividend nor consider in our valuation assessment of Mantra the value of the accumulated franking credits.

In our opinion, the value of the franking credits does not accrue to Mantra per se but they may be valuable under certain circumstances to Australian resident shareholders who can claim an income tax offset. We have considered the potential value of the franking credits attached to the Special Dividend in our reasonableness considerations.



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The following table summarises our valuation assessment:

Fairness assessment SectionA$ per share Reference Low HighFair market v alue of Mantra Shares before the Proposed Transaction (on a control basis) 6 3.86 4.53 Total Cash Consideration 1.1 3.96 3.96 Premium/ (discount) 0.10 (0.57) Premium/ (discount) (%) 2.6% -12.6%FAIRNESS ASSESSMENTSource: GTCF calculations

FAIR

We have assessed the fair market value of Mantra Shares on a control basis adopting three valuation methodologies as outlined below:

Quoted Security Price Method – Mantra Shares have a free float level of circa 98.4%6 and there is sufficient liquidity in Mantra’s trading prices for utilisation of the Quoted Security Price Method. We have selected a value range based on the trading prices before the announcement of the Indicative Proposal between A$3.00 and A$3.20 and we have applied a premium for control between 30% and 40%.

DCF Method – We have built a financial model projecting the post-tax free cash flows of Mantra based on the internal management forecast, the impairment model and industry benchmark information. The future cash flows include the financial contribution from a number of scheduled acquisitions (“Scheduled Acquisitions”) which are in relation to properties where the underlying legal agreements have already been executed and they will join the portfolio subject to customary completion terms. We have selected a discount rate between 9.0% and 10.0% to assess the net present value of future cash flows.

EBITDA Multiple Method – We have selected a normalised EBITDA for FY18 and FY19 between A$110 million to A$120 million based on FY18 EBITDAI7 guidance released by Mantra to market of between A$107 million and A$115 million in constant currency terms and investments analysts’ consensus forecast8 for FY18 and FY19 EBITDA of A$108.85 million and A$119.45 million. We have selected an EBITDA multiple applicable to Mantra between 11.5x and 12.0x on a control basis. We note that where Mantra has recorded an impairment charge or reversal of impairment, there would be a difference between EBITDA and EBITDAI. In the absence of any indicators of impairment for the Company, we do not consider EBITDA and EBITDAI to be materially different.

We have set out in the table below a summary of our assessed valuation range based on the selected valuation methodologies.

6 This comprises of the total shares outstanding (297,428,917) less the shares held by company employees and strategic corporate investors. 7 EBITDAI – Earnings Before Interest, Taxation, Depreciation, Amortisation and Impairment. 8 After the announcement of the H1FY18 results.


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Valuation assessment summary (control basis) SectionA$ per share Reference Low HighQuoted Security Price Method 6.2 3.90 4.48 DCF Method 6.3 3.85 4.71 EBITDA Multiple Method 6.4 3.82 4.41 GT assessed fair market value per share (control basis) - Average 3.86 4.53 Source: GTCF calculations

Mantra Shareholders should be aware that our assessment of the value per Mantra Share does not reflect the price at which Mantra Shares will trade if the Scheme is not implemented. The price at which Mantra Shares will ultimately trade depends on a range of factors including, and not limited to, the liquidity of Mantra Shares, macro-economic conditions, the regulatory and political environment, the performance of the tourism industry in Australia and the underlying general performance of Mantra’s business.

Reasonableness Assessment

In accordance with RG111 the Scheme is deemed to be reasonable because it is fair. However, in assessing the reasonableness of the Scheme, we have also considered the following advantages, disadvantages and other factors.

Advantages

Premium for control

A premium for control is applicable when the acquisition of control of a company or business would give rise to benefits such as the ability to realise synergies, access to cash flows, access to tax benefits and control of the board of directors of the company.

Evidence from studies indicates that premium for control on successful takeovers has frequently been in the range of 20% to 40% in Australia and that the premium varies significantly from transaction to transaction. As set out in more details in Section 6.2.4, we have estimated that the average premium for control in the hotel/accommodation and tourism sectors in Australia has been circa 30% since March 2011.

The Total Cash Consideration of $3.96 per Mantra Share represents a premium of:

22.6% compared with the closing price of Mantra on Friday, 6 October 2017 (date before the announcement of the Indicative Proposal).

24.6% compared with the 2 week VWAP of Mantra on 6 October 2017 adjusted for the FY17 final dividend of 6 cents per share.

29.2% compared with the 1 month VWAP of Mantra on 6 October 2017 adjusted for the FY17 final dividend of 6 cents per share.

33.1% compared with the 3 month VWAP of Mantra on 6 October 2017 adjusted for the FY17 final dividend of 6 cents per share.



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This premium for control is unlikely to be available to Mantra Shareholders in the absence of the Scheme or an alternative proposal.

Share price in the absence of the Scheme

In the absence of the Scheme or an alternative transaction, all other things being equal, it is likely that Mantra Shares will trade at prices below the Total Cash Consideration, at least in the short-term. In our opinion, the prospect of Mantra Shares trading above the Total Cash Consideration in the short term, based on the current market conditions, is limited.

From a broader market perspective, we note that since the announcement of the Indicative Proposal, market participants have continued to benefit from favourable trading conditions. Specifically, we note that the trading prices of Hilton, InterContinental, Wyndham and Hyatt, which we consider the most comparable listed peers9 to Mantra, have increased by circa 17% on average since the announcement of the Indicative Proposal. The uplift in the trading prices was driven by the respective financial performance exceeding investors’ expectations during the last reporting season and continued favourable industry dynamics. Whilst, all other things being equal, Mantra’s share price may have followed the same trend, we note that Mantra experienced tougher than anticipated market conditions in some regions for the six month period to 31 December 2017 (“H1FY18”) which may have hindered an uplift in the trading prices in line with its global peers, in the absence of the Scheme. Specifically, we note the following in relation to Mantra’s financial performance for H1FY18:

Underlying EBITDAI decreased by A$2.1 million or 3.6% compared with the previous corresponding period due to softer trading conditions in the US operations and Melbourne and Perth properties in the central business districts (“CBD”).

Underlying EBITDAI margin decreased by 1% to 15.5% in H1FY18 compared with the previous corresponding period.

Revenue per available room (“RevPAR”)11 remained substantially unchanged whilst room occupancy12 slightly decreased compared with the previous corresponding period.

Ability to realise their investment in Mantra

If the Scheme is implemented, Mantra Shareholders will avoid ongoing risks associated with the operations of Mantra which are summarised below in a non-exhaustive manner:

A significant component of Mantra’s historical growth rate was derived from external acquisitions and Mantra Shareholders have usually benefited from a re-rating of the financial contribution of the acquired businesses in line with Mantra’s EBITDA multiple. However, lately, bolt-on acquisitions have become more competitive and large acquisition targets more rare which may affect the ability of Mantra to continue to grow at the historical growth rates in the absence of the Scheme.

9 Refer to section 6.4.2 for details. 11 RevPAR measures the total average room revenue received per room available throughout the period. It can also be calculated by taking the average occupied room rate and multiplying by the occupancy rate. 12 Occupancy measures the average number of rooms that have been utilised compared to the total average available rooms throughout the period.


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Mantra has recently completed two large acquisitions being the Ala Moana Resort in Hawaii and the Art Series Hotel Group13. The performance of the Ala Moana Resort has experienced softer than anticipated trading since acquisition due to increased competition in the local area and reduced demand for conferences and functions. Whilst completion of the Art Series Acquisition occurred only recently, if the Scheme is implemented, Mantra Shareholders will transfer to Accor the integration risks of future and recently completed acquisitions.

One of the most significant changes in the industry is the emergence of the home sharing economy. Since its launch in 2012, Airbnb has grown in Australia to around 2.1 million guests hosting approximately 3.7 million nights in 2015-1614. Sydney is Airbnb’s 5th largest market in the world and Melbourne is in the top 20 Airbnb cities in the world. Whilst Management has indicated Mantra’s operations have not been adversely affected by the shared economy, these circumstances may rapidly change in the future.

Mantra employs a multi-channel sales strategy aimed at maximising those distribution channels with the highest yield for Mantra and its stakeholders. Mantra pays commission calculated on gross revenue for bookings made through third party channels including Online Travel Agents (“OTAs”). OTAs are becoming more dominant in the market place and as a result of the increased bookings through OTAs, the overall commissions charged to hotels and accommodation providers are increasing. Brand name chains, including Mantra, are investing heavily in campaigns to encourage direct booking via their websites, however the market share of OTAs continue to increase which may adversely affect the future profitability of Mantra and other accommodation providers.

One of the key strategies adopted by accommodation providers to encourage recurring purchases by their customers and to increase direct booking is to create a loyalty program. Like frequent flyer programs, hotel loyalty schemes are a key component of the marketing strategy of accommodation providers to retain the customers and provide unique clients’ experience. Mantra’s loyalty program was launched relatively recently in 2012 and does not have an extensive global properties footprint.

Underlying demand for Mantra properties may be adversely affected by a significant deterioration of the underlying economy in Australia and/or worldwide which may have a flow-on effect on the propensity of domestic and international visitors to travel and to incur discretionary expenses.

Franking credits attached to the Special Dividend

The Special Dividend component of the Total Cash Consideration is fully franked. Australian resident shareholders on a lower tax rate can claim an income tax offset and accordingly realise greater value from the Total Cash Consideration. Those Mantra Shareholders are better off on a post-tax basis based on the structure of the Total Cash Consideration compared with the scenario that 100% of the consideration would have been paid as capital gain.

13 Comprising a portfolio of seven luxury hotels in Australian capital cities (“Art Series Acquisition”). 14 Deloitte Access Economics, Economic effects of Airbnb in Australia, page 3



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No brokerage costs

Mantra Shareholders will be able to realise their investment in Mantra without incurring any brokerage costs.

Disadvantages

Shareholders will not be able to participate in the future upside of Mantra

If the Scheme is implemented, Mantra Shareholders will forgo the opportunity to participate in the future potential upside of the Company and any uplift in the current market conditions. However, our valuation assessment based on the net present value of the future cash flows reflects the current known growth opportunities as outlined below:

The Company has secured a number of acquisitions which are expected to come online over the next few years up to FY20 which we have included in the future financial performance.

RevPAR growth rate is expected to continue to increase in line with market and we have assumed in the medium/long term a RevPAR growth rate of circa 3.0% per annum based on various industry reports and market expectations.

Increases in available room nights are mainly driven by the Scheduled Acquisitions up to FY20. Post FY20, we have assumed that the available room nights will continue to increase in line with the historical average.

We have assumed that the proportion of booking made through the Mantra booking system will increase in the long-term in line with the trend towards digitisation in the market and the propensity for customers to use digital means for booking. This has positive effect on the future financial performance of Mantra.

Other factors

Prospect of a superior offer

To date, no superior proposal to the Scheme has emerged. Whilst Mantra has agreed not to solicit any competing proposals or, subject to Directors’ fiduciary duties exception, to participate in discussions or negotiations in relation to any competing proposals, there are no material impediments to an alternative proposal being submitted by potential interested parties. The transaction process may act as a catalyst for potential interested parties and the additional information provided in the Scheme Booklet and Independent Expert’s Report will facilitate the ability of interested parties to assess the merits of potential alternative transactions. If an alternative proposal on better terms were to emerge, it is expected that this would occur prior to the scheme meeting to approve the Proposed Transaction.

Share price after the announcement

As set out below, following the announcement of the Indicative Proposal, the share trading prices of Mantra have been substantially in line with the Total Cash Consideration of A$3.96 per share which


8

seems to indicate good support from investors for the Scheme, perceived low risk of the Scheme not being implemented and limited expectation for a superior proposal.

0.0

5.0

10.0

15.0

20.0

25.0

3.0

3.2

3.4

3.6

3.8

4.0

4.2

Share trading volume (in millions)

Shar

e pric

es (A

$ per

shar

e)

Mantra - share trading after Indicative Proposal

Total Cash Consideration: A$3.96 per share

Source: S&P Global and GTCF calculations

Implications if the Scheme is not implemented

If the Scheme is not implemented, it would be the current Directors’ intention to continue operating Mantra in line with its objectives. Mantra Shareholders who retain their shares would continue to share in any benefits and risks in relation to Mantra’s ongoing business.

Value of Mantra for Accor

In 2012, Accor’s Australian subsidiary AAPC Properties Pty Limited, acquired Mirvac Hotels Pty Ltd from Mirvac Group (“Mirvac”). This acquisition included several management letting rights (“MLR”) properties operated by Mirvac, and gave Accor a strategic exposure to the MLR segment of the hotel industry in Australia. The addition of Mantra’s properties to Accor’s portfolio in Australia is expected to result in the following benefits:

If the Scheme is implemented, Mantra will be delisted from the ASX and Accor will realise synergies in relation to cost savings due to ASX listing and compliance costs, Directors’ fees and the duplication of certain functions throughout the business. We have included a share of these cost savings available to a pool of potential parties in our valuation assessment of Mantra.

Accor has a well-developed loyalty program which may be extended to Mantra’s customers and may enhance recurring purchases and customers’ loyalty and overall profitability of Mantra’s operations.

As discussed in detail in section 4, the MLR operating structure is a substantial part of Mantra’s business model. This structure is more commonly used in the Australian market rather than in other countries. Accor’s portfolio includes a number of MLR properties in Australia or overseas and accordingly Accor should have a greater ability to smoothly integrate Mantra’s properties into its portfolio than other global players.



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Reimbursement fee

In the event that a competing superior proposal emerges or the Directors of the Company do not recommend the Scheme or withdraw their recommendation, Mantra will pay to Accor a reimbursement fee of A$11.8 million. The reimbursement fee may also become payable under other circumstances as set out in Section 1.14 of the Scheme Booklet. If Accor is in breach of the SIA, Mantra is entitled to receive the reimbursement fee.

Tax implications

Implementation of the Scheme may crystallise a capital gains tax liability for Mantra Shareholders, however the taxation consequences for Mantra Shareholders will vary according to their individual circumstances and will be impacted by various factors such as place of residence. Mantra Shareholders should read the overview of tax implications of the Scheme set out in the Scheme Booklet and also seek independent financial and tax advice.

Directors’ recommendations and intentions

As set out in the SIA and Scheme Booklet, as at the date of this Report, the Directors of Mantra have recommended that Mantra Shareholders vote in favour of the Scheme subject to the independent expert concluding and not changing its conclusion that the Scheme is the best interest of Mantra Shareholders. The Directors also intend to vote the shares they hold or control in favour of the Scheme.

Reasonableness conclusion

Based on the qualitative factors identified above, it is our opinion that the Scheme is REASONABLE to Mantra Shareholders.

Overall conclusion

After considering the abovementioned quantitative and qualitative factors, Grant Thornton Corporate Finance has concluded that the Scheme is FAIR AND REASONABLE and hence in the BEST INTERESTS of the Mantra Shareholders in the absence of a superior alternative proposal emerging.


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Other matters

Grant Thornton Corporate Finance has prepared a Financial Services Guide in accordance with the Corporations Act. The Financial Services Guide is set out in the following section.

The decision of whether or not to vote in favour of the Scheme is a matter for each Mantra Shareholder to decide based on their own views of value of Mantra and expectations about future market conditions, Mantra’s performance, risk profile and investment strategy. If Mantra Shareholders are in doubt about the action they should take in relation to the Scheme, they should seek their own professional advice.

Yours faithfully GRANT THORNTON CORPORATE FINANCE PTY LTD

ANDREA DE CIAN JANNAYA JAMES Director Director



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29 March 2018

Financial Services Guide

1 Grant Thornton Corporate Finance Pty Ltd

Grant Thornton Corporate Finance carries on a business, and has a registered office, at Level 17, 383 Kent Street, Sydney NSW 2000. Grant Thornton Corporate Finance holds Australian Financial Services Licence No 247140 authorising it to provide financial product advice in relation to securities and superannuation funds to wholesale and retail clients.

Grant Thornton Corporate Finance has been engaged by Mantra to provide general financial product advice in the form of an independent expert’s report in relation to the Proposed Transaction. This report is included in Mantra’s Scheme Booklet.

2 Financial Services Guide

This Financial Services Guide (“FSG”) has been prepared in accordance with the Corporations Act, 2001 and provides important information to help retail clients make a decision as to their use of general financial product advice in a report, the services we offer, information about us, our dispute resolution process and how we are remunerated.

3 General financial product advice

In our report we provide general financial product advice. The advice in a report does not take into account your personal objectives, financial situation or needs.

Grant Thornton Corporate Finance does not accept instructions from retail clients. Grant Thornton Corporate Finance provides no financial services directly to retail clients and receives no remuneration from retail clients for financial services. Grant Thornton Corporate Finance does not provide any personal retail financial product advice directly to retail investors nor does it provide market-related advice directly to retail investors.

4 Remuneration

When providing the Report, Grant Thornton Corporate Finance’s client is the Company. Grant Thornton Corporate Finance receives its remuneration from the Company. In respect of the Report, Grant Thornton Corporate Finance will receive from Mantra a fee of $200,000 (plus GST) which is based on commercial rates, plus reimbursement of out-of-pocket expenses for the preparation of the report. Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority.

Except for the fees referred to above, no related body corporate of Grant Thornton Corporate Finance, or any of the directors or employees of Grant Thornton Corporate Finance or any of those related bodies or any associate receives any other remuneration or other benefit attributable to the preparation of and provision of this report.

5 Independence

Grant Thornton Corporate Finance is required to be independent of Mantra in order to provide this report. The guidelines for independence in the preparation of independent expert’s reports are set out in RG 112 Independence of expert issued by ASIC. The following information in relation to the independence of Grant Thornton Corporate Finance is stated below.


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“Grant Thornton Corporate Finance and its related entities do not have at the date of this report, and have not had within the previous two years, any shareholding in or other relationship with Mantra (and associated entities) that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation the Scheme.

Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the Scheme, other than the preparation of this report.

Grant Thornton Corporate Finance will receive a fee based on commercial rates for the preparation of this report. This fee is not contingent on the outcome of the Scheme. Grant Thornton Corporate Finance’s out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Thornton Corporate Finance will receive no other benefit for the preparation of this report.

Grant Thornton Corporate Finance considers itself to be independent in terms of RG 112 “Independence of expert” issued by the ASIC.”

6 Complaints process

Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member of the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing and addressed to the Chief Executive Officer at Grant Thornton Corporate Finance. We will endeavour to resolve all complaints within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service who can be contacted at:

Financial Ombudsman Service Limited GPO Box 3 Melbourne, VIC 3001 Telephone: 1800 367 287

Grant Thornton Corporate Finance is only responsible for this report and FSG. Complaints or questions about the General Meeting should not be directed to Grant Thornton Corporate Finance. Grant Thornton Corporate Finance will not respond in any way that might involve any provision of financial product advice to any retail investor.

7 Compensation arrangements

Grant Thornton Corporate Finance has professional indemnity insurance cover under its professional indemnity insurance policy. This policy meets the compensation arrangement requirements of section 912B of the Corporations Act, 2001.



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Contents Page

1 Outline of the Scheme 14

2 Purpose and scope of the report 16

3 Profile of the industry 19

4 Profile of Mantra 28

5 Valuation methodologies 43

6 Valuation assessment of Mantra Shares 46

7 Sources of information, disclaimer and consents 66

Appendix A – Valuation methodologies 68

Appendix B – Comparable companies 69

Appendix C – Comparable transactions 71

Appendix D – Discount rate 73

Appendix E – Premium for control 80

Appendix F – Glossary 81


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1 Outline of the Scheme

1.1 Key terms of the Scheme

The key terms of the Scheme pursuant to the SIA are outlined below:

Offer Price – Mantra Shareholders will receive the Total Cash Consideration of A$3.96 per share on a fully diluted basis (comprising the Scheme Consideration plus the Special Dividend). The Total Cash Consideration has been calculated as A$4.02 per Mantra Share less the final dividend for FY17 of 6 cents per share, which was paid on 6 October 2017.

Special Dividend – Based on the terms of the SIA, Mantra has the discretion to pay a special dividend of up to a maximum of 23.5 cents per share to its shareholders which will be deducted from the Total Cash Consideration. On 21 March 2018, subject to the Scheme becoming effective, the Board of Directors of Mantra approved the payment of a special fully franked dividend of A$0.16 per share on the Special Dividend Payment Date as defined in the SIA. We understand that the Special Dividend above will be determined by the Board of Mantra and confirmed before the first court hearing and circulation of the Scheme booklet to Mantra Shareholders.

Performance Rights – As at the date of this report, the Company has 1,106,061 performance rights15 issued to its executives under a long term incentive plan (“Performance Rights”). Upon certain conditions being achieved, the Performance Rights are convertible into Mantra Shares on a 1-for-1 basis without the payment of any consideration. Under the terms of the SIA, the Scheme is extended to the Performance Rights converted into Mantra Shares before the Scheme record date. Based on the terms of the SIA, the vesting of the performance rights into Mantra Shares will be accelerated prior to the Scheme record date.

Conditions precedent – the SIA includes the following conditions precedent:

- Approval of the Scheme by Mantra Shareholders at the Scheme Meeting.

- Approval of the Scheme by the Court in accordance with Section 411 of the Corporations Act.

- The Independent Expert stating that in its opinion the Scheme is in the best interests of Mantra Shareholders and the Independent Expert does not change or publicly withdraw this conclusion before the Scheme becomes effective.

- Other conditions precedents customary for a transaction of this type including material adverse changes and prescribed occurrences (refer to section 1 of the Scheme Booklet for details).

Reimbursement fee – A$11.8 million reimbursement fee may become payable by Mantra to Accor if during the exclusivity period:

- The Directors withdraw their recommendation to Mantra Shareholders to vote in favour of the Scheme16.

15 Including 481,357 Performance Rights granted after the date of the SIA in accordance with the terms of the SIA. 16 Unless the Independent Expert concludes that the Scheme is not in the best interests of Mantra Shareholders or change that recommendation before the Scheme becomes effective or Mantra has the right to terminate the SIA.



15

- A competing proposal is publically endorsed by the Directors.

- A reimbursement fee is also payable to Accor if a Competing Proposal is announced by a third party during the exclusivity period and it completes within nine months from its announcement.

A reimbursement fee is payable by Accor to Mantra if Mantra terminates the SIA due to Accor being in breach of the SIA. Refer to the Scheme Booklet for full details of when the reimbursement fee is payable.

Others – other terms common for a transaction of this nature, including customary exclusivity arrangements such as “no shop”, “no talk”, and “no due diligence” and a right for Accor to be notified of and to match any competing proposals.

Refer to the Scheme Booklet and SIA for further details.


16

2 Purpose and scope of the report

2.1 Purpose

Section 411 of the Corporations Act

Section 411 of the Corporations Act, 2001 regulates schemes of arrangement between companies and their members. Part 3 of Schedule 8 of the Corporations Regulations 2001 prescribes information to be sent to shareholders and creditors in relation to members’ and creditors’ schemes of arrangement pursuant to Section 411 of the Corporations Act.

Part 3 of Schedule 8 (s640) of the Corporations Regulations requires an independent expert’s report in relation to a scheme to be prepared when a party to that scheme has a shareholding greater than 30% in the company subject to the scheme, or where any of its directors are also directors of the company subject to the scheme. In those circumstances, the independent expert’s report must state whether a scheme is in the best interests of shareholders and state reasons for that opinion. Even where there is no requirements for an independent expert’s report, documentation for a scheme of arrangement typically includes an independent expert’s report.

As at the date of the report, Accor does not hold any Mantra Shares and Mantra and Accor do not have common directors. Accordingly, there is no legal requirement for an independent expert’s report to be prepared in respect of the Scheme. Notwithstanding this, the Directors of Mantra have requested that Grant Thornton Corporate Finance prepare an independent expert’s report to express an opinion as to whether the Scheme is in the best interests of Mantra Shareholders.

2.2 Basis of assessment

In determining whether the Scheme is in the best interests of the Company’s members, Grant Thornton Corporate Finance has had regard to relevant Regulatory Guides issued by the ASIC, including RG 111, Regulatory Guide 60 Scheme of arrangement (“RG60”) and RG 112. The IER will also include other information and disclosures as required by ASIC. We note that neither the Corporations Act nor the Corporations Regulations define the term “in the best interests of members”.

RG 111 establishes certain guidelines in respect of independent expert’s reports prepared for the purposes of the Corporations Act. RG111 is framed largely in relation to reports prepared pursuant to Section 640 of the Corporations Act and comments on the meaning of “fair and reasonable” in the context of a takeover offer. RG111 requires an independent expert report prepared for a change of control transaction implemented by way of scheme of arrangement to undertake an analysis substantially the same as for a takeover bid. However, the opinion of the expert should be whether or not the proposed scheme is “in the best interests of the members of the company”. If an expert were to conclude that a proposal was “fair and reasonable” if it was in the form of a takeover bid, it will also conclude that the proposed scheme is “in the best interests of the members of the company”.

Pursuant to RG111, an offer is “fair” if the value of the offer price or consideration is equal to or greater than the value of the securities that are subject of the offer. A comparison must be made assuming 100% ownership of the target company.



17

RG111 considers an offer to be “reasonable” if it is fair. An offer may also be reasonable if, despite not being “fair” but after considering other significant factors, shareholders should accept the offer in the absence of any higher bid before the close of the offer.

In our opinion, the most appropriate way to evaluate the fairness of the Scheme is to compare the fair market value of Mantra on a control basis with the Offer Price.

In considering whether the Scheme is in the best interests of Mantra Shareholders, we have considered a number of factors, including:

Whether the Scheme is fair.

The implications to the Mantra Shareholders if the Scheme is not approved.

Other likely advantages and disadvantages associated with the Scheme.

Other costs and risks associated with the Scheme that could potentially affect the Mantra Shareholders.

2.3 Independence

Prior to accepting this engagement, Grant Thornton Corporate Finance (a 100% subsidiary of Grant Thornton Australia Limited) considered its independence with respect to the Proposed Transaction with reference to RG 112 issued by ASIC.

Grant Thornton Corporate Finance has no involvement with, or interest in, the outcome of the approval of the Proposed Transaction other than that of an independent expert. Grant Thornton Corporate Finance is entitled to receive a fee based on commercial rates and including reimbursement of out-of-pocket expenses for the preparation of this report.

Except for these fees, Grant Thornton Corporate Finance will not be entitled to any other pecuniary or other benefit, whether direct or indirect, in connection with the issuing of this report. The payment of this fee is in no way contingent upon the success or failure of the Proposed Transaction.

In our opinion, Grant Thornton Corporate Finance is independent of Mantra and its Directors and all other relevant parties of the Scheme.

2.4 Consent and other matters

Our report is to be read in conjunction with the Scheme dated on or around 4 April 2018 in which this report is included, and is prepared for the exclusive purpose of assisting Mantra Shareholders in their consideration of the Scheme. This report should not be used for any other purpose.

Grant Thornton Corporate Finance consents to the issue of this report in its form and context and consents to its inclusion in the Scheme Booklet.

This report constitutes general financial product advice only and in undertaking our assessment, we have considered the likely impact of the Proposed Transaction to the Mantra Shareholders as a whole. We have not considered the potential impact of the Scheme on individual Mantra Shareholders. Individual


18

shareholders have different financial circumstances and it is neither practicable nor possible to consider the implications of the Proposed Transaction on individual shareholders.

The decision of whether or not to approve the Scheme is a matter for each Mantra Shareholder based on their views on the value of Mantra and expectations about future market conditions, together with Mantra’s performance, risk profile and investment strategy. If the Mantra Shareholders are in doubt about the action they should take in relation to the Proposed Transaction, they should seek their own professional advice.

2.5 Compliance with APES 225 Valuation Services

This report has been prepared in accordance with the requirements of the professional standard APES 225 Valuation Services (“APES 225”) as issued by the Accounting Professional & Ethical Standards Board. In accordance with the requirements of APES 225, we advise that this assignment is a Valuation Engagement as defined by that standard as follows:

“An Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Member is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Member at that time.”



19

3 Profile of the industry

3.1 Introduction

The hotel, resorts and serviced apartment industry in Australia is made up of several operators that provide short term accommodation. These services providers can be categorised based on their size and geographical presence as follows:

Global hotel chains such as Hyatt, Accor, Marriott/Starwood, Four Seasons and Hilton.

Australia-wide hotel chains such as Toga Far East Hotels and Event Hospitality.

Independent owner-operated hotel chains such as Stamford and Hotel Grand Chancellor.

Serviced apartment or unit-leased offerings such as Mantra, Oaks, Quest and Meriton.

Motels such as Best Western and Choice Hotels International.

Service providers can also be categorised according to their target market and the nature of the customer served, depending on the level of comfort and price (i.e. economy, midscale, upscale and luxury). Consumers are also quite often segmented by their travel purpose (i.e. corporate, leisure, friends and family).

Key performance indicators for the industry are outlined below:

Occupancy: measures the number of available rooms that have been utilised compared to the total available rooms throughout the period.

Average Room Rate (“ARR”): ARR measures the average room revenue received per occupied room per day throughout the period.

RevPAR: measures the average room revenue received per room available throughout the period. It can also be calculated by multiplying the ARR by the occupancy rate.

As set out in the graph below, RevPAR has increased gradually since FY11 both nationally and in the CBD of main Australian cities. Occupancy has remained broadly unchanged ranging between 64% and 66% since FY11.


20

60.0%

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Industry CBD Occupancy

Source: Australian Bureau of Statistics, Dransfield Hotels and Resorts HY2017 Snapshot

Note: Industry RevPAR is based on total takings of licenced hotels and serviced apartments, excluding takings from motels.

3.2 Market participants

The graph below shows how fragmented the Australian hotel market is, and also shows the large number of small independent hotel operators who may not necessarily be included in mainstream industry databases. The top-10 market participants only hold a total market share of 34%.

Accor 8.0%

Mantra 6.0% Ascott 3.0%Choice Hotels International

3.0%

Toga Far East Hotels 3.0%

InterContinental Group 3.0%Event Hospitality 2.0%

Minor International 2.0%

Best Western 2.0%Marriott/Starwood 2.0%

Other 66.0%

Hotel and resorts in Australia - Market share breakdown by number of rooms

Source: STR (June 2017)

Hotel operators in the industry adopt a wide range of operating models or structures including hotel management agreements, leasing, management letting rights and franchising. (Refer to section 4.1 for an overview).

Accor operates in Australia via its wholly owned subsidiary AAPC Limited (“AAPC”), and is the largest hotel operator in Australia with a market share of 8.0%17. AAPC strengthened its position in the market with the acquisition of hotels from the Mirvac Group in 2012. Despite AAPC’s push towards franchising

17 STR (June 2017)



21

and management agreement models, it still operates under a range of other operating models including leasing, management letting rights and outright ownership.

Globally, Accor is comprised of two divisions: Accor’s HotelServices, which operates as a hotel manager and franchisor; and AccorInvest, which operates owned and leased hotels. In January 2017, Accor announced plans to divest/sell a majority stake in the AccorInvest division, with a view to move towards an asset-light model. Accor recently announced that a 55% stake in the AccorInvest division is proposed to be sold to various institutional and sovereign investors.

Mantra holds the second highest market share of 6.0%18 which, over the past five years, has increased mainly through acquisitions. One of the recent acquisitions is that of the Art Series Hotel Group, which enabled Mantra to add an established brand and business to its existing portfolio in Melbourne, Brisbane and Adelaide19 and has added approximately 1,000 rooms to Mantra’s portfolio.

Other large operators consist mainly of international hotel chains including Marriott and InterContinental.

3.3 Key value drivers

3.3.1 International tourism

Since 2011, the number of international visitors to Australia annually has increased from 5.9 million to 8.5 million (for the year ending September 2017)20. The increase was mainly driven by international visitors from China, which increased by 0.8 million over the same period to 1.3 million per annum. Based on the historical growth rate, visitors from China are expected to soon overtake New Zealand as the biggest source of international visitors to Australia.

The increase in international travellers to Australia is largely driven by the following:

The rise of the Asian middle class and the associated increase in disposable income has resulted in larger numbers of international visitors to Australia. The Chinese economy is transitioning from an investment and export led economy to a more balanced economy with strong household consumption, with a particular focus on overseas travel and education. This has led to improved occupancy rates in major tourist destinations like Sydney and Melbourne.

Significant capacity growth on aircraft routes from Asia to Australia (refer to Section 3.3.4 for details).

The depreciation of the Australian dollar since 2013.

18 STR (June 2017) 19 Market share estimated before the acquisition of Art Series by Mantra was announced. 20 Tourism Research Australia, Tourism Forecast (August 2017)


22

We have set out below the current and forecast proportion of international travellers by country of origin:

14.60%

15.90%

8.80%

8.50%

5.20%

47.00%

China NZ US UK Singapore Others

International visitor market share (FY17)

25.70%12.00%

8.50%

6.50%

4.10%

43.20%

China NZ US UK Singapore Others

International visitor market share (FY27)

Source: Tourism Research Australia, Tourism Forecasts 2017

By 2027, Tourism Research Australia forecasts an additional 6.5 million arrivals, of which 62% are expected to arrive from China, New Zealand, the US, the UK and Singapore. The number of arrivals from China is forecasted to increase from 1.3 million in 2017 to approximately 3.9 million by 2027, increasing the country’s share of arrivals from 14.6% to 25.7%. As a result of the significant increase in international travellers, inbound visitor arrivals are expected to exceed outbound departures by 2027 and the growth in the visitor nights is expected to be driven largely by international travellers.

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ons)

Inbound visitor arrivals v/s Outbound depatures

Inbound visitor arrivals Outbound departures Domestic visitor nights

Actual Forecast

Source: Tourism Research Australia, Tourism Forecast 2017

3.3.2 Domestic tourism

Growth in domestic travel has slowed down in the last 12 months as a result of reduced household consumption and stagnating household incomes. However, the length of the stay has increased slightly



23

resulting in an uplift of 3.8% in the visitor nights from circa 326 million nights in FY16 to circa 338 million nights in FY17. Strong growth in visitor nights was recorded in NSW, Queensland, Victoria and Tasmania.

Travel is a discretionary expenditure item and thus changes in consumer sentiment and real household discretionary income significantly impact travel decisions. In this regard, we note that below-trend GDP growth, volatility in the global equity markets, low housing affordability and sluggish wage growth have led to subdued consumer sentiment in 2017. The Westpac Consumer Sentiment Index21 has been below par for the majority of 2017.

Conversely, the latest Sensis Business Index22 reported an increased level of optimism in small and medium business (SMBs) in all states except Western Australia (“WA”). In WA, declining sales and profitability in the resource sector, together with uncertainty in employment are exerting downward pressure on the business confidence level.

The Australian Treasury forecasts real GDP to rebound and grow by 2.5% in FY18 and 3.00% in FY19 after growth of 2% was achieved in FY17. The expected improvement in the Australian economy is forecast to result from increases in household consumption, non-mining investments and more competitive exchange rates. There are also a number of other factors such as low fuel prices, historically low interest rates and low unemployment which are likely to increase consumer spending and therefore benefit the accommodation industry in the future.

As outlined in the graph below, the growth in the domestic visitor nights is correlated to the performance of the Australian economy.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2011 2012 2013 2014 2015 2016

Correlation between domestic leisure travel and GDP growth

Growth in GDP Growth in domestic visitor nights

Source: ABS

21 The Westpac-Melbourne Institute Consumer Sentiment Index remained fairly volatile, trading below 100 (i.e. pessimists outweigh optimists) for most of 2017. The Westpac-Melbourne Institute Consumer Sentiment Index reflects the consumers' evaluation of their household financial situation over the past year and the coming year, anticipated economic conditions over the coming year and the next five years, and buying conditions for major household items. Westpac 15 November 2017, “Consumer Index back below 100” 22 The Sensis Business Index is a quarterly survey of Australia’s small and medium businesses (SMBs) which commenced in 1993 to track SMB activity, work expectation and overall confidence.


24

In FY18, Tourism Australia expects only a modest increase in domestic visitor nights (up 1.5% to 343 million nights) and day trips (up 2.6% to 191 million trips). However, there are some key events in FY2018 which may strengthen growth rates such as the Commonwealth Games to be held on the Gold Coast in April 2018 and other significant events

Over the long term, Tourism Australia expects day trips and domestic visitor nights to increase at an average annual rate of 2.9% and 2.2% respectively.

3.3.3 Demand and supply equation

Over the last 5 years, the number of establishments in the industry has grown at a moderate pace23 as set out below. This has caused the demand to outpace the supply.

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2011 2012 2013 2014 2015 2016

Visitor nights (million)Hotel rooms ('000s)Demand and supply equation

Hotels Serviced apartments Visitor nights

Source: Australian Bureau of Statistics, Tourist Accommodations, Australia (2015-16)

Despite strong demand, the hotel room supply growth rate has been relatively low, but development activity is expected to strengthen as a large number of proposed projects undergo construction.

It is expected that residential real estate developers will shift their focus to the construction of hotels, primarily in the capital cities. At present there are several proposed or under-construction hotel projects, which are expected to launch in the medium term. In Melbourne alone, an estimated 94 hotel projects will be added by 201924. Construction of serviced apartments is also expected to increase over the next 5 years. Supply of serviced apartments is forecast by Australian Bureau of Statistics to grow at an average rate of 3.5% per annum going forward.

3.3.4 Aviation

International aviation capacity to Australia is one of the key drivers of demand in the industry and has grown from 18 million seats in 2011 to 25 million seats in 2017, representing a growth rate of 5.8% per annum as illustrated in the graph below.

23 For 2014-15 a new source was used, with a frame being provided by STR Global, a company that tracks supply and demand data for the hotel industry. A comparison of the STR Global list with the existing STA frame (in combination with undertaking standard STA frame maintenance procedures) resulted in the identification and subsequent addition of 279 new establishments to the STA beginning with the September quarter 2014. These establishments comprised of 105 hotels, 75 motels and 99 serviced apartments. 24 Theurbandeveloper.com - https://www.theurbandeveloper.com/hotel-sector-booms-across-nation/



25

0.0%

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-

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2011 2012 2013 2014 2015 2016 2017

Intnl' visitor nightsAirline seats (in millions)

Contribution of airline seat capacity to inbound tourism

Airline seats (in millions) Growth in international visitor nights Source: Tourism Australia & Tourism Research Australia

The growth in the seat capacity, which has had a positive effect on international visitor nights, has been driven mainly by the following:

In December 2016, the open skies pact between Australia and China was signed. This removed the administrative restrictions on expanding seat capacity between the two countries. As a result, China Southern Airlines expects its Australian operations to grow by 10% per annum for the next 5 years. China Southern Airlines is China’s largest airline in terms of passenger numbers and it accounted for approximately 40% of Chinese visitors to Australia. China Southern Airlines has also recently commenced a new service from Guangzhou to North Queensland which is expected to increase Chinese visitors by circa 350,000 per annum by 2020.

Nippon Airways re-entering the Australian market and Qantas commencing weekly services between Tokyo and Melbourne.

Virgin Australia announced the execution of a Memorandum of Understanding to enter into a strategic co-operation agreement with Air Canada. In addition, a codeshare partnership with Hong Kong Airlines was announced to provide connectivity to 11 destinations across the flight network of both airlines.

Qantas announced network changes under its joint partnership with Emirates that will further enhance the Trans-Tasman connectivity.

Singapore Airlines entered into a joint co-operation agreement with Lufthansa Group covering flights between Singapore, Australia, Germany, Switzerland, Austria and Belgium.

3.3.5 Non-traditional accommodation

One of the most significant changes in the industry is the emergence of the home sharing economy. Since its launch in 2012, Airbnb has grown in Australia to around 2.1 million users hosting approximately 3.7


26

million nights in 2015-1625. With approximately 800,000 bookings made on the Australian platform over 2015-1626, it is clear that non-traditional players like Airbnb have a solid market share of the industry. Specifically, we note that Sydney is Airbnb’s 5th largest market globally while Melbourne is in the top 20 Airbnb cities.

The home sharing economy has, to some extent, limited the industry’s ability to dynamically price rooms as demand increases. Airbnb’s huge inventory and spare capacity allows it to meet sudden large influxes of travellers with competitive prices, thereby putting downward pressure on operators’ room rates.

3.3.6 Online retail segment

The online retail segment offers consumers the convenience of searching for and booking their travel over the internet, and is a critical distribution channel for the industry. The segment consists of both local and regional operators as well as large global operators and can be categorised as follows:

Accommodation supplier website: a website operated by the travel supplier through which a consumer can book directly with the supplier (e.g. mantrahotels.com).

Traditional travel agency website: a website operated by a traditional travel agency with a number of stores across various locations, through which a consumer can access travel information and a wider range of products than a single travel supplier website (e.g. helloworld.com.au).

Metasearch website and Online Travel Agents: a website which essentially acts as an aggregator and allows the consumer to search across multiple online travel agent and travel supplier websites at once. The bookings are either made directly or consumers are re-directed to the underlying website. While travel agency websites generate their revenue from commissions, metasearch websites generate revenue from online advertising. The OTA’s market in Australia is dominated by Expedia.com (28%), Booking.com (25.3%), Webjet Limited (10.7%) and Lux Group Limited (5.1%)27.

The growth of OTAs over bricks-and-mortar agencies is a result of the increasing sophistication of mobile technology, and the favourable cost structures of OTAs over traditional travel agents.

The OTA’s segment of the industry is also forecast to see heavy consolidation as larger players acquire smaller operators to increase their share of traffic. Over the last five years, Expedia Australia has made a series of acquisitions, including Wotif.com and Travel.com.au that substantially increased its revenue and market share. Consolidation in the industry allows large OTAs to achieve economies of scale and better margins. This puts pressure on hotel operators who don’t have access to a similar scale of web traffic and technology infrastructure. It is estimated that OTAs are on average charging commission equivalent to 12.3% of revenue, up from 11.8% five years ago28.

3.4 Industry outlook

The medium-term outlook for the industry remains positive with strong growth expected in RevPAR and occupancy remaining at 78-80% in major Australian cities and 70% nationally. Whilst new supply of

25 Deloitte Access Economics, Economic effects of Airbnb in Australia, page 3 26 Deloitte Access Economics, Economic effects of Airbnb in Australia, page 5 27 IBISWorld – Online Travel Bookings in Australia OD4163 (January 2017) 28 Citi Research, published in AFR on September 27 2017



27

accommodation is expected to enter market, it is forecast to be outpaced by demand growth. The chart below illustrates the movement of RevPAR in major cities across Australia.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

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RevPAR (A$)

RevPAR growth in Australian major cities

Historical data Forecast data

CAGR of 1.87% p.a.

CAGR of 4.57% p.a.

Source: Dransfield Hotel Futures 2017

We note the following with respect to the chart above:

Although each city has observed peaks and troughs in the local hotel industry’s performance, the long-term outlook for all cities is positive. The construction of new hotels has increased and the market outlook is positive owing to the fact that drivers of demand (for example visitor forecasts, infrastructure facilities at tourist destinations and availability of hotels at various locations) are trending upwards.

Over the longer term, RevPAR is forecast to grow at 4.6% per annum to FY25, exceeding the historical long term average growth of around 2.0%. Also in the long-term, while major capital cities like Sydney and Melbourne are expected to grow at rates above the national average, the resource-dependent markets like Brisbane, Perth or Darwin are expected to grow at slower rates (these markets are currently experiencing oversupply).

Longer term demand is expected to grow at 3.9% per annum supported by increased number of international visitors and access to better infrastructure.


28

4 Profile of Mantra

4.1 Introduction

Mantra is one of Australia’s largest accommodation operators with 136 properties across Australia, New Zealand, Indonesia and USA (Hawaii). In addition to providing accommodation services, Mantra’s core services include management of guest relations, guest rooms and facilities, reception areas, restaurants and bars, conference and function centres, pool and entertainment facilities and offices.

Mantra was established in 2005 following the acquisitions of BreakFree and Peppers businesses, which at the time operated approximately 3,500 rooms across Australia and New Zealand. In the years following these initial acquisitions, Mantra has continued to grow both organically and through further acquisitions, including the acquisitions of the portfolios and brands associated with Pacific International, Saville and certain of Outrigger’s Australian operations.

Since listing in 2014, Mantra completed the acquisition of the remainder of Outrigger’s Australian operations, Ala Moana Resort in Hawaii and the Art Series Hotel Group and brand, amongst others.

Today, Mantra’s properties are consolidated into four main brands being the ‘Art Series’, ‘Peppers’, ‘Mantra’ and ‘BreakFree’. Each brand targets different clients and demographics, both domestically and internationally.

Mantra employs over 5,900 people carrying out various services including property and facility management, sales, reservations, marketing and distribution and information technology.

We have set out in the graphs below the split of Mantra’s properties by geographic location and by brand as at 30 June 2017.

Gold Coast 23.4%

Tropical North Queensland 8.3%

Melbourne 12.8%

Sunshine Coast 5.8%

Sydney 5.5%

Other VIC 4.9%

New Zealand 4.1%

Northern NSW 3.0%

Northern Territory 3.2%

Other NSW 3.4%

WA 4.5%

SA 3.9%

Brisbane 6.5%

TAS 2.4%

ACT 1.8%Indonesia 0.3%

Hawaii 6.3%

Keys under management by geographic location

Breakfree 12.7%

Mantra 66.3%

Peppers 15.3%

Art Series 5.7%

Pro-forma keys under management by brand1

Source: Management & Annual Report FY2017

Note 1: Keys under management as at 30 June 2017 has been adjusted on a pro-forma basis to include the Art Series portfolio (which was

acquired in November 2017).

Nationally, performance is varied across Mantra’s portfolio:

New South Wales and Queensland (ex-Brisbane): Sydney, ACT, Sunshine Coast and Tropical North Queensland are experiencing strong inbound and domestic leisure demand, and an uplift in corporate



29

travel which is supporting robust RevPAR growth and financial performance. Additionally, the Gold Coast is expected to benefit from the 2018 Commonwealth Games.

Victoria: occupancy in Melbourne has been strong, however properties have experienced limited RevPAR growth due to increased supply.

Western Australia, and Northern Territory: performance is subdued with minimal or negative growth in Perth, and Darwin, where the local economies are adversely affected by the continued decline of the capital expenditure in the mining and infrastructure sectors. Contributing to the relatively poor performance and outlook, significant levels of new supply will be entering the Perth market.

4.2 Operating models

Mantra pursues “capital-light” operating structures by entering into management contracts and leases with property owners, allowing Mantra to manage a portfolio of real estate assets with relatively low upfront and ongoing capital commitments. Mantra usually acquires freehold ownership or other forms of interest in certain strategic areas of its properties such as the lobby, restaurants, conference areas etc. which improves Mantra’s ability to retain the management of the property and the rooms/apartments in its letting pool.

Mantra utilises five different operating structures for the properties in its portfolio, as outlined below:

Management Letting Rights: Mantra enters into a caretaking and/or letting agreement with the body corporate of a strata-titled building to operate the caretaking and/or letting business of the property. Mantra also enters into letting agreements and other contractual arrangements with individual apartment owners of the property, which form part of Mantra’s keys under management. Mantra usually owns the freehold or other interests to certain strategic areas of the property to provide ancillary services (e.g. reception areas, offices, restaurants, and conference halls/ function centres).

Mantra’s MLR agreements with the bodies corporate generally have a 20 to 25 year tenure, which can be renewed for further periods by mutual agreement between the parties. However, the letting contract entered into between Mantra and the apartment owner generally allows the apartment owner to exit the letting pool by providing 30 days’ notice. In FY17, income from MLRs accounted for approximately 50% of Mantra’s gross revenue. Resort properties are typically operated under MLR arrangements.

Leases: Mantra leases the property from the owner and operates the property under a Mantra brand. The Company collects 100% of gross revenue from customers, and pays either fixed or variable lease rental on a monthly or quarterly basis. The agreements usually have an initial 20 year term with embedded renewal options. Lease costs may increase on an annual basis either by a fixed percentage or CPI, and may also increase or reduce based on regular market reviews.

In FY17, properties under lease generated approximately 41% of Mantra’s gross revenue. Due to the stable nature of demand for accommodation in CBD locations, these properties are typically operated as leases.

Management Agreements (“MA”): Mantra manages the hotel’s operations for the owner or a third party management rights owner in exchange for management fees. Mantra is responsible for providing all operational services including marketing, booking and other technical services such as IT


30

and human resources. Mantra earns income in the form of a management fee based on the level of hotel revenue.

Most of Mantra’s peers in Australia and abroad, such as Hyatt, Intercontinental and Hilton, operate under MA or franchising models, due to the relative ease in establishing a brand presence without needing to incur significant capital costs. For example, Choice Hotels International Inc. earns 99% of its revenues from the franchise model.

Hotel Management Rights (“HMR”): Mantra purchases the right to manage a property which operates under a hybrid model (e.g. a property under a long term lease and MA). Mantra’s income depends on the type of agreement or operational structure adopted and can either be derived through a management fee or deducted directly from gross room revenue.

Management Service Agreements (“MSAs”): The owner of the property runs the operations independently from Mantra, but utilises Mantra’s brand and associated services, such as marketing, distribution and reservation systems. Mantra receives agreed fees (based on the level of hotel revenue) and a booking fee for the use of its online reservation system. Mantra provides marketing and distribution support to the hotel, and the hotel is treated equally with other Mantra hotels on the Company’s website and booking system. These agreements are typically for 5 to 10 year terms. 2.3% of Mantra’s properties are under MSA arrangements.

As at 31 December 2017, based on keys under management, Mantra’s property portfolio has an average remaining tenure of over 16 years. Only 9.4% of rooms under management are due to expire during the next five years (excluding MA and MSA properties).

0500

1,0001,5002,0002,5003,0003,5004,000

0 - 1.9 2 - 4.9 5 - 9.9 10 - 14.9 15 - 19.9 20+

Keys

und

er M

anag

emen

t

Years remaining

MLR and Lease tenure as at 31 December 2017

Lease MLR Source: Management

4.3 Reporting divisions

While Mantra has five different operating models, for the purpose of financial reporting and analysis, Mantra has three operating segments as outlined below.

CBD: This division includes properties located in capital cities throughout Australia. The CBD division predominantly operates through the Mantra brand, which is targeted at providing spacious rooms and high quality service to match the expectations of the key target customer segments in CBD areas. This division typically targets business travellers for midweek stays, and leisure travellers on weekends and holiday periods around special events. These properties are mainly operated under the



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lease model, owing to the relatively stable cash flows and high occupancy rates throughout the year, which enables the Company to cover the large fixed rent costs.

Resorts: This division contains leisure retreats and resorts throughout Australia, New Zealand, USA (Hawaii) and Indonesia. These properties are targeted mainly at domestic and international leisure travellers visiting tourist destinations. Mantra has a strong presence in key leisure destinations in Queensland such as the Gold Coast, Sunshine Coast and Tropical North Queensland. Most properties under this division operate under the MLR structure.

Central Revenue and Distribution (“CR&D”): This division includes the Company’s online reservation system, property management services provided to property owners and the revenue generated from the MA and MSA operating models. Mantra’s centralised, real-time IT system underpins this division and the reservation system

The charts below presents the EBITDA and revenues by reporting division:

CBD 37.3%

Resorts 36.9%

CR&D 25.9%

H1 FY18 EBITDA by division

0

50

100

150

200

250

300

350

CBD Resorts CR&D

Reve

nue (

A$m)

Revenue by department

FY13 FY14 FY15 FY16 FY17 H1 FY18

Source: Management & Annual Report FY13 to H1FY18

Note: EBITDA in the above chart is before corporate costs which are not allocable to any particular division.

FY17 Revenue in the Resorts division increased by circa 30% compared with FY16 mainly due to new properties acquisitions and openings such as the Ala Moana Hotel by Mantra Resort in Hawaii, Mantra Residences at Southport Central on the Gold Coast and Mantra The Observatory in Port Macquarie. The Resorts division also experienced a significant increase in RevPAR over the last few years from $90 per room night in FY12 to circa $135 in FY17.

Mantra did not complete any significant acquisitions or openings in the CBD division in FY17, and both revenue and EBITDA remained substantially in line with FY16. In H1FY18, the Art Series Group acquisition was completed with 7 new properties added to the CBD portfolio.

FY17 performance of the CR&D Division was particularly strong and revenue increased by circa 11% due to an increased number of keys in the portfolio, significant investments undertaken by Mantra to market its website and an integrated platform together with the continued increased in the number of consumers booking directly online.

4.4 Acquisition strategy

Historically, Mantra has grown both organically and through acquisitions. The Australian market is quite fragmented, in particular in relation to MLR opportunities, which has allowed the Company to significantly grow the keys under management over the years as shown in the graph below.


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11,500+13,000+

15,000+16,500+

18,000+

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

2014 2015 2016 2017 2018 F

Keys under management

Source: Management

In FY17, Mantra added six properties to its portfolio, including the Ala Moana Hotel by Mantra in Hawaii. This acquisition was completed in July 2016 for a contracted purchase price of circa US$52 million. The hotel is located next to the Ala Moana shopping mall, which is a popular tourist destination as it is one of the largest open-air malls in the world. The Ala Moana Hotel by Mantra is part of the Resorts segment and is operated under the MLR model. The hotel contributed revenues of A$56.4 million and EBITDA of A$7.9 million in FY17. However, Ala Moana Hotel by Mantra experienced challenging market conditions in H1FY18 due to reduction of conference events and increased supply of renovated product in local area.

In November 2017, Mantra completed the acquisition of the Art Series Hotel Group which comprises seven luxury hotels, inspired and dedicated to Australian contemporary artists with over 1,000 hotel suites and apartments. These hotels are recognised in Mantra’s CBD segment and are operated under Lease and MLR models. These hotels are expected to contribute circa A$7.0 million EBITDA in the first full year of ownership, with a stabilised EBITDA between A$8.5 to 9.0 million29.

These two acquisitions are particularly significant for Mantra as they represent two of the largest purchases by the Group since the IPO in 2014 and have enabled the Company to establish a presence in new target markets.

Historically, bolt-on acquisitions have proven particularly value accretive for Mantra Shareholders as the acquisition EBITDA multiple paid is usually at a discount to the Mantra’s EBITDA multiple implied in the ASX trading prices.

The Company has already secured the following Scheduled Acquisitions which are expected to come online over the next few years:

29 As announced by Mantra on ASX dated 7 August 2017.



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Scheduled Acquisitions Expected keysProperty name Location Segment in building Expected start datePeppers Silo Launceston, TAS CR&D 108 H2FY2018Mantra City Road Melbourne CBD 469 May-18Mantra Albury Riverina, NSW CR&D 146 Apr-18Mantra Southport Sharks Gold Coast, QLD Corporate 100 Apr-18FV Stage 2, Brisbane Brisbane CBD NA May-19Mantra 900 Hay Street Perth CBD 220 Nov-19Peppers Southbank Melbourne CBD 164 Jun-20Mantra Epping Melbourne CR&D 212 Late 2019Peppers Queenstown Queenstown, New Zealand CR&D 260 HYFY2021Mantra Sky Hotel Tekapo Lake Tekapo, New Zealand CR&D 100 Jun-20Mantra Wallaroo Shores Yorke Peninsula, SA CR&D 100 Mar-20Mantra M-City Melbourne CBD 250 Late 2019 Source: Management

We note that over the last six years, Mantra also divested circa 30 properties to improve the quality of its portfolio and brand value. Mantra typically explores the divestment of a property where it comprises a low proportion of rooms in the letting pool or becomes economically unviable.

4.5 Distribution strategy and IT platform

Over the last five years, Mantra has invested significant resources to build an integrated and automated distribution platform which allows, amongst other features, continual analysis of supply and demand dynamics and adjustments to pricing and availability information. Mantra’s IT platform is premised around the internally managed central reservation system (“MGRES”) which contains all rates and inventory for the Group and directly links in real time to both Manta Group websites and Mantra Group’s external distribution platform. This system provides links to loyalty programs, accounting systems, reservation call centres and data analytics through consolidated data warehousing. MGRES is easily scalable with the ability to add new properties at marginal costs.

Mantra employs a multi-channel sales strategy aimed at maximising those distribution channels with the highest yield for Mantra and its stakeholders. Commissions on gross revenue are paid for bookings made through third party channels, including OTAs, which are becoming more prevalent in the market place.

As part of its distribution strategy, Mantra generates significant recurring revenues by entering into contracts for the provision of accommodation to corporates, government departments and airlines (i.e. crew accommodation).

4.6 Asset Management

This division actively manages and optimises the number of keys under management in the Mantra portfolio. A key value driver of Mantra’s business model is the high level of engagement with the property owners. All stakeholders are provided with information relevant to their investment on a regular basis.

Mantra pursues these objectives via tailored service divisions within the Asset Management team:

Owner Relations – provides apartment owners with support and personalised services. Apartment owners’ returns on investments is monitored with the aim of maintaining equitable and consistent returns with other apartment owners in the Mantra letting pool, in the same property and room category. The team is also responsible for the overall management of individual letting contracts with each apartment owner in each of the Mantra operated MLR properties.


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Asset growth and development – encompasses business development and project management initiatives which includes working closely with existing and new apartment owners within Mantra's MLR properties to manage and grow keys under management and incorporates apartment resales and management of Mantra’s permanent rental portfolio.

Strata Operations – includes the management of relationships with the bodies corporate and Mantra’s obligations to the bodies corporate under the relevant caretaking or management agreements and Mantra’s contractual rights to operate onsite letting services.

Compliance – proactively managing and maintaining Mantra’s letting agent obligations in an efficient and ‘best practice’ manner by providing ongoing training, legislative and ‘best practice’ support to the operational teams.

Refurbishment –an in-house refurbishment team works with interior designers and project managers to provide either complete apartment furniture packages or ad-hoc replacement items for apartments on behalf of apartment owners. The purpose is to provide competitively priced products on a room by room basis aimed at maintaining consistency of brand. Under the MLR structure, in general, costs associated with apartment refurbishment are largely funded by owners.



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4.7 Financial information

4.7.1 Financial performance

The following table summarises the Company’s audited consolidated statements of comprehensive income for the financial years ended 30 June 2016 (“FY16”) and 30 June 2017 (“FY17”) and the reviewed consolidated statement of comprehensive income for the 6 months ended 31 December 2017 (“H1FY18”):

Consolidated statements of comprehensive income for the period FY16 FY17 H1FY18A$'000 Audited Audited ReviewedRevenue from continuing operations 606,076 688,973 366,223Other income 60 - 23Total revenue and other income 606,136 688,973 366,246Growth 1 21.5% 13.7% 2.8%

Operating expenses (192,803) (216,775) (111,279)Administration Expenses (13,011) (15,784) (8,103)Employee Benefit Expense (196,568) (233,364) (125,335)Occupancy and Utilities Expenses (113,932) (121,840) (64,917)Reported Underlying EBITDA 89,822 101,210 56,612Underlying EBITDA margin 14.8% 14.7% 15.5%

Transaction costs associated with business combinations (7,258) (1,749) (2,661)Net Impairment (charge)/ reversal 2,129 1,445 -Reported EBITDAI 84,693 100,906 53,951EBITDAI margin 14.0% 14.6% 14.7%

Depreciation and Amortisation Expenses (23,299) (27,666) (14,607)Reported EBIT 61,394 73,240 39,344EBIT margin 10.1% 10.6% 10.7%

Net Finance Costs (5,176) (4,658) (2,600)Net Profit before tax 56,218 68,582 36,744Income tax (expense)/benefit (19,069) (22,985) (11,606)Net profit/(loss) 37,149 45,597 25,138Net profit margin 6.1% 6.6% 6.9%

Key operational metricsAverage Room Rate (A$) 169.14 175.24 177.08 Occupancy % 78.1% 79.5% 81.9%RevPAR 132.10 139.28 145.07 Total Available Rooms ('000s) 4,234.1 4,645.0 2,409.0Source: S&P Global and ManagementNote 1: Revenue growth in H1 FY18 represents growth over the previous corresponding period i.e. the 6 months ending 31 December 2017.

In relation to the above, we note the following:

Over the FY16 to FY17 period underlying EBITDAI increased by 12.7% reflecting completion of a series of major acquisitions over the period which represented approximately 11% of total revenue in FY16 and 8.6% in FY17.

RevPAR and occupancy rates both increased A$139 per room and 79.50% in FY17 mainly driven by the Resorts division.

The group’s underlying EBITDAI margin was fairly stable at around 15%.

In relation to the financial performance in H1FY18, we note the following:

The Company completed the acquisition of seven hotels trading under the Art Series brand for circa A$52 million. Three additional properties were also acquired during the period.


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The CBD division reported relatively stronger revenue and EBITDAI compared with the previous corresponding period due to the impact of recent acquisitions and increased demand.

The Resorts division observed fairly limited growth, with a marginal increase in revenue and RevPAR. The Australian and New Zealand operations continue to benefit from strong short term travel demand, whereas Ala Moana Hotel by Mantra in Hawaii experienced softer than anticipated trading due to increased competition in the region and reduced demand in the convention centre market. Overall underlying EBITDAI decreased by circa 6.1% over the previous corresponding period.

The CR&D division observed marginally lower revenues and underlying EBITDAI during H1FY18. The underlying EBITDAI reduction was mainly the result of one-off termination fees received in the previous corresponding period, which did not repeat in H1FY18.



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4.7.2 Financial position

The consolidated statements of financial position of Mantra as at 30 June 2016, 30 June 2017 and 31 December 2017 are summarised in the table below.

Consolidated statements of financial position as at 30-Jun-16 30-Jun-17 31-Dec-17A$'000 Audited Audited ReviewedCurrent assetsCash and Cash Equivalents 117,091 62,923 64,316 Trade and Other Receivables 45,678 54,125 87,321 Current Tax Asset - 1,686 1,606 Inventories 2,826 3,099 3,527 Other Current Assets 11,503 8,321 3,361 Total current assets 177,098 130,154 160,131

Non-current AssetsProperty, Plant and Equipment 121,869 157,658 168,184 Deferred Tax Assets - 356 356 Receivables 660 639 635 Intangible Assets 469,397 513,352 571,833 Other Non-current Assets - 4,100 4,100 Total non-current assets 591,926 676,105 745,108

Total assets 769,024 806,259 905,239 Current liabilitiesTrade and Other Payables 44,785 52,595 64,952 Employee Benefits Obligations 16,968 16,554 16,370 Derivative Financial Instruments - 13 - Current Tax Liabilities 2,260 2,348 - Advance deposits 25,329 26,103 43,689 Total current liabilities 89,342 97,613 125,011

Non-current liabilitiesBorrowings 125,097 135,252 186,355 Deferred Tax Liabilities 87,844 91,930 104,789 Provisions 3,674 3,516 3,853 Total non-current liabilities 216,615 230,698 294,997

Total liabilities 305,957 328,311 420,008

Net assets 463,067 477,948 485,231

EquityCommon Stock - Par Value 412,321 414,252 414,252 Retained Earnings/accumulated Losses (179,339) (164,924) (157,632) Other Reserves 230,085 228,620 228,611 Total equity 463,067 477,948 485,231

Total Liabilities & Shareholders Equity 769,024 806,259 905,239 Source: S&P Global

We note the following in relation to Mantra’s balance sheet:

Property, Plant and Equipment: includes land and buildings, plant and equipment, and leasehold improvements. The increase in Property, Plant and Equipment is mostly due to maintenance and refurbishments as well as the Art Series acquisition.

Intangible Assets: primarily consists of goodwill, intellectual property, brand names, MLRs, lease rights and hotel management rights. Lease rights recognised in the financial statements are a result of an acquisition made prior to IPO. The increase since 30 June 2017 is due to the acquisition of ten new properties.

Deferred Tax Liabilities: mainly represent timing differences in relation to the amortisation of intangible assets.

Other Liabilities: it includes advance deposits in relation to forward bookings.


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Net Borrowings: The cash balance has slightly increased compared with the 30 June 2017 balance whereas the gross borrowings have increased from A$135 million to A$186 million primarily as a result of the Art Series and other acquisitions.

4.7.3 Cash flow statement

Mantra’s cash flow statements for FY16, FY17 and H1FY18 are set out below:

Consolidated statements of cash flows for the period FY16 FY17 H1FY18A$'000 Audited Audited ReviewedCash flows from operating activities Receipt from customers 655,629 738,797 383,905Payments to suppliers and employees (568,655) (646,386) (330,082)

86,974 92,411 53,823Payments for business combinations transaction costs (5,313) (922) (699)Interest paid (5,457) (5,062) (2,740)Income taxes paid (22,521) (23,885) (14,404)Interest received 731 779 432Net cash inflow from operating activities 54,414 63,321 36,412

Cash flows from investing activities Payments for property, plant and equipment (15,576) (14,117) (10,812)Payments for intangible assets (5,690) (8,134) (8,272)Proceeds from sale of property, plant and equipment 214 359 350Payments of deposits for post year end business combinations (8,342) - -Payments for business combinations net of cash acquired (98,406) (67,582) (49,119)Payments of deposits for other acquisitions - (8,010) (220)Proceeds from sale of intangible assets 1,538 297 -Net cash outflow from investing activities (126,262) (97,187) (68,073)

Cash flows from financing activities Proceeds from issues of shares and other equity securities 113,731 191 -Proceeds from borrowings 55,000 15,000 51,000Payment of share transaction costs (2,463) - -Repayment of borrowings (35,000) (5,000) -Borrowing costs (773) (153) (100)Dividends paid to company's shareholders (24,669) (29,441) (17,846)Net cash (outflow)/inflow from financing activities 105,826 (19,403) 33,054

Net (decrease)/increase in cash and cash equivalents 33,978 (53,269) 1,393Cash and cash equivalents at the beginning of the financial year 85,059 117,091 62,923Effects of exchange rate changes on cash and cash equivalents (1,946) (899) -Cash and cash equivalents at end of year 117,091 62,923 64,316Source: S&P Global

Cash flow from operating activities was strong with a cash conversion of EBITDAI30 of circa 67% in H1FY18.

The Company incurs maintenance capital expenditure on only that part of the property which it owns (i.e. reception desks, restaurants, conference rooms and other common areas). Over the last three years, 64% of this capital expenditure was incurred towards refurbishments and replacements of these areas with the balance being spent towards maintenance and upgrades required to the Company’s IT systems.

Business combinations payments relate to acquisitions accounted for under the Australian Accounting Standard 3 Business Combinations.

Mantra paid 6 cents per share in dividends in relation to the final dividend for FY17. For the H1FY18, the Company did not declare an interim dividend.

30 Cash conversion is calculated as cash flow from operations (adjusted for significant items) / Normalised EBITDA.



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4.8 Share capital structure

As at the date of this report, Mantra had 297,428,917 Mantra Shares held publicly and 1,106,061 Performance Rights issued to employees. These Performance Rights have been issued to key executives of the Company under a Long-term Incentive plan with a three year vesting period, depending upon the satisfaction of performance criteria. We note that based on the terms of the SIA, the vesting of the performance rights into Mantra Shares will be accelerated and completed prior to the Scheme record date.

4.8.1 Share price and market analysis

Our analysis of the daily movements in Mantra’s trading share prices and volume for the period from March 2015 to October 2017 is set out below:

Year Month2,017 11

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

0.0

1.0

2.0

3.0

4.0

5.0

6.0

VolumeShare price (A$)Historical share trading prices and volume for Mantra

Volume Share price

23 4

5 6 78

9 14

10

111

12 and 13

Source: S&P Global, GTCF analysis

The following table describes the key events which may have impacted the share price and volume movements shown above.

Event Date Comment

1 Mar-15

Mantra acquired Outrigger Hotels & Resorts Pty Ltd for $29.5 million which included 4 properties in holiday destinations where Mantra already had an existing presence, and included 984 keys under management and the freehold title to real estate like the restaurants, conference facilities and other common areas. In order to fund the acquisition, Mantra announced a $50 million fully underwritten institutional placement.

2 Apr-15

2 shareholders of Mantra, EV Hospitality NV (“EVHNV”) and UBS Australia Holdings Pty Ltd (“UBS”) agreed to a sell a total of 27 million shares (25% of their escrowed shares), at a price of $3.38 (erstwhile share price $3.39). Post the share sale, EVHNV and UBS retained 81 million shares, representing 30.4% of total shares outstanding.

3 May-15 Mantra revised the FY15 EBITDA guidance from $69.5m to within a range of $71m - $73m, and NPAT from $32.6m to a range of $35m – $36.5m.

In addition, Mantra secured the management and caretaking rights and associated real estate for the 77-level Soul residential tower in Surfers Paradise.

4 Aug-15 Declaration of dividend 5.0 cents per share.

5 Sept-15 Mantra added to the S&P/ASX 200 index.


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Event Date Comment

6 Feb-16 The company announced positive FY 2015 half year results. Revenue and EBITDAI increased by 21.7% and 26.1% respectively over the previous corresponding period. Further, occupancy improved from 78.1% to 79.9% over the period, with a strong pipeline of development opportunities.

7 May-16 Mantra announced the acquisition of Ala Moana Hotel by Mantra from ALM Management Services LLC for a purchase price of US$52.5 million. The acquisition comprised a total of 1,086 keys under management, resulting in an acquisition price per key of approximately US$48,300. Ala Moana Hotel by Mantra was expected to contribute approximately US$7 million in the first year of full ownership, before taking into consideration possible synergies.

Mantra also raised $107 million through a fully underwritten institutional placement to fund the Ala Moana acquisition and other identified pipeline opportunities. The placement involved the issue of shares at an underwritten price of $3.95 per share, representing a 1% discount to the last closing price on 17 May 2016. The placement represented 10.1% of Mantra Group’s issued share capital after completion.

A share purchase plan was issued along with the placement, under which existing shareholders were able to acquire up to $15,000 worth of additional shares

8 June-16 The CFO of the Company, Steven Becker, provided notice of his intention to leave Mantra to pursue a new opportunity in a non-related industry.

9 Aug-16 The Company announced positive FY2016 results. Revenue and EBITDAI increased by 21.6% and 13.0% respectively over FY15. EBITDAI margin increased by 0.1% to 14.8%, with new properties contributing $8.4 million to EBITDAI. Further, occupancy and RevPAR improved from 76.4% and $125.39 in FY 2015 to 78.1% and $125.39 in FY2016.

10 Feb-17 The Company announced positive results for the half year ended 31 December 2016. Revenue increased by 15.9% and EBITDAI increased by 10.3% over the previous corresponding period. However, EBITDAI margin reduced by 0.8% compared to that achieved in the half year ending 31 December 2015. Occupancy and RevPAR improved from 79.9% and $171.14 in 2015 to 82.2% and $176.33 in 2016.

11 Mar-17 In response to media speculation regarding a possible acquisition or stake sale, Mantra announced that it was not in discussions with any potential buyers. The Company’s share price closed at $2.93 from $2.61 the previous day, with volume of shares traded increasing by 433% from the previous day.

12 Aug-17 Mantra announced the acquisition of The Art Series Hotel Group for $52.5 million. The Art Series Hotel Group consists of 7 properties (under leasehold and MLR operating models) comprising over 1,000 hotel rooms and apartment. The Art Series is expected to contribute $7 million to EBITDA in the first full year of ownership, with a stabilised EBITDA between $8.5 million to $9.0 million.

13 Sept-17 Mantra released the full year results for FY2017

- Group revenue and underlying EBITDAI both increased from FY 2016 by 13.7% and 12.7% respectively.

- All segments of the Company achieved positive movements in revenue, with the largest increase coming from the Resorts division (29.6%). Growth in the Resorts segment was supported by recent acquisitions including Ala Moana Resort, Mantra Residences at Southport Central and Mantra the Observatory.

14 Oct-17 Mantra confirmed it received an indicative and non-binding proposal from Accor S.A. at a cash consideration of $3.96 cash per share, representing a 29.2% premium over the 30 day volume weighted average price, and a FY17 EV/EBITDA multiple of 12.4x.



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The monthly share price performance of Mantra since February 2017 and the weekly share price performance of Mantra over the last 16 weeks is summarised below:

Mantra Group Limited Average

High Low Close volume $ $ $ 000'

Month ended Feb 2017 27 28/02/2017 3.100 2.690 2.700 10,676 Mar 2017 30 31/03/2017 3.040 2.580 2.920 12,152 Apr 2017 29 30/04/2017 2.995 2.800 2.820 5,581 May 2017 30 31/05/2017 3.100 2.800 2.920 6,829 Jun 2017 29 30/06/2017 3.150 2.910 3.050 8,199 Jul 2017 30 31/07/2017 3.220 2.910 3.010 8,723 Aug 2017 30 31/08/2017 3.070 2.705 2.990 9,613 Sep 2017 29 30/09/2017 3.220 2.880 3.190 7,877 Oct 2017 30 31/10/2017 3.930 3.170 3.900 29,343 Nov 2017 29 30/11/2017 3.950 3.890 3.910 7,433 Dec 2017 30 31/12/2017 3.920 3.900 3.900 7,488 Jan 2018 30 31/01/2018 3.920 3.880 3.900 11,474 Feb 2018 27 28/02/2018 3.920 3.830 3.860 15,459

Week ended17 Nov 2017 3.920 3.900 3.900 3,613 24 Nov 2017 3.910 3.890 3.900 7,585 1 Dec 2017 3.920 3.900 3.900 13,087 8 Dec 2017 3.920 3.900 3.910 7,345 15 Dec 2017 3.915 3.900 3.900 9,663 22 Dec 2017 3.910 3.900 3.900 7,803 29 Dec 2017 3.910 3.900 3.900 2,444 5 Jan 2018 3.910 3.900 3.910 1,707 12 Jan 2018 3.920 3.900 3.900 5,809 19 Jan 2018 3.910 3.880 3.880 22,754 26 Jan 2018 3.900 3.880 3.880 13,575 2 Feb 2018 3.910 3.880 3.910 15,592 9 Feb 2018 3.920 3.860 3.880 12,970 16 Feb 2018 3.900 3.830 3.850 21,330 23 Feb 2018 3.890 3.840 3.870 13,790 2 Mar 2018 3.880 3.850 3.870 9,259


Share Price

We have considered the recent trading share prices of Mantra for the purpose of our valuation of Mantra. Refer to Section 6.1 for further details and analysis on the trading prices of Mantra.


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4.8.2 Top shareholders

We have provided in below table the top 10 shareholders of Mantra as at 25 February 2018:

Mantra - Top 10 shareholdersName of shareholder Number of shares % shareholdingCredit Suisse 19,535,266 6.6%Alpine Associates Management Inc. 15,775,892 5.3%BT Investment Management Limited 15,747,833 5.3%Yarra Funds Management Limited 14,863,797 5.0%Ellerston Capital Limited 14,379,883 4.8%Bennelong Funds Management Ltd. 13,991,393 4.7%Goldman Sachs Asset Management Australia Pty Ltd 13,815,718 4.6%Norges Bank Investment Management 13,520,846 4.5%Janus Henderson Group plc 13,222,195 4.4%AustralianSuper Pty Ltd 12,551,961 4.2%Top 10 shareholders 147,404,784 49.6%Other minority shareholders 150,024,133 50.4%Total 297,428,917 100.0% Source: S&P Global

4.8.3 Dividend payout

We note that Mantra has paid dividends every year since its ASX listing in 2014. Mantra’s historical dividend distribution to ordinary shareholders is set out below:

Mantra Group LimitedDividend policy FY20144 FY2015 FY2016 FY2017Dividend on ordinary shares (cents/ share)1 68.0 10.0 10.5 11.0 Payout ratio² NA 70.4% 76.0% 71.9%Dividend yield³ 37.8% 2.9% 3.0% 3.6% Source: S&P Global Note 1: Dividend payouts are based on the results declared for the previous year although these may be paid in the current year. Note 2: Dividend paid out per share (“DPS”) divided by Earning per Share (“EPS”) Note 3: Dividend yield has been calculated by dividing the annual dividend by the trading prices at year-end of $1.80 in FY14, $3.42 in FY15, $3.50 in FY16 and $3.05 in FY17. Note 4: Dividend of 68.0 cents per share in FY14 represents pre-IPO dividend.

In its FY17 results announcement, the Company declared a final dividend of 6 cents per share, bringing the total dividend for FY17 to 11 cents per share. This dividend was paid on 6 October 2017, prior to the announcement of the Scheme.

Before the Scheme becomes effective, the Company will pay a Special Dividend of A$0.16 per share. We understand that the Special Dividend above will be determined by the Board of Mantra and confirmed before the first court hearing and circulation of the Scheme booklet to Mantra Shareholders.



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5 Valuation methodologies

5.1 Introduction

As discussed in Section 2.2, our fairness assessment involves comparing the Total Cash Consideration of $3.96 per Mantra Share to the fair market value of Mantra Shares on a control and fully diluted basis.

Grant Thornton Corporate Finance has assessed the value of Mantra using the concept of fair market value. Fair market value is commonly defined as:

“the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length.”

Fair market value excludes any special value. Special value is the value that may accrue to a particular purchaser. In a competitive bidding situation, potential purchasers may be prepared to pay part, or all, of the special value that they expect to realise from the acquisition to the seller.

5.2 Valuation methodologies

RG 111 outlines the appropriate methodologies that a valuer should generally consider when valuing assets or securities for the purposes of, amongst other things, share buy-backs, selective capital reductions, schemes of arrangement, takeovers and prospectuses. These include:

Discounted cash flow and the estimated realisable value of any surplus assets (“DCF Method”).

Application of earnings multiples to the estimated future maintainable earnings or cash flows of the entity, added to the estimated realisable value of any surplus assets (“FME Method”).

Amount available for distribution to security holders on an orderly realisation of assets (“NAV Method”).

Quoted price for listed securities, when there is a liquid and active market (“Quoted Security Price Method”).

Any recent genuine offers received by the target for any business units or assets as a basis for valuation of those business units or assets.

Further details on these methodologies are set out in Appendix A to this report. Each of these methodologies is appropriate in certain circumstances.

RG111 does not prescribe any above methodologies as the method(s) that an expert should use in preparing their report. The decision as to which methodology to use lies with the expert based on the expert’s skill and judgement and after considering the unique circumstances of the entity or asset being valued. In general, an expert would have regard to valuation theory, the accepted and most common market practice in valuing the entity or asset in question and the availability of relevant information.


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5.3 Selected valuation methods

In our assessment of the fair market value of Mantra, Grant Thornton Corporate Finance has relied on a number of valuation methodologies as outlined below:

Quoted Security Price Method: the Quoted Security Price Method is based on the Efficient Market Hypothesis which assumes that the share price at any point in time reflects all publicly available information and will change when new information becomes publicly available. We note that in the absence of a takeover or other share offers, the trading share price represents the value at which minority shareholders could realise their portfolio investment. Accordingly, Grant Thornton Corporate Finance has selected the Quoted Security Price Method based on the Mantra Share price before the announcement of the Indicative Proposal as one of the approaches to assess the fair market value of Mantra.

DCF Method: Grant Thornton has built 10 year cash flows projections for the Company (“GT Model”) for the purpose of assessing 100% of the equity value of Mantra. The assumptions underlying the cash flows projections included in the GT Model are based on the impairment model as at 30 June 2017 (“Impairment Model”) and internal Management cash flows projections up to FY21 (“Internal Model”). We have extended the GT Model compared with the Internal Model in order to assess the terminal value when the business has reached a steady state.

We believe DCF Method is appropriate due to the following:

- Mantra has a long history growing profitability.

- The medium-term growth of the keys under management is based on the Scheduled Acquisitions.

- Working capital and capital expenditure requirements can be modelled in a robust way.

- The DCF Method is one of the most commonly used methodologies for the valuation of hotel companies.

EBITDA Multiple Method: Grant Thornton Corporate Finance has selected the EBITDA capitalisation approach to assess the fair market value of Mantra. We have adopted the EBITDA multiple approach due to the following key considerations:

- EBITDA is a frequently used valuation metric to assess the value of a company as it is not affected by differences in earnings caused by varying capital structures and depreciation and amortisation policies.

- Companies in the hotel management sector (including Mantra) typically adopt EBITDA metrics to assess the value of property acquisitions.

- Mantra is an asset-light business that does not own any of its hotels (apart for limited freehold assets in relation to common areas).

- The Company is a mature business with a history of profitability, which is expected to continue over the long term.



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- Availability of transactional evidence and listed comparable companies for the calculation and analysis of implied EBITDA multiples.

The EBITDA capitalisation approach involves the following key processes:

- Selecting an appropriate level of EBITDA, having regard to the historical and budgeted operating results after adjusting for non-recurring items of income and expenditure, and other known factors likely to affect the future operating performance of the business.

- Determining appropriate EV/EBITDA multiples having regard to the trading multiples of comparable companies and comparable transaction evidence, and the specific circumstances of Mantra.


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6 Valuation assessment of Mantra Shares

6.1 Valuation summary

As discussed in Section 5.3, we have assessed the fair market value of Mantra Shares on a control basis using the Quoted Security Price Method, FME Method and DCF Method. We have set out in the table below a summary of our assessed valuation range.

Valuation assessment summary (control basis) SectionA$ per share Reference Low HighQuoted Security Price Method 6.2 3.90 4.48 DCF Method 6.3 3.85 4.71 EBITDA Multiple Method 6.4 3.82 4.41 GT assessed fair market value per share (control basis) - Average 3.86 4.53 Source: GTCF calculations

3.00 3.16 3.32 3.48 3.64 3.80 3.96 4.12 4.28 4.44 4.60 4.76 4.92

EBITDA Multiple Method

DCF Method

Quoted Security Price Method

Fairness assessment (A$ per share)Total Cash Consideration: A$3.96 per share

6.2 Quoted Security Pricing Method

In our assessment of the fair market value of Mantra Shares, we have had regard to the trading prices of the listed securities on the ASX in the period prior to the Indicative Offer on 9 October 201731. Set out in the table below is a summary of our assessed valuation range:

Valuation summary - Quoted Security Price Method Section

A$ per share Reference Low HighAssessed value per Mantra Share based on trading prices (on a minority basis) 6.2.3 3.00 3.20 Control premium 6.2.4 30.0% 40.0%Assessed value per Mantra Share based on trading prices (on a control basis) 3.90 4.48 Source: S&P Global, GTCF calculations

The adopted value of Mantra based on the trading prices is an exercise of professional judgement that takes into consideration the depth of the market for the listed securities, volatility of the market price, and whether or not the trading prices are likely to represent the underlying value of Mantra. The following sections detail the analysis undertaken in selecting the share price range.

31 Mantra announced on 9 October 2017 that it had received an indicative, incomplete and non-binding offer from Accor at $3.96 per share.



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6.2.1 Liquidity analysis

In accordance with the requirements of RG111, we have analysed the liquidity of Mantra Shares before relying on them for the purpose of our valuation assessment. We have set out below the monthly trading volume of Mantra Shares since October 2016 as a percentage of the total shares outstanding as well as free float shares outstanding32.

Month end

Volume traded('000)

Monthly VWAP ($)

Total value of shares traded

($'000) Volume traded as %

of free float shares

Cumulative volume traded as % of

free float sharesVolume traded as % of total shares

Cumulative volume traded as % of

total shares

Oct 2016 38,387 3.3074 126,959 13.1% 13.1% 12.9% 12.9% Nov 2016 31,748 3.1919 101,337 10.9% 24.0% 10.7% 23.6% Dec 2016 31,860 3.0688 97,772 10.9% 34.9% 10.7% 34.3% Jan 2017 43,119 2.8989 124,998 14.7% 49.6% 14.5% 48.8% Feb 2017 42,703 2.8636 122,286 14.6% 64.3% 14.4% 63.2% Mar 2017 55,898 2.7502 153,731 19.1% 83.4% 18.8% 82.0% Apr 2017 22,324 2.8889 64,492 7.6% 91.0% 7.5% 89.5% May 2017 31,412 3.0036 94,348 10.7% 101.7% 10.6% 100.1% Jun 2017 36,077 3.0405 109,695 12.3% 114.1% 12.1% 112.2% Jul 2017 36,636 3.0617 112,167 12.5% 126.6% 12.3% 124.5% Aug 2017 44,218 2.8863 127,629 15.1% 141.7% 14.9% 139.4% Sep 2017 33,085 3.1019 102,628 11.3% 153.0% 11.1% 150.5%

Min 7.63% 7.51%Average 12.75% 12.54%Median 12.43% 12.22%Max 19.12% 18.81%Source: S&P Global and GTCF calculations

With regard to the above analysis, we note that:

The level of free float of Mantra Shares is circa 98.4%33. From October 2016 to September 2017, circa 150% of the free float shares were traded with an average monthly volume of 12.54% of the total free float shares. This indicates that the stock is liquid, and is well traded by large segments of the market. The Company is recognised as a major player in the industry and forms part of the S&P/ASX 200 Index as well as the accommodation and tourism sub-indices (e.g. S&P 500 Hotels, Resorts and Cruise Lines sub-index etc.).

In the absence of a takeover or alternate transactions, the trading prices represent the value at which minority shareholders could realise their portfolio investment.

Mantra complies with the full disclosure regime required by the ASX. As a result, the market is fully informed about the performance of Mantra.

Mantra stock is covered by several investment analysts who provide updates to the market on a regular basis.

We note that the large trading volumes in March 2017 were triggered by market speculation regarding possible corporate interest for Mantra. While the Company publicly confirmed that it was not in discussion with any interested parties, strong trading volumes and upward share price movement were recorded.

32 Free float Shares excludes those owned by Company employees, individual insiders, related parties and other strategic investors. 33 This comprises of the total shares outstanding (297,428,917) less the shares held by company employees and strategic corporate investors.


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As set out in the table below, the free float of Mantra Shares is consistent with or higher than most of the listed global peers.

Liquidity analysisCompany name Country Free float total shares1 free float shares1

Mantra Group Limited Australia 98.4% 12.5% 12.7%Marriott International, Inc. United States 84.8% 15.1% 17.8%Hilton Worldwide Holdings Inc. United States 67.2% 18.5% 27.5%InterContinental Hotels Group PLC United Kingdom 98.3% 6.2% 6.4%Wyndham Worldwide Corporation United States 98.3% 21.9% 22.3%Hyatt Hotels Corporation United States 29.8% 12.6% 42.2%Accor SA France 68.0% 7.2% 10.7%Shangri-La Asia Limited Hong Kong 31.7% 1.2% 3.9%Average (excluding Mantra) 68.3% 11.8% 18.7%Median (excluding Mantra) 68.0% 12.6% 17.8%

Average volume traded as a % of

Source: S&P Global, GTCF calculations Note 1: For the 12 months before the Indicative Offer.

In addition to the above, where a company’s stock is not heavily traded or relatively illiquid, the market typically observes a difference between the ‘bid’ and ‘ask’ price for the stock as there may be a difference in opinion between the buyer and seller on the value of the stock. As set out in the graph below, we note that the historical difference between the bid and ask price has been minimal in the twelve month period before the announcement of the Scheme.

1.502.002.503.003.504.004.505.005.50

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%Share price (A$)Spread %

Mantra: Spread between Bid and Ask price

Spread % Mantra share price (A$)

Source: S&P Global, GTCF calculations

Based on the analysis above, we have concluded that there is sufficient liquidity in Mantra’s trading prices for utilisation of the Quoted Security Price Method as required pursuant to RG111.

6.2.2 Valuation assessment of Mantra based on trading prices

As part of our valuation procedures based on the trading prices, we have first analysed the performance of Mantra trading prices compared with international peers and the ASX200 Index as outlined below.



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1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5Share price performance (rebased to Mantra's share price)

Mantra Peer index ASX 200 Total Cash Consideration

Announcement of Scheme


Note: Peer index comprises Marriott, Hilton, InterContinental, Wyndham and Hyatt

Mantra’s stock listed in June 2014 at $1.80 per share and then rose to circa A$5 per share by December 2015. Subsequently, the share price declined significantly to circa A$3 per share in January 2017, and continued trading between A$2.80 – A$3.10 per share up to the announcement of the Proposed Transaction. As part of our analysis, we have considered the historical trading prices of Mantra to understand the rationale for the historical volatility, in particular for that period when Mantra traded significantly above the Total Cash Consideration, in order to ensure that the timing of the Scheme is not opportunistic.

We believe the following factors are responsible for the volatile movement in Mantra’s stock price:

Since its IPO, Mantra was considered and valued by the market as a growth stock given its successful track record of executing and integrating acquisitions and the market opportunities to continue to do so. We note that Mantra historically acquired individual or portfolios of MLR properties at prices ranging between 3x-6x EBITDA of the properties, however, the Company historically traded at a rolling NTM34 EBITDA multiple between high single digits to low-mid teens ensuring significant value arbitrage on each acquisition. The market’s view of Mantra as a growth stock was also well supported by the actual financial performance of the Company. Underlying EBITDAI increased from $61.3 million in FY14 to $101.2 million in FY17 and underlying NPAT from a loss of $0.3 million in FY14 to $47.2 million in FY17.

In order to consider the relative valuation of Mantra compared with listed peers, we have analysed in the graph below the historical NTM EBITDA multiple35 of Mantra compared with the Peer Index36 and the ASX200 Index.

34 Next twelve months (“NTM”). 35 This is calculated as the daily enterprise value divided by consensus estimate of EBITDA for the next twelve months. 36 The peers included above are Marriott, Hilton, InterContinental, Wyndham and Hyatt.


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6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

EV/ E

BITD

A mu

ltiple

(times

)

Rolling LTM EBITDA multiple

Mantra LTM Median peer LTM S&P/ ASX 200

Announcement of Scheme

Speculative spike in Mantra's trading price


Note: The peers included above are Marriott, Hilton, InterContinental, Wyndham and Hyatt.

As set out above, during the period between April 2015 and August 2016, Mantra NTM EBITDA multiple was at a circa 30% premium to the listed international peers which, in our opinion, is difficult to sustain in the long term having regard to difference in scale of operations, geographic footprint, EBITDA margins and brand value of the global players included in the Peer Index. Specifically, we note that based on the trading prices on 31 December 2015 of $5.05 per share, Mantra NTM EBITDA multiple was circa 15.0x.

In December 2015, a number of investment analysts downgraded their recommendations in relation to Mantra and highlighted a number of risk factors such as:

Significant premium to international listed peers.

The multiple arbitrage on bolt-on acquisitions was compressing.

Signs that the attractive returns generated by hotel and resorts operators were attracting increased supply and investment into the industry, including the shadow supply represented by Airbnb.

As outlined in the graph below, hotel stocks around the world saw a significant decline in value in 2016, as the market viewed the rise of short-term accommodation providers negatively. Specifically, we note the release of a broker report37 in April 2016 highlighting the risks faced by the hotel industry due to the growing presence of short-term accommodation providers like Airbnb. Mantra’s share price dropped by 7% the day after the broker’s report was released.

37 Citigroup Inc – “Mantra Group Limited: Is Airbnb the new Mantra?”, 20 April 2016



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3.00

3.50

4.00

4.50

5.00

5.50Share price performance (rebased to Mantra's share price)

ASX 200 Mantra Marriott Hilton InterContinental Wyndham Hyatt

Source: S&P Global

As illustrated in the graph in Section 6.2.1, we observed a material difference in the ‘bid’ and ‘ask’ price for Mantra Shares in period from IPO to June 2016 which seems to indicate a degree of reluctance of investors to buy shares in line with the trading prices. The difference between the ‘bid’ and ‘ask’ price disappeared when Mantra started to trade at prices more in line with the period before the announcement of the Scheme.

Based on the above analysis, we are of the opinion that the reduction in Mantra trading prices since the peak achieved in 2015 and the first half of 2016 is the result of a general repricing of Mantra shares to take into account specific risks and changes in the overall market. Accordingly, we are of the opinion that the timing of the Scheme is not opportunistic and the trading prices of Mantra before the announcement of the Scheme represent the fair market value of the Company on a minority basis at that point in time.

6.2.3 Conclusion on the selected valuation range

Set out below is a summary of the VWAP of Mantra Shares before the announcement of the Indicative Proposal.

Low High VWAPPrior to 09 Oct 2017 (Announcement of Indicative Proposal1)5 days prior 3.170 3.265 3.217 10 days prior 3.120 3.265 3.181 30 days prior 2.675 3.265 3.066 2 months prior 2.735 3.265 3.039 3 months prior 2.705 3.265 3.005 4 months prior 2.705 3.265 3.018 5 months prior 2.705 3.265 3.016 6 months prior 2.705 3.265 3.004 Source: S&P Global and GTCF calculations

VWAPA$ per share

Note 1: We note that while the SIA was formally executed on 12 October 2017, the Company on 9 October 2017 confirmed the receipt of the Indicative Proposal. Note 2: We have reduced the share prices for 1 week prior to 4 September 2017 by $0.06 to reflect that Mantra was trading cum-dividend before this date.


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Based on the analysis undertaken in Section 6.2.1 and 6.2.2 above, we have assessed the fair market value of Mantra Shares based on the trading prices between A$3.00 and A$3.20 per share. We have set out the recent historical share price of Mantra Shares for the 12 month period before the announcement of the Scheme.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1.5

2.0

2.5

3.0

3.5

4.0

Share trading volume (in m

illions)

Shar

e pric

es (A

$ per

shar

e)

Mantra - Historical share price and volume

Selected range:A$3.00 - A$3.20


6.2.4 Premium for control

Evidence from studies suggests that successful takeovers in Australia have completed based on premium for control in the range of 20% to 40%.

As shown in the table below we have considered the premium for control paid by acquirers in recent transactions in the hotel industry.

Control premium assessment - Recent transactions Deal Date Target Bidder Stake (% ) Value (A$'m) 1-day 1-month

08-Dec-17 Millennium & Copthorne Hotels City Developments Limited 35% 3,584.8 36.3% 33.6%

09-Jul-17 ClubCorp Holdings, Inc Apollo Global Management, LLC 100% 1,480.4 30.7% 25.4%

01-Apr-17 Intrawest Resorts Holdings, Inc KSL Capital Partners and Aspen Skiing Company 100% 1,259.7 40.0% 23.9%

24-Oct-16 Hilton Worldwide HNA Tourism Group 25% 8,549.9 14.6% 14.5%16-Nov-15 Starwood Hotels & Resorts Marriott International 100% 20,831.2 27.1% 20.4%21-Mar-11 Oaks Hotels & Resorts Minor International 80% 159.0 100.0% 73.3%Median premium 33.5% 24.7%

Premia to trading price1

Source: Mergermarket and GTCF analysis

Note 1: Premia have been calculated based on the share price of the target before market speculation of a potential transaction.

Given the distribution of the control premium in the Australian market and in the hotel industry, we have applied in our valuation assessment a control premium between 30% and 40%.



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6.3 DCF Method

For the purpose of our valuation assessment of Mantra utilising the DCF method, Grant Thornton Corporate Finance developed the GT Model based on a critical review and consideration of the following:

Historical financial performance of Mantra.

Budget for FY18 which has been approved by the Board and prepared after an extensive bottom-up budgeting process. The FY18 Budget represents the starting point for the GT Model.

Financial projections included in the Impairment Model.

Management projections for FY19 to FY21 included in the Internal Model.

Scheduled Acquisitions up to FY20 and expected financial contribution. We note that the Scheduled Acquisitions are in relation to properties where the underlying legal agreements have already been executed and they will join the portfolio subject to customary completion terms.

Various investments’ analysts provide regular market updates about Mantra’s historical and expected performance.

Key industry risks, growth prospects and general economic outlook.

Whilst Grant Thornton Corporate Finance believes that the assumptions underlying the GT Model are reasonable and appropriate to be adopted for the purpose of our valuation, in accordance with the requirements of RG111, we have not disclosed them in our IER as they contain commercially sensitive information and they do not meet the requirements for presentation of prospective financial information as set out in ASIC Regulatory Guide 170 “Prospective Financial Information”.

In accordance with the requirement of RG 111, we have undertaken a critical analysis of the projections before integrating them into the GT Model and relying on them for the purpose of our valuation assessment. Specifically, we have performed the following analysis:

Conducted high level checks, including limited procedures in relation to the mathematical accuracy of the Impairment Model and Internal Model.

Performed a broad review, critical analysis and benchmarking with the historical performance of Mantra and current trends in the industry.

Held discussions and interviews with Management of the Company and its advisor to discuss the Internal Model and the Impairment Model.

Reviewed and benchmarked revenue growth rates and earnings margins with listed peers.

The assumptions adopted by Grant Thornton Corporate Finance do not represent projections by Grant Thornton Corporate Finance but are intended to reflect the assumptions that could reasonably be adopted by industry participants in their pricing of similar businesses. We note that the assumptions are inherently subject to considerable uncertainty and there is significant scope for differences of opinion. It should be noted that the value of Mantra could vary materially based on changes to certain key assumptions.


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Accordingly, we have conducted further sensitivity analysis below to highlight the impact on the value of Mantra Shares caused by movements to certain key assumptions.

The table below sets out a summary of our valuation assessment of Mantra based on the DCF Method:

DCF Method - valuation summary SectionA$ '000s Reference Low HighEnterprise value on a contol basis (including synergies) 6.3.1 and 6.3.2 1,273,842 1,529,151Less: Outstanding consideration for the Art Series acquisition Note 1 (1,513) (1,513)Less: Net debt as at 31 December 2017 6.3.3 (122,039) (122,039)Equity value (control basis) 1,150,290 1,405,599Number of outstanding shares ('000s) (fully diluted) 4.8.1 298,535 298,535Value per share (control basis) (A$ per share) 3.85 4.71 Source: GTCF analysis

Note 1: The Company expects to incur the outstanding consideration for the Art Series acquisition between January and March 2018.

6.3.1 GT Model – Key valuation assumptions

The key underlying assumptions adopted in our DCF Method are outlined below:

FY18 Budget: We have assumed the FY18 Budget as a starting point, which we have considered reasonable due to the following:

- Mantra released FY18 EBITDAI guidance to the market between A$107 million and A$115 million in constant currency terms.

- Mantra indicated in the H1FY18 that the business is performing to expectations.

- Mantra is covered by 10-12 investment analysts who provide regular market updates in relation to the Company. After the release of H1 FY18 results, the consensus FY18 EBITDA forecast was $108.85 million. Refer to Section 6.4.1 for details.

- We have reviewed the key assumptions underlying the FY18 Budget and we believe that they are not unreasonable

FY19-FY27: Based on the Impairment Model and the Internal Model, we have set out below the key P&L assumptions underlying the GT Model and related narrative.

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%DCF Method - Occupancy rates

CBD Resorts

Historical GT assessment based on internal model and

impairment modelGT assessment

90.0

110.0

130.0

150.0

170.0

190.0

210.0DCF Method - RevPAR (A$ per Available room-night)

CBD Resorts

Historical GT assessment based on internal model and

impairment modelGT assessment

Occupancy rate: CBD occupancy is expected to slightly decrease due to new supply coming to market whereas Resorts occupancy is expected to stabilise at around 78%, driven by strong inbound



55

international visitor arrivals. The gap in occupancy between the CBD and Resorts divisions is driven by market dynamics which are expected to continue in the future. Occupancy rates in the CBD properties have remained relatively stable throughout the economic cycle, due to both demand from business travellers and a variety of events held in CBD locations. Conversely, the properties in the Resorts divisions display seasonal demand trends corresponding to peak holiday periods.

RevPAR: We have relied on Management projections in connection with expected room rates for both the CBD and Resorts divisions up to FY21. Beyond FY21, we have assumed a RevPAR of circa 3.0% based on various industry reports and market expectations as discussed in Section 3. We note that the industry expects substantial RevPAR growth in the long-term, driven by an increased demand for hotel rooms. While economic hubs like Sydney and Melbourne or holiday destinations like the Gold Coast, Sunshine Coast and Tropical North Queensland are expected to continue on the strong historical growth pattern, resource-reliant cities like Brisbane and Perth, which are currently witnessing a reduction in RevPAR, are expected to revert to normal growth in the long-term. Refer to Section 3.4 for details.

Available room nights: Room revenue and changes in available room nights are mainly driven by the Scheduled Acquisitions up to FY21. Post FY21, we have assumed that the available room nights will increase by circa 600 rooms per annum which is based on discussion with management, a review of the historical information, assumptions in the Internal Model and expectations in relation to the supply growth.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%DCF Method - Growth in available room-nights

HistoricalGT assessment based

on Scheduled Acquisitions

GT assessment

CR&D revenue: As mentioned in Section 4, the CR&D division earns revenue mainly as a commission from online bookings made on the Company’s website. Management expects the proportion of bookings made on the Company’s website to increase steadily in the long-term, given the trend towards digitisation in the market and the propensity for customers to use digital means for booking. We are of the opinion that this assumption is reasonable.

EBITDA margins: it is observed that the Company’s underlying EBIDTA margins were generally 14-15% between FY13 and FY17. In the GT Model, we have assumed an EBITDA margin in line with the historical average.


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Tax: We have assumed a nominal corporate tax rate of 32.0%, based on the effective tax rate in FY17. While the majority of Mantra’s operations are in Australia, the Company has observed a higher effective tax rate due to the non-deductibility of amortisation of intangibles and operations in the USA (which has a higher corporate tax rate).

Capital expenditure: In the GT Model, we have separately assessed the growth capex and the maintenance capex as outlined below.

- Growth capex: For the purpose of our valuation assessment, we have relied on the cost for the Scheduled Acquisitions between FY18 and FY21. Post FY21, we have assumed an average room acquisition cost of $15,000 per room which is based, among other things, on the capital cost expected to be incurred by Mantra on the historical and Scheduled Acquisitions.

- Maintenance capex: We have relied on Management estimates of maintenance capex to be incurred up to FY20. These include refurbishments and replacements in Mantra-owned portions of the hotel, such as the common areas, restaurants, conference rooms and reception desks plus regular upgrades to Mantra’s IT system. Post FY20, we have assumed that maintenance capex will range between $15 million and $17 million per annum based on discussions with Management.

Working capital: Changes in working capital are not material in the free cash flows and they have been assessed in line with historical averages.

Terminal value: We have adopted the following assumptions in the calculation of the terminal value of the business:

- Terminal growth rate of 3%.

- EBITDA margin of approximately 15%.

- Total capex of circa $27 million per annum including both growth and maintenance capex.

Discount rate: We have assessed the net present value of future cash flows having regard to an assessed discount rate based on the weighted average cost of capital (“WACC”) in the range of 9.0% and 10.0%. Given we have risk adjusted the projected cash flows, we have not applied any additional company specific risk premium in our assessment of the WACC. Refer to Appendix D for details.

6.3.2 Assessment of potential synergies

We note that Mantra incurred corporate costs of circa $27 million in FY17. These costs include the costs of being a listed company plus the centralised shared services such as the management team, sales, marketing, IT, finance, legal, acquisition and asset management.

In our valuation assessment, we have adopted annual gross synergies of $10 million to $15 million per annum based on the following:

As discussed in detail in section 4, the MLR operating structure is a substantial part of Mantra’s business model. This structure is more commonly used in the Australian market rather than in other countries. Accor’s portfolio includes a number of MLR properties in Australia or overseas and



57

accordingly in our opinion, the potential synergies reflect some special value which may only be realised by Accor and accordingly it should not be included in our valuation assessment under the fair market value concept.

Due to the generally autonomous nature of hotels with each facility operating independently, no significant synergies are expected to be achieved at property level from the integration of the operations of Mantra into Accor.

Accor should be able to realise cost synergies in relation to listed company costs, Directors fees and the duplication of certain functions throughout the business.

It is unlikely that a potential purchaser would be prepared to pay away 100% of the potential synergies.

We have assumed that it will take Accor approximately three years to fully realise the estimated synergies and it will incur upfront implementation costs equivalent to two times the annual normalised synergies.

6.3.3 Net debt

The net debt of the Company as at 31 December 2017 is outlined in the table below:

Net debt of Mantra as at 31 December 2017$ million 31-Dec-17Funding - External debt 186,355 Less: Cash balance (64,316) Net debt of Mantra as at 31 December 2017 122,039 Source: Management

6.3.4 Sensitivity analysis

It should be noted that the enterprise value of Mantra could vary materially based on changes in certain key assumptions. Accordingly, we have conducted certain sensitivity analysis below to highlight the impact on the value of the Mantra’s enterprise value based on the DCF Method caused by movements in certain key assumptions.


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DCF MethodSensitiv ity analy sis Low HighGT assessed v alue 3.85 4.71

Discount rate+ 0.5% p.a. 3.56 4.32 - 0.5% p.a. 4.19 5.17

Terminal grow th rate+ 0.5% p.a. 4.06 5.01 - 0.5% p.a. 3.67 4.45

Long-term grow th in Av erage Room Rate1

+ 0.5% p.a. 3.96 4.84 - 0.5% p.a. 3.75 4.58

Long-term occupancy 2

+ 2.0% p.a. 4.05 4.95 - 2.0% p.a. 3.65 4.47

A$ per share

Source: GTCF analysis Note 1: An increase in the Average room rate of 3.0% has been applied from FY22 onwards. We have tested the sensitivity of the value per share to this assumption. Note 2: A long-term occupancy of 82.0% for the CBD properties and 78.0% for the Resorts properties has been applied. We have tested the sensitivity of the value per share to this assumption.

These sensitivities do not represent a range of potential enterprise value of Mantra, but they intend to show to Mantra Shareholders the sensitivity of our valuation assessment to changes in certain variables.

6.4 FME Method

Set out below is our valuation assessment of Mantra based on the capitalisation of maintainable earnings.

FME Method SectionA$ '000s Reference Low HighAssessed EBITDA 6.4.1 110,000 120,000Assessed EBITDA multiple (on a control basis) 6.4.2 11.5 x 12.0 xEnterprise value (control basis) 1,265,000 1,440,000Less: Outstanding consideration for the Art Series acquisition Note 1 (1,513) (1,513)Less: Net debt as at 31 December 2017 6.3.3 (122,039) (122,039)Equity value (control basis) 1,141,448 1,316,448Number of outstanding shares ('000s) (fully diluted) 4.8.1 298,535 298,535Value per share (control basis) (A$ per share) 3.82 4.41 Source: GTCF analysis



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6.4.1 Maintainable EBITDA of Mantra

Our assessment of the maintainable EBITDA of Mantra is summarised in the table below which also provides a benchmark with the historical underlying earnings.

Future maintainable EBITDA Mantra guidanceA$ '000s FY15 FY16 FY17 for FY181 FY18 FY19Revenue 498,722 606,266 689,131 754,829 813,614 Revenue growth 9.7% 21.6% 13.7% 9.5% 7.8%

Underlying EBITDA 73,052 89,822 101,210 107,000 - 115,000 108,850 119,450 Underlying EBITDA margin 14.6% 14.8% 14.7% 14.4% 14.7%

Grant Thornton adopted EBITDA 110,000 to 120,000

Consensus estimates

Source: GTCF analysis Note 1: On 29 August 2017, Management released the FY17 results and provided guidance for FY18 Underlying EBITDAI of $107 million - $115

million in constant currency terms.

As set out above, we have assessed Mantra’s EBITDA in the range of A$110 million to A$120 million for the purpose of our valuation assessment. In our assessment of the future maintainable EBITDA for Mantra, we have considered the following key factors:

Current financial performance

For the last 3 years, Mantra’s financial performance has been in line with or above budget, with a growing portfolio of properties, relatively high occupancy in both CBD and Resorts divisions, and higher revenue growth than many of its global peers. Since listing on the ASX in 2014, the Company’s revenues have grown at double-digit rates in most years, while earning margins have been maintained.

While the Company has been adding new properties to its portfolio, it has also focussed on stabilising earnings from prior acquisitions. Based on discussions with Management, we understand that the Company is progressing well in the current financial year and sees no material impediment to the achievement of targets.

On 29 August 2017, Mantra released FY18 EBITDAI guidance to the market between A$107 million and A$115 million in constant currency terms.

Consensus forecast

The available broker consensus estimates for Mantra published after the release of the H1 FY18 results are set out below.


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Broker estimates Report date FY18 (B) FY19 (F) FY20 (F)

RevenueBroker 1 15-Feb-18 740.9 801.1 852.3 Broker 2 18-Feb-18 751.0 821.0 868.0 Broker 3 15-Feb-18 738.0 793.0 NABroker 4 15-Feb-18 776.0 841.6 861.6 Broker 5 14-Feb-18 759.1 828.2 875.4 Broker 6 19-Feb-18 773.8 826.4 886.2 Broker 7 16-Feb-18 745.0 784.0 832.0

Broker consensus 754.8 813.6 862.6 Growth 9.6% 7.8% 6.0%

EBITDABroker 1 15-Feb-18 111.7 122.4 130.9 Broker 2 18-Feb-18 106.3 123.2 132.2 Broker 3 15-Feb-18 NA NA NABroker 4 15-Feb-18 107.5 116.5 118.8 Broker 5 14-Feb-18 110.1 121.7 131.9 Broker 6 19-Feb-18 110.5 120.9 130.3 Broker 7 16-Feb-18 107.0 112.0 119.0

Broker consensus 108.9 119.5 127.2 Margin 14.4% 14.7% 14.7% Source: Various broker reports

Impact of the Scheduled Acquisitions

Mantra has a growth pipeline based on the Scheduled Acquisitions up to FY21 which we have considered in our assessment of the EBITDA for the purpose of the valuation.

Industry outlook is supportive of medium term growth

As mentioned in Section 3, the hotel industry in Australia is witnessing rapid growth, and is expected to grow at higher than benchmark rates in the medium term. In the long-term (i.e. FY23-FY25), significant increases in RevPAR of circa 5-6% p.a. are expected in hotels located in major Australian cities, as the number of international visitors exceeds the number of domestic tourists.

Commonwealth Games

Major sporting events like the Commonwealth Games are expected to drive interest and visitors to the Gold Coast. In conjunction with the Commonwealth Games, the Gold Coast has also witnessed the addition of significant supporting infrastructure by the State and Federal Governments, such as rail lines, sporting venues and better connectivity. These are aimed at improving tourist experiences, which is expected to result in a rise in the number of tourists visiting the Gold Coast and consequently, the rest of Australia. The FY18 Budget prepared by Management includes a seasonality factor to take into account the expected uplift in occupancy rates on the Gold Coast properties during the Commonwealth Games and in the shoulder periods.

6.4.2 Assessment of EV/ EBITDA multiples

The selection of the appropriate EBITDA multiples to apply are a matter of professional judgement and involve consideration of a number of factors including: the stability and quality of earnings; the nature and size of the business; the financial structure of the company and gearing level; future prospects of the



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business; cyclical nature of the industry; and the asset backing of the underlying business of the company and the quality of the assets.

For the purpose of assessing an appropriate EBITDA multiple range to value Mantra, we have considered:

The trading multiples of listed comparable companies.

The multiples implied by recent transactions involving comparable companies

Trading multiples

Summarised below are the trading multiples of the selected listed companies:

Market Cap EV LTM FY20181 FY20191 LTM FY20181 FY20191

AUD AUDCompany Country (Millions) (Millions) Actual Projected Projected Actual Projected Projected

Selected multiple discount 21.6% 19.4%Control premium 0% Mantra discount 21.9% 25.7%Mantra Group Limited Australia 1,148 1,270 12.8x 12.0x 10.6x 28.6x 22.2x 20.6x

Tier 1: Asset-light hotel operators 15.3x 14.3xMarriott International, Inc. United States 64,382 74,392 19.9x 17.1x 15.6x 36.8x 26.3x 23.8xChoice Hotels International, Inc. United States 5,878 6,503 18.2x 15.7x 14.5x 40.1x 22.5x 19.2xHilton Worldwide Holdings Inc. United States 33,088 40,779 19.5x 15.5x 14.4x NM 31.5x 27.7xInterContinental Hotels Group PLC United Kingdom 15,484 17,907 16.3x 15.3x 14.3x 14.7x 15.9x 14.6xRed Lion Hotels Corporation United States 304 439 13.2x 12.0x 10.7x NM NM NMWyndham Worldwide Corporation United States 14,998 22,511 14.3x 12.8x 11.4x 13.5x 16.1x 14.1xHyatt Hotels Corporation United States 11,885 13,051 15.1x 12.6x 12.0x 37.5x 47.8x 41.6xNH Hotel Group, S.A. Spain 3,286 4,350 12.1x 10.6x 9.6x 62.1x 26.7x 20.8xScandic Hotels Group AB Sweden 1,487 2,321 9.9x 8.5x 8.1x 13.5x 12.4x 11.2xRezidor Hotel Group AB (publ) Belgium 651 687 NM NM NM NM NM NM

Low (Tier 1) 9.9x 8.5x 8.1x 13.5x 12.4x 11.2xAverage (Tier 1) 15.4x 13.4x 12.3x 31.2x 24.9x 21.6xMedian (Tier 1) 15.1x 12.8x 12.0x 36.8x 24.4x 20.0xHigh (Tier 1) 19.9x 17.1x 15.6x 62.1x 47.8x 41.6x

Tier 2: Asset-heavy hotel operatorseasyHotel plc United Kingdom 208 170 NM 31.8x 12.4x NM NM NMAccor SA France 21,739 25,283 24.3x 21.9x 19.7x 31.4x 37.3x 30.6xShangri-La Asia Limited Hong Kong 10,194 16,402 25.9x 19.3x 17.9x NM NM NMPandox AB (publ) Sweden 4,016 8,116 23.0x 18.5x 17.7x 8.2x 15.4x 13.8xMillennium & Copthorne Hotels plc United Kingdom 3,084 5,259 9.6x 9.9x 9.0x 14.0x 15.2x 14.0xDalata Hotel Group plc Ireland 1,666 1,949 13.2x 10.8x 9.5x 22.2x 14.4x 12.8xPPHE Hotel Group Limited Netherlands 851 2,118 11.0x 8.7x 8.7x 18.6x 12.6x 11.2xPlaya Hotels & Resorts N.V. United States 1,396 2,340 13.0x 9.5x 8.7x NM 21.7x 15.1x

Extended Stay America, Inc. United States 4,783 7,870 10.3x 9.9x 9.7x 23.1x 18.1x 18.3xMeliá Hotels International, S.A. Spain 4,010 4,956 10.6x 9.4x 8.7x 20.9x 19.0x 16.3x

Low (Tier 2) 9.6x 8.7x 8.7x 8.2x 12.6x 11.2xAverage (Tier 2) 15.6x 15.0x 12.2x 19.8x 19.2x 16.5xMedian (Tier 2) 13.0x 10.4x 9.6x 20.9x 16.8x 14.6xHigh (Tier 2) 25.9x 31.8x 19.7x 31.4x 37.3x 30.6x

Low (Overall) 9.6x 8.5x 8.1x 8.2x 12.4x 11.2xAverage (Overall) 15.5x 14.2x 12.2x 25.5x 22.1x 19.1xMedian (Overall) 13.8x 12.6x 11.4x 21.6x 18.6x 15.7xHigh (Overall) 25.9x 31.8x 19.7x 62.1x 47.8x 41.6x

EV/EBITDA multiple P/E multiple


Note 1: Financial year end for Australian companies is 30 June, and 31 December for most other companies.

In relation to the comparability of the above assessed multiples, we note the following key considerations:

The EV/EBITDA multiples presented above reflects the value of underlying companies on a minority basis and do not include a premium for control.


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We have selected two sets of comparable companies. Tier 1 consists of hotel operators who focus on an asset-light model, with the majority of their properties being leased/ franchised rather than owner operated. These companies have business models closer to Mantra than other hotel operators. They also have significant intangible assets such as management rights or franchise agreements.

We have also selected a second set of companies who operate on an asset-heavy model i.e. the majority of their properties are owned. Most of these companies, while also significantly larger than Mantra, have a large fixed asset base and they incur significant refurbishment and renovation capex on their properties. Accordingly, we believe that these companies are less comparable than the Tier 1 comparable companies.

In order to gather greater insights into the comparability of the listed peers, we have benchmarked in the table below the revenue growth rates and operating margins of the selected comparable companies.

Market Cap EV FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY12-FY17 FY18-FY21AUD AUD

Company Country (Millions) (Millions) Historical Historical Historical Forecast Forecast Forecast Forecast Last 6 yrs Next 4 yrsSelected multiple discountControl premium 0% Mantra discount

Mantra Group Limited Australia 1,148 1,270 14.6% 14.8% 14.7% 14.3% 14.8% 14.6% 15.1% 10.7% 6.4%

Tier 1: Asset-light hotel operatorsMarriott International, Inc. United States 64,382 74,392 10.3% 11.3% 57.2% 14.1% 14.5% 14.3% NA 9.6% 4.9%Choice Hotels International, Inc. United States 5,878 6,503 29.1% 28.6% 27.9% 29.4% 30.1% NA NA 7.5% 5.8%Hilton Worldwide Holdings Inc. United States 33,088 40,779 33.2% 39.6% 47.4% 21.3% 21.2% 22.3% NA -16.0% 4.3%InterContinental Hotels Group PLC United Kingdom 15,484 17,907 40.5% 44.1% 48.2% 48.4% 49.5% 48.3% 57.3% -1.7% 4.8%Red Lion Hotels Corporation United States 304 439 8.4% 11.6% NA 14.2% 15.0% NA NA 2.0% NAWyndham Worldwide Corporation United States 14,998 22,511 25.5% 26.5% 26.7% 25.7% 24.6% NA NA 2.2% 17.3%Hyatt Hotels Corporation United States 11,885 13,051 25.3% 24.7% 24.4% 17.3% 17.2% 16.9% NA 1.9% 4.4%NH Hotel Group, S.A. Spain 3,286 4,350 9.8% 11.8% NA 15.9% 16.7% 17.2% 15.6% 3.2% 5.3%Scandic Hotels Group AB Sweden 1,487 2,321 9.9% 11.0% 10.3% 10.1% 10.2% 9.3% NA 13.0% 4.3%Rezidor Hotel Group AB (publ) Belgium 651 687 9.8% 8.2% 8.5% 10.3% 11.4% 13.0% NA 1.0% 6.0%

Low (Tier 1) 8.4% 8.2% 8.5% 10.1% 10.2% 9.3% 15.6% -16.0% 4.3%Average (Tier 1) 20.2% 21.7% 31.3% 20.7% 21.0% 20.2% 36.4% 2.3% 6.3%Median (Tier 1) 17.8% 18.2% 27.3% 16.6% 17.0% 16.9% 36.4% 2.1% 4.9%High (Tier 1) 40.5% 44.1% 57.2% 48.4% 49.5% 48.3% 57.3% 13.0% 17.3%

Tier 2: Asset-heavy hotel operatorseasyHotel plc United Kingdom 208 170 23.6% 24.3% 16.2% 27.0% 39.7% 38.6% 41.7% 35.9% 42.2%Accor SA France 21,739 25,283 33.5% 30.9% 33.6% 31.3% 31.5% 28.4% 27.3% -27.0% 18.3%Shangri-La Asia Limited Hong Kong 10,194 16,402 23.7% 24.1% NA 27.0% 28.3% 29.0% NA 0.0% 2.6%Pandox AB (publ) Sweden 4,016 8,116 43.7% 46.1% 52.7% 57.4% 57.7% 58.8% NA 9.2% 3.1%Millennium & Copthorne Hotels plc United Kingdom 3,084 5,259 25.3% 23.7% 24.7% 23.9% 24.7% 24.9% NA 4.8% 4.9%Dalata Hotel Group plc Ireland 1,666 1,949 28.6% 29.3% NA 31.1% 33.2% 34.3% NA 52.2% 5.8%PPHE Hotel Group Limited Netherlands 851 2,119 36.6% 33.9% NA 33.4% 34.1% NA NA 3.0% -2.1%Playa Hotels & Resorts N.V. United States 1,396 2,340 19.2% 26.4% NA 32.3% 33.5% NA NA 24.1% NA

Extended Stay America, Inc. United States 4,783 7,870 45.3% 46.6% NA 48.1% 48.6% NA NA 5.9% 1.2%Meliá Hotels International, S.A. Spain 4,010 4,956 16.3% 15.2% NA 16.8% 17.3% 17.0% 16.8% 7.9% 3.9%

Low (Tier 2) 16.3% 15.2% 16.2% 16.8% 17.3% 17.0% 16.8% -27.0% -2.1%Average (Tier 2) 29.6% 30.0% 31.8% 32.8% 34.9% 33.0% 28.6% 11.6% 8.9%Median (Tier 2) 26.9% 27.8% 29.1% 31.2% 33.4% 29.0% 27.3% 6.9% 3.9%High (Tier 2) 45.3% 46.6% 52.7% 57.4% 57.7% 58.8% 41.7% 52.2% 42.2%

Low (Overall) 8.4% 8.2% 8.5% 10.1% 10.2% 9.3% 15.6% -27.0% -2.1%Average (Overall) 24.9% 25.9% 31.5% 26.7% 27.9% 26.6% 31.7% 6.9% 7.6%Median (Overall) 25.3% 25.5% 27.3% 26.3% 26.5% 23.6% 27.3% 4.0% 4.8%High (Overall) 45.3% 46.6% 57.2% 57.4% 57.7% 58.8% 57.3% 52.2% 42.2%Source: S&P Global and GTCF calculations

Revenue CAGREBITDA margin

Among the Tier 1 comparable companies, we believe that Hilton, InterContinental, Wyndham and Hyatt have business models which are relatively more comparable to Mantra due to the following:

These companies operate under management agreements or franchise agreements which are similar to Mantra’s MA model.

These companies operate hotels at price points ranging from economical to luxury, similar to Mantra and they are highly acquisitive in nature.

Conversely, we note that these companies generate significantly better operating margins than Mantra and they have a high proportion of their properties under the franchise model, which reduces



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their liability for operating expenses and capital expenditure while still delivering high returns. Some companies like Hilton and Wyndham have also diversified their portfolios by operating timeshare properties and also trading in vacation ownership interests.

Overall, while none of the peer companies are perfectly comparable to Mantra, we believe the selected most comparable companies provide directional evidence for the multiple applicable to Mantra. A brief description of the comparable companies is provided in Appendix B.

Transaction multiples

We have further considered multiples implied by historical transactions involving companies comparable to Mantra. The table below summarises the EV/EBITDA multiples implied by these historical transactions. A brief description of the comparable companies is provided in Appendix C.

Date Target Company Country Bidder CompanyStake

(% )Deal Value

(A$'m)EBITDA Multiple Status

Tier 1: Similar business models to MantraJun-17 Restel Oy Finland Scandic Hotels Group AB 100% 169.0 8.36x ClosedNov-15 Starwood Hotels & Resorts Worldwide United States Marriott International, Inc. 100% 20,831.2 11.83x ClosedJan-15 Delta Hotels Limited Canada Marriott International, Inc. 100% 170.6 10.00x ClosedDec-14 Kimpton Hotel & Restaurant Group, United States InterContinental Hotels Group PLC 100% 523.5 21.50x ClosedOct-16 Hilton Worldwide Holdings Inc. United States HNA Tourism Group Co., Ltd 25% 8,549.9 10.54x ClosedDec-16 Rezidor Hotel Group AB (publ) Belgium HNA Tourism Group Co., Ltd 51% 437.4 7.60x ClosedOct-14 Waldorf Astoria New York United States Anbang Insurance Group Co., Ltd. 100% 2,233.2 15.00x ClosedDec-11 Mirvac Hotels & Resorts Pty Ltd. Australia Ascendas Pte, Ltd.; AAPC Limited 100% 195.3 8.44x ClosedMar-11 Oaks Hotels & Resorts Limited Australia Delicious Food Holding (Singapore) 80% 159.0 5.24x Closed

Average 10.95xMedian 10.00x

Tier 2: Relatively different business models to Mantra

Jun-16 Diamond Resorts International, Inc. United States Apollo Global Management, LLC; Apollo Investment Fund VIII, L.P. 100% 4,568.7 8.56x Closed

Sep-14 Club Méditerranée FranceArdian; The Silverfern Group, Inc.; Fosun International Limited and others

81% NA 7.49x Closed

Dec-15 FRHI Holdings Limited Canada Accor SA 100% 4,012.7 13.80x ClosedMar-16 Strategic Hotels & Resorts Inc United States Anbang Insurance Group Co., Ltd. 100% 7,389.0 19.59x ClosedJan-15 Hotéis Tivoli, SA Portugal Minor International Public Company 100% 418.2 9.49x ClosedAug-16 Whistler Blackcomb Holdings Inc. Canada Vail Resorts, Inc. 100% 1,615.4 14.96x ClosedMay-16 Morgans Hotel Group Co. United States SBE Entertainment Group, LLC 100% 1,084.6 NM Closed

Average 12.32xMedian 11.65x


In relation to the multiples implied by comparable transactions, we note that:

The implied transaction multiples may incorporate various levels of control premium and special values paid for by the acquirers. In particular, the multiples may reflect synergies paid which are unique to the acquirers.

Economic and market factors, including competition dynamics and room pricing may be materially different at the respective transaction dates from those that are at the valuation date. These factors may influence the amounts paid by the acquirers for these businesses.

The transaction multiples are calculated based on the historical EBITDA of the acquired companies (unless otherwise stated).


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Regarding the multiples implied by the above transactions, we note the following in relation to the recent transactions:

Australian MLR transactions involving foreign investors

Accor – Mirvac: In June 2012, AAPC Properties Pty Ltd acquired Mirvac Hotels Pty Ltd (a subsidiary of Mirvac Group, an ASX-listed real estate company) which owned 2 hotels and managed 45 hotels in Australia and New Zealand. The transaction substantially increased Accor’s presence in Australia to 241 hotels, and was undertaken in order to invest in asset-light operations. The acquisition of the established Mirvac hotels gave Accor a strong presence in the MLR sector in Australia.

The proceeds from acquisition of the hotel management business was $195 million generating an historical EBITDA of circa $23 million and implying an EV/ EBITDA multiple of circa 8.5x.

While we consider this to be the most comparable transaction, we note that the property portfolio comprised of 2 owned hotels and 45 managed hotels. In comparison, Mantra has a significant portion of leased and MLR properties, which enables diversification of the portfolio. In addition, this transaction took place in 2011-12 at a time when the property price growth in Australia appeared to have slowed down.

Minor International - Oaks Hotels & Resorts: In 2011, Minor International acquired a controlling interest in Oaks Hotels & Resorts, a serviced apartment and Resorts operator predominantly based on the MLR model. The transaction was undertaken at a relatively low LTM EBITDA multiple of 5.2x. However, in our opinion, the transaction multiple reflected a situation of financial distress of Oaks rather than being representative of fair market value. At the time of the transaction, Oaks was in a relatively weak financial position as the company was having difficulties in raising the required funding to refinance its debt facilities. We note that in order to obtain control of Oaks, Minor bought a 34% interest in the company from the receiver38.

Overseas transactions

Marriott – Starwood: In November 2015, Marriot International, Inc. announced the acquisition of Starwood Hotels & Resorts Worldwide Inc. Starwood was a listed hotel operator with more than 1,200 properties either owned/ leased, managed or under franchise agreements, and with additional income from selling vacation ownership interests under the Starwood brand name. Starwood operated its hotels under various brand names including St. Regis, Westin, the Sheraton, FourPoints, Le Meridien and others.

Given that the management contracts and franchise agreements contributed to the majority of Starwood’s revenue and earnings, and consequently formed the majority of the company’s intangible assets, we consider the transaction comparable with the Proposed Transaction. However Starwood was a global player in the hotel industry whilst Mantra mainly operates in Australia with significantly lower brand value.

InterContinental - Kimpton: In 2015, InterContinental acquired Kimpton Hotel & Restaurant Group for US$430 million, at a 21.5x multiple to its expected 2014 EBITDA of US$20 million. Kimpton had 62

38 Given that two private companies holding the 34% interest were placed into receivership



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properties with 11,300 rooms, all under management contracts, and targeted the Upper Upscale segment of the market (Kimpton had a RevPAR of US$192.85 in 2016).

The acquisition of Kimpton enabled InterContinental to gain a strong market positioning in the boutique/luxury hotels segment, adding 62 hotels (11,300 rooms) with a pipeline of 16 hotels (3,000 rooms) along with 71 hotel-based destination restaurants and bars to its portfolio. Kimpton had recorded 7.7% p.a. growth in RevPAR for the 5 years before the acquisition, and was operating under management contracts with an asset-light business model. Marriott had previously tried to acquire the chain in 2000, but was unsuccessful. The transaction was expected to be highly synergistic for InterContinental, with InterContinental’s management planning to expand the Kimpton brand outside North America by leveraging their presence in various countries. This was expected to result in Kimpton‘s expected EBITDA of US$20 million in 2014 increasing to $39 million in 2017. These factors collectively contributed to the significant premium paid by InterContinental. The EBITDA multiple reduces to circa 11x if the synergies are taken into account.

Conclusion on EV/ EBITDA multiple

Based on the analysis of listed comparable companies and comparable transactions, Grant Thornton Corporate Finance has assessed an EV/EBITDA multiple for the valuation of Mantra in the range of 11.5x and 12.0x on a control basis. In our selection of the EV/EBITDA multiple, we have mainly considered the following:

The median historical EBITDA multiple of the comparable transactions is 10.0x. However we note that several of these transactions occurred several years ago, and more recently, the industry as a whole, and the equity stock markets more broadly have been performing strongly. For example, the acquisition of Mirvac by Accor is considered the most comparable transaction. However it occurred in December 2011 at a time when the property price growth in Australia appeared to have slowed down. This would likely have had an impact on the value of the transaction. We note that since December 2011, the ASX 200 Index has increased by circa 38% and the ASX A-REIT Index by circa 62.7%.39

The average EBITDA multiple for Hilton, InterContinental, Wyndham and Hyatt in FY18 and FY19 are 14.1x and 13.0x respectively on a minority basis. We are of the opinion that it is not unreasonable for Mantra’s EV/EBITDA multiple to be at a discount to global peers due to the following:

- Most of the Tier 1 comparable companies operate on a global scale and they are many times larger in scale than Mantra in terms of the number of properties and market capitalisation.

- They have significantly higher operating margins than Mantra. We note that the average and median FY18 EBITDA margins of Hilton, InterContinental, Wyndham and Hyatt were 28% and 23% respectively.

- They have significantly greater brand value.

39 Increases observed between 16 December 2011 (i.e. the date of announcement of the transaction between Accor and Mirvac) and 9 October 2017 the date of announcement of the Indicative Proposal.


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7 Sources of information, disclaimer and consents

7.1 Sources of information

In preparing this report Grant Thornton Corporate Finance has used various sources of information, including:

Draft Scheme Booklet.

Annual reports/ consolidated accounts of Mantra for FY14 to FY17.

FY18 budget pack and minutes of Board meeting.

Management Projections up to FY21.

Draft redacted submission to ACCC.

Press releases and announcements by Mantra on the ASX.

Management accounts from FY15 to FY17 and for the half year FY18.

CEO and CFO reports for the last 6 months before the announcement of the Proposed Transaction.

S&P Global.

IBISWorld.

Various industry and broker reports.

Other publicly available information.

In preparing this report, Grant Thornton Corporate Finance has also held discussions with, and obtained information from, Management of Mantra and its advisers.

7.2 Limitations and reliance on information

This report and opinion is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time.

Grant Thornton Corporate Finance has prepared this report on the basis of financial and other information provided by the Company, and publicly available information. Grant Thornton Corporate Finance has considered and relied upon this information. Grant Thornton Corporate Finance has no reason to believe that any information supplied was false or that any material information has been withheld. Grant Thornton Corporate Finance has evaluated the information provided by the Company through inquiry, analysis and review, and nothing has come to our attention to indicate the information provided was materially misstated or would not afford reasonable grounds upon which to base our report. Nothing in this report should be taken to imply that Grant Thornton Corporate Finance has audited any information supplied to us, or has in any way carried out an audit on the books of accounts or other records of the Company.

This report has been prepared to assist the Directors of Mantra in advising the Mantra Shareholders in relation to the Proposed Transaction. This report should not be used for any other purpose. In particular, it is not intended that this report should be used for any purpose other than as an expression of Grant Thornton Corporate Finance’s opinion as to whether the Proposed Transaction is in the best interest of Mantra Shareholders.



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Mantra has indemnified Grant Thornton Corporate Finance, its affiliated companies and their respective officers and employees, who may be involved in or in any way associated with the performance of services contemplated by our engagement letter, against any and all losses, claims, damages and liabilities arising out of or related to the performance of those services whether by reason of their negligence or otherwise, excepting gross negligence and wilful misconduct, and which arise from reliance on information provided by the Company, which the Company knew or should have known to be false and/or reliance on information, which was material information the Company had in its possession and which the Company knew or should have known to be material and which did not provide to Grant Thornton Corporate Finance. The Company will reimburse any indemnified party for all expenses (including without limitation, legal expenses) on a full indemnity basis as they are incurred

7.3 Consents

Grant Thornton Corporate Finance consents to the issuing of this report in the form and context in which it is included in the Scheme Booklet to be sent to the Mantra Shareholders. Neither the whole nor part of this report nor any reference thereto may be included in or with or attached to any other document, resolution, letter or statement without the prior written consent of Grant Thornton Corporate Finance as to the form and content in which it appears.


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Appendix A – Valuation methodologies

Capitalisation of future maintainable earnings

The capitalisation of future maintainable earnings multiplied by appropriate earnings multiple is a suitable valuation method for businesses that are expected to trade profitably into the foreseeable future. Maintainable earnings are the assessed sustainable profits that can be derived by a company’s business and excludes any abnormal or “one off” profits or losses.

This approach involves a review of the multiples at which shares in listed companies in the same industry sector trade on the share market. These multiples give an indication of the price payable by portfolio investors for the acquisition of a parcel shareholding in the company.

Discounted future cash flows

An analysis of the net present value of forecast cash flows or DCF is a valuation technique based on the premise that the value of the business is the present value of its future cash flows. This technique is particularly suited to a business with a finite life. In applying this method, the expected level of future cash flows are discounted by an appropriate discount rate based on the weighted average cost of capital. The cost of equity capital, being a component of the WACC, is estimated using the Capital Asset Pricing Model.

Predicting future cash flows is a complex exercise requiring assumptions as to the future direction of the company, growth rates, operating and capital expenditure and numerous other factors. An application of this method generally requires cash flow forecasts for a minimum of five years.

Orderly realisation of assets

The amount that would be distributed to shareholders on an orderly realisation of assets is based on the assumption that a company is liquidated with the funds realised from the sale of its assets, after payment of all liabilities, including realisation costs and taxation charges that arise, being distributed to shareholders.

Market value of quoted securities

Market value is the price per issued share as quoted on the ASX or other recognised securities exchange. The share market price would, prima facie, constitute the market value of the shares of a publicly traded company, although such market price usually reflects the price paid for a minority holding or small parcel of shares, and does not reflect the market value offering control to the acquirer.

Comparable market transactions

The comparable transactions method is the value of similar assets established through comparative transactions to which is added the realisable value of surplus assets. The comparable transactions method uses similar or comparative transactions to establish a value for the current transaction.

Comparable transactions methodology involves applying multiples extracted from the market transaction price of similar assets to the equivalent assets and earnings of the company. The risk attached to this valuation methodology is that in many cases, the relevant transactions contain features that are unique to that transaction and it is often difficult to establish sufficient detail of all the material factors that contributed to the transaction price.



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Appendix B – Comparable companies

Company Description

easyHotel plc

easyHotel plc owns, develops, operates, and franchises hotels in the United Kingdom, rest of Europe, and internationally. It operates through two segments, Owned properties and Franchising. The company operates its hotels under the easyHotel brand. It operates 22 easyHotels with 2,033 rooms comprising 19 franchised hotels covering 1,643 rooms and 3 owned hotels consisting of 390 rooms. The company was founded in 2004 and is based in London, the United Kingdom. easyHotel plc is a subsidiary of easyGroup Holdings Limited.

Accor SA Accor SA operates a chain of hotels worldwide. It operates through HotelServices and HotelInvest segments. The company engages in hotel management and franchising business. Accor SA was founded in 1967 and is based in Issy-les-Moulineaux, France.

Shangri-La Asia Limited

Shangri-La Asia Limited, an investment holding company, owns and operates hotels and associated properties worldwide. It operates through four segments: Hotel Ownership, Property Rentals, Hotel Management Services, and Property Sales. The company also provides hotel management, marketing, consultancy, reservation, and related services; and owns and leases office and commercial properties, and serviced apartments/residences. In addition, it is involved in real estate development and operation activities; the ownership and operation of golf clubs; and property investment and office management, as well as wines trading activities. The company operates hotels under the Shangri-La, Kerry Hotel, Hotel Jen, Traders Hotel, Rasa, Summer Palace, Shang Palace, and CHI, The Spa at Shangri-La brand names. As of December 31, 2016, it had equity interests in 76 operating hotels with 34,705 rooms. The company was founded in 1971 and is headquartered in Quarry Bay, Hong Kong.

Pandox AB (publ)

Pandox AB (publ) engages in the ownership, management, operation, and lease of a portfolio of hotel properties in Sweden, Norway, Finland, Denmark, Germany, and internationally. It operates in two segments, Property Management and Operator Activities. The company owns and operates hotels, as well as leases hotel properties to third parties. As of February 16, 2017, the company’s hotel property portfolio comprised 120 hotels with approximately 26,000 hotel rooms in 10 countries. Pandox AB (publ) was founded in 1995 and is based in Stockholm, Sweden.

Marriott International, Inc.

Marriott International, Inc. operates, franchises, and licenses hotels and timeshare properties worldwide. The company operates through three segments: North American Full-Service, North American Limited-Service, and International. It also operates, markets, and develops residential properties, as well as provides services to home/condominium owner associations. The company operates its properties primarily under the brand names of Bulgari, The Ritz-Carlton and The Ritz-Carlton Reserve, St. Regis, W, EDITION, JW Marriott, The Luxury Collection, Marriott Hotels, Westin, Le Méridien, Renaissance Hotels, Sheraton, Delta Hotels by MarriottSM, Marriott Executive Apartments, Marriott Vacation Club, Autograph Collection Hotels, Tribute Portfolio, Design Hotels, Gaylord Hotels, Courtyard, Four Points by Sheraton, SpringHill Suites, Fairfield Inn & Suites, Residence Inn, TownePlace Suites, AC Hotels by Marriott, Aloft, Element, Moxy Hotels, and Protea Hotels by Marriott. As of February 15, 2017, it operated, franchised, and licensed approximately 6,000 properties in 122 countries and territories. Marriott International, Inc. was founded in 1971 and is headquartered in Bethesda, Maryland.

Choice Hotels International, Inc.

Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor worldwide. It operates in two segments, Hotel Franchising and SkyTouch Technology. The company franchises lodging properties under the proprietary brand names Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Extended Stay Hotel, Cambria hotels and suites, and Ascend Hotel Collection. It also develops and markets cloud-based technology products, including inventory management, pricing, and connectivity to third party channels and hoteliers that are not under franchise agreements with the company; and provides onsite and remote installation, training, and 24/7 phone support services. As of October 30, 2017, the company franchised approximately 6,500 hotels comprising approximately 500,000 rooms. Choice Hotels International, Inc. was founded in 1981 and is based in Rockville, Maryland.

Hilton Worldwide Holdings Inc.

Hilton Worldwide Holdings Inc., a hospitality company, owns, leases, manages, develops, and franchises hotels and Resorts. It operates through Management and Franchise, and Ownership segments. The company engages in the hotel management and licensing of its brands to franchisees. It operates hotels under the Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton, and Tapestry Collection by Hilton brands. The company operates in North America, South America, and Central America, including all Caribbean nations; Europe, the Middle East, and Africa; and the Asia Pacific. As of October 10, 2017, it had approximately 5,000 properties with 825,000 rooms in 103 countries and territories. Hilton Worldwide Holdings Inc. was founded in 1919 and is headquartered in McLean, Virginia.

InterContinental Hotels Group PLC

InterContinental Hotels Group PLC owns, manages, franchises, and leases hotels. It operates hotels, Resorts, and restaurants under the InterContinental, Kimpton, Hotel Indigo, EVEN, HUALUXE, Holiday Inn, Holiday Inn Express, Staybridge Suites Hotels, Crowne Plaza, Holiday Inn Club Vacations, Holiday Inn Resort, and Candlewood Suites Hotels brand names. The company also manages IHG Rewards Club, a hotel loyalty program. As of March 02, 2017, it franchised, leased, managed, and owned approximately 5,200 hotels with 770,000 guest rooms in approximately 100 countries worldwide. The company was founded in 1967 and is headquartered in Denham, the United Kingdom.

Red Lion Hotels Corporation

Red Lion Hotels Corporation, a hospitality and leisure company, owns, manages, and franchises hotels under its Hotel RL, Red Lion Hotel, Red Lion Inn & Suites, GuestHouse, and Settle Inn & Suites brands primarily in the United States. The company operates through three segments: Franchised Hotels, Company Operated Hotels, and Entertainment. It also promotes and presents entertainment productions under the WestCoast Entertainment name. In addition, the company provides ticketing services, such as online ticket sales, ticketing inventory management systems, call center services, and outlet/electronic channel distribution for event locations under the TicketsWest name. As of December 31, 2016, the company’s owned, operated, leased, managed, and franchised properties consisted of approximately 1,137 hotels. The company was formerly known as WestCoast Hospitality Corporation and changed its name to Red Lion Hotels Corporation in September 2005. Red Lion Hotels Corporation was founded in 1937 and is headquartered in Spokane, Washington.

Millennium & Copthorne Hotels plc

Millennium & Copthorne Hotels Plc, a hospitality real estate company, owns, operates, leases, manages, and franchises hotels in Asia, Australasia, Europe, the Middle East, and North America. It operates its hotels primarily under The Bailey’s Hotel London, The Chelsea Harbour Hotel, Grand Hotel Palace Rome, M Hotels, Studio M, M Social, Grand Millennium Hotels, Millennium Hotels, Copthorne Hotels, and Kingsgate Hotels brand names. The company also offers Resorts management and hotel management consultancy, as well as reservation services to hotel owners and operators; invests in, develops, and manages properties; and provides REIT investment and property fund management services. It operates approximately 131 hotels. The company was incorporated in 1994 and is headquartered in London, the United Kingdom. Millennium & Copthorne Hotels Plc is a subsidiary of City Developments Limited.


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Company Description

Dalata Hotel Group plc

Dalata Hotel Group plc owns and operates hotels under the brand names of Clayton Hotel and Maldron Hotel in Dublin, Ireland Regional, and the United Kingdom. The company operates in the three and four star market segments. It also operates Red Bean Roastery coffee spaces; grain & grill bar and restaurant facilities; and Club Vitae health and fitness clubs in hotels. In addition, the company provides catering and asset management services, as well as management services for third party hotel proprietors. Further, it engages in property investment activities. As of November 7, 2017, it had a portfolio of 38 hotels with approximately 7,600 rooms comprising 26 hotels owned by the company; 9 hotels operated under lease agreements; and partner hotels operated under management agreements. Dalata Hotel Group plc was founded in 2007 and is based in Sandyford, Ireland.

Wyndham Worldwide Corporation

Wyndham Worldwide Corporation provides hospitality services and products to individual and business customers worldwide. It operates through three segments: Hotel Group, Destination Network, and Vacation Ownership. The Hotel Group segment primarily franchises hotels in the upscale, upper midscale, midscale, economy, and extended stay segments, as well as provides property management services for full-service and select limited-service hotels. This segment operates approximately 7,923 franchised hotels and 697,600 hotel rooms. The Destination Network segment provides vacation exchange services and products to owners of intervals of vacation ownership interests (VOIs); manages and markets vacation rental properties primarily on behalf of independent owners. The Vacation Ownership segment develops, markets, and sells VOIs to individual consumers; and provides consumer financing in connection with the sale of VOIs, as well as offers property management services at resorts. The company offers its hospitality services and products under the Wyndham Hotels and Resorts, Ramada, Days Inn, Super 8, Howard Johnson, Wingate by Wyndham, Microtel Inns & Suites by Wyndham, TRYP by Wyndham, Dolce Hotels and Resorts, RCI, Landal GreenParks, Novasol, Hoseasons, cottages.com, James Villa Holidays, Wyndham Vacation Rentals, Wyndham Vacation Resorts, Shell Vacations Club, and WorldMark by Wyndham. Wyndham Worldwide Corporation was founded in 1990 and is headquartered in Parsippany, New Jersey.

PPHE Hotel Group Limited

PPHE Hotel Group Limited owns, leases, develops, operates, and franchises full-service upscale and lifestyle hotels in Europe, the Middle East, and Africa. It operates a portfolio of 40 owned, managed, leased, and franchised hotels with a total of approximately 9,200 rooms under the Park Plaza Hotels & Resorts, art’otel, and Arenaturist brand names. The company also operates 4 holiday apartment complexes, 8 campsites, and approximately 50 food and beverage outlets in Istria, Croatia under the Arenaturist brand name. In addition, it operates restaurants and bars; licensed outlets, including espressamente illy Italian coffee bar; and the Balinese Mandara Spa. The company was formerly known as Park Plaza Hotels Limited and changed its name to PPHE Hotel Group Limited in March 2012. PPHE Hotel Group Limited was founded in 1989 and is based in Amsterdam, the Netherlands.

Hyatt Hotels Corporation

Hyatt Hotels Corporation, a hospitality company, develops, owns, operates, manages, franchises, licenses, or provides services to full and select service hotels, resorts, and residential and other properties. It operates in four segments: Owned and Leased Hotels, Americas Management and Franchising, ASPAC Management and Franchising, and EAME/SW Asia Management and Franchising. The company operates its properties under the Hyatt, Park Hyatt, Miraval, Grand Hyatt, Hyatt Regency, Andaz, Hyatt Centric, The Unbound Collection by Hyatt, Hyatt Place, Hyatt House, Hyatt Ziva, Hyatt Zilara, Hyatt Residence Club, Hyatt Residences, Hyatt Gold Passport, and Hyatt Resorts brands and trademarks. As of September 30, 2017, its portfolio consisted of 739 properties in 57 countries. It primarily serves corporations; national, state, and regional associations; specialty market accounts, including social, government, military, educational, religious, and fraternal accounts; travel organizations; and a group of individual consumers. The company was formerly known as Global Hyatt Corporation and changed its name to Hyatt Hotels Corporation in June 2009. Hyatt Hotels Corporation was founded in 1957 and is headquartered in Chicago, Illinois.

NH Hotel Group, S.A.

NH Hotel Group, S.A. operates hotels in Europe, the Americas, and Africa. It operates a network of approximately 400 hotels with approximately 60,000 rooms in 30 countries. The company was formerly known as NH Hoteles, S.A. and changed its name to NH Hotel Group, S.A. in June 2014. NH Hotel Group, S.A. was incorporated in 1881 and is headquartered in Madrid, Spain.

Playa Hotels & Resorts N.V.

Playa Hotels & Resorts N.V. owns, operates, and develops all-inclusive resorts in prime beachfront locations in various vacation destinations in Mexico and the Caribbean. The company owns, operates, and manages resorts under the Hyatt Ziva, Hyatt Zilara, THE Royal, and Gran brand names. As of March 14, 2017, it owned a portfolio consisting of 13 resorts consisting of 6,142 rooms located in Mexico, the Dominican Republic, and Jamaica. Playa Hotels & Resorts N.V. is headquartered in Fairfax, Virginia.

Extended Stay America, Inc.

Extended Stay America, Inc. owns and operates hotels in the United States and Canada. As of December 31, 2016, the company had 629 hotels with approximately 69,400 consisting of 626 hotels with approximately 68,900 rooms under the Extended Stay America brand; and 3 hotels with 500 rooms under the Extended Stay Canada brand. It serves customers in the mid-priced extended stay segment. The company was founded in 1995 and is headquartered in Charlotte, North Carolina.

Meliá Hotels International, S.A.

Meliá Hotels International, S.A. owns, manages, operates, leases, and franchises hotels worldwide. The company operates approximately 370 hotels in 43 countries under the Gran Meliá Hotels & Resorts, Paradisus Resorts, ME by Meliá, Meliá Hotels & Resorts, Innside by Meliá, Sol Hotels & Resorts, and TRYP by Wyndham brand names. It also operates Club Meliá vacation club; develops and operates real estate properties; and engages in casinos, golf, and tour operations. The company was formerly known as Sol Meliá, S.A. and changed its name to Meliá Hotels International, S.A. in June 2011. Meliá Hotels International, S.A. was founded in 1956 and is headquartered in Palma de Mallorca, Spain.

Scandic Hotels Group AB

Scandic Hotels Group AB (publ), together with its subsidiaries, operates and franchises hotels in Europe. The company operates hotels under the Scandic and Hilton brands. As of July 04, 2017, it operated approximately 230 hotels with 45,000 hotel rooms in operation and under development. The company was founded in 1963 and is based in Stockholm, Sweden. Scandic Hotels Group AB (publ) is a subsidiary of Sunstorm Holding AB.

Rezidor Hotel Group AB (publ)

Rezidor Hotel Group AB (publ), a hospitality company, operates, manages, leases, and franchises hotels. It operates a portfolio of 483 hotels with approximately 105,000 rooms in operation or under development in approximately 80 countries in Europe, the Middle East, and Africa under the Radisson Blu, Park Inn by Radisson, Radisson RED, and Quorvus Collection brand names. The company also operates bars and restaurants under the Filini, RBG Bar & Grill, Firelake, Verres en Vers, Ochaya Asian Grill, Sure, Vascobelo, The Larder, The Lounge, Bocca Buona, Paulaner, TGI Fridays, and Live-Inn room brands. The company was founded in 1960 and is headquartered in Brussels, Belgium. Rezidor Hotel Group AB (publ) is a subsidiary of Carlson Hotels, Inc.

Source: S&P Global



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Appendix C – Comparable transactions

Target Description

Restel Oy Restel Oy owns and operates a network of hotels and restaurants in Finland. Its amenities and facilities include accommodations, meeting rooms, restaurants, swimming pools, spas, lobby bars, mini-gyms, saunas, and other facilities. Its restaurants provide various foods, drinks, and snacks; and night pubs and others services. The company was incorporated in 1990 and is based in Helsinki, Finland. Restel Oy operates as a subsidiary of Tradeka Group Ltd.

Starwood Hotels & Resorts Worldwide Inc.

Starwood Hotels & Resorts Worldwide, Inc., together with its subsidiaries, operates as a hotel and leisure company worldwide. The company owns, operates, and franchises luxury and upscale full-service hotels, resorts, residences, retreats, select-service hotels, and extended stay hotels under the St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points, Aloft, Tribute Portfolio, and Element brand names. It also provides financing to customers who purchase such interests. In addition, the company develops, markets, and sells residential units at mixed use hotel projects. As of December 31, 2015, the company had 1,282 owned, managed, or franchised hotels with approximately 362,300 rooms; and approximately 15 stand-alone vacation ownership resorts and residential properties. The company was founded in 1969 and is headquartered in Stamford, Connecticut. As of September 23, 2016, Starwood Hotels & Resorts Worldwide Inc. operates as a subsidiary of Marriott International, Inc.

Delta Hotels Limited

Delta Hotels Limited, also known as Delta Hotels and Resorts, operates and manages hotels. The company operates city-centers, and airport hotels and resorts. It also provides guest rooms, breakfasts, and snacks; and space for meetings and events, and family programs. The company was founded in 1962 and is based in Toronto, Canada. As of April 11, 2017, Delta Hotels Limited operates as a subsidiary of Altera Development Company LLC.

Kimpton Hotel & Restaurant Group, LLC

Kimpton Hotel & Restaurant Group, LLC develops, owns, and manages boutique hotels and restaurant in the United States. Its hotel amenities include rooms, suits, outdoor pools, onsite fitness centers, spas, lounges, restaurants, villas, and bars, as well as meeting, event, and wedding facilities. The company was founded in 1981 and is headquartered in San Francisco, California. As of January 16, 2015, Kimpton Hotel & Restaurant Group, LLC operates as a subsidiary of Intercontinental Hotels Group plc.

Hilton Worldwide Holdings Inc.

Hilton Worldwide Holdings Inc., a hospitality company, owns, leases, manages, develops, and franchises hotels and resorts. It operates through Management and Franchise, and Ownership segments. The company engages in the hotel management and licensing of its brands to franchisees. It operates hotels under the Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Curio - A Collection by Hilton, DoubleTree by Hilton, Tapestry Collection by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton, Home2 Suites by Hilton, and Tapestry Collection by Hilton brands. The company operates in North America, South America, and Central America, including all Caribbean nations; Europe, the Middle East, and Africa; and the Asia Pacific. As of October 10, 2017, it had approximately 5,000 properties with 825,000 rooms in 103 countries and territories. Hilton Worldwide Holdings Inc. was founded in 1919 and is headquartered in McLean, Virginia.

Rezidor Hotel Group AB (publ)

Rezidor Hotel Group AB (publ), a hospitality company, operates, manages, leases, and franchises hotels. It operates a portfolio of 483 hotels with approximately 105,000 rooms in operation or under development in approximately 80 countries in Europe, the Middle East, and Africa under the Radisson Blu, Park Inn by Radisson, Radisson RED, and Quorvus Collection brand names. The company also operates bars and restaurants under the Filini, RBG Bar & Grill, Firelake, Verres en Vers, Ochaya Asian Grill, Sure, Vascobelo, The Larder, The Lounge, Bocca Buona, Paulaner, TGI Fridays, and Live-Inn room brands. The company was founded in 1960 and is headquartered in Brussels, Belgium. Rezidor Hotel Group AB (publ) is a subsidiary of Carlson Hotels, Inc.

Waldorf Astoria New York

Waldorf Astoria New York operates as a hotel that provides accommodation and dining services in Midtown Manhattan. The company’s amenities include rooms and suites, restaurants, bars and lounges, a fitness center, a business center, a gift shop/newsstand, and a spa. It also provides services for weddings and other events. The company was founded in 1931 and is headquartered in New York, New York. Waldorf Astoria New York operates as a subsidiary of Hilton Worldwide Holdings Inc. As of February 10, 2015, Waldorf Astoria New York operates as a subsidiary of Anbang Insurance Group Co., Ltd.

Mirvac Hotels Pty Ltd.

Mirvac Hotels Pty Ltd. owns and operates hotels and resorts in Australia and New Zealand. Its facilities, services, and amenities include meetings and events, weddings, spas, and golf facilities. The company is based in Sydney, Australia.

Oaks Hotels & Resorts Limited

Oaks Hotels & Resorts Limited owns and operates resorts, retreats, and hotels. The company offers hotel and resort apartments; rooms across hotels, resorts, and serviced suites; gift vouchers; long stay apartments; leisure facilities and business services, including swimming pools, gymnasiums, saunas, spas, onsite restaurants, car parking, and others; and conference and event facilities in Melbourne, Broome, the Gold Coast, Redcliffe, Gladstone, Townsville, Caloundra, Sunshine Coast, Hunter Valley, Gladstone, and Adelaide. It serves business and leisure travelers. The company was incorporated in 2005 and is based in Sunshine Coast, Australia. It has resorts, retreats, and hotels in Sydney, The Entrance, Port Stephens, Hunter Valley, Darwin, Brisbane, Gold Coast, Port Douglas, Ipswich, Townsville, Sunshine Coast, Redcliffe, Gladstone, Moranbah, Middlemount, Mackay, Adelaide, Glenelg, Melbourne, and Broome, Australia; Auckland and Queenstown, New Zealand; Abu Dhabi and Dubai, United Arab Emirates; and Thailand. Oaks Hotels & Resorts Limited operates as a subsidiary of Minor Hotel Group Limited.

Diamond Resorts International, Inc.

Diamond Resorts International, Inc. operates in the hospitality and vacation ownership industry in the continental United States, Hawaii, Canada, Mexico, the Caribbean, Central America, South America, Europe, Asia, Australia, New Zealand, and Africa. The company operates in two segments, Hospitality and Management Services, and Vacation Interest Sales and Financing. It provides hospitality and management services. The company operates 109 resort properties, 250 affiliated resorts and hotels, and 20 cruise itineraries. It also offers vacation ownership program; and markets and sells vacation interests that provide access to its resort network. Diamond Resorts International, Inc. was incorporated in 2013 and is headquartered in Las Vegas, Nevada.

Club Méditerranée

Club Méditerranée SA provides vacation packages worldwide. It sells vacations and related services; operates villages and cruises; and provides tours and discovery programs. As of October 31, 2014, the company operated 66 villages. The company is also involved in real estate development business, which builds and sells villas and chalet-apartments. The company markets and sells its vacations through its direct network, such as Website, group-owned agencies, and call centers, as well as through an indirect network of travel agencies. Club Méditerranée SA was founded in 1950 and is headquartered in Paris, France.

FRHI Holdings Limited

FRHI Holdings Limited owns, operates, and manages a chain of hotels and resorts. It operates hotels under Fairmont, Raffles, and Swissôtel brands. The company also manages Fairmont and Raffles branded estates and luxury private residence club properties. FRHI Holdings Limited is based in Cayman Islands. As of July 12, 2016, FRHI Holdings Limited operates as a subsidiary of Accor S.A.

Strategic Hotels & Resorts Inc

As of September 27, 2016, Portfolio of 15 Hotels was acquired by Anbang Insurance Group Co., Ltd. Portfolio of 15 Hotels comprises hotels. The asset is located in the United States.


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Target Description

Hotéis Tivoli, SA Hotéis Tivoli, SA owns and operates hotels and resorts. The company was founded in 1933 and is based in Lisbon, Portugal. As of February 1, 2016, Hotéis Tivoli, SA operates as a subsidiary of Minor International PCL.

Whistler Blackcomb Holdings Inc.

Whistler Blackcomb Holdings Inc. operates a four season mountain resort in Canada. It offers summer activities, including mountain biking, cycling golfing, hiking, fishing, swimming, canoeing, kayaking, bungee jumping white water rafting, tennis, zip trekking, in-line skating, and sailing; and winter activities, such as snowmobiling, snowshoeing, cross-country skiing, and skating. The company also provides sightseeing, hiking, glacier skiing, snowtubing, mini golf, alpine sliding, wall climbing, horseback riding, ATV tours, and a host of other activities; and non-ski season activities comprising golf, hiking, mountain biking, canoeing, rafting, kayaking, swimming, children activities, and various festivals. In addition, it provides various private and group ski and snowboard lessons; and a range of dining choices consisting of restaurants, bars, cafés, warming huts, cafeterias, and upscale dining options through operating 18 restaurants and bars. Further, the company owns and operates 18 retail outlets that sell ski accessories comprising goggles, sunglasses, hats, and gloves; hard goods consisting of skis, snowboards, and boots; and other soft goods, such as jackets and snowsuits, mountain bikes, and related gear; and 22 rental shops that rent ski and snowboard units and mountain bikes. Additionally, it engages in various supporting businesses, including guided heli-skiing day trips, lodging management for approximately 250 condo hotel units, employee housing, activities, resort reservation, and event management. The company was founded in 1966 and is based in Whistler, Canada. As of October 17, 2016, Whistler Blackcomb Holdings Inc. operates as a subsidiary of Vail Resorts Inc.

Morgans Hotel Group Co.

Morgans Hotel Group Co., an integrated lifestyle hospitality company, owns, develops, operates, and licenses boutique hotels. It operates primarily in gateway cities and select resort markets in the United States, Europe, and internationally. The company was incorporated in 2005 and is headquartered in New York, New York. As of November 30, 2016, Morgans Hotel Group Co. operates as a subsidiary of SBE Entertainment Group, LLC.

Source: S&P Global



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Appendix D – Discount rate

Introduction

The cash flow assumptions underlying the GT Model are on a nominal, ungeared and post-tax basis. Accordingly, we have assessed a range of nominal post-tax discount rates for the purpose of capitalising the free cash flows of Mantra.

The discount rate was determined using the WACC formula. The WACC represents the average of the rates of return required by providers of debt and equity capital to compensate for the time value of money and the perceived risk or uncertainty of the cash flows, weighted in proportion to the market value of the debt and equity capital provided. However, we note that the selection of an appropriate discount rate is ultimately a matter of professional judgment.

Under a classical tax system, the nominal WACC is calculated as follows:

Where:

Re = the required rate of return on equity capital;

E = the market value of equity capital;

D = the market value of debt capital;

Rd = the required rate of return on debt capital; and

t = the statutory corporate tax rate.

WACC Inputs

Required rate of return on equity capital

We have used the Capital Asset Pricing Model (“CAPM”), which is commonly used by practitioners, to calculate the required return on equity capital.

The CAPM assumes that an investor holds a large portfolio comprising of risk-free and risky investments. The total risk of an investment comprises of systematic and unsystematic risk. Systematic risk is the variability in an investment’s expected return that relates to general movements in capital markets (such as the share market) while unsystematic risk is the variability that relates to matters that are unsystematic to the investment being valued.

The CAPM assumes that unsystematic risk can be avoided by holding investments as part of a large and well-diversified portfolio and that the investor will only require a rate of return sufficient to compensate for the additional, non-diversifiable systematic risk that the investment brings to the portfolio. Diversification cannot eliminate the systematic risk due to economy-wide factors that are assumed to affect all securities in a similar fashion. Accordingly, whilst investors can eliminate unsystematic risk by diversifying their portfolio, they will seek to be compensated for the non-diversifiable systematic risk by way of a risk premium on the expected return. The extent of this compensation depends on the extent to which the company’s returns are correlated with the market as a whole. The greater the systematic risk faced by investors, the larger the required return on capital will be demanded by investors.

ED

ERt1ED

DRWACC ed


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The systematic risk is measured by the investment’s beta. The beta is a measure of the co-variance of the expected returns of the investment with the expected returns on a hypothetical portfolio comprising all investments in the market - it is a measure of the investment’s relative risk.

A risk-free investment has a beta of zero and the market portfolio has a beta of one. The greater the systematic risk of an investment the higher the beta of the investment.

The CAPM assumes that the return required by an investor in respect of an investment will be a combination of the risk-free rate of return and a premium for systematic risk, which is measured by multiplying the beta of the investment by the return earned on the market portfolio in excess of the risk-free rate.

Under the CAPM, the required nominal rate of return on equity (Re) is estimated as follows:

fmefe RRRR

Where:

Rf = risk free rate

βe = expected equity beta of the investment

(Rm – Rf) = market risk premium

Risk free rate

In the absence of an official risk free rate, the yield on government bonds (in an appropriate jurisdiction) is commonly used as a proxy. We have observed the yield on the 10-year Australian Commonwealth Government Bond over several intervals from a period of 5 trading days to 10 trading years as set out in the table below:

Australia Government Debt - 10 Yearas at 26 February 2018 Range Daily average

Previous 5 trading days 2.83% - 2.89% 2.86%Previous 10 trading days 2.83% - 2.91% 2.87%

Previous 20 trading days 2.79% - 2.92% 2.86%Previous 30 trading days 2.48% - 2.92% 2.70%Previous 60 trading days 2.48% - 2.92% 2.72%Previous 1 year trading 2.36% - 2.99% 2.66%Previous 2 years trading 1.82% - 2.99% 2.50%Previous 3 years trading 1.82% - 3.16% 2.60%Previous 5 years trading 1.82% - 4.44% 3.00%Previous 10 years trading 1.82% - 6.79% 4.06%Source: S&P Global and GTCF calculations

Given the unprecedented, historically low Australian Commonwealth Government Bond yields as a result of the volatility in global equity markets, we believe utilising a long-term average yield is reasonable given the current economic climate, as set out below:



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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Yield

(%)

10-year Australian government bond yield

AUS 10-yr Govt Bond GT adopted RfR Rolling 5-yr average 10-year avg Source: S&P Global, GTCF calculations

Accordingly, we have adopted a risk free rate of 4.0%, which is consistent with our view of an appropriate long-term risk free rate estimate.

Market risk premium

The market risk premium represents the additional return an investor expects to receive to compensate for additional risk associated with investing in equities as opposed to assets on which a risk free rate of return is earned. However, given the inherent high volatility of realised rates of return, especially for equities, the market risk premium can only be meaningfully estimated over long periods of time. In this regard, Grant Thornton studies of the historical risk premium over periods of 20 to 80 years suggest the premium is between 5.5% and 6.0% for Australia.

For the purpose of the WACC assessment, Grant Thornton Corporate Finance has adopted a market risk premium of 6.0%.

Beta

The beta measures the expected relative risk of the equity in a company. The choice of the beta requires judgement and necessarily involves subjective assessment as it is subject to measurement issues and a high degree of variation.

An equity beta includes the effect of gearing on equity returns and reflects the riskiness of returns to equity holders. However, an asset beta excludes the impact of gearing and reflects the riskiness of returns on the asset, rather than returns to equity holders. Asset betas can be compared across asset classes independent of the impact of the financial structure adopted by the owners of the business.

Equity betas are typically calculated from historical data. These are then used as a proxy for the future which assumes that the relative risk of the past will continue into the future. Therefore, there is no right equity beta and it is important not to simply apply historical equity betas when calculating the cost of equity.

For the purpose of this report, we have had regard to the observed betas (equity betas) of comparable companies operating in the hotel industry.

While selecting the comparable companies, we note that:


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Hilton, Intercontinental, Wyndham and Hyatt all engage in hotel operation and management, and have similar business models to Mantra. However, they own a small portion of their portfolio while Mantra does not own any hotels in its portfolio (other than the common areas, reception, restaurants etc).

The above mentioned operators are large global players with significantly greater brand value and economy of scales.

There are few publicly listed companies in Australia or New Zealand that are comparable to Mantra, both in terms of operations and scale.

We consider Hilton, Intercontinental, Wyndham and Hyatt to be the most comparable companies to Mantra. This is due to their relatively similar nature of operations. However, we note that the betas of some of the comparable companies are not statistically meaningful (i.e. low R squared40 or may not have enough trading observations) to carry out a robust analysis.

Beta analysis Market Cap Equity R squared Gearing Ungeared Regeared Ungeared RegearedCompany name Country $'million Beta¹ Ratio¹ Beta Beta Beta BetaeasyHotel plc United Kingdom 208 NM 0.29 0.0% NM NM NM NM

Accor SA France 21,739 0.94 0.68 7.1% 0.90 0.96 0.96 1.03

Shangri-La Asia Limited Hong Kong 10,194 1.04 0.34 10.8% 0.94 1.01 0.88 0.94

Pandox AB (publ) Sweden 4,016 0.75 0.06 87.4% 0.40 0.43 0.40 0.43

Marriott International, Inc. United States 64,382 1.28 0.94 19.4% 1.07 1.15 1.26 1.35Choice Hotels International, Inc. United States 5,878 1.18 0.82 17.7% 1.00 1.08 0.72 0.78Hilton Worldwide Holdings Inc. United States 33,088 1.26 0.01 34.7% 0.94 1.01 0.94 1.01InterContinental Hotels Group PLC United Kingdom 15,484 1.19 0.73 19.5% 0.99 1.07 1.06 1.14

Red Lion Hotels Corporation United States 304 0.91 0.36 39.0% 0.65 0.70 0.95 1.02Millennium & Copthorne Hotels plc United Kingdom 3,084 0.78 0.01 34.5% 0.58 0.62 1.06 1.14

Dalata Hotel Group plc Ireland 1,666 0.63 0.34 15.8% 0.56 0.60 0.56 0.60

Wyndham Worldwide Corporation United States 14,998 1.34 0.80 53.2% 0.87 0.94 1.66 1.79PPHE Hotel Group Limited Netherlands 851 0.24 0.49 232.9% 0.09 0.10 0.26 0.28Hyatt Hotels Corporation United States 11,885 1.28 0.59 11.5% 1.15 1.23 1.12 1.20

NH Hotel Group, S.A. Spain 3,286 1.40 0.67 46.3% 0.96 1.03 1.23 1.32

Playa Hotels & Resorts N.V. United States 1,396 0.10 0.04 67.6% 0.06 0.06 0.06 0.06

Extended Stay America, Inc. United States 4,783 1.04 0.07 69.0% 0.62 0.66 0.62 0.66

Meliá Hotels International, S.A. Spain 4,010 0.76 0.49 42.2% 0.54 0.58 1.10 1.18

Scandic Hotels Group AB Sweden 1,487 0.74 0.79 48.6% 0.50 0.54 0.50 0.54

Rezidor Hotel Group AB (publ) Belgium 651 1.19 0.04 0.2% 1.19 1.28 1.37 1.48Average 0.95 0.43 42.9% 0.74 0.79 0.88 0.94Median 1.04 0.43 34.6% 0.87 0.94 0.95 1.02

10-year beta5-year beta

Source: S&P Global and GT calculations

Note 1: Equity betas are calculated using data provided by S&P Global. The betas are based on a five-year period with monthly observations and

have been degeared based on the average gearing ratio over five years.

Note 2: NM – Not Meaningful, owing to a negative figure.

It should be noted that the above betas are drawn from the actual and observed historic relationship between risk and returns. From these actual results, the expected relationship is estimated generally on the basis of extrapolating past results. Despite the arbitrary nature of the calculations it is important to

40 It is a measure of the correlation of the portfolio's returns to the benchmark's returns. Typically, a higher R squared will indicate a high level of correlation and vice versa.



77

assess their commercial reasonableness. That is, to assess how closely the observed relationship is likely to deviate from the expected relationship.

Consequently, while measured equity betas of the listed comparable companies provide useful benchmarks, the selection of an unsystematic equity beta requires a level of judgement.

The asset betas of the selected companies are calculated by adjusting the equity betas for the effect of gearing to obtain an estimate of the business risk of the comparable companies, a process commonly referred as de-gearing. We have then recalculated the equity beta based on an assumed ‘optimal’ capital structure deemed appropriate for the business (re-gearing). This is a subjective exercise, which carries a significant possibility of estimation error.

We used the following formula to undertake the de-gearing and regearing exercise:

t

ED

ae 11

Where:

βe = Equity beta

βa = Asset beta

t = corporate tax rate

The betas are de-geared using the median gearing level over the period in which the betas were observed and then re-geared based on a gearing ratio of 10-15% debt to 85-90% equity (see the Capital Structure Section below for further discussions).

We note that the median 5-year and 10-year regeared betas for the most comparable companies (i.e. Hilton, InterContinental, Hyatt and Wyndham) are 1.07 and 1.20 respectively. While we note that these companies have differences to Mantra, we believe that the beta for these companies provides a reasonable measure of the industry beta.

Based on the above, for the purposes of our valuation, we have selected a beta range of between 1.05 and 1.15 to calculate the required rate of return on equity capital.

Specific risk premium

Specific risk premium represents the additional return an investor expects to receive to compensate for specific risks not reflected in the beta of the observed comparable companies.

We note that we have not incorporated any specific risk premium in our assessment of the WACC, given that we have already risk adjusted the underlying cash flows in the GT Model.

Cost of debt

For the purpose of estimating the cost of debt applicable to Mantra, Grant Thornton Corporate Finance has considered the following:

The margin in corporate bond yields over the US and Australian Government bond yields.

The weighted average interest rate on credit outstanding for large businesses over the last one to five years as published by the Reserve Bank of Australia.


78

The historical and current cost of debt for Mantra and its comparable companies.

Expectations of the yield curve.

Based on the above, Grant Thornton Corporate Finance has adopted a cost of debt range of 5.5% to 6.0% (pre-tax).

Capital structure

Grant Thornton Corporate Finance has considered the gearing ratio which a hypothetical purchaser of the business would adopt in order to generate a balanced return given the inherent risks associated with debt financing. Factors which a hypothetical purchaser may consider include the shareholders’ return after interest payments, and the business’ ability to raise external debt.

The appropriate level of gearing that is utilised in determining WACC for a particular company should be the “target” gearing ratio, rather than the actual level of gearing, which may fluctuate over the life of a company. The target or optimal gearing level can therefore be derived based on the trade-off theory which stipulates that the target level of gearing for a project is one at which the present value of the tax benefits from the deductibility of interest are offset by present value of costs of financial distress. In practice, the target level of gearing is evaluated based on the quality and variability of cash flows. These are determined by an assessment of:

the quality and life cycle of a company;

the quality and variability of earnings and cash flows;

working capital;

level of capital expenditure; and

the risk profile of the assets.

In determining the appropriate capital structure, we have had regard to the current capital structure of the comparable companies as well as Mantra’s net debt level. We have also had regard to the average gearing ratio of Mantra and comparable companies over the last five year period as set out in the beta section of this report.

For the purpose of the valuation, Grant Thornton Corporate Finance has adopted a debt-to-enterprise ratio of 10% to 15% debt and 85% to 90% equity.



79

Discount rate summary

WACC calculation Low HighCost of equity

Risk free rate 4.0% 4.0%

Beta 1.05 1.15

Market risk premium 6.0% 6.0%

Specific risk premium 0.0% 0.0%

Cost of equity 10.3% 10.9%

Cost of debt

Cost of debt (pre tax) 5.5% 6.0%

Tax 32.0% 32.0%

Cost of debt (post tax) 3.7% 4.1%

Capital structure

Proportion of debt 15.0% 10.0%

Proportion of equity 85.0% 90.0%

WACC (post tax) 9.3% 10.2%

WACC (selected) 9.0% 10.0%


Based on the above, we have adopted a discount rate between 9.0% and 10.0% for Mantra.


80

Appendix E – Premium for control

Evidence from studies indicates that premia for control on successful takeovers has frequently been in the range of 20% to 40% in Australia, and that the premia vary significantly for each transaction.

0

20

40

60

80

100

120

< (1

00%

)

(100

%) -

(90%

)

(90%

) - (8

0%)

(80%

) - (7

0%)

(70%

) - (6

0%)

(60%

) - (5

0%)

(50%

) - (4

0%)

(40%

) - (3

0%)

(30%

) - (2

0%)

(20%

) - (1

0%)

(10%

) - 0

%

0% -

10%

10%

- 20

%

20%

- 30

%

30%

- 40

%

40%

- 50

%

50%

- 60

%

60%

- 7

0%

70%

- 80

%

80%

- 90

%

90%

- 10

0%

> 10

0%

Num

ber o

f tra

nsac

tions

1 Month Prior Control Premium

0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

<$50m $50m-$99m $100m-$249m $250m-$499m $500m+

1 m

onth

prio

r pre

miu

m (%

)

Control premium and size

0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

CG&R E&R FSI HLS IndustrialServices

Industrials Infrastructure PrimaryIndustry

Property Services THL TMT

1 mon

th pr

ior pr

emium

(%)

Control premium per industry

0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1 mon

th pr

ior pr

emium

(%)

Control premium per completion date

Average 34.25%Median 29.31%

Control premium

Source: GTCF analysis



81

Appendix F – Glossary

$ or A$ Australian Dollar

ACCC Australian Competition and Consumer Commission

Accor or the Buyer Accor S.A.

APES Accounting Professional and Ethical Standards

APES110 Code of ethics for Professional Accounting

ASIC Australian Securities Investment Commission

ASX Australian Stock Exchange

CAGR Compounded Annual Growth Rate

CBD Central Business District, a reporting segment of Mantra

CR&D Central Revenue and Distribution, a reporting segment of Mantra

Corporations Act Corporations Act 2001

DCF Discounted Cash Flow

EBITDAI Earnings before interest, tax, depreciation, amortisation and impairment

EBITDA Earnings before interest, tax, depreciation and amortisation

EV Enterprise Value

FIRB Foreign Investment Review Board

FSG Financial Services Guide

FY Financial year ended 30 June GTCF, Grant Thornton, or Grant Thornton Corporate Finance Grant Thornton Corporate Finance Pty Ltd

HMR Hotel Management Agreement

MA Management Agreement

Mantra or the Company Mantra Group Limited

Mantra Share 1 outstanding ordinary share in Mantra

Mantra Shareholder An individual/ entity beneficially holding Mantra Share(s)

MLR Management Letting Right

MSA Marketing Services Agreement

NSW New South Wales

Offer Price $3.96 per Mantra Share

pa Per annum

Proposed Transaction or Scheme Scheme of Arrangement whereby Accor will acquire all outstanding shares of Mantra

QLD Queensland

RevPAR Revenue per Available Room

RG Regulatory Guide

RG111 ASIC Regulatory Guide 111 “Contents of expert reports”

RG112 ASIC Regulatory Guide 112 “Independence of Experts”

RG74 ASIC Regulatory Guide 74 “Acquisitions agreed to by shareholders”

SIA Scheme Implementation Agreement

Scheduled Acquisitions Properties which Mantra has agreed to acquire and include in its portfolio in the short- to medium-term

Scheme Scheme of Arrangement between Mantra and Accor

Special Dividend An amount of $0.16 forming part of the Offer Price which is proposed to be distributed to Mantra Shareholders

SA South Australia

VWAP Volume Weighted Average Price

WA Western Australia

WACC Weighted Average Cost of Capital


ANNEXURE BNOTICE OF SCHEME MEETING



Annexure B

Notice of Scheme Meeting

Mantra Group Limited ABN 69 137 639 395 (Mantra Group or the Company)(ASX Code: MTR)

Notice of General Meeting of Shareholders of the Company (the Meeting)

Notice is hereby given, that by an order of the Federal Court of Australia (the Court) pursuant to section 411(1) of the Corporations Act 2001 (Cth), a general meeting of shareholders of Mantra Group (Mantra Shareholders) will be held at Tower One, International Towers Sydney, Level 46, 100 Barangaroo Avenue, Barangaroo NSW 2000 on Friday 18 May 2017 at 10 am (Sydney Time).

The Court has directed that Peter Bush act as the Chair of the Meeting, or failing him, David Gibson act as Chair of the Meeting.

Business of MeetingThe purpose of the Meeting is to consider and, if thought fit, to agree to a proposed Scheme of Arrangement (with or without modification) to be made between Mantra Group and Mantra Shareholders, at the Scheme Record Date, pursuant to Part 5.1 of the Corporations Act (the Scheme).

ResolutionThe Meeting will be asked to consider, and, if thought fit, to pass the following resolution as a special resolution:

“That, pursuant to and in accordance with section 411 of the Corporations Act, the Scheme (the terms of which are described in the Scheme Booklet of which this Notice of Meeting forms part) is approved (with or without modification as approved by the Court) and subject to approval of the Scheme by the Court, the Mantra Board is authorised to implement the Scheme with any such modifications or conditions.”

There are no relevant voting exclusions that apply to this Meeting.

By Order of the Court and the Mantra Group Board

Fiona van WykCompany Secretary11 April 2018

Important NoticeTo enable you to make an informed voting decision, a copy of the Scheme and a copy of the explanatory statement required by section 412 of the Corporations Act in relation to the Scheme are contained in the Scheme Booklet of which this Notice of Meeting forms part. Terms used in this Notice of Meeting have the same meanings as set out in the Glossary in Section 8 of the Scheme Booklet. Details about your entitlement to vote, how to vote and how to appoint a proxy, attorney or a corporate representative are set out in the Scheme Booklet as well as in the attached proxy form.


EXPLANATORY NOTES TO THE MEETING

Voting by Proxy or Attorney

• The item of business set out in the Notice of Meeting will be decided by poll.• If you are unable to attend the Meeting, you may appoint a proxy to attend and vote on your behalf. A

shareholder entitled to attend and vote at the Meeting has a right to appoint a proxy to attend and vote for the shareholder. A proxy form is enclosed with this Notice of Meeting.

• A shareholder may appoint a person or a body corporate as their proxy. If a shareholder appoints a body corporate as proxy, the body corporate will need to ensure that it appoints an individual as corporate representative and provides satisfactory evidence of the appointment of its corporate representative. A proxy need not be a shareholder of the Company.

• The Chair of the Meeting intends to vote all available proxies in favour of the resolution. By appointing theChair of the Meeting as your proxy you expressly direct the Chair to vote in favour of the resolution.

• A shareholder who is entitled to cast two or more votes may appoint two proxies.• Where two proxies are appointed you should specify the proportion or number of votes each proxy is entitled to

exercise. If the appointments do not specify the proportion or number of the shareholder’s votes that each proxy may exercise, then each proxy may exercise half of the shareholder’s votes. Where more than one proxy is appointed,neither proxy is entitled to vote on a show of hands.

• You can direct your proxy how to vote by following the instructions on the proxy form. Shareholders areencouraged to direct their proxy how to vote (eg, ‘for’, ‘against’ or ‘abstain’ by selecting the relevant box next to each item of business on the proxy form).

• Any directed proxies that are not voted on a poll at the Meeting by a shareholder’s appointed proxy will automatically default to the Chair of the Meeting, who is required to vote proxies as directed on a poll.

• Where a shareholder appoints an attorney to act on his or her behalf, such appointment must be made by a dulyappointed power of attorney.

• To be effective, a proxy form and the original (or a certified copy) of the power of attorney or any other instrumentunder which it is signed, must be received by the Company at an address or facsimile number set out below by no

later than 10 am (Sydney Time) on Wednesday 16 May 2018. Attorneys who have been authorised to attend and vote at the Meeting should bring with them the original or a certified copy of the power of attorney (or any other instrument under which they have been authorised to attend and vote at the Meeting).

Company’s Registry:By Mail:Mantra Group LimitedC/- Link Market Services LimitedLocked Bag A14Sydney South NSW 1235Australia

Delivery:Mantra Group LimitedC/- Link Market Services LimitedLevel 12680 George StreetSydney NSW 2000Australia

Facsimile: 02 9287 0309 (within Australia) +61 2 9287 0309 (outside Australia)Online: www.linkmarketservices.com.au

Voting RightsThe Board has determined that a shareholder’s voting entitlement at the Meeting will be taken to be held by the persons who are the registered shareholders of the Company at 7.00 pm (Sydney Time) on Wednesday, 16 May 2018Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

A corporate shareholder or proxy must appoint a person as its corporate representative. The appointment must comply with section 250D of the Corporations Act and the representative must provide satisfactory evidence of his / her appointment.

If you propose to attend and vote at the Meeting, please bring the enclosed proxy form with you. This will assist in registering your attendance.



Custodian VotingFor Intermediary online subscribers only (custodians) please visit www.intermediaryonline.com to submit your voting intentions.

Conditionality of ResolutionThe resolution to be considered at the Meeting is conditional on being passed by the requisite majorities at the Meeting.

Required MajoritiesFor the Scheme to proceed, the Scheme Resolution must be passed by:

• a majority in number (more than 50%) of Mantra Shareholders present in person or by proxy, and voting (whether inperson or by proxy) on the Scheme Resolution; and

• at least 75% of the votes cast on the Scheme Resolution.


ANNEXURE CSCHEME OF ARRANGEMENT



Baker & McKenzie ABN 32 266 778 912 AMP Centre Level 27 50 Bridge Street Sydney NSW 2000 Australia www.bakermckenzie.com

Scheme of Arrangement

Mantra Group Limited

Scheme Shareholders


2

Scheme of Arrangement under section 411 of the Corporations Act 2001 (Cth) between Mantra Group Limited (ABN 69 137 639 395) of Level 15, 50 Cavill Avenue,

Surfers Paradise QLD 4217 (Mantra)

and Each person who is registered as the holder of Mantra Shares on the Register as at the Scheme Record Date (Scheme Shareholders)

Operative provisions

1. Definitions and interpretation

Definitions

In this document, unless the context requires otherwise: 1.1

AAPC means AAPC Limited (ACN 009 175 820).

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or, where the context requires, the financial market which it operates.

Business Day means a day that is not a Saturday, Sunday, public holiday or bank holiday in Sydney or Brisbane.

CHESS means the Clearing House Electronic Subregister System of share transfers operated by ASX Settlement Pty Ltd.

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Federal Court of Australia or such other court of competent jurisdiction under the Corporations Act agreed in writing by Mantra and AAPC.

Deed Poll means the deed poll in respect of the Scheme executed by AAPC in favour of each Scheme Shareholder.

Effective means, when used in relation to the Scheme, the coming into effect, under section 411(10) of the Corporations Act, of the Scheme Order.

Effective Date means the date on which the Scheme becomes Effective.

End Date means:

(a) 5.00pm on 30 June 2018; or

(b) such other date as agreed in writing by Mantra and AAPC.

Implementation Agreement means the scheme implementation agreement dated 12 October 2017 between Mantra and AAPC in connection with the implementation of this Scheme.

Implementation Date means the third Business Day following the Scheme Record Date, or such other Business Day as Mantra and AAPC agree in writing.



3

Listing Rules means the official listing rules of ASX as amended from time to time.

Mantra Group means Mantra and each of its Subsidiaries.

Mantra Share means an issued fully paid ordinary share in Mantra.

Mantra Shareholder means each person who is registered in the Register as a holder of Mantra Shares.

Register means the register of shareholders of Mantra maintained in accordance with the Corporations Act.

Scheme Consideration means $3.80, being $3.96 per Scheme Share, minus the per-share cash amount of the Special Dividend.

Scheme means this scheme of arrangement under Part 5.1 of the Corporations Act between Mantra and Scheme Shareholders, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by Mantra and AAPC.

Scheme Meeting means the meeting of Mantra Shareholders ordered by the Court to be convened under section 411(1) of the Corporations Act in relation to this Scheme and includes any meeting convened following any adjournment or postponement of that meeting.

Scheme Order means the orders of the Court approving the Scheme under section 411(4)(b) of the Corporations Act.

Scheme Record Date means 7.00pm on the third Business Day (or such other Business Day as Mantra and AAPC agree in writing) after the Effective Date.

Scheme Share means a Mantra Share on issue as at the Scheme Record Date.

Scheme Shareholder means a person who holds one or more Scheme Shares.

Second Court Date means the first day on which an application made to the Court for an order under section 411(4)(b) of the Corporations Act approving the Scheme is heard or scheduled to be heard or, if the application is adjourned for any reason, means the date on which the adjourned application is heard or scheduled to be heard.

Share Registry means Link Market Services Limited (ACN 083 214 537).

Special Dividend means a fully franked cash dividend to be paid by Mantra in accordance with clause 9.7 of the Implementation Agreement.

Subsidiary has the meaning given to that term in section 46 of the Corporations Act.

Interpretation

In this document: 1.2

(a) unless the context requires otherwise, a reference:

(i) to the singular includes the plural and vice versa;

(ii) to a document or instrument is a reference to that document or instrument as amended, consolidated, supplemented, novated or replaced;

(iii) to a clause, paragraph, Schedule or Annexure is to a clause, paragraph, Schedule or Annexure of or to this document;


4

(iv) to a law includes any legislation, judgment, rule of common law or equity or rule of any applicable stock exchange, and is a reference to that law as amended, consolidated, supplemented or replaced and includes a reference to any regulation, by-law or other subordinate legislation;

(v) to any time is to Sydney, Australia time;

(vi) to "$" is to the lawful currency of Australia;

(vii) to a party means a party to this Scheme;

(viii) to a "person" includes an individual, a firm, a body corporate, a partnership, a joint venture, an unincorporated body or association, or any regulatory authority;

(b) the words "including" or "includes" means "including, but not limited to", or "includes, without limitation" respectively;

(c) where a word or phrase is defined, its other grammatical forms have a corresponding meaning;

(d) headings are for convenience only and do not affect interpretation of this document;

(e) if a payment or other act must (but for this clause) be made or done on a day that is not a Business Day, then it must be made or done on the next Business Day; and

(f) if a period must be calculated from, after or before a day or the day of an act or event, it must be calculated excluding that day.

2. Preliminaries

Mantra is a public company limited by shares, incorporated in Australia and admitted to the 2.1official list of ASX.

AAPC is a public company limited by shares and incorporated in Australia. 2.2

If the Scheme becomes Effective: 2.3

(a) AAPC must provide or procure the provision of the Scheme Consideration to each Scheme Shareholder in accordance with the terms of this Scheme and the Deed Poll; and

(b) all of the Scheme Shares, and all the rights and entitlements attaching to them as at the Implemetation Date, must be transferred to AAPC, and Mantra must enter AAPC in the Register as the holder of the Scheme Shares on the Implementation Date.

Mantra and AAPC have entered into the Implementation Agreement and agreed to implement 2.4the Scheme on the terms and conditions set out in the Implementation Agreement.

AAPC has executed the Deed Poll under which it has covenanted in favour of each Scheme 2.5Shareholder, subject to the Scheme becoming Effective, to perform its obligations as contemplated by this Scheme and to do all things necessary or desirable to implement the Scheme, including to provide or procure the provision of the Scheme Consideration.



5

3. Conditions precedent

Conditions precedent to Scheme

The Scheme is conditional on and will have no force or effect until, the satisfaction of each of 3.1the following conditions precedent:

(a) all of the conditions precedent in clause 3.1 of the Implementation Agreement (other than those relating to Court approval of this Scheme) having been satisfied or waived in accordance with the terms of the Implementation Agreement, before 8:00am on the Second Court Date;

(b) neither the Implementation Agreement nor the Deed Poll having been terminated as at 8.00am on the Second Court Date;

(c) the Court making the Scheme Order, including with any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by Mantra and AAPC;

(d) any other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to the Scheme and agreed to by Mantra and AAPC, having been satisfied or waived; and

(e) an office copy of the Scheme Order (and, if applicable, any orders under section 411(6) of the Corporations Act) is lodged with ASIC as contemplated by section 411(10) of the Corporations Act on or before the End Date,

and the provisions of clauses 4 and 5 will not come into effect unless and until each of these conditions precedent has been satisfied.

Certificate in relation to conditions precedent

Prior to or at the Court hearing on the Second Court Date, Mantra and AAPC must provide to 3.2the Court a certificate, or such other evidence as the Court requests, confirming (in respect of matters within their knowledge) whether or not all of the conditions precedent to the Scheme have been satisfied or waived.

The giving of a certificate by Mantra and AAPC under clause 3.2 will, in the absence of 3.3manifest error, be conclusive evidence of the satisfaction or waiver of the conditions precedent referred to in the relevant certificate.

Termination

Without limiting any rights under the Implementation Agreement, if the Implementation 3.4Agreement or Deed Poll is terminated in accordance with its terms before the Scheme becomes Effective, unless AAPC and Mantra otherwise agree in writing, Scheme Shareholders release Mantra and AAPC from:

(a) any further obligation to take steps to implement the Scheme; and

(b) any liability with respect to the Scheme,

and the Scheme will lapse and be of no further force or effect.

End Date

The Scheme will lapse and have no further force or effect if the Effective Date has not 3.5occurred on or before the End Date.


6

4. Implementation of Scheme

Lodgement of Scheme Order

Mantra must lodge with ASIC, in accordance with section 411(10) of the Corporations Act, 4.1an office copy of the Scheme Order as soon as practicable and no later than 5.00pm on the first Business Day after the date on which the Court makes that Scheme Order.

Transfer of Scheme Shares

Subject to the Scheme becoming Effective, the following will occur on the Implementation 4.2Date in the order set out below:

(a) the Scheme Consideration must be provided in the manner contemplated by clauses 4.5 to 4.7; and

(b) the Scheme Shares, together with all rights and entitlements attaching to them as at the Implementation Date, must be transferred to AAPC without the need for any further act by any Scheme Shareholder (other than acts performed by Mantra as attorney and agent for Scheme Shareholders under clause 7.1 of this Scheme) by:

(i) Mantra delivering to AAPC a duly completed share transfer form executed on behalf of the Scheme Shareholders (which may be a master share transfer form) to transfer all the Scheme Shares to AAPC; and

(ii) AAPC duly executing and delivering this transfer form to Mantra for registration.

Immediately following receipt of the transfer form, Mantra must enter, or procure the entry of, 4.3the name and address of AAPC in the Register as the holder of all the Scheme Shares.

To the extent permitted by law, the Scheme Shares (including all rights and entitlements 4.4attaching to the Scheme Shares) transferred under this Scheme to AAPC, will, at the time of transfer of them to AAPC, vest in AAPC free from all mortgages, charges, liens, encumbrances, pledges, security interests, other interests of third parties of any kind (whether legal or otherwise) and any restrictions on transfer of any kind.

Provision of Scheme Consideration

AAPC must, by no later than the Business Day before the Implementation Date, deposit, or 4.5procure the deposit of, in cleared funds an amount equal to the aggregate amount of the Scheme Consideration payable to each Scheme Shareholder, in an Australian dollar denominated trust account operated by Mantra as trustee for the Scheme Shareholders (provided that any interest on the amounts deposited (less bank fees and other charges) will be credited to AAPC’s account).

Subject to AAPC complying with clause 4.5, on the Implementation Date, Mantra must pay or 4.6procure the payment from the trust account referred to in clause 4.5 to each Scheme Shareholder based on the number of Scheme Shares held by that Scheme Shareholder as at the Scheme Record Date.

Mantra's obligation under clause 4.6 will be satisfied by Mantra: 4.7

(a) where a Scheme Shareholder has, before the Scheme Record Date, made an election in accordance with the requirements of the Share Registry to receive dividend payments from Mantra by electronic funds transfer to a bank account nominated by



7

the Scheme Shareholder, paying, or procuring the payment of, the relevant amount of Australian currency by electronic means in accordance with that election; or

(b) otherwise, dispatching, or procuring the dispatch of, a cheque in Australian currency to the Scheme Shareholder by prepaid post to their address shown in the Register as at the Scheme Record Date, such cheque being drawn in the name of the Scheme Shareholder (or in the case of joint holders, in accordance with the procedures set out in clause 4.9), for the relevant amount.

To the extent that, following satisfaction of Mantra’s obligations under clause 4.6, there is a 4.8surplus in the amount held by Mantra as trustee for the Scheme Shareholders in the trust account referred to in that clause, that surplus may be paid by Mantra to AAPC.

Joint holders

In the case of Scheme Shares held in joint names, any Scheme Consideration will be taken to 4.9be paid to the joint holders upon payment to the holder whose name appears first in the Register as at the Scheme Record Date.

Orders of a Court or Government Agency

If written notice is given to Mantra (or the Registry) of an order or direction made by a court 4.10of competent jurisdiction or by another Government Agency that:

(a) requires consideration to be provided to a third party in respect of Scheme Shares held by a particular Scheme Shareholder, which would otherwise be payable to that Scheme Shareholder in accordance with this Scheme, then Mantra shall be entitled to procure that provision of that consideration is made in accordance with that order or direction; or

(b) prevents Mantra from providing consideration to any particular Scheme Shareholder in accordance with this Scheme, or the payment of such consideration is otherwise prohibited by applicable law, Mantra shall be entitled to retain an amount, in Australian dollars, equal to the number of Scheme Shares held by that Scheme Shareholder multiplied by the Scheme Consideration until such time as provision of the consideration in accordance with this Scheme is permitted by that order or direction or otherwise by law.

Unclaimed monies

If: 4.11

(a) in the case of a payment under clause 4.7(a), the transfer is rejected or refunded or a bank account which has been nominated is no longer valid; or

(b) in the case of a dispatch of a cheque under clause 4.7(b):

(i) the cheque is returned to Mantra;

(ii) the cheque is not presented within six months after the Implementation Date; or

(iii) Mantra reasonably believes that a Scheme Shareholder is not known at a Scheme Shareholder's registered address,

then Mantra may cancel the relevant cheque and credit the amount payable to the relevant Scheme Shareholder to a separate bank account of Mantra to be held until the Scheme Shareholder claims the amount, or the amount is dealt with in accordance with any applicable


8

unclaimed moneys legislation. An amount credited to the account is to be treated as having been paid to the Scheme Shareholder when credited to the account. Mantra must maintain records (for the minimum period required by applicable law) of the amounts paid, the people who are entitled to the amounts, and any transfers of the amounts.

5. Dealings in Mantra Shares

Determination of Scheme Shareholders

For the purpose of determining the identity of Scheme Shareholders, dealings in Mantra 5.1Shares or other alterations to the Register must only be recognised if:

(a) in the case of dealings of the type to be effected by CHESS, the transferee is registered in the Register as the holder of the relevant Mantra Shares by the Scheme Record Date; and

(b) in all other cases, share transfer forms in registrable form or registrable transmission applications in respect of those dealings are received by the Share Registry by the Scheme Record Date,

and Mantra must not accept for registration, nor recognise for any purpose (except a transfer to AAPC pursuant to this Scheme and any subsequent transfer by AAPC or its successors in title), any transfer or transmission application or other request received after such times, or received prior to such times but not in registrable or actionable form, as appropriate.

Register

Mantra must register any registrable transfers or transmission applications of the kind referred 5.2to in clause 5.1(b) by the Scheme Record Date.

If this Scheme becomes Effective, a Scheme Shareholder (and any person claiming through 5.3that holder) must not dispose of, or purport or agree to dispose of, any Scheme Shares or any interest in them after the Scheme Record Date (other than in accordance with this Scheme), and any attempt to do so will have no effect and Mantra will be entitled to disregard any such disposal.

For the purpose of determining entitlements to the Scheme Consideration, Mantra must, until 5.4the Scheme Consideration has been provided to Scheme Shareholders, maintain or procure the maintenance of the Register in accordance with this clause 5. The Register in this form will solely determine entitlements to the Scheme Consideration.

From the Scheme Record Date, each certificate or holding statement for Scheme Shares will 5.5cease to have any effect as a document of title in respect of the Scheme Shares or otherwise (other than holding statements in favour of AAPC or its successors in title).

Each entry on the Register as at the Scheme Record Date (other than entries in respect of 5.6AAPC or its successors in title) will cease to have any effect other than as evidence of the entitlements of Scheme Shareholders to the Scheme Consideration in respect of the Scheme Shares relating to that entry.

6. Quotation of Mantra Shares

Mantra must apply to ASX for suspension of trading in Mantra Shares on ASX with effect 6.1from the close of trading on the Effective Date.



9

After the Scheme has been fully implemented in accordance with its terms, Mantra must 6.2apply to ASX for the termination of the official quotation of Mantra Shares on ASX and to have Mantra removed from the official list of ASX.

7. General Scheme provisions

Appointment of Mantra as agent and attorney

Each Scheme Shareholder, without the need for any further act irrevocably appoints Mantra 7.1and each of the directors and officers of Mantra (jointly and severally) as its agent and attorney for the purpose of doing all things and executing all deeds, instruments, transfers and other documents that may be necessary or desirable to give full effect to the Scheme and the transactions contemplated by it, including but not limited to:

(a) enforcing the Deed Poll against AAPC; and

(b) executing any document or doing any other act necessary or desirable to give full effect to this Scheme and the transactions contemplated by it, including executing a proper instrument of transfer of Scheme Shares,

and Mantra accepts such appointment. Mantra may sub-delegate its functions, authorities or powers under this clause 7.1 as agent and attorney of each Scheme Shareholder to any or all of its directors or officers.

Each Scheme Shareholder irrevocably consents to Mantra and AAPC doing all things and 7.2executing all deeds, instruments, transfers or other documents as may be necessary, incidental or expedient to the implementation and performance of this Scheme.

Agreement by Scheme Shareholders

Each Scheme Shareholder: 7.3

(a) agrees to the transfer of its Scheme Shares together with all rights and entitlements attaching to those Scheme Shares to AAPC in accordance with the terms of the Scheme;

(b) agrees to the variation, cancellation or modification (if any) of the rights attached to its Mantra Shares constituted by or resulting from the Scheme; and

(c) acknowledges that this Scheme binds Mantra and all Scheme Shareholders (including those who do not attend the Scheme Meeting or those who do not vote, or vote against this Scheme, at the Scheme Meeting).

Warranty by Scheme Shareholders

Each Scheme Shareholder is deemed to have warranted to Mantra and AAPC and appointed 7.4and authorised Mantra as its attorney and agent to warrant to AAPC, on the Implementation Date, that:

(a) all of its Scheme Shares (including all rights and entitlements attaching to them) transferred to AAPC under the Scheme will, on the date of the transfer, be fully paid and free from all mortgages, charges, liens, encumbrances, pledges, security interests, other interests of third parties of any kind (whether legal or otherwise) and restrictions on transfer of any kind; and

(b) it has full power and capacity to sell and transfer its Scheme Shares (including all rights and entitlements attaching to them) to AAPC.


10

Mantra undertakes that it will provide this warranty to AAPC as agent and attorney of each Scheme Shareholder.

Title to Scheme Shares

On and from the Implementation Date, subject to Alice providing the Scheme Consideration 7.5in accordance with clause 4.5, and pending registration by Mantra of AAPC in the Register as the holder of the Scheme Shares, AAPC will be beneficially entitled to the Scheme Shares.

Appointment of AAPC as sole proxy

Subject to the provision of the Scheme Consideration for the Scheme Shares as contemplated 7.6by this Scheme, on and from the Implementation Date and until registration by Mantra of AAPC in the Register as the holder of the Scheme Shares, each Scheme Shareholder:

(a) without the need for any further act, irrevocably appoints AAPC as its agent and attorney to appoint any officer or agent nominated by AAPC as its sole proxy and where applicable, corporate representative to:

(i) attend shareholders' meetings of Mantra;

(ii) exercise the votes attached to the Scheme Shares registered in the name of the Scheme Shareholder; and

(iii) sign any shareholders' resolution of Mantra;

(b) undertakes not to attend or vote at any such meetings or sign any such resolutions, whether in person, by proxy or by corporate representative other than under this clause 7.6;

(c) must take all other actions in the capacity of a registered holder of Scheme Shares as AAPC reasonably directs; and

(d) acknowledges and agrees that in exercising the powers referred to in this clause 7.6, AAPC and each of the directors, officers and secretaries of AAPC may act in the best interests of AAPC as the intended registered holder of the Scheme Shares.

Mantra undertakes in favour of each Scheme Shareholder that it will appoint the officer or 7.7agent nominated by AAPC as that Scheme Shareholder's proxy or, where applicable, corporate representative in accordance with clause 7.6(a).

Scheme alterations and conditions

If the Court proposes to approve the Scheme subject to any alterations or conditions under 7.8section 411(6) of the Corporations Act, Mantra may, by its counsel or solicitors, and with the consent of AAPC, consent to those alterations or conditions on behalf of all persons concerned, including, for the avoidance of doubt, all Scheme Shareholders.

Effect of Scheme

The Scheme binds Mantra and all Scheme Shareholders (including those who do not attend 7.9the Scheme Meeting, do not vote at the meeting or vote against the Scheme) and, to the extent of any inconsistency and to the extent permitted by law, overrides the constitution of Mantra.

No liability when acting in good faith

Neither Mantra nor AAPC, nor any of their respective officers or agents, will be liable to a 7.10Mary Shareholder for anything done or omitted to be done in the performance of the Scheme or the Deed Poll in good faith.



11

Notices

Where a notice, transfer, transmission application, direction or other communication referred 7.11to in the Scheme is sent by post to Mantra, it will not be deemed to be received in the ordinary course of post or on a date other than the date (if any) on which it is actually received at Mantra's registered office or at the Share Registry.

The accidental omission to give notice of the Scheme Meeting or the non-receipt of such a 7.12notice by any Mantra Shareholder will not, unless so ordered by the Court, invalidate the Scheme Meeting or the proceedings of the Scheme Meeting.

Further assurances

Each party must, at its own expense, whenever requested by the other party, promptly do or, 7.13to the extent reasonably practicable, arrange for others to do everything, including executing any documents, reasonably necessary to give full effect to this Scheme and the transactions contemplated by this Scheme.

Costs and stamp duty

AAPC must pay all stamp duty (if any) and any fines, penalties and interest with respect to 7.14stamp duty in respect of this Scheme .

Governing law and jurisdiction

This Scheme is governed by the laws of New South Wales. Each party irrevocably and 7.15unconditionally:

(a) submits to the non-exclusive jurisdiction of the courts of New South Wales; and

(b) waives, without limitation, any claim or objection based on absence of jurisdiction or inconvenient forum.


ANNEXURE DSCHEME DEED POLL


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RIFLE MEDIA #MTR-18001

MANTRA GROUP LIMITED

Level 1550 Cavill AvenueSurfers Paradise QLD 4217

FINANCIAL ADVISER

Highbury Partnership Pty LtdLevel 12, The Chifley Tower2 Chifley SquareSydney NSW 2000

LEGAL ADVISORS

Clifford ChanceLevel 161 O’Connell StreetSydney NSW 2000

Baker McKenzieTower One – International Towers SydneyLevel 46, 100 Barangaroo AvenueSydney NSW 2000

SHARE REGISTRY

Link Market Services LimitedLevel 2110 Eagle StreetBrisbane QLD 4000

www.linkmarketservices.com.auTelephone: +61 1800 502 355 (free call within Australia)

INDEPENDENT EXPERT

Grant Thornton Corporate Finance Pty LtdLevel 17, 383 Kent StreetSydney NSW 2000

SHAREHOLDER INFORMATION LINE

Telephone: 1300 795 998 (within Australia) and +61 1300 795 998 (outside Australia)

Monday to Friday between 8:30am and 5:30pm (Sydney time)

SCHEME BOOKLET MANTRA GROUP

CORPORATE DIRECTORY

scheme booklet registered with australian securities and ... · mantra group limited domestique...

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