Loans From a Foreign Company Loans from a foreign company as at December 31, 1997 represent loans in US dollars obtained by the Company from a foreign company under two loan agreements. Both loan agreements are repayable in ten equal semi-annual installments commencing January 31, 1994 and April 29, 1994, respectively. Interest under the first loan agreement is payable semi-annually at the rate of 5.97% per annum, while interest rates and interest payments under the second loan agreement are at the 6 month LIBOR plus the rate as prescribed in the said agreements. Repayments of both loan agreements were fully made by the Company in the fourth quarter of 1998. As at December 31, 1997, outstanding balances under the aforesaid two loan agreements amounted to approximately Baht 79.88 million. Other information According to the aforesaid loan agreements made with financial institutions and foreign companies, there are certain terms and conditions for the Company and a subsidiary to comply. At December 31, 1998, certain outstanding loan balances comprising loan from a foreign bank under a long-term loan agreement (" first loan agreement "), syndicated loans obtained from foreign banks under three long-term loan agreements (" second, third and fourth loan agreement ") and loans obtained from two finance companies under four long-term loan agreements (" fifth, sixth, seventh and eighth loan agreement "), in the total amount of US dollar 203.14 million, and are repayable from December 1999 through September 2002. Shinawatra Computer and Communications Public Company Limited (" SC&C "), as stipulated under the first, fifth and sixth loan agreement, is required to have its shareholding in the Company for at least 50% of total issued shares of the Company, and as stipulated under the second, third, fourth, seventh and eighth loan agreement, SC&C is required to have its shareholding in the Company for at least 51% of total issued shares of the Company. Current Ratio has also been stipulated under the fifth loan agreement obtained from a finance company at 0.75:1.On January 7, 1999 the said finance company agreed to make an allowance in respect of such current ratio. On January 6,1999, the Board of Directors of SC&C passed a resolution to approve the sale of 14,300,000 common shares of the Company to Singapore Telecom International, and on the same day the Board of Directors of the Company passed a resolution to approve the issuance of 36,000,000 common shares to sell specifically to Singapore Telecom International. SC&C's shareholding in the Company, after the completion of exercises which were approved by the Board of Directors of SC&C and the Company as discussed previously, will be lower than the levels stipulated in the aforesaid loan agreements. During January 27, 1999 through February 5, 1999, all the aforesaid foreign banks and finance companies had officially confirmed to the Company of which the majority providing relevant loan balances amounting to approximately US$ 180.64 million, agreed to make allowances in respect of the above requirements, while the Company agrees to repay loans payable to the remaining parties by March 30, 1999 amounting to US$ 22.5 million. Those amounts which have been agreed to repay by March 30, 1999 are reclassified as current portion of long-term liabilities under current liabilities in the balance sheet. 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, 1998, the Company was committed to future payments under financial leases shown in present value, using the discount rates ranging from 19.81 - 23.648% per annum, as follows: Year Amount (Baht) 1999 876,049.45 2000 1,082,576.51 2001 920,364.54 Total 2,878,990.50 Payment commitments as of December 31, 1999 are included in current portion of long-term liabilities as shown in the schedule of long-term liabilities. NOTE 19 - OTHER LIABILITIES Other liabilities at December 31, comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997 Deposits received from customers - Related parties (Note 3) 129.27 - 427.58 - - Other customers 2,936.96 3,270.29 2,872.83 3,171.10 3,066.23 3,270.29 3,300.41 3,171.10 Excess of book value of investment in subsidiary over cost (Note 4) 21.99 - - - Total 3,088.22 3,270.29 3,300.41 3,171.10 NOTE 20 - OTHER INCOME Other income for the years ended December 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Interest income 440.78 340.75 370.86 289.16 Cash discount received from suppliers and service providers 58.64 29.11 58.64 29.11 Others 61.90 31.31 53.16 8.30 Total 561.32 401.17 482.66 326.57 NOTE 21 - CAPITALIZATION OF THE BORROWING COSTS The Company and a 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 22 - DIRECTORS' REMUNERATION Directors' remuneration represents meeting fees and gratuities as approved by the shareholders of the Company and its subsidiary in their Annual General Meetings. NOTE 23 - OTHER EXPENSES Other expenses for the years ended December 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Amortzation of goodwill (Note 4) 36.60 36.60 - - Provision for decline in values of inventories (Notes 4 & 9) 5.03 25.80 - - Provision for loss on obsolete equipment (Notes 4 & 12) - 7.19 - - Losses from written off current assets 13.67 10.19 1.96 8.80 Others 0.98 - - - Total 56.28 79.78 1.96 8.80 NOTE 24 - INCOME TAX Income tax for the years ended December 31, are summarized as follows: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Income tax before considering adjustment of net effect derived from the effect of change in exchange rate system 1,584.98 1,797.82 1,450.31 1,665.87 Income tax effect on adjustment derived from the effect of change in exchange rate system - (531.34) - (525.65) Income tax for current year 1,584.98 1,266.48 1,450.31 1,140.22 NOTE 25 - FOREIGN CURRENCY RISK MANAGEMENT The Company and its subsidiaries, in terms of approved policy limit of Shinawatra Computer and Communications Group, 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 subsidiaries 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 subsidiaries hedging policy is to hedge currency risk mostly based on their net exposure and the structure of their revenues. The Company and its subsidiaries focus more on hedging when their revenues 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 26 - 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 gains or losses derived from the change in exchange rate system incurred during the reporting period as income or expense in the statements of income. As at December 31, 1998, the Company and its subsidiaries have significant outstanding assets and liabilities in foreign currencies as follows: Million Consolidated Company's Separate Balance Sheets Balance Sheets Assets by type of currency US dollar 43.94 43.93 Liabilities by type of currencies US dollar 356.38 346.85 Deutschmark 15.52 15.51 Japanese yen 490.95 490.95 Norway krone 1.57 1.57 From the foreign currency liabilities as shown above, periods of their settlement are categorised as follows: Million Consolidated Company's Separate Financial Statements Financial Statements Payment periods Within December 31, 1999 US dollar 230.59 221.06 Deutschmark 15.52 15.51 Japanese yen 490.95 490.95 Norway krone 1.57 1.57 After December 31, 1999 US dollar 125.79 125.79 Foreign currency assets as shown above represent foreign currency deposits with foreign banks and receivables from network operators, while foreign currency liabilities represent short-term loans, long-term loans and related accrued interest expense, notes payable to a foreign supplier and foreign trade accounts payable. Long-term loans and related accrued interest in US dollars are repayable and payable in accordance with conditions in loan agreements as described in Note 18, while short-term loans, foreign notes payable to foreign supplier and foreign trade accounts payable are payable within December 31, 1999. From the foreign currency liabilities as shown above, a total amount of US$ 191.97 million in the book of the Company and its subsidiaries have been hedged against the risk of currency losses on future repayments and payments. Net effect derived from the change in exchange rate system as shown in the statements of income for the year ended December 31, 1997 is calculated based on the guideline of the Institute of Certified Accountants and Auditors of Thailand. Effects derived from the change in exchange rates, incurred between January 1, 1999 and February 5, 1999, to the financial position and results of operations of the Company and its subsidiaries based on their outstanding unhedged foreign currency assets and liabilities as at December 31, 1998 are not significant. NOTE 27 - APPROPRIATION OF EARNINGS OF ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED The shareholders of the Company 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 for 1996 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 the Company approved the interim dividend for 1997 in the amount of Baht 702 million. The shareholders of the Company at the Extraordinary Meeting held on October 16, 1997 approved the interim dividend for 1997 in the amount of Baht 702 million. The shareholders of the Company at the Annual General Meeting held on April 29, 1998 approved the interim dividend during 1997 of Baht 702 million. Additional dividend and legal reserve for 1997 of Baht 257.40 million and Baht 15.30 million, respectively, were also approved by such meeting. NOTE 28 - LEGAL RESERVE Legal reserve of the Company 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 29 - PROVIDENT FUND The provident fund of the Company and its subsidiaries complies with the Provident Fund Act B.E. 2530. The fund is independently maintained and therefore does not appear in the balance sheets. (More)