ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 AND 1998 NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION Since July 1997, certain Asia Pacific countries, including Thailand, have experienced economic difficulties relating to currency devaluation and slowdown in growth. Accordingly, the Thai government sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The consolidated financial statements of Advanced Info Service Public Company Limited (" the Company ") and subsidiaries for the three-month periods ended March 31,1999 and 1998 and the separate financial statements of the Company for the same periods have been presented on a going concern basis and in conformity with generally accepted accounting principles applied on a consistent basis and reflect the management's current assessment of the possible impact of this economic situation on the financial position of the Company and its subsidiaries. The operations of the Company and its subsidiaries since 1997 have been affected and may continue to be influenced for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or classifications of assets and liabilities at the balance sheet date cannot presently be determined. The consolidated financial statements of the Company and subsidiaries for the three-month periods ended March 31, 1999 and 1998 and the separate financial statements of the Company for the same periods therefore may not necessarily include all adjustments that might ultimately result from these economic conditions due to such adjustments being both uncertain and unquantifiable. The accompanying interim consolidated financial statements of the Company and its subsidiaries and the separate interim financial statements of the Company have been prepared in conformity with generally accepted accounting principles practiced in Thailand and in accordance with the requirements of the Securities and Exchange Commission and the Stock Exchange of Thailand. The consolidated financial statements for the three-month periods ended March 31, include the financial statements of the Company and the following subsidiaries: % Holdings 1999 1998 Advanced Paging Company Limited (Formerly: Shinawatra Paging Company Limited) 99.99 59.99 Advanced Wireless Marketing Company Limited (Formerly: Shinawatra Wireless Marketing Company Limited) 99.99 - All significant intercompany transactions between the Company and its subsidiaries have been eliminated in the preparation of these consolidated financial statements. On February 19, 1999, the Company acquired from Thai Page Pte Limited an additional investment in common share capital of Advanced Paging Company Limited, and the Company's shareholding in this subsidiary therefore increased from 59.99% to 99.99%. NOTE 2 - GENERAL INFORMATION As at March 31, 1999 major shareholders of the Company comprised Shin Corporations Public Company Limited (formerly: Shinawatra Computer and Communications Public Company Limited) (40.63%) and Singapore Telecom International group (18.63%), while major shareholder of the Company as at March 31, 1998 was Shin Corporations Public Company Limited (54.34%). The Company and its subsidiaries are principally engaged in two major business segments comprising 1) the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM under a concession received from the Telephone Organization of Thailand, under an agreement dated March 27, 1990, trading mobile phones, rendering repair services for mobile phones and providing mobile phones for rent; 2) the operations of a DIGITAL DISPLAY PAGING SYSTEM under a concession received from the Telephone Organization of Thailand, under an agreement dated December 19, 1989, trading pagers and providing pagers for rent. Under the aforesaid agreements made with the Telephone Organization of Thailand, the Company and Advanced Paging Company Limited have to pay annual fees to the Telephone Organization of Thailand based on certain percentage of certain service income or at the minimum fees as specified in those agreements, whichever is higher. However, under the letter dated March 4, 1997 from the Telephone Organization of Thailand, no annual fee for the operations of pager service will be charged to the said subsidiary as from March 1, 1997 since the said fee has been waived by the Telephone Organization of Thailand, while the said subsidiary has to reduce fee of pager service charging to its customers. In addition, the Company and the said subsidiary, according to the aforesaid agreements, have to transfer their ownership of certain equipment and other assets procured by the Company and the said subsidiary for the operations of a 900-MHZ CELLULAR TELEPHONE SYSTEM and a DIGITAL DISPLAY PAGING SYSTEM to the Telephone Organization of Thailand on the dates of their completion of installation. As at March 31, book values of the aforementioned equipment and other assets, which have been transferred or have to be transferred to the Telephone Organization of Thailand, presented in the financial statements are as follows: Million Baht Concessions' Consolidated Company's Separate Expiry Date Balance Sheets Balance Sheets 1999 1998 1999 1998 Book values of equipment and other as sets which have been transferred to and/or ready to be transferred to the Telephone Organization of Thailand: - Mobile phone network September 30, 2015 28,874.59 23,835.29 28,874.59 23,835.29 - Pager network June 11, 2005 760.73 835.66 - - 29,635.32 24,670.95 28,874.59 23,835.29 Costs of equipment and other assets under construction and installation: - Mobile phone network 144.39 747.57 144.39 747.57 - Pager network - 0.48 - - 144.39 748.05 144.39 747.57 Total 29,779.71 25,419.00 29,018.98 24,582.86 The aforementioned equipment and other assets are presented as costs of mobile phone and pager networks under concession agreements under other assets in the balance sheets and amortized over the remaining period of each agreement commencing the dates of their completion of installation. Periods of concessions obtained from the Telephone Organization of Thailand have been granted until September 30, 2015 for the Company, and until June 11, 2005 for Advanced Paging Company Limited. NOTE 3 - TRANSACTIONS WITH RELATED PARTIES The accompanying consolidated financial statements of the Company and its subsidiaries and the separate financial statements of the Company include transactions with related parties. The basis of transactions occurred among the Company and related parties is approximate of those occurred in the normal course of business. Outstanding balances with related parties as at March 31, are summarized as follows: - Accounts and notes receivable, as referred to in Note 8 to the financial statements, include balances with related parties as follows: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 The parent company (1998 only) - 0.08 - 0.08 Subsidiary companies - - 0.88 0.02 Other related companies 5.91 8.57 0.45 0.57 Total 5.91 8.65 1.33 0.67 - Accounts and notes payable and accrued expenses, as referred to in Note 13 to the financial statements, include balances with related parties as follows: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 The parent company (1998 only) - 32.57 - 32.57 Subsidiary companies - - 25.32 - Other related companies 123.99 165.33 86.38 164.09 Accrued interest on short-term bonds payable (Note 15) - A major shareholder of an other related company 5.78 - 5.78 - - Executives of an other related company and directors of the Company and subsidiaries 1.13 0.54 1.13 0.54 6.91 0.54 6.91 0.54 Accrued interest on long-term bonds payable (Note 16) - A major shareholder of an other related company 1.65 33.84 1.65 33.84 - An other related company 0.61 - 0.61 - 2.26 33.84 2.26 33.84 Total 133.16 232.28 120.87 231.04 - Balances with related parties which are included in deposits received from customers, as referred to in Note 19 to the financial statements, comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 The parent company (1998 only) - 56.04 - 56.04 A subsidiary company - - 330.80 - Other related companies 129.27 20.25 129.27 20.25 Total 129.27 76.29 460.07 76.29 - Short-term loans and advances to related parties comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 Short-term loan to an other related company - 4.50 - - Advances to the parent company (1998 only) - 8.62 - 8.62 Advances to subsidiary companies - - 1.00 0.03 Advances to other related companies 15.57 21.62 6.29 1.10 Amounts received from customers by a subsidiary and other related companies on behalf of the Company and another subsidiary such as deposits, registration fees, service fees and sales of pagers 0.32 167.01 69.38 136.44 15.89 201.75 76.67 146.19 Less Allowance for loss on collection of advances to related parties 0.37 0.37 0.37 0.37 Total 15.52 201.38 76.30 145.82 Short-term loan to an other related company represent loans with interest at the approximate minimum rate of bank overdraft and loan from bank. Advances to parent and other related companies in the consolidated balance sheets mainly derived from payments made by the Company and its subsidiaries on behalf of those companies, while advances to parent, subsidiary and other related companies in the Company's separate balance sheets mainly derived from payments made by the Company on behalf of those companies. - Advances from related parties comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 Advances from the parent company (1998 only) - 0.08 - 0.08 Advances from subsidiary companies - - 1.46 - Advances from other related companies 20.14 74.16 15.42 1.17 Amounts received from customers on behalf of an other related company relating to sales of pagers 1.05 13.02 - - Total 21.19 87.26 16.88 1.25 Advances from parent and other related companies mainly derived from payments made by the parent and other related companies on behalf of the Company and its subsidiaries, and purchases of fixed assets from an other related company made by a Company's subsidiary, while advances from parent, subsidiary and other related companies in the Company's separate balance sheets mainly derived from payments made by those companies on behalf of the Company. - Short-term bonds Short-term bonds as at March 31, as referred to in Note 15 to the financial statements, include balances with related parties as follows: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 A major shareholder of an other related company 102.80 - 102.80 - Executives of an other related company and directors of the Company and subsidiaries 20.10 20.00 20.10 20.00 Total 122.90 20.00 122.90 20.00 - Long-term bonds Long-term bonds as at March 31, as referred to in Note 16 to the financial statements, include balances with related parties as follows: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1999 1998 1999 1998 An other related company 100.00 - 100.00 - A major shareholder of an other related company 270.00 2,000.00 270.00 2,000.00 Total 370.00 2,000.00 370.00 2,000.00 (More)