Loans From Foreign Finance Companies Loans from a foreign finance company as at December 31, 1996 comprise loans under five loan agreements. Loans under the first and second agreement are repayable in fifteen equal simi-annual installments commencing March 15, 1993 and June 23, 1993, respectively. Interest payments under the said two loan agreements are payable semi-annually at the rates ranging from 6.78% - 7.40% per annum. Loan under the third agreement is repayable in four equal semi-annual installments commencing January 15, 1997. Interest rates and interest payments is at the 6 month LIBOR plus the rates as prescribed in the said agreement. Loan under the fourth agreement is repayable in ten equal semi-annual installments commencing July 15, 1996. Interest payment under the said loan agreement is payable semi-annually at the rate of 6.88% per annum. Loan under the fifth agreement is repayable in nine equal semi-annual installments commencing January 15, 1997. Interest payment under the said loan agreement is payable semi-annually at the rate of 6.10% per annum. Loans from foreign finance companies as at December 31, 1997 comprise loans obtained from two finance companies under six loan agreements. Loans from the first finance company under five loan agreements obtained from the same lenders and the same loan agreements as at December 31, 1996. Loan from the second finance company is repayable in six equal semi-annual installments commencing September 15, 1999. Interest rate and interest payments are at the 6 month LIBOR. As at December 31, 1997 and 1996, outstanding loan balances obtained from two finance companies under six loan agreements amount to approximately Baht 1,868.25 million and Baht 1,189.51 million, respectively. Loans From Foreign Company Loans from a foreign company as at December 31, 1997 and 1996 represent loans obtained from a company under four loan agreements. Loans under the first, second and third agreement are repayable in ten equal semi-annual installments commencing December 30, 1992, June 30, 1993 and January 31, 1994, respectively, while interest payments under the said three loan agreements are payable semi-annually at the rates ranging from 5.875% - 6.750% per annum. Loan under the fourth agreement is repayable in ten equal semi-annual installments commencing April 29, 1994, while interest rate and interest payments under the said loan are at the 6 month LIBOR plus the rate as prescribed in the said agreement. As at December 31, 1997 and 1996, outstanding balances under the aforesaid four loan agreements amount to approximately Baht 79.88 million and Baht 108.89 million, respectively. According to the aforesaid loan agreements made with foreign banks, finance and foreign companies, there are certain terms and conditions for the Company and its subsidiary to comply. At December 31, 1997, Advanced Info Service Public Company Limited has outstanding loan balances obtained from a foreign financial institution under two agreements amounting to US Dollar 16.97 million and their repayments are scheduled within January 2001. Debt/Equity Ratio and Current Ratio stipulated under the first loan agreement are 1.75:1 and 0.75:1, respectively. Debt/Equity Ratio stipulated under the second loan agreement is 1.75:1. As at December 31, 1997, the Debt/Equity Ratio of the Company was higher than the point stipulated in the both loan agreements while Current Ratio was lower than the point stipulated in one loan agreement, caused by the large unrealized exchange loss which derived from the change in exchange rate system. The Company has been achieving progress in re- negotiating with the aforesaid financial institution to make allowances for the Company relating to the aforesaid loan agreements and the approval is expected to be given by the said foreign financial institution. Liabilities Under Financial Leases The Company has entered into six financial lease agreements with a related company to obtain vehicles for its business operations. The financial leases are irrevocable and payable monthly in 60 installments with interest at the rates ranging from 19.81 - 23.648% per annum. The said lease agreements stipulate that the Company has the right to buy those vehicles, after fully paid up those leases, at the price of 10% of the vehicles' costs or of the prices purchased by the lessor from car agency. At December 31, 1997, the Company has annual payment commitments under financial leases shown in present value, using the discount rates ranging from 19.81 - 23.648% per annum, as follows: Year Amount (Baht) 1998 709,128.35 1999 876,049.45 2000 1,082,576.51 2001 920,364.54 Total 3,588,118.85 Payment commitments for 1998 are included in current portion of long- term liabilities as described above. NOTE 17 - CAPITALIZATION OF THE BORROWING COSTS The Company and its subsidiary do not capitalize interest incurred relating to the acquisition and installation of assets to costs of tools, equipment and other assets for the operations of the 900-MHZ CELLULAR TELEPHONE SYSTEM and the DIGITAL DISPLAY PAGING SYSTEM due to the installation periods of most assets are short. In addition, the relevant borrowing costs which should be capitalized to costs of those tools, equipment and other assets transferred to the Telephone Organization of Thailand are not significant. No capitalization of the borrowing costs was made to costs of those assets which need not to be transferred to the Telephone Organization of Thailand as they are mostly funded by working capital derived from operations. NOTE 18 - OTHER INCOME Other income for the years ended December 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1997 1996 1997 1996 Interest income 340.75 568.75 289.16 481.14 Net gain on exchange 7.88 - 12.43 - Others 60.42 25.76 37.41 1.28 Total 409.05 594.51 339.00 482.42 NOTE 19 - DIRECTORS' REMUNERATION Directors' remuneration represents meeting fees and gratuities as approved by the shareholders of Advanced Info Service Public Company Limited and a subsidiary in their Annual General Meetings. NOTE 20 - OTHER EXPENSES Other expenses for the years ended December 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1997 1996 1997 1996 Amortization of goodwill 36.60 36.60 - - Estimated loss on collection of other receivable - 39.46 - 39.46 Adjustments relating to values of inventories 25.80 - - - Provision for loss on obsolete equipment 7.19 - - - Losses from written off assets 5.09 - 3.71 - Adjustments on investment and other 1.50 1.59 1.50 1.89 Total 76.18 77.65 5.21 41.35 NOTE 21 - FOREIGN CURRENCY RISK MANAGEMENT The Company and its subsidiary, in terms of the Shinawatra Computer and Communications Group policy, enter into various types of foreign exchange contracts to hedge their transaction risk both in short-term and long-term foreign currency exposures. Short-term foreign currency exposures are related to trade import, short-term foreign borrowings and interest flows on long-term foreign borrowings. Long-term foreign currency exposure is related to long-term foreign borrowings. The currency risks of the Company and its subsidiary occur in various currency combinations, but mostly in the United States Dollars, due to the fact that the Company and its subsidiary involves in transactions with different countries. The Company and its subsidiary hedging policy are to hedge currency risk mostly based on their net exposure and the structure of their revenues. The Company and its subsidiary focus more on hedging when their revenue are on local currency base whereas it will do less when their revenues are on foreign currency base due to the natural hedge phenomenon. The senior executives in Group Finance meet on a monthly basis to analyze currency exposures and re-evaluate forex management strategies against revised currency forecasts. NOTE 22 - ADJUSTMENT OF NET EFFECT DERIVED FROM THE CHANGE IN EXCHANGE RATE SYSTEM On July 2, 1997, the Ministry of Finance issued its notification, dated July 2, 1997, to change the exchange rate system to the managed float system. The Shinawatra Computer and Communications group has its policy to recognize all exchange losses derived from the change in exchange rate system incurred during the reporting year as expenses in the statements of income. As at December 31, 1997, the Company and its subsidiary have significant outstanding assets and liabilities in foreign currencies as follows: Million Consolidated Company's Separate Balance Sheets Balance Sheets Assets U.S. Dollar 40.00 40.00 Liabilities U.S. Dollar 287.47 260.86 German Mark 13.28 13.28 Norway Krone 7.83 7.83 Hong Kong Dollar 1.67 1.67 According to the above information, foreign currency assets shall be received within 1998 while future payments of liabilities are summarized as follows: Million Consolidated Company's Separate Financial Statements Financial Statements Liabilities and payment periods Within 1998 U.S. Dollar 125.75 99.14 German Mark 13.28 13.28 Norway Krone 7.83 7.83 Hong Kong Dollar 1.67 1.67 After 1998 U.S. Dollar 161.72 161.72 Assets and liabilities in foreign currencies as shown above, represent time deposits with foreign banks, long-term loans and related accrued interest expense, and foreign accounts payable. Long- term loans and accrued interest expense are payable in accordance with the conditions in loan agreements as described in Note 16, while foreign accounts payable are mostly payable within 1998. From the liabilities in foreign currencies as shown above, amounts of US$ 90.74 million in the book of Advanced Info Service Public Company Limited and US$ 26.56 million in the book of Shinawatra Paging Company Limited have been hedged against the risk of currency losses on loan repayments. Net effect derived from the change in exchange rate system as shown in the statements of income is calculated based on the guideline of the Institute of Certified Accountants and Auditors of Thailand. Further effects derived from the change in exchange rate system, incurred between January 1, 1998 and February 13, 1998, to the financial position and results of operations of the Company and its subsidiary based on their outstanding assets and liabilities as at December 31, 1997 are as follows: Million Baht Net gain on Decrease in Decrease in Exchange Assets Liabilities Advanced Info Service Public Company Limited 102.96 31.74 134.70 Advanced Info Service Public Company Limited and subsidiaries 102.99 31.74 134.73 NOTE 23 - APPROPRIATION OF EARNINGS OF ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED The shareholders of Advanced Info Service Public Company Limited at the Annual General Meeting held on April 29, 1996 approved the interim dividend and legal reserve appropriated during 1995 of Baht 468 million and Baht 61.75 million, respectively. Additional dividend and legal reserve of Baht 702 million and Baht 88.05 million, respectively, were also approved by such meeting. The shareholders of Advanced Info Service Public Company Limited at the Annual General Meeting held on April 25, 1997 approved the interim dividend and legal reserve appropriated during 1996 of Baht 702 million and Baht 89.50 million, respectively. Additional dividend and legal reserve of Baht 702 million and Baht 88.70 million, respectively, were also approved by such meeting. On August 11, 1997, the Board of Directors of Advanced Info Service Public Company Limited approved the interim dividend for 1997 in the amount of Baht 702 million. The shareholders of Advanced Info Service Public Company Limited at the Extraordinary Meeting held on October 16, 1997 approved the interim dividend for 1997 in the amount of Baht 702 million. NOTE 24 - LEGAL RESERVE Legal reserve of Advanced Info Service Public Company Limited was established in accordance with the provision of the Public Limited Company Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income each year until the reserve reaches 10% of the authorized share capital. This reserve is not available for dividend distribution. NOTE 25 - PROVIDENT FUND The provident fund of the Company and its subsidiary complies with the Provident Fund Act B.E. 2530. The fund is independently maintained and therefore does not appear in the consolidated balance sheets and the Company's separate balance sheets. (More)