ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
MESSAGE FROM THE CHAIIRMAN
Dear Shareholders
The economic crisis triggered by currency devaluation in July 1997 has continued to seriously affect the business operation Shinawatra Computer and Communications Company Limited (Public) in 1998.
However the operating results for the year ended December 31, 1998, have reflected the strength of the company due to proper financial structure and management. The company earned a total income of 28,932 million Baht, 3,923 million Baht increase from that of 1997, while the net loss was 1,088 million Baht, compared with the 4,554 million Baht loss in 1997.
With respect to the financial aspect, the company realizes that the telecommunication business is entirely dependent on imported technology and equipment, as well as oversea loans for continued investment. Therefore the company has placed its emphasis on hedging policy to prevent the risk from exchange rate resulted from foreign-currency loans, proper and prudent investment plan, revised cost structure for actual understanding in business potential, as well as classification of major and minor assets for prioritization of local and oversea investments. Those will help maximize the return to shareholders and conform with the market demand. Such practice has caused the company to survive through the economic crisis, maintain its liquidity and financial ratio in accordance with the actual business conditions while the financial institutes, investors and business alliances still rely on the company. The company believes that such reliance is resulted from transparent operation and business ethic which is the key concept employed by the company.
The financial policy and strategy mentioned above had led to a major management restructure before the end of 1998 while the results could be felt in 1999. Under the new structure, the holding company will be downsided with main focus on investment management, search for new investment opportunities to maintain the value of current investments and study on prospective investment in telecommunication business. The subsidiary companies which are involving two businesses, wireless telecommunication and satellite, would stress their roles as the major telecommunication service provider in the country and the leading satellite service provider in the region.
While liberalization of telecommunication business is coming, the company has followed the progress and the actions taken by the government. the study has been made on the impacts of related laws which are being closely scrutinized by the government and the parliament. The company is ready to convert the concession contracts. In 1998, the concession contract on publishing and advertising in the phone directory has been converted into a joint venture and management contract, in addition to conversion of information service contract to a joint venture contract.
The year 1999 will be the year for a major overhaul to upgrade the management system to an international standard and to prepare for trade liberalization which is coming soon, as well as strength toward the turn of the twentieth century to the twenty first century.
The company would like to publicly inform that from 1999 onwards, the company has changed its name to Shin Corporations Co., Ltd. (Public) to go along with its new role as the word “Shin” means “Victory”.
Finally, the company would like to express its sincere thank for the trust and support provided by shareholders, customers, business alliances and all patrons throughout the crisis period and its gratitude towards the sacrifice in terms of actions and ideas from all executives and employees so the company is able to proudly maintain its leading status in the title communication business.
Bhanapot Damapong Boonklee Plangsiri Chairman of the Board Chairman of the Executive Committee
1 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
REPORT OF THE AUDIIT COMMIITTEE
Dear Shareholders
For the past few years, the Stock Exchange of Commission and the Stock Exchange of Thailand have put their emphasis on good corporate governance in the listed companies. Therefore all listed companies are required to set up an audit committee within December 31, 1999. The company has formed the audit committee during mid-1998.
The audit committee of the company is assigned with duties and responsibilities as follows :-
] Supervise and review the financial reports of the company to reflect the fact and proper, adequate and reliable disclosure. ] Ensure proper and efficient internal control system in the company. ] Review, elect and propose an auditor to be appointed by the company. ] Ensure compliance with related requirements and laws by the company. ] Ensure that there is no conflict of interest. ] Perform the work assigned by the board of directors of the company. ] Prepare a report of the Audit Committee to be disclosed in the annual report of the company.
The company has arranged the meeting of the audit committee. The key issues reviewed during the year are the following.
] In the past, the internal audit division of the company focused its examination on operation and assessment of the internal control system of each agency. The Audit Committee has proposed that the examination should be placed on management audit and system analysis to ensure transparency in the management team of the company and to prevent fraud and to encourage modernization of the management system. The management has a policy to support those who provide cooperation to the internal audit division to function in such scope.
] Report of the meeting of the Audit Committee of the subsidiary companies such as Advanced Info Service Plc., Shinawatra Satellite Plc. has been prepared to inform the Audit Committee of the company of the overall performance of the entire group of companies to improve and standardize the efficiency of the internal audit of the group of the company.
The audit result of the company last year indicates that the overall internal control system of the company has shown no material defect; however, the Audit Committee has started its work in 1998. The work is still in the preliminary stage. The Audit Committee determines to push ahead for wider scope of the internal audit to ensure good corporate governance in accordance with the objectives of related agencies and acceptable among local and oversea companies
Mr. Olarn Chaiprawat Chairman of the Audit Committee Shin Corporations Public Company Limited
2 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
SUBSIIDIIARIIES & ASSOCIIATED COMPANIIES
Registered Par Paid Up % of Capital Value Capital Investment COMPANY NATURE OF BUSINESS (Million (Baht) (Million Shares) Baht) Shin Corporations Plc. Holding Company 300 10 1,386 - 414 Phaholyothin Rd. Samsennai Phayathai Bangkok 10400 Tel: 299-5000 Fax: 299-5224 Advanced Info Service Plc. Service provider of 500 10 2,700 42.00 Head Office : Cellular 414 Phaholyothin Rd. Samsennai Phone network for NMT Phayathai Bangkok 10400 900 and Digital GSM Tel : 299-5000 Fax : 299-5719 Branch : 1291/1 Phaholyothin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-6000 Fax : 299-6005 Shinawatra Satellite Plc. Operator of Satellites 500 10 3,500 55.71 Head Office : lease 414 Phaholyothin Rd. Samsennai transponders to public Phayathai Bangkok 10400 and Tel : 299-5000 Fax : 299-5224 private telecom and Branch : broadcasters 41/103 Rattanathibet Rd. Nonthaburi 11000 Tel : 591-0736 Fax : 591-0705 Shenington Investment (B.V.I.) Investment in 38 1 38 100.00 Pte Ltd. international MUSD USD MUSD Vanterpool Plaza, 2 nd Floor, Telecommunication P.O.Box 873, Road Town, project Tortola, Via JV. British Virgin Islands Shinawatra Directories Co.,Ltd. Publish the white and 80 10 800 50.99 414 Phaholyothin Rd, Samsennai Yellow pages telephone Phayathai Bangkok 10400 Directories and distribute Tel : 299-5000 Fax : 299-5929 them throughout Thailand Shinawatra Information Distributor of computer 10 10 100 99.99 Technology Co.,Ltd. Peripherals and telecom 414 Phaholyothin Rd. Samsennai Equipment Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5196 SC Matchbox Co.,Ltd. A full-service advertising 0.9 10 9 74.97 414 Phaholyothin Rd. Samsennai Agency Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5624
As at March 31, 1999
3 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
FIINANCIIAL HIIGHLIIGHTS
Baht millions except per share data 1998 1997
Operating Results ¶ Revenues from services hire of work, equipment installation and equipment rental 18,126.84 17,666.38 ¶ Sales of merchandise equipment 4,679.97 6,786.88 ¶ Total Revenues 28,932.83 25,009.84 ¶ Gross Margin 8,988.66 11,102.72 ¶ Net Income (Loss) (1,088.04) (5,642.56) ¶ Total Assets 57,787.91 59,915.70 ¶ Total Liabilities 46,606.93 50,813.83 ¶ Shareholders’ Equity 2,709.27 3,794.69
1998 1997
Financial Position ¶ Net Profit Margin (3.76%) (22.56%) ¶ Return on Average Shareholders’ Equity (33.46%) (79.75%) ¶ Return on Average Assets (1.85%) (10.73%) ¶ Earning per Share (Baht) (7.85) (40.71) ¶ Dividend per Share (Baht) - 3 ¶ Book Value per Share (Baht) 19.55 27.37
4 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
THE SHAREHOLDIING STRUCTURE OF THE GROUP COMPANY
SHIN CORPORATAIONS PLC.
42.00% 100.00% 55.71%
ADVANCED INFO SHENINGTON SHINAWATRA SERVICE PLC. INVESTMENT (B.V.I.) SATELLITE PLC. PTE. LTD.
100.00% 99.00% 51.00% 99.99%
Shinawatra C.S. Advanced Wireless Shinawatra Information Communications Marketing Co., Ltd. International Plc. Technology Co., Ltd. Co., Ltd. 100.00% 49.00% 80.00% 50.99%
Advanced Paging Lao C.S. Satellite Shinawatra Co., Ltd. Telecommunication Phone Co., Ltd. Directories Co., Ltd. s Co., Ltd. 27.87% 100.00% 74.99%
Shinawatra Cambodia S.C. MatchBox Datacom Co., Ltd. Shinawatra Co.,Ltd. Co., Ltd.
30.00%
Isla Communication Pte.Ltd.
33.00%
Fascel Ltd.
40.00%
Microwave Communication Ltd.
As at March 31, 1999
5 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
TYPES OF BUSIINESS
Shin Corporations Plc. the old name is Shinawatra Computer and Communication Public Company Limited. (SHIN) makes investment in telecommunications business embracing information technology, multi-media, advertising among other things put into classification 5 categories as follows:
1. Information Technology Business 2. Wireless Telecommunications Business 3. Satellite Communications Business 4. International Business 5. Media and Advertising Business
Information Technology Business 1. Shinawatra Information Technology Co.,Ltd. (SIT) is engaged in computers telecommunications, selling equipment and services, telecommunication system, including marketing and installation of TV network, microwave signal system, fiber optics system, satellite communications system, etc. The Company also sells equipment and offers the same for leasing, including installation of computers for clients, namely, government agencies, state enterprises, financial institutions, and the private sector. Aforementioned Subsidiary currently has paid-up registered capital of 100 Million Baht. SHIN shareholdings amount to 99.99% 2. Shinawatra Data Com Co.,Ltd. (SDC), has obtained concession from TOT for data communication services via telephone lines under the name of DATANET. Registered capital is 457.52 Million Baht with ADVANC shareholdings amount to 27.87%.
Wireless Telecommunications Business 1. Advanced Info Services Public Company Limited (ADVANC) which is a Subsidiary. SHIN’s shareholding in this Company comes to 42% (after increasing capital in favor of Singapore Telecom International Private Limited) out of paid-up registered capital of 2,700 Million Baht. The Company offers services with mobile telephone in the range of 900 MHz. and Digital GSM. It holds 20-year concession from TOT. Subsequently, the concession was extended to 25 years in September 1996. ADVANC debuted at the Stocks Exchange of Thailand (SET) on 5 November 1991. 2. Advanced Paging Co.,Ltd. (APG), obtained a concession from TOT for Digital Display Paging services under the Phonelink Trademark. It’s registered capital is 350 Million Baht, with ADVANC’s shareholding being 100% (after ADVANC purchased shares from Thai Pate Pte. Ltd. around February 1999. 3. Advanced Wireless Marketing Co.,Ltd.(AWM), is selling telecommunication products under Franchise system. It sells products and services of all kinds. It is doing retailing under Telewiz Brand Name. Current registered Capital is 240 Million Baht with ADVANC holding 100% shares.
Satellite Communication Business 1. Shinawatra Satellite Public Company Limited (SATTEL). This is a Subsidiary which SHIN is holding shares in the ratio of 55.71% of the registered capital of 3,500 Million Baht. The Company is engaged in satellite services with permission granted by Ministry of Communications, with right to collect fees for leasing from satellite service users over 30 years. His Majesty The King has named the satellite “THAICOM”. In this nexus, SATTEL is registered at the SET on 18 January 1994. 2. C.S. Communications Co.,Ltd. (CSC), has been created by joint venture between SATTEL and CAT to render earth station services in the country and overseas for receiving-transmitting TV signals via THAICOM and international telephone services (ICO) with SATTEL’s shareholding coming to 51% of the 10 Million Baht registered capital. 3. C.S. Satellite Phone Co., Ltd. (CSP), has been created by joint venture between CSC, Sahaviriya OA Public Company Limited and Jakawal Communications Co., Ltd.
International Telecommunications Business 1. Shenington Investment (B.V.I.) Pte. Ltd. (BVI) whose shares are held by SHIN at 100%. The Company pursues objective for overseeing investments overseas. It carries registered capital of MUS$ 38 and already paid-up.
6 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
2. Shinawatra International Public Company Limited (INTER) is a Subsidiary whose shares are held by Shenington at 99.825% out of the 5,000 Million Baht registered capital. The INTER is engaged in international telecommunications business. It has Subsidiaries as follows: 3. Isla Communications Pte. Ltd. is engaged in basic telephone services and overseas phone services in Philippines. It has registered capital of 2,500 Million Peso of which 1,728 Million Peso is already paid up, with INTER’s shareholdings at 30%. 4. Fascel Limited is engaged in mobile telephone services using GSM system in Gujarat State of India, with registered capital of 5,000 Million Rupees. Shareholdings by INTER is 33%. 5. Microwave Communication Limited is engaged in radio paging services, using Pagelink Trademark in India. It has registered capital of 500 Million Rupees. Shareholdings by INTER is 40%. 6. Lao Telecommunications Co.,Ltd., is engaged in Telecommunications services, busically, including supportive services in Laos. It has registered capital of 91.84 Million US Dollars. Shareholdings by INTER is 49%. 7. Cambodia Shinawatra Co.,Ltd. is engaged in basic telephone services. It has registered capital of 8 Million US Dollars. Shareholdings by INTER is 100%.
Media And Advertizing Business 1. Shinawatra Directory Co.,Ltd., a Subsidiary whose shares are held by SHIN at 51%, with TOT also holding 49% of the 800 Million Baht paid-up capital. The Subsidiary is the Publisher of Telephone Directories : White as well as Yellow Pages for distribution throughout the nation. 2. S.C. Match Box Co.,Ltd., the Company involving in the advertising business and found in April 1991 has provided the advertising services to the Shinawatra Group and other companies. The company has grown up rapidly and has won a number of advertisement awards. Its advertising products are widely accepted for the internationl-standard creativity. The registered and paid-up capital of the Company is 9 million baht, 75% of which is held by SHIN.
STRUCTURE OF IINCOME OF THE GROUP OF COMPANIIES
Unit : Million baht Products/Services Operated by % of 1998 1997 Shareholdin Revenue % Revenue % g Sales of merchandises Shin Corporations - 3,186.33 15.41 6,786.88 28 and equipment Public Co., Ltd. Shinawatra 99.99 Information Technology Co., Ltd. 99.99 Advance Wireless Marketing Co., Ltd. Mobile phone and Advance Info Service 54.34 14,843.56 71.79 14,533.73 59 pagers Public Co., Ltd. Advance Paging Co., 59.99 Ltd. Satellite business Shinawatra Satellite 57.86 2,290.26 11.08 1,558.96 6 Public Co., Ltd. C.S. Communications - Co., Ltd. Advertising Media Shinawatra 51.00 340.52 1.647 908.43 4 Directories Co., Ltd. 75.00 S.C. Matchbox Co.,Ltd. Other - - 16.99 0.082 751.68 3 Data as of December 31, 1998
7 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
CHANGES AND DEVELOPMENT OF THE COMPANY IIN 1998
February 16, 1998 Percentage of shareholding of the company in United Broadcasting Corporation Plc. (UBC or IBC, originally) reduced to 17.49 from 34.61 because UBC had specifically sold its shares to Telecom Holding Co., Ltd. for 237,782,376 shares. Therefore the total registered capital of UBC was 4,807,823,760 baht.
February 26, 1998 The company had sold its investment in common stock of Advance Info Service Plc. (ADVANC) to an oversea financial institute for 7,850,000 shares or 3.35% of the total shares; therefore, the investment in ADVANCE shares was reduced to 54.34% from 57.69%.
May 5, 1998 The Executive Board of Directors appointed the Audit Committee consisting of three committee as follows :- ] Mr. Olarn Chaiprawat (Ph.D.) Chairman of the Audit Committee ] Mr. Thanong Bhidhaya (Ph.D.) Audit Committee ] Mr. Sirin Nimmarnhaemin Audit Committee November 13, 1998 The Executive Board of Directors agreed to sell the investment in common stock of Shinawatra Wireless Marketing Co., Ltd. (SWM) to ADVANC for 23,999,994 shares, 99.99% of the registered capital of SWM, for an amount not exceeding 700 million baht. However such sale transaction was related to the listed company so ADVANC was required to ask for an approval in the Extraordinary Meeting of Shareholders on December 18, 1998.
November 19, 1998 Shinawatra Directories Co., Ltd. (SDY), the wholly owned subsidiary company, converted the concession contract to a joint-venture contract with the Telephone Organization of Thailand (TOT). At a result, the shareholding of the company in SDY was reduced from 100% to 51% of the total registered capital.
December 1, 1998 The company had restructured its management in the holding group to facilitate the company, which is the holding company, towards flexibility and good corporate governance so the executives wire assigned to take responsibility in the following businesses. ] Mr. Bunkhli Plangsiri - Chairman of the Executive Board of Directors of Shinawatra Group and Managing Director of Shin Corporation Public Ltd. ] Mr. Somprasong Boonyachai - Chairman of the Executive Board of Directors for Wireless Communication Business and Managing Director of Advance Info Service Public Co., Ltd. ] Mr. Damrong Kasemset - Chairman of the Executive Board of Directors for Satellite Business and Managing Director of Shinawatra Satellite Public Co., Ltd. ] Mr. Niwat Boonsong - Chairman of the Executive Board of Directors for Advertising Media Business
December 18, 1998 The Extraordinary Meeting of Shareholders of ADVANC agreed to purchase SWM shares for 23,999,994 shares from the company for 600 million baht with respect to the resolution of the Executive Board of Directors on November 13, 1998.
December 24, 1998 The company sold its investment in common stock of Shinawatra International Public Co., Ltd. (INT) to Shenington Investment (B.V.I.) Plc. Ltd. a wholly-owned subsidiary company, for 439,999,994 shares at 5 baht a share to efficiently restructure the shareholding in oversea investments.
January 6, 1999 The company sold the common stock of ADVANC to Singapore Telecom International Private Limited (STI) for 14.3 million shares at 230 baht a share. Therefore, the shareholding of the company in ADVANC was lowered to 42% after ADVANC shares were sold and issued to STI.
8 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
January 6, 1999 The Executive Board of Directors agreed to increase its capital from 1,386 million baht to 2,772 million baht through right issue to the existing shareholders at the ratio of 1:1 share. The new share would be sold at 15 baht a share. The subscription date was set between March 10-16, 1999. The money received from shares sold would used to pay up the loans of the company. January 6, 1999 The Executive Board of Directors agreed to change the company name from Shinawatra Computer and Communications Public Company Limited to Shin Corporations Public Co., Ltd.
January 29, 1999 The Executive Board of Directors agreed to sell the entire shares of UBC to Telecom Holding Co., Ltd. (TH) for 37,038,600 shares, M.I.H. Co., Ltd. for 12,500,000 shares and other financial institutes for 53,815,657 shares. The company is now having no investment in UBC shares.
February 10, 1999 The Extraordinary Meeting of Shareholders agreed to the increase of the capital of the company from 1386 million baht to 2,772 million baht. The common stock would be issued to sell to the existing shareholders at one old share for one new share for 15 baht a share. The subscription date is March 10 - 16, 1999.
February 10, 1999 The Extraordinary Meeting of Shareholders agreed to the change of company name from Shinawatra Computer and Communications Public Co., Ltd. to Shin Corporations Public Co., Ltd.
9 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
IINDUSTRIIAL CONDIITIIONS AND COMPETIITIION
Information Technology Computer Business Demand in computers is high while the market continues to grow every year. However, competition in the computer market is fierce, the products are shorts lived and after-sale services are greatly needed more than other products. The cost is high and the margin is low. Those involved in this market are required to have expertise and is affexible for rapid change in technology. In addition, most agencies or customers have not properly understood the computer system and the information technology so the advisory services needed in the market are required to be fully complete in all areas. The company is moving towards the trend of computer and information technology business by changing its focus on sales of hardware to sales of the integrated System (System Integrator). Therefore the emphasis will be on software and information technology advisory services in an integrated manner. The company has expanded its advisory services and started new information technology services such as Electronic Data Interchange service and advisory service for design and installation of the business system package (SAP) because the company is quite confident in the long-term potential return from this business.
Telecommunication Business The telecommunication market is a large market because the local telecommunication system has continued to expand rapidly with greater demand in infrastructure telecommunication equipment, mainly, PBP optic fiber cable, microwave and satellite equipment. Thus the market is severely competitive, but not, the telecommunication equipment to be sold to the turnkey project, of which the market competition is not as serious as that of the regular telecommunication equipment.
In addition to the demand in infrastructure telecommunication system, the market is still in need of other telecommunication system such as radio and television system equipment. Thus, the related terminal equipment market is growing.
Wireless Telecommunication Business Presently, there are seven mobile phone systems in Thailand : NMT-470 of the Telephone Organization of Thailand, AMPS-800 of the Communications Authority of Thailand, Worldphone 800 PCN 1800 of Total Access Communications Public Co., Ltd., Cellular 900 and Digital GSM of Advance Infor Service Public Co., Ltd. and the newly introduced CDMA system of Tawan Mobile Telecom Co., Ltd. However, the supply is unable to satisfy the need even though the economic condition is still in recession. The growth in mobile phone market is slightly lower and continues to fulfill the deficiency in the communication infrastructure system of the country. In 1998, the market for Analog mobile phone is contracting which the market for digital mobile phone has grown up. Therefore the company is in an advantageous position because the Digital GSM network is capable of covering a larger service area with better service quality. That will help the marketing work.
Comparison of Mobile Phone Systems in Thailand
System NMT 900 Digital GSM AMP 800 PCN 1800 NMT 470 1. System Advance Info Advance Info 1. CAT 1. Total Access TOT Management Service Public Co., Ltd. Service Public 2. Total Access Communications Co., Ltd. Communications Public Co., Ltd. Pubic Co., Ltd, 2. Wireless Communication Service Co.,Ltd. 3. Samart Corporation Public Co., Ltd.
2. Range of City 0.5 - 4 km. City 1 - 5 km. City 0.5 - 4 km. City 1 - 5 km. 16 km. service capacity
3. Portability Convenient Convenient Convenient Convenient Come with bag or kept in the car. 4. Voice Good Excellent Good Excellent quality
5. Limit service Unlimited Unlimited Unlimited Unlimited numbers
6. Service Area All provinces in the All provinces in the 76 provinces 76 provinces with 76 provinces 10 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Country include country include focus on Muang Important district and Important district and District of each main highway. main highway. province
7. Network Increasing Increasing Increasing Increasing No inceasing extension
8. Oversea - More countires - Fewer countries - service
9. Selling price 13,500 - 22,000 16,000 - 59,000 11,000 - 30,000 14,000 - 54,000 55,000 - 65,000
10. Number of 13 brands 17 brands 10 brands 12 brands 5 brands brand-name mobile phone available in the Thailand
11 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Market Share of Wireless Telecommunication Business
Major Competitor Percent of market share 1. Telephone Organization of Thailand 2 2. Communications Authority of Thailand 2 3. Total Access Communications Public Co., Ltd. 46 4. Advance Infor Service Public Co., Ltd. 45 5. Samart Corporation Public Co., Ltd. 5 Total 100
Data as of December 31, 1998
Satellite Communication Business 1. Industry 1.1 Type and system of communication satellite At present, the global satellite networks may be classified according to the service area and owner into three categories as follows :- International satellite system There are currently three organizations which provide the international satellite communication services as follows :-
] Intelsat or International Telecommunication Satellite Organization. Found in 1965, Intelsat has over 136 members while its head office is in Washington D.C., United States of America. There are 24 satellites employed to provide the service with area covering countries around Atlantic, Pacific and Indian Oceans. The main service is international communication, in particular, oversea phone service and television broadcasting service. However, the domestic phone service is still in need. Thailand was the forty ninth member of Intelsat in 1966.
] Inmarsat or International Maritime Satellite Organization. Found in 1979, Inmarsat has 76 members and its headquarter is in London, England. It provides the communication service to the ships in Atlantic, Pacific and Indian Oceans. It is the only international organization which provides the service to spaceship and mobile vehicles on land.
] Intersputnik or International Organization of Space Communication. Found in 1971, Intersputnik has 15 members and its headquarters is in Moscow, USSR. It provides the telecommunication services to the member countries, most of them are Social Democratic Countries such as North Korea, Vietnam, Laos Bulgaria, Romania and Poland.
Regional Satellite System means the satellite designed to provide the service domestically and internationally in or between the regions. For example, ASTRA provides the television broadcasting service in Europe, EUTELSAT provides the television communication service in Europe ARABSAT provides the telecommunication service to Middle East Region and Northern Africa Region, Pan Am Sat provides the telecommunication service between North America and South America, Europe and Asia, Asiasat, Apstar and Thaicom 3 provides the telecommunication service to countries in Asia. Domestic Satellite System is the satellite system which mainly provides the communication service in the country. The service area covers a particular country only. They are 1.2 Orbit Slot Subscription and Frequency Coordination As the space orbits are limited resource, the orbit subscription and frequency coordination are important. The international organization formed to supervise the telecommunication service is International Telecommunication Union or ITU. Thailand represented by the Post and Telegraph Department, Ministry of Communications and Transport has become a member of ITU. With regard to coordination negotiation, ITU has divided the orbit space into three regions as follows :-
] Region 1, covering Europe, Africa, Middle East and Russia ] Region 2, covering North America and South America ] Region 3, covering Asia, India and Pacific
Process in orbit slot subscription and frequency coordination The country which desires to set up a satellite communication network is required to subscribe the orbital slot by filling a form with technical data on satellite system as well as the earth stations and submit the
12 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC. form to the International Frequency Registration Board (IFRB), currently changed to Bureau of Radio Communication (BR), which is the agency under the supervision of ITU, for consideration.
After BR has checked the provided data, such data will be published in the BR Weekly Circular (Special Section “AR 11/A”) and telexed to all member countries of ITU for consideration.
After the member country receives such circular, it will examine whether the new orbit will disturb the communication of the existing or prospective satellite. If there is a potential of disturb, such member country will inform its protest to the country desiring for the new orbital slot and BR. Then BR and the protesting country will look into ways and means to settle the dispute. If there is no protest from any member country after 4 months, it is held that all countries have accepted the orbit of the new satellite.
13 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
After four months of coordination, the coordinating country is required to report to BR whether there is any protest from the member country. For the protesting country, if the dispute is unable to be resolved within four months, the coordinating country is required to inform the related countries and BR for further coordination. The progress report is required to be prepared and submitted to BR every six months. The countries and international organizations which Thailand is required to coordinate in case of the communication network of Thaicom at 78.5° F are China, England, India, Indonesia, Tonga, Intelsat, Inmarsat, Malaysia, Singapore and Russia, and in case of the communication network of Thaicom of 120° F are China, Indonesia, England, Russia, Tonga, Inmarsat and Japan.
1.3 Satellite provides the services in Asian - Pacific Region (ITU-3)
Since 1997, 62 satellites have been launched into the space to provide the services in Asian - Pacific Region. They are as follows :
Type of Satellite Organization/Countr Name of Satellite Frequency Area y International Intelsat Intelsat 501 C/Ku Intelsat 503 C/Ku Intelsat 505 C/Ku Intelsat 507 C/Ku Intelsat 508 C/Ku Intelsat 510 C/Ku Intelsat 511 C/Ku Intelsat 602 C/Ku Intelsat 604 C/Ku Intelsat 701 C/Ku Intelsat 703 C/Ku Intelsat 704 C/Ku Intelsat 708 C/Ku Intelsat 801 C/Ku Intelsat 802 C/Ku Regional Asiasat / Hongkong ASIASAT 1 C ASIASAT 2 C/Ku APT / Hongkong APSTAR –2A C/Ku APSTAR 1 C APSTAR –1A C JSAT / Japan JCSAT3 C/Ku Binariang / Malaysia MEASAT 1 C/Ku MEASAT 2 C/Ku PT Telecom / Indonesia Palapa B 2R C Palapa B4 C Palapa C1 C/Ku Palapa C2 C/Ku PanAmSAt / USA PAS 2 C/Ku PAS 4 C/Ku Domestic OPTUS / Australia OPTUS A3 Ku OPTUS B1 Ku/L OPTUS B3 Ku/L Ministry of Post and ChinaSat2 C Telecomunication / China ChinaSat3 C ChinaSat4 C Chinasat5 C/Ku ISRO / India Insat 1D C/S Insat 2A C/S Insat 2B C/S Insat 2C C/Ku/S Insat 2D C/Ku/S Jsat / Japan JCSATT1 Ku JCSAT2 Ku JCSAT-1A C/Ku JCSAT3 Ku JCSAT5 Ku Telecomunications BS-3A Ku Advancement BS-3B Ku Organization / Japan CS-3A C/Ku CS-3B C/Ku BS-3N Ku NHK / Japan N-Star A C/Ku/S NTT / Japan N-Star B C/Ku/S SCC / Japan Superbird A Ku/Ka Superbird B Ku/Ka Superbird C Ku Korea Telecom / Korea KoreaSat 1 Ku 14 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
KoreaSat 2 Ku Shinawatra / Thailand Thaicom1 C/Ku Thaicom2 C/Ku Thaicom3 C/Ku Mabuhay / Philippine Mabuhay-1 C/Ku Conclusion : Number of Satellites International 15 Religional 14 Domestic 33 Total 62
15 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Type of Satellite Organization/Country Name of Satellite Frequency Area Regional PanAnSat / USA PAS-7 Ku PAS-8 Ku AsiaSat / Hongkong AsiaSat – 3 C/Ku Singapoer / Singkapore ST – 1 C/Ku Orion/Marshall Island Orion-3 C/Ku Jsat / Japan JCSAT-6 Ku Laostar / Lao Laostar Ku Domestic Korea / Korea Koreasat-3 Ku
Summary : The number of satellites in the regional communication system : 7 The number of satellites in the domestic communication system : 1 The total number of satellites : 8 Therefore, the total number in the Asia-Pacific region as on 1998 : 70
2. Competition within the industry The satellite circuit service industry is somewhat in a situation of dearth in terms of demand versus supply, which is in both the form of an overdemand and the form of an oversupply, scattering in various areas, which, from the trends of the applications and the demand for use of satellite circuits, is made possible by several factors, such as ] Economic growth, which results in the development of telecommunication network systems in several countries, such as China, India, the countries in the Subcontinent and several developing countries. ] The development of technology and the forms of satellite circuit application, which will result in the growth of satellite circuit use, such as direct satellite telecasting, rural telephone systems, Internet network systems, and the trends of the development of telecommunication systems of all forms in both the developed and developing countries, both countries of a large size and small size, while use in some categories grows at a slower rate, e.g. satellite exchange linking networks, etc., since there are ground network systems coming as a replacement.
However, due to the economic recession of Asia in the past year period, the demand volume of satellite circuit use has declined to some degree, giving rise to competition in price at times, the level of which is not significant, but when one considers from the industrial situation in an overview, the demand for use is regarded as growing. As for the condition of competition of Thaicom Satellites 1, 2, and 3, the company has provided a plan to promote sales of several things at competitive prices, e.g. giving a special price structure to customers beginning to use quickly, customers subscribing for a great number for use, a contract term as long as 10 years. At the same time, the company also applied for an approval to improve the service fee from the Ministry of Transport and Communications in early 1998, as the result of which, at present the Ku-Band signal channel subscription fee has been reduced from 4.3 - 4.5 million U.S. dollars per transponder per year to 3.2 - 3.5 million U.S. dollars per transponder per year, while the C-Band signal channel subscription fee has been adjusted from 1.3 - 1.5 million U.S. dollars per transponder per year to 1.5 - 1.7 million U.S. dollars per transponder per year due to the flotation of the country’s baht currency value in 1997. 2.1 Competition from related industries In the providing of the satellite communication service, the medium acting as the linker of signals between fellow networks is the satellite. Consequently; competition from industries related with this business is the use of the service of linking signals between fellow networks through media other than the satellite, which at present are, for example, copper cable networks, optic fiber cable networks, and media for use of microwaves or other low-frequency radiowaves, e.g. HF, VHF and UHF. From the abovesaid examples, the media regarded as being the main competitors for the satellite communication service business are media using optic fiber cables, which are regarded as being a signal linking medium with high efficiency and capable of rendering all types of communication service whether it is the visual, sound signals ore data in the very high quality and capacity of signal. However, the rendering of a communication service through optic fiber cables still has various limitations as follows :-
] Regarding the time for the construction of a network or the addition of a network, a longer time must be spent than using the satellite medium, because it calls for the laying of linking cables at various spots to which communication is to be linked.
16 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
] Investment in network linking at each spot calls for use of a considerable investments budget, thus necessitating the operator to take account of linking only between important spots or areas. ] The ability in the aspect of the area to provide a service or to construct a network to cover various areas would be lower than providing a satellite service, thus causing areas without the linking of cables or spots inaccessible by cables to be wanting in a communication opportunity. ] The mobility in use of cables would be lower than using a satellite service because the equipment cannot be moved from the installation spot.
However, from the abovesaid limitations, it can be shown that communication through the optic fiber medium would be suitable only for some manners of use, e.g. linking a large quantity of signals between fellow telephone exchange, because it is linking between main spots. However, operators also consider using the satellite medium as a back-up linker as aforesaid.
17 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
2.2 A summary of the industrial situation and the future trends At present, various countries in the Asia-Pacific region have a high demand for satellite circuit and has had a rising growth rate throughout, but the supply of satellite circuits is lower than it, thus prompting several countries to have a project for launching satellites into the orbit so as to meet the demand for their domestic use, but since the providing of a satellite circuit service still has limitations in the aspect of use of satellite orbiting positions and the width of the frequency band used at a particular orbiting position, i.e. at the mid-sky orbit, which the one for any communication satellite, would be able to have a limited number of satellites to orbit in the orbit, because the satellites must be at least 2-3 degrees distant from one another. Also, the width of the frequency band to be used for providing the circuit of each satellite must be used in a limit, thus causing the number of satellite circuits on each satellite to be limited too. From the said limitations of the satellite circuit service business, the industrial situation and the trends of this type of service business indicate that it still belongs to satellite circuit service providers.
As for the future trends, although the number of service-rendering satellites will grow, at the same time the volume of the demand for satellite circuit use will also grow along with economic growth and technological development, thus causing the trends of this type of service business to indicate that it is still desired forever.
SHAREHOLDERS AND MANAGEMENT
SHAREHOLDERS Share Amount % Investment 1. Mrs. Potjaman Shinawatra 34,650,000 25.00 2. Mr. Thaksin Shinawatra Ph.D. 32,920,000 23.75 3. Singapore Telecom International Pte. Lid. 7,600,000 5.48 4. Mr. Bhanapot Damapong 6,809,015 4.91 5. American International Insurance Co.,Ltd. 5,147,400 3.71 6. State Street Bank & Trust Company, Boston 4,534,357 3.27 7. HSBC (Singapore) Nominees Pte. Ltd. 3,463,458 2.50 8. Lloyds bank secs services chelmsford sub a/c 6387 2,838,696 2.05 9. Chase Nominees Limited 1 2,823,933 2.04 10. Deutsche borse clearing AG 2,692,386 1.94
As at February 22, 1999
BOARD OF DIRECTOR Bhanapot Damapong Chairman of the Board Paiboon Limpaphayom Ph.D. Director Boonklee Plangsiri Director Siripen Sitasuwan Director Paron Isarasena Na Ayudhaya Ph.D. Director Lee Shin Koi Director Thanong Bidaya Ph.D. Independent Director Sirin Nimmanahaeminda Independent Director Olarn Chaipravat Ph.D. Independent Director
EXECUTIVE COMMITTEE Boonklee Plangsiri Chairman of the Executive Committee Busaba Damapong Executive Committee Somkiet Phaloprakarn Executive Committee Arak Chonlatanon Executive Committee Siripen Sitasuwan Executive Committee Jurairat Uhaka Executive Committee
AUDIT COMMITTEE Olarn Chaipravat Ph.D. Chairman of the Audit Committee Thanong Bidaya Ph.D. Audit Committee Sirin Nimmanahaeminda Audit Committee
18 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
MANAGEMENT TEAM Boonklee Plangsiri Chairman of the Group Executive Board Somkiet Phaloprakran Executive Committee – IT Business Arak Chonlatanon Executive Committee – Business Development Somprosong Boonyachai Chairman of the Executive Committee – Wireless Communications Business Dumrong Kasemset Ph.D. Chairman of the Executive Committee – Satellite Business Niwat Boonsong Chairman of the Executive Committee – Media and Advertising Business Siripen Sitasuwan Group - Chief Finance Officer Jurairat Uhaka Executive Vice President – Portfolio Management
19 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
REMUNERATIION FOR DIIRECTORS AND MANAGEMENT TEAM
Total Remuneration of Directors • Total Salary 48,900,000 Baht • Total Bonus 4,075,000 Baht • Total Allowance 160,000 Baht • Total 53,135,000 Baht
Total Remuneration of Management Team • Total Salary 25,212,000 Baht • Total Bonus 2,101,000 Baht • Total Allowance - Baht • Total 27,313,000 Baht
Total Remuneration of the top 15 Directors and Management Team • Total Salary 35,581,920 Baht • Total Bonus 6,176,000 Baht • Total Allowance 160,000 Baht • Total 41,917,920 Baht
RELATED PERSONS AND RELATED TRANSACTIIONS
RELATED PERSON
1. S.C. Office Park Co.,Ltd. Nature of Business Office Space rental Major Shareholder Shinawatra’s Family 100% Directors Mrs. Potjaman Shinawatra Mr. Chanon Suwasin Mrs. Kanchanapa Honghern Relationship with Company The Company whose major shareholder of its parent company holds 100% Size of Transaction Transaction 1997 1998 The company has rented office space at Shinawatra Tower 1 35,405,318.70 29,448,396.80
2. SC Assets Co.,Ltd. Nature of Business Office space rental Major Shareholder Mr. Bhanapot Damapong 66.67% Directors Mr. Bhanapot Damapong Mr. Surathian Chaktharanon Mrs. Busaba Damapong Mrs. Duangruethai Kasisopha Ms. Boonchou Rianpradup Relationship with Company Chairman is major shareholder in SC Assets. Size of Transaction Transaction 1997 1998 The company has rented office space in Shinawatra Tower 1 36,978,267.42 48,554,592.30
3. OAI Leasing Co., Ltd. Nature of Business Car leasing Major Shareholder Shinawatra’s Family 44.99% Directors Mrs. Potjaman Shinawatra Mrs. Busaba Damapong Mr. Chanon Suwasin Mrs. Kanchanapa Honghern 20 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Relationship with Company The company whose major shareholder of its parent company holds 45% Size of Transaction Transaction 1997 1998 Rental of car for the Executives 23,883,979.58 17,942,745.54
The transaction is in the normal course of business and continuously done every year.
21 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
The Common share sale Transaction of SWM to ADVANC Date of Transaction December 22, 1998 Description of the Transaction The Company sell SWM’s share to ADVANC its Subsidiaries of the Company Conditions of the Transaction This transaction requires a resolution of not less than three quarters of the total number of votes of shareholders (or proxies, if any) who are present at the meeting and have the right to vote, excluding the votes of interested shareholders which is SHIN. The extraordinary general meeting of the shareholders will be held on December 18, 1998 The Opinion of Financial Advisor We refer to the Board of Directors’ resolution of Advanced Info Service PLC (“ADVANC” or “the Company”) No. 4/1998 dated November 12, 1998, whereby the Company and Shinawatra Computer & Communication PLC (“SHIN”) propose to enter into an agreement pursuant to which the Company will acquire 99.99% of Shinawatra Wireless Marketing Co.,Ltd.’s (“SWM” or “the Acquiree”) common stock for an all cash consideration at a price of not more than Baht 700 million. Because SHIN currently holds a 54.34% stake in ADVANC and a 99.99% stake in SWM, this acquisition transaction is considered to be a connected transaction based on the Stock Exchange of Thailand’s regulations. Merrill Lynch Phatra Securities Company Limited (“MLP”) has been asked by ADVANC to render its opinion as to whether or not the proposed cash consideration to be paid by the Company in the acquisition transaction is fair and reasonable from a financial point of view. We understand ADVANC’s basic objectives in this transaction are; a) to eliminate potential conflicts of interest between its minority shareholders and SHIN, as the major shareholder of both ADVANC and SWM, b) to provide ADVANC more marketing flexibility, c) to more rapidly put into place a more comprehensive and integrated marketing strategy including well-trained sales staff and technicians, and point-of- sale and service outlets, and d) to offer ADVANC benefits from a well-established brand name, “Mobile and Accessories from Shinawatra”.
In arriving at the opinion set forth below, we have, among other things: Reviewed certain publicly available business and financial information relating to the Acquiree that we deemed to be relevant; a) Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of the Acquiree; b) Conducted discussions with member of senior management and representatives of the Acquiree concerning the matters described in clauses 1 and 2 above; c) Reviewed the valuation multiples for the Acquiree shares and compared them with those of certain publicly traded companies that we deemed to be relevant; d) Reviewed the results of operations of the Acquiree and compared them with those of certain publicly traded companies that we deemed to relevant; 22 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
e) Conducted a discounted cash flow (DCF) analysis based on projected operating cash flows of the Acquiree; f) Reviewed the Acquiree’s financial statements (as of September 30, 1998) that were extracted from those of its parent company, SHIN and reviewed by the independent outside auditor for the Company, SHIN and the Acquiree; g) Reviewed such other financial studies and analyses and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. In preparing our opinion, we have assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us, discussed with or reviewed by or for us, or publicly available, and we have not assumed any responsibility for independently verifying such
23 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
information or undertaken an independent evaluation or appraisal of any of the assets or liabilities of the Acquiree. In addition, we have not assumed any obligation to conduct any physical inspection of the properties or facilities of the Acquiree, we have assumed that they have been reasonably prepared and reflect the best currently available estimates and judgment of the Acquiree’s management as to the expected future financial performance of the Acquiree.
Our opinion is necessarily based upon the market, economic and other conditions as they exist and can be evaluated on, and on the information made available to us as of, the date hereof. We have assumed that in the course of obtaining the necessary consents or approvals (contractual or otherwise) for the Transaction, no restrictions, amendments or modifications, will be imposed that will have a material adverse effect on the contemplated benefits of the Transaction.
We have, in the past, provided financial advisory and financing services to the Company and may continue to do so and have received, and may receive, fees for the rendering of such services. In addition, in the ordinary course of our business subjected to regulartory requirements, we may actively trade the Company Shares for our own account and for the accounts of customers. This opinion is for the use and benefit o the outside directors of the Company. Our opinion does not address the merits of the underlying decision by the Company to engage in the Transaction and does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote on the proposed Transaction or any matter related thereto. We are not expressing any opinion herein as to the prices at which the Company Shares will trade following the annoucement or consummation of the Transaction. Based on the valuation methodologies described earlier, including DCF and publicly traded comparable analysis, the maximum offer value of Baht 700 million was within the derived valuation range. On the basis of and subject to the foregoing, we are of the opinion that, as of the date hereof, the Consideration to be paid by the Company pursuant to the Transaction is fair and reasonable from a financial point of view. The Opinion of Independent Directors The independent directors of the Company, have already reviewed this transaction with the opinion in the conformity with the resolution of the Company’s board of directors and the opinion from independent financial consultant to the extent that the price of SWM’s shares at 600 million Baht is fair and the transaction is justifiable.
1. Shinawatra Wireless Marketing Co.,Ltd.
Relationship with Company It’s subsidiary own by SHIN holds 99.99% ( Present sell to ADVANCE) Nature of Business Importer of a 900-MHz cellular phone and retail franchiser of all Shinawatra product i.e. mobile. Major Shareholder Shinawatra Computer and Communication Plc. (present- sell to ADVANCE on December 22,1998) Directors Mr. Somprasong Boonyachai Mr. Boonklee Plangsiri Mr. Arak Chonlatanon Mrs. Siripen Sitasuwan Mr. Allen Lew Yoong Keong Size of Transaction Baht Transaction 1997 1998 24 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Revenue – Sales 1,936,204,000.98 1,008,598,366.41 Revenue – Computer service 20,907,030.50 10,772,586.00 Revenue – Consulting and Management service 9,000,000.00 162,040,000.00 Revenue – Interest 2,111,473.98 45,540,753.41 Expense – Sales Promotion 128,960,952.55 - Expense – Interest 15,972,602.74 - Property and Equipment 122,437,026.83 -
25 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
1. Advanced Info Service Plc. Relationship with Company It’s subsidiary own by SHIN holds 49.84% ( As at December 31, 1998) Nature of Business Service provider of cellular phone networks for NMT 900 and Digital GSM systems Major Shareholder Shinawatra Computer and Communications Plc. Dirtectors Mr. Paiboon Limpaphayom Ph.D. Mr. Boonklee Plangsiri Mr. Somprasong Boonyachai Mrs. Siripen Sitasuwan Mr. Allen Lew Yoong Keong Mr. Chow Wing Keung Lucas Mr. Supadej Poonpipat Mr. Withu Ruksvanichpongs Mr. Vithit Leenutapong Mr. Arun Churdboonchart Size of Transaction Baht Transaction 1997 1998 Revenue – Sales 208,757,425.65 - Revenue – Computer service 126,631,514.00 95,706,948.45 Revenue – Consulting and Management service 168,000,000.00 138,528,000.00 Revenue – Interest 12,482,823.08 16,578,126.03 Revenue – Operating equipment sold - 12,944,636.27 Revenue - Sale total investment in SWM - 600,000,000.00
1. ICSI Partnership Relationship with Company It’s subsidiary own by SHIN holds 90.00% (As at December 31, 1998) Nature of Business Computer rental for State Rialway Organization of Thailand Major Shareholder Shin Corporations Plc. 90.00% Directors Mrs. Busaba Damapong Size of Transaction Baht Transaction 1997 1998 Revenue – Sales - 23,700,000.00 Revenue – Interest - 13,391,334.68 Revenue – Rental and Other service - 21,600,000.00
1. Shinawatra Satellite Plc. Relationship with Company It’s subsidiary own by SHIN holds 55.71 % (As at December 31, 1998) Nature of Business Operator of Satellites lease transponders to public and private telecom and broadcasters Major Shareholder Shinawatra Computer and Communications 55.71% Directors Mr. Paron Isarasena Na Ayudhaya Mr. Boonklee Plangsiri Mr. Dumrong Kasemset Ph.D. Mr. Arak Chonlatanon Mrs. Nongluck Phinainitisart D. Eng. Mr. Rianchai Reowvilaisuk Mr. Manaspas Xuto Ph.D. Mrs. Nilaya Malakul Na Ayudhaya Mr. Kowit Vorapipatana Ph.D. Size of Transaction Baht Transaction 1997 1998 Revenue – Consulting and Management service 18,000,000.00 14,184,000.00 Revenue – Interest 2,518,082.18 42,159,293.88
26 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
1. Shinawatra International Plc. Relationship with Company It’s subsidiary of SHIN through BVI holds 100% (As at December 31,1999) Nature of Business Oversea Investment Abroad Major Shareholder Shenington Investment (B.V.I.) Pte. Ltd. 100.00% Directors Mr. Sung Sio Ma Mr. Dumrong Kasemset Ph.D. Mr. Arak Chonlatanon Mrs. Siripen Sitasuwan Mr. Pirat Isarasena Na Ayudhaya Mr. Nissai Vejjajiva Mr. Pasarn Soonthornratanarak Size of Transaction Transaction 1997 1998 Revenue – Consulting and Management service 24,000,000.00 15,292,000.00 Revenue – Interest - 90,786,123,.34
1. Shinawatra Directories Co.,Ltd. Relationship with Company It’s subsidiary own by SHIN holds 50.99% (As at December 31, 1998) Nature of Business The publicher of Telephone Directories : White as well as Yellow Pages for distribution throughout the nation. Major Shareholder Shin Corporations Plc. 50.99% Telephone Organization of Thailand 49.00% Directors Mr. Niwat Boonsong Mrs. Jurairat Uhaka Mr. Surachart Kugasemrat Miss. Yingluck Shinawatra Mr. Somchai Sinjananuruk Mr. Somboon Kuptimanus Mr. Pongpan Manorot Mr. Vichain Naksinoun Mr. Pasit Thamrongsiriwat Mrs. Tippawan Vutisarn Mr. Sayan Thinsumrant Size of Transaction Baht Transaction 1997 1998 Revenue – Interest 13,409,686.30 27,053,184.92 Expense – Rental and Other service 17,019,040.00 15,600,000.00
1. Shinawatra Information Technology Co.,Ltd. Relationship with Company It’s subsidiary own by SHIN holds 99.99% (As at December 31,1998) Nature of Business Computers telecomunications, selling equipment and services Major Shareholder Shin Corporations Plc. 99.99% Directors Mr. Boonklee Plangsiri Mr. Somkiet Phaloprakarn Mrs. Busaba Damapong Mr. Arak Chonlatanon Mrs. Siripen Sitasuwan Mrs. Jurairat Uhaka Size of Transaction Baht Transaction 1997 1998 Revenue – Interest - 10,695,896.41 Revenue – Operation Equipment sold 11,738,840.39 - Expense – Consulting and Management service - 91,130,000.00
27 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
1. Shenington Investment (B.V.I.) Pte.Ltd. Relationship with Business It’s subsidiary own by SHIN holds 100% (As at December 31,1998) Nature of Business International Telecommunications Business Major Shareholder Shin Corporation Plc. 100% Directors Mr. Boonklee Plangsiri Mrs. Siripen Sitasuwan Size of Transaction Baht Transaction 1997 1998 Revenue – Sale total investment in INT - 2,200,000,000.00 Revenue – Sale a portion of investment in ADVANC - 2,140,940,000.00 Revenue – Sale a portion of investment in SATELL - 270,000,000.00
1. Shinawatra (B.V.I.) Ltd. Relationship with Company It’s subsidiary own by SHIN holds 100% (As at December 31, 1997 – Present Closed) Nature of Business International Telecommunications Business Major Shareholder Shinawatra Computer and Communication Plc. 100% Directors Mr. Boonklee Plangsiri Mrs Siripen Sitasuwan Size of Transaction Baht Transaction 1997 1998 Revenue – Sale a portion of investment in ADVANC 1,805,500,000.00 -
1. SC Matchbox Co.,Ltd. Relationship with Company It’s subsidiary own by SHIN holds 74.97% Nature of Business Media and Advertising Business Major Shareholder Shinawatra Computer and Communication Plc. 74.97% Directors Mr. Bhanapot Damapong Mr. Niwat Boonsong Mr. Arak Chonlatanon Mr. Songsak Premsuk Mr. Sanchai Teiewprasertkul Mr. Chatchai Sanuekum Mr. Banpot Boonyanit Size of Transaction Baht Transaction 1997 1998 Expense - Advertising 139,143,607.33 6,292,292.66
28 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
1. United Broadcasting Corporation Plc. Relationship with Company It’s Affiliated own by SHIN holds 13.95% (As at December 31, 1998) Nature of Business Broadcaster of subscription TV (UBC Cable TV) Major Shareholder Telecom Holding Co.,Ltd. 35.96% MIH Limited 26.11% Shin Corporations Plc. 13.95% Directors Mr. Paiboon Limpaphayom Ph.D. Mrs. Niwat Boonsong Mr. Han Hawikels Mr. Soopakij Chearavanont Mr. Chatchaval Chearavanont Mr. Supachai Chearavanont Mr. Athueck Asvanund Dr. Vallobh Vimolvanich Mr. Satok Bandal Mrs. Aranrat Youkong Mr. Allan Mark Rosenzweig Mr. Mark Sorour Mr. Panlert Baiyoke Mrs. Phenthippha Dulyachinda Size of Transaction Baht Transaction 1997 1998 Revenue – Computer service 11,379,390.09 11,000,754.08
The basis of transactions accurred among the Company and related parties is similar to the basis of those transaction deal with non-related parties.
RISK FACTORS
Risk s of Currency Exchange Rates The Company and its subsidiaries, in term 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 is 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.
Preparation to solve the problem of Year 2000 (Y2K) This report comprises data of Shinawatra Computer & Communications Public Co. Ltd. And its seven other subsidiaries and affiliates as follows:
1. Advanced Info Service Public Co. Ltd. 2. Shinawatra Satellite Public Co. Ltd. 3. Shinawatra International Public Co. Ltd. 4. Shinawatra Wireless Marketing Co. Ltd. 5. Shinawatra Directories Co. Ltd. 6. Shinawatra Information Technology Co. Ltd. 7. SC Matchbox Co. Ltd.
29 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
1. Analysis and assessment of impact The Companies have set up working groups to tackle the problem of year 2000 which comprises senior executives, representatives from subsidiaries/affiliates including representatives from computer service units, which are supervisors and responsible parties for the main computer system used jointly for the entire group of companies, subsidiaries and affiliates. The working group has defined the scope of Y2K problem for use in analysis of impact, preparation of test guidelines and request the manufacturer to confirm the readiness of the system to tackle the problem. The working group is the assessor of impact that may result from the said problem. Moreover, the users are encouraged to survey the data used in the system to ensure that the important data have been taken care of and backup made already. The systems that are vital to the business shall be inspected carefully to make sure that no problems occur.
30 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
For the employees of the Companies to understand the Y2K problem, we had campaigned to alert and provide understanding with their general employees on the first meeting in July 1997. It was attended by representatives from various business fields and those involved with the information technology (IT). Later, there were collections of data concerning definitions of Y2K problem, guidelines for solving, tests of computers and publicity through the Internet of the Companies, which is another way to help on impact analysis and assessment more accurately.
Moreover, the subsidiaries and affiliates have also set up a number of working groups by defining operations plans, guidelines and guidelines for tests as a whole to ensure the transition will be consistent and in time for the schedule. The working group of the Company will coordinate with the working groups of the subsidiaries and affiliates in following up the results as a whole and in details. Those involved in solving Y2K problem of the companies totaled 69 persons (Exclusive of Advanced Info Service Public Co. Ltd. and Shinawatra Satellite Public Co. Ltd. which filed separate reports). The guidelines for analysis and assessment Y2K problem consisting of three main parts are:
Part 1 Hardware of computer 1.1 Main computer system
1.1.1 We have compiled a list of equipment specifying brand names, models, numbers and impact of Y2K problem divided according to the working system. The check of machines has determined guidelines for checking according to enclosed document 1. 1.1.2 We have requested a documentary confirmation from the suppliers for main machines capable of support Y2K operations.
1.2 Stand-alone PC’s
1.2.1 We have compiled a list of equipment specifying brand names, models, numbers and impact of Y2K problem divided according to the sections. The check of machines has determined guidelines as follows:
1.2.1.1 Setting up time at 23.55 hours of the 31st day of December, 1999 and let it stand for 5 minutes, test of the machines whether they can work continuously or not. And will the time and date go back if the machine is turned off? And can the use of the date from BIOS be put on the date for the year 2000? Furthermore, check on the number of days in weeks and the number of days in a year if they are correct or not. In February 2000, there will be 29 days Julian date 00366 corresponds to 31st December 2000. 1.2.1.2 There has been a download of software named RDTS 2000 from http://www rd- comp.co.th for testing computers by following the instructions for testing and checking machines. The Companies have determined the responsible parties to undertake and report the results to the working group solving the Y2K for summarizing guidelines for correction afterwards.
Part 2 Software There is a compilation of application software that are ready-made or being developed for its own use including the operating system that is used in the entire system, for checking impact and preparing for correction as follows: 1. Check the software that is used in developing program of the entire system. Some developers specified that the software recognizes in AD for 2-back digit, including the check on the date whether or not that is the format of 99/99/99 for a line-up of data, computation and printing program in all systems. 2. Check the application software used in the entire system for which are their brand names, versions and seek confirmation from the manufacturers that are ready to help checking for the owner of the product on capability of supporting the Y2K. This includes a follow-up on development of program for patching file for correction in case of incapable of supporting the Y2K.
Part 3 Data Check the structure that stores data files filed in AD for only 2-digit. A retrieval of data will be confusing after collections of data on the date after the first of January 2000. The line-up of data will be mistaken, interpretation of data is false when that software is retrieved.
31 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
2. Impact on the Y2K problem toward the business
2.1 The impact that may occur to the computer system which is an internal management system within an organization (In fact there is no effect at all due to the Companies are implementing work systems with plans to solve the Y2K already, as per details in clause 3). 2.1.1 The vehicle information & monitor system is the vehicle information for office cars of the company’s executives including records of maintenance which data can be stored until 2019. 2.1.2 The bank reconciliation system is the system of checking deposit and withdrawal of account of the Companies by receiving information tape from the bank. The annual date is in 2-digit, when the bank tries to correct program and send it in 4-digit, the program for reading data from the tape shall revise the reading to 4-digit forthwith.
32 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
2.1.3 Petty cash system is a control system for small cash. 2.1.4 Payroll system is a salary payment system with its annual date is stored in 2-digit, which may cause mistakes on settlement of account. 2.1.5 GL, AP, AR and inventory systems on annual date of the Companies are stored in 2-digit, which may cause storing data and closing of account discrepancy and in turn cannot close the account in time. 2.1.6 Annual personnel assessment system is stored in 2-digit that may cause mistake upon retrieving the data on the statistics later. 2.1.7 Budget planning is stored in 2-digit system may cause mistake in request for approval of budget amounts for purchasing materials and equipment. 2.1.8 Job cost sheet is a control, follow-up of work procedure and expenditure projection system of SC Matchbox Co. Ltd. 2.1.9 Legal affairs records data can be stored up to the year 2019. 2.1.10 Customer service and bill collection from customers that use mobile telephone in Cambodia of Cambodia Shinawatra Co. Ltd., which is an affiliate of Shinawatra International Public Co. Ltd. may have mistakes in bill collections and customer service. 2.1.11 Customer service and bill collections from customers that use telephone in Laos of Laos Telecommunications Co. Ltd., which is an affiliate of Shinawatra International Public Co. Ltd. may have mistakes in bill collections and customer service. 2.1.12 Systems for customer service and bill collections for customers using mobile telephone in the Philippines of Isla Communication Pte. Ltd. which is an affiliate of Shinawatra International Public Co. Ltd. may have mistakes in bill collections and customer service. 2.1.13 Systems for customer service and bill collections for customers using mobile telephone in India of Fascel Co. Ltd., which is Shinawatra International Public Co. Ltd. is a shareholder, may cause mistakes in bill collections and customer service. 2.1.14 Office systems such as alarm system, fax, phone equipment and access control system.
2.2 Impact that may cause to the general business operations 2.2.1 The operation system of SC billing of the annual date is stored in 2-digit may cause mistakes in issuing bills and could be sued in case of incorrect billing. 2.2.2 The purchase order/product estimate of the stored year to 2-digit may cause mistake in issuing purchase order and transfer of data to other systems.
2.3 Possible impact from outside factors
The accounting system that has online data among the affiliates and online data of the banks. There could be mistake a resulted from outsiders have not corrected their work systems and not prepared for the Y2K problem.
3. Plan for solving Y2K problem
Projects that the Companies are preparing to support the Y2K problem can be divided into two types. a. Projects that are undertaken in response to the business need replacing the old systems. These systems have been prepared for the Y2K solution already. b. The operation system in use now and being corrected to support the Y2K problem directly.
3.1 Computer hardware 3.1.1 The host computer that is used in the system according to provision 2.1.1 to 2.1.13 are classified in type a can be divided into 5 groups are: Group 1 The IBM mainframe which is used in the billing system of Advanced Info Service Public Co. Ltd. will be replaced by the CUBICS system, a new purchase with details in the report of Advanced Info Service Public Co. Ltd. Group 2 The IBM AS400, used in accounting and finance (GL, A/P, A/R, inventory) will be replaced by the software SAP/R3. The Company purchased the hardware HP9000, model K100, K210, K220 and T520 provided with certificate of Y2K compliance. Group 3 The minicomputer and server used with the work system according to provision 2.1.10 to 2.1.13 will be replaced by a new hardware, chosen for Y2K compliance. Group 4 Compaq (LAN Novell netware) its main system is human resources system will be replaced by the SAP/R3.
33 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Group 5 Server Sun Solaris Ultra I, II which is used in the Intranet system and Electronic mail within the group with certificate of Y2K compliance. 3.1.2 The general computers are classed as stand-alone PC which are under testing and grouping which expected to be completed by October 1998. The Companies used 30 employees which are subgroups working and reporting results to the committee solving the Y2K problem. The guidelines for grouping the hardware of computers specify 5 groups are: Group 1 The group that has no Y2K problem with the BIOS and RTC working correctly. Group 2 The group with the problem of RTC working incorrectly but the BIOS has helped to rectify it until it has no problem. Group 3 The group that has RTC and BIOS working incorrectly but the BIOS can help solving some problems. Group 4 The group with problems of RTC and BIOS working incorrectly. The BIOS cannot help on this problem, but it can be corrected by using help from outside software. Group 5 The group that the RTC and BIOS work incorrectly and cannot recruit help from outside software to help.
34 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
3.1.3 Guidelines for solving the problem after grouping Method 1 Using software to solve the problem for the general computers classified under groups 2, 3, and 4 of provision 3.1.2 by expecting to be completed by December 1998. The Companies use 11 persons as the subgroup for the operation. Method 2 By waiting until the 1st January, 2000 and change the date of the system. Method 3 By changing the main board or upgrading the BIOS, which this method will be reconsidered again whether or not to do it depending on the number of computers classified under group 5 that found. However, the operation and correction of the said problem, the Companies shall print stickers for machines that can support the Y2K problem. The operation will be completed by December 1998. However, the computers classified under group 5 may terminate the job or change it to other job that have no impact from the Y2K problem. 3.2 Software The software under type a 3.2.1 As the management of the Companies has recognised the importance of internal management to have optimal efficiency and storage of important data in support of the management in quick decision and keep abreast with the events. So, the Companies agreed to sign the contract to use the software SAP/R3 between Shinawatra Computer & Communications Public Co. Ltd. and SAP (Thailand) on the 19th March, 1996 and implementation started since September 1996 onward. By establishing the organization chart of Integrated Software Project with its 65 employees according to the enclosed document 2 and having IBM (Thailand) as the consultant for implementation of SAP/R3 comprising module financing & accounting, controlling, material management, sales & distribution and human resources. Now the implementation has been completed for six companies, Shinawatra Computer & Communications Public Co. Ltd. , Shinawatra Information Technology Co. Ltd. , Advanced Info Service Public Co. Ltd., Shinawatra Wireless Marketing Co. Ltd., Shinawatra Satellite Public Co. Ltd. and C.S. Communications Co. Ltd. For the details of the roll-out plan for the rest of companies will comply with the enclosed document 3. However, the implementation of the integrated software project has avoided impact from the Y2K 2000 tacitly. Moreover, other than the Companies will have highly effective, internal management, as the said project can replace the work system according to clause 2 almost entirely. For the small jobs are in the process of correction. 3.2.2 The customer service and bill collection for mobile phone customers in Cambodia of Cambodia Shinawatra Co. Ltd, which is an affiliate of Shinawatra International Public Co. Ltd. to introduce CUBICS software of Advanced Info Service Public Co. Ltd. to be adopted replacing the old system. 3.2.3 Customer service and bill collection for customers of mobile telephone in Laos of Laos Telecommunications Co. Ltd., which is an affiliate of Shinawatra International Public Co. Ltd. will be replaced by a new software package. 3.2.4 Customer service and bill collection for customers of mobile telephone in the Philippines of Isla Communication Pte Ltd. , which is an affiliate of Shinawatra International Public Co. Ltd. has been replaced by the Intebiz software package. 3.2.5 Customer service and bill collection for customers of mobile telephone in India of Fascel Co. Ltd., which Shinawatra International Public Co. Ltd. is the shareholder, shall select a software package for substitution to support the growing business and to support the Y2K problem. 3.2.6 Directory system of Shinawatra Directories Co. Ltd. Due to the installation of the new supporting system is Enterprise Yellow Pages System replacing the old system, that is Golden Pages Computerized System that has been in operation since November 1997. It will be completed for the first phase around September 1998, which will use Oracle software, to manage the database and has been certified by both system and software sellers that there will not be any problem with the Y2K problem. However, there will be a check to make sure that no problems ever present, which will be finished by December 1998 with no impact to all the users. 3.2.7 The service center system is for customers bringing mobile telephones for service at the center, it does issuing repair orders, does pricing, issues receipts, settles inventory, prints & records repaired items and issues reports. 3.2.8 The data warehouse is a system in collecting information concerning customers including use of mobile telephone in different forms for analysis and issue of statistics data up to cost evaluation for marketing decisions.
Software that is classed in type b 35 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
3.2.9 The LAN of Shinawatra Directories Co. Ltd. There is use of account receivable system for feeding data to the bill collection and use of legal data, which the affected parties will be notified of both systems for the impact. So, there would be correction on the storage of data, which is expected to be finished in May 1999 without any effect to the use before the year AD 2000. 3.2.10 The payroll system of the Companies will be corrected to support the Y2K problem and completed by December 1998. 3.2.11 The job cost sheet system will be corrected to support the Y2K problem and completed by December 1998.
3.3 Data system
As the Companies have set up the integrated software project on CUBICS and EYPS, the data in the old system has been gradually transferred to the new system with tests on it. There has been arrangement for tape archive on a monthly basis, which expected by the year AD 2000 will pose no negative effect as prior preparation has been already made.
36 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
3.4 Plan for solving the Y2K problem Activities 1997 1998 1999 Resources Budget Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (Baht) 1.Preliminary Phase 10 - Understanding the Y2K problem Set up working committee to take care 2. Inventory Analysis Phase 41 - Collection of IT programme Ranking priority 3.Impact Analysis 10 - Determination of criteria Test plan preparing timetable for test 4. Modification Phase 25 - Hardware/Software Upgrade File/Database Conversion 5. Testing and Certification 54 3,000,000 6. Contingency Plan 10 - 7. Back up Data 15 - 8. Public Relations (Internal/External) 5 100,000
Plan of operations for types a and b shown in the enclosed document 4
3.5 Ranking of results report
3.5.1 Board of executive directors of Shinawatra Ltd. 3.5.2 Committee solving Y2K problem 2000 of group of companies 3.5.3 Committee solving Y2K problem 2000 of each business field, while the committee Y2K reports directly to the managing director of each field too.
3.6 List of working committees solving Y2K problem The working committee solving Y2K problem consisting of business representatives as follows: 1. Khun Somkiet Phaloprakarn Chairman Executive Director 2. Khun Somchai Sinjananuruk Corporate Affair Vice President 3. Khun Arpattar Sringkarrinkul Wireless Communications Business Vice President 4. Pol Maj Theerawat Kusalanggoorawat Maintenance Information System Asst. Vice President 5. Khun Suvimon Kulalert Internal Audit Asst. Vice President 6. Khun Keratiyuth Laksanapanich Media and Advertising Business Information System Director 7. Dr Sakol Kittiwacharaphong Satellite Business Department Manager 8. Khun Bussakorn Thanasombatkit IT Business Department Manager 9. Khun Phoblab Boonchuay International Business IT Specialist 10. Khun Wiwat Songsasen Company Secretary Department Manager 11. Khun Sanan Tanheng Office Building Section Senior Computer Operation Each business field has appointed a working committee to solve the Y2K problem of each internal business field.
37 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
4. Operation to solve the Y2K problem of the Companies at present
4.1 On computer hardware
4.1.1 The host computer will be replaced to support the SAP/R3 system, so all hardware needs a certificate of Y2K compliance. The suppliers are being requested and now we are waiting for the answer. 4.1.2 The standalone PC’s are being tested and grouped to be prepared for correction. 4.1.3 Computers for Laos Telecommunications Co. Ltd. are in the process of being selected for new equipment. 4.1.4 Installation of computers for Cambodia Shinawatra Co. Ltd. has been completed already. 4.1.5 Computers of Fascel Co. Ltd. are being reconsidered. 4.1.6 Installation of computers for Shinawatra Directories Co. Ltd. has been completed and certified by the supplier to support the Y2K. However, the Company shall proceed to test further.
4.2 On computer software
4.2.1 SAP/R3 system has a roll-out plan as per enclosed document 3. 4.2.2 Work system of Cambodia Shinawatra Co. Ltd. is being upgraded. 4.2.3 Work system of Laos Telecommunication Co. Ltd. is being selected new software. 4.2.4 Work system of Fascel Co. Ltd. is being selected a new software. 4.2.5 Directory system is being installed a new work system (90% completed). 4.2.6 LAN system of Shinawatra Directories Co. Ltd. is being corrected (20% completed). 4.2.7 Payroll system on standalone PC’s is being corrected (Completed 10%). 4.2.8 Job cost sheet system is being corrected (Completed 15%).
4.3 On office system
It is being checked and waited for partial confirmation from the suppliers (Completed 10%).
Preparation to solve the problem of Year 2000 (Y2K) as at December 31, 1998
1. Hard Ware We had acquired and received the compliance statements from the vendors for each computer hardware equipments. The hardware that serves main application which had already reported in Report 1/2541 can be grouped as follows:
Group 1 IBM Mainframe, which operates Mobile Phone Billing System for Advanced Info Service Public Company Limited was substituted by New In-house Development Software so-called CUBICS which run on the new platform. Therefore, IBM Mainframe was terminated since December 31, 1998. Group 2 IBM AS 400, which used for Financial & Accounting System will be substituted by application software called SAP R/3 which run on HP 9000 model K100, K210, K220 and T520 which comply to Y2K. However, the system has been tested further on November 20, 1998 which yielded a satisfactory result. Group 3 Minicomputer and other servers in item 2.6 to 2.9 will be substituted by new Y2K compliance hardware. It is now under the selection process. Group 4 Compaq servers which operate LAN under Novell NetWare environment running Human Resource Systems was already substituted by SAP R/3 Application and hardware like in Group 2. Validation and testing of Y2K compliant both hardware and application activities had been performed and completed since 20 November 1998, same as group 2 (See detail under 2) Group 5 SUN Solaris Ultra I, II Server which are used for Intranet Application and e-mail. Y2K compliance statement has been received from vendor. Validation and testing of Y2K compliant both hardware and application activities had been performed and completed since 16 December 1998.
Personnel Computer which classified in type B (Stand Alone PC)
38 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The validation and testing of Y2k compliance had been performed and completed since end of October 1998. There are 196 PCs available and they are classified into group1 and 2 (see definition from report 1/1998). Seventy percent of those PCs are complied to Y2K and the other 30% are classified in group 3 and 4. Those PCs are only for general administrative purposes that will be off each day; therefore, no correction is required. In such case, manual adjustment of date/time shall be applied when encounter to 1 January 2000. From the inventory assessment reports, we found no PCs, which classified in group 5.
2. Software Software (Type A) 2.1 Financial and Accounting System for Shinawatra Group (GL, A/P, A/R and Inventory) 2.2 Bank Reconciliation System 2.3 Petty Cash System 2.4 Auto Budget System 2.5 Job Cost Sheet System. The applications mentioned above will be substituted by SAP R/3 Application which the are currently under implementation rollout for all companies under Shinawatra Group. The completion of implementation rollout schedule is targeted at mid of June 1999. During the November – December 1999, we had performed the Y2K testing in both SAP R/3 application S/W and hardware platform included its OS (operation system). We found no issues concerned Y2K matters.
39 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
2.6 Customer Service and Bill Collections System for Cambodia Shinawatra Company Limited, a Shinawatra International Public Company Limited affiliate, will solve the Y2K problem on existing systems by substituted them by CUBICS application. The said application is tested and thus guarantees to be Y2K compliance. 2.7 Customer Service and Bill Collections System for Laos Telecommunications Company Limited, a Shinawatra International Public Company Limited affiliate, will substitute the current system with the new software applications and hardware platforms which is under vendors selection state. 2.8 Customer Service and Bill Collection System for Philippines of Isla Communication Pte. Ltd, an affiliate of Shinawatra International Public Company Limited, Intebiz plan to complete Jun’99,is currently under the Y2K validating and testing phases. 2.9 Customer Service and Bill Collection System for India of Fascel Company Limited which is an affiliate of Shinawatra International Company Limited will substitute the current system with the new software application and hardware platform. It is under selection of Vendors State. 2.10 Yellow Pages System for Shinawatra Directories Company Limited. The company had performed the Y2K software application and hardware testing activities during September 21, 1998 through January 31, 1999. On September 25 through October 9, 1998, we tested on the hardware and Operating System respectively. 2.11 Service Center System (see detail in report 2) 2.12 Data Warehouse System (see detail in report 2) Software that were categorized in Type B 2.13 Legal System: The validation and testing of Y2K compliance had been performed and completed since the end of October 1998. No Y2K problems were found. 2.14 Payroll System: The application correction was made. The validation and testing of Y2K compliance had also been performed and completed since December 1998. No Y2K problems were found. 2.15 Vehicle Information System: The validation and testing of Y2K compliance had been performed and completed since October 1998. No Y2K problems were found. 2.16 Staff Evaluation Report System: Application correction, validation and testing of Y2K compliance activities will be performed during January 16 to 31, 1999. 2.17 SC Billing System: The validation and testing of Y2K compliance activities had been performed and completed since end December 1998. No Y2K problems were found.
3. Contingency Plan In order to ensure there will be no interruption caused by Y2K problems, the contingency plan has been established and contained as following activities: • Appoint Authorized Personnel for each business line to supervise, act and monitor according to the contingency plan. • Define emergency center for reporting any interruption as well as assign personnel to handle and assist when encounter the problems. • See detail plan for further information.
OTHER FACTORS ASSECTING THE INVESTMENT
Legal Resuiting
- None -
Dividend Policy The Company has dividend policy of at least 40% of profit after tax and the payment of dividend has no significant impact to the operations of the Company
Obligation to Issue Share in the Future
-None-
40 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
TERM AND CONDITION OF DEBENTURE
Debenture of Shin Corporation Plc. No.1 Due 2000 Type of Instrument Unsecured, unsubordinated debentures without a trustee. Type of Debenture Specified name of Debentureholder. Term 3 years after Issue Date Principle Amount THB 60,000,000 (Six hundred million Baht) Share Amount 60,000 units (Six hundred thousand units) Face Value THB 1,000 (One thousand Baht) Issue Price THB 1,000 (One thousand Baht) Issue Date December 22, 1997 Maturity Date December 22, 2000 Early redemption Date February 22, 1999 Interest Minimum Loan Rate Average from Thai Farmer Bank and Bangkok Bank Pay every 3 months Security None Redemption Right of Issue None Redemption Right of Debentureholder None Debentureholder(s) Specified investors and/or qualified investors in accordance with the Notification No. Gor Jor. 13/2537, clause 9.(2) Transfer Restriction All transfer of Debentures and entries on the register of Debentureholders will be only made in accordance with Notification No. Gor Jor. 13/2537, clause 9.(2)
Debenture of Shin Corporations Plc. No. 2 Due 2001 Type of Instrument Unsecured, unsubordinated debentures without a trustee. Type of Debenture Specified name of Debentureholder. Term 3 years after Issue Date Principle Amount THB 400,000,000 (Four hundred million Baht) Share Amount 400,000 units (Four hundred thousand units) Face Value THB 1,000 (One thousand Baht) Issue Price THB 1,000 (One thousand Baht) Issue Date February 13, 1998 Maturity Date February 13, 2001 Early redemption Date February 22, 1999 Interest Minimum Loan Rate Average from Thai Farmer Bank and Bangkok Bank Pay every 3 months Security None Redemption Right of Issue None Redemption Right of Debentureholder None Debentureholder(s) Specified investors and/or qualified investors in accordance with the Notification No. Gor Jor. 13/2537, clause 9.(2) Transfer Restriction All transfer of Debentures and entries on the register of Debentureholders will be only made in accordance with Notification No. Gor Jor. 13/2537, clause 9.(2)
Debenture of Shin Corporations Plc. No. 3 Due 2001 Type of Instrument Unsecured, unsubordinated debentures without a trustee. Type of Debenture Specified name of Debentureholder. Term 3 years after Issue Date Principle Amount THB 1,000,000,000 (One billion Baht) Share Amount 1,000,000 units (One million units) Face Value THB 1,000 (One thousand Baht per units) Issue Price THB 1,000 (One thousand Baht per units) 41 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Issue Date August 20, 1998 Maturity Date August 20, 2001 Early redemption Date February 22, 1999 Interest Minimum Loan Rate Average from Thai Farmer Bank and Bangkok Bank Pay every 3 months Security None Redemption Right of Issue None Redemption Right of Debentureholder None Debentureholder(s) Specified investors and/or qualified investors in accordance with the Notification No. Gor Jor. 13/2537, clause 9.(2) Transfer Restriction All transfer of Debentures and entries on the register of Debentureholders will be only made in accordance with Notification No. Gor Jor. 13/2537, clause 9.(2)
42 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
THE MANAGEMENT’S EXPLANATION AND ANALYSIS
Shin Corporations Plc. and its subsidiaries are leaders in wireless communications, information technology, multi-media and advertising media business integrated and covering the largest number of businesses in the telecommunication industry in Thailand, whose primary businesses are the business of selling and providing services for mobile telephones and pager telephones, the business of operating and providing a service for subscription of signal channels, including joint ventures in the region, e.g. India, the Philippines and Laos.
From events since the past year 1997 , Thailand and some countries in the Asia-Pacific region have had meet with economic difficulties in connection with a decline in value of the currency unit, a decline of the economic growth of the country, the problem of economic liquidity and the problem of bad debt of the financial institution system, which have impacts on the past operation of the company too.
However, the company is still confident in its potentials and leadership role, which is committed to providing communication and telecommunication services and ready to respond to free competition to take place in the near future, which is visible in the major restructuring of the group of companies by dividing them into various business lines for liquidity and emphasizing providing services with the character of good governance, with organizational cultures of its own identity and with the international standard level of diligence. So the company is confident in its ability to possess business leadership continuously.
Assets : Although the company’s total assets in 1998 dropped from 1997 by 2,127-79 million baht or equivalent to 3.55%, the company still kept investing in telecommunication projects under concession contracts continuously, which is 1998 had net increase from 1997 of 5,444.8 million baht or an increase of 16.6%, the major part of which was in the mobile telephone network projects, since the company has a policy of enhancing the capacity of the system in response to service use by customers sufficiently in the future. As for investments in related businesses and other businesses in 1998, there was a decline from 1997 of 5,927.6 million baht, mainly because in 1998 there was an investment expansion in I-Co Global Communication Co.,Ltd. In addition to that, it was also caused by a decline in value of investments due to the losses of associated companies, particularly the group of companies prosecuting businesses abroad.
Liabilities : The company had total assets in 1998 amounting to 46,606.93 million baht, a decline from 1997 of 4,206.90 million baht or equivalent to 8.28%, due to the repayment of the company’s loans became due, the major part of which was the repayment of foreign loans. However, in 1998 the company issued short-term and long-term debenture in support of additional investment in various projects and in support of the repayment of loans falling due. Although in 1998 the economic situations of the country and of the Asia-Pacific region were with lower fluctuations than in 1997, the company continued conducting the policy of preventing risks that might arise from changes in the baht currency value on an ongoing basis throughout.
Equity : The company’s equity shown in 1998 amounted to 2,709.27 million baht, a decline from 1997 of 1,085.43 million baht, equivalent a declining proportion of 28.60%, due to losses from 1998’s operation, the major part of which were losses of the subsidiaries and acknowledgment of the net result from investment in the joint ventures.
Net loss : In 1998 the company had a net loss of 1,088 million baht, a loss less than that in 1997, which was equal to 5,642 million baht, since in 1997 there was a loss from the change of the currency exchange system as high as 9,088 million baht, while in 1998 the company had a profit of 5,177 million baht from the exchange rate. However, in 1998 had a loss from the net result from investment in the joint venture as much as 2,293 million baht and a loss from the depreciation of the baht currency and an estimated loss from entering into security for the joint venture of approximately 2,589 million baht and 1,459 million baht respectively.
Cash flow : In 1998 the company had 6,630.26 million baht in net cash received from operation, an increase from 1997 of 3,037.89 million baht, equivalent to 84.57%; 3,894.01 million baht in net cash received for investment activities, a decline from 1997 of 11,905.08 million baht, equivalent to 75.35%, since it received money from selling investments in shares in an amount of approximately 4,849 million baht, and 1,092.62 million baht in net cash received 43 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
from fund-raising activities, since in 1998 the company had a burden of repaying long-term loans from financial institutions, the net amount of which was equal to 9,226.40 million baht, for part of which the company used net cash from operation. In addition to that, the company also raised money from borrowing other companies a net amount of 2,864 million baht and issuing debentures both short-term and long-term for an amount of 5,400 million baht to support a loan repayment burden and investing in its various projects.
44 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The company had total incomes classified by type of business work division as follows :
( million baht) Service fee, employment, 1998 % 1997 % Increase % installation, (decrease) Equipment hire incomes : Mobile telephone and pager telephone 15,101.0 83.3 15,183.1 85.9 (82.1) (0.5) businesses Satellite circuit business and related 2,415.6 13.3 1,620.3 9.2 795.3 49.1 businesses Advertising media business 714.1 3.9 1,167.5 6.6 (453.4) (38.8) Information technology business 430.4 2.4 505.7 2.9 (75.3) (14.9) Other business 362.4 2.0 249.2 1.4 113.3 45.5 Item adjustment company and subsidiaries (896.7) (4.9) (1,059.4) (6.0) 162.7 (15.4) Total 18,126.8 100.0 17,666.4 100.0 460.5 2.6
Equipment goods sales : Mobile telephone and pager telephone 4,544.4 97.1 7,604.3 112.0 (3,060.0) (40.2) business Satellite circuit business and related 0.0 275.3 4.1 (275.3) (100.0) business Information technology business 1,368.1 29.2 1,203.6 17.7 164.5 13.7 Item adjustment company and subsidiaries (1,232.4) (26.3) (2,296.3) (33.8) 1,063.9 (46.3) Total 4,680.0 100.0 6,786.9 100.0 (2,106.9) (31.0)
Incomes from all business types Mobile telephone and pager telephone 19,645.5 86.1 22,787.4 93.2 (3,142.0) (13.8) businesses Satellite circuit business and related 2,415.6 10.6 1,895.6 7.8 520.0 27.4 businesses Advertising media business 714.1 3.1 1,167.5 4.8 (453.4) (38.8) Information technology business 1,798.5 7.9 1,709.3 7.0 89.2 5.2 Other business 362.4 1.6 249.2 1.0 113.3 45.5 Item adjustment company and subsidiaries (2,129.2) (9.3) (3,355.7) (13.7) 1,226.6 (36.6) Total 22,806.8 100.0 24,453.3 100.0 (1,646.5) (6.7)
The company had total profits (losses) from operation classified by type of business work division :
Profits (losses) from operation : Mobile telephone and pager telephone 3,603.8 97.0 6,878.6 108.8 (3,274.8) (47.6) businesses Satellite circuit business and related 642.3 17.3 (215.8) (3.4) 858.1 (397.6) businesses
45 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Advertising media business (81.4) (2.3) (89.0) (1.4) 4.7 (5.2) Information technology business (133.5) (3.6) (207.5) (3.3) 74.0 (35.6) Other business (42.1) (1.1) (172.2) (2.7) 130.1 (75.6) Item adjustment company and subsidiaries (269.9) (7.3) 130.0 2.1 (399.8) (307.7) Total 3,719.2 100.0 6,324.0 100.0 (2,607.8) (41.2)
46 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
In 1998, the company had a total profit from operation declining from 1997 by about 2,607.8 million baht or 41% mainly caused by decline of equipment goods sales of the mobile telephone business which was caused by the buying power declining along with the past economic situation.
Financial Ratios 1998 1997 Liquidity Ratios : Liquidity ratio Time 0.44 0.55 High-speed liquidity ratio Time 0.35 0.43 Trade debtor revolving ratio Time 4.98 4.83 Average bill collection period Day 73.29 75.57 Inventory revolving ratio Time 2.96 3.85 Average goods sale period Day 123.31 94.81
Profitability Ratios : Preliminary profit rate % 39.41 45.60 Shareholder return rate % (33.46) (79.77)
Financial Policy Ratio : Liabilities to equity ratio Time 17.2 13.39
The management’s analysis and explanation on coping with A.D. 2000 :
The company took action according to the procedures prescribed and notified under the first report on August 31, 1998 and the second report on October 31, 1998 out of which, at this moment, particularly softwares classified to belong in type B that must be updated to cope with A.D. 2000, testing and result reporting have practically be completed as reported above, As regards software of type A which are made mainly for business objective, the work system used in Thailand is still according to the work plan notified. As for the work system used in the companies in which the Shinawatra group hold shares abroad, such as Lao, Cambodia, India the major shareholders in each country have also taken action.
OTHER REFERENCES
The Securities Registrar Thailand Securities Depository Company Limited 62 Ratchadapisek Road, Klongtoey Bangkok 10110 Tel : 359-1200 Fax : 359-1259
Auditor Mr. Nirand Lilamethwat Certified Public Accountant Registration Number 2316 KPMG Audit (Thailand) Limited 92 Sathorn Thani Tower 2, 9 th Floor North Sathorn Road, Yannawa, Bangkok 10500 Tel” 236-6161-4, 2367877-8 Fax: 2366165
DIRECTOR’’S REPORT
Name SHIN ADVANCE SATTEL BVI SDY SIT SMB 1. Mr. Bhanapot Damapong 6,809,015 - 110,200 - - 1 90 2. Mr. Paiboon Limpaphayom Ph.D. - - 100,000 - - - - 3. Mr. Boonklee Plangsiri - - 200 - - 1 - 4. Mrs. Siripen Sitasuwan - - 200 - - - - 5. Mr. Paron Isarasena Na Ayudha Ph.D. ------6. Mr. Lee Shin Koi ------7. Mr. Thanong Bidaya Ph.D. - - 300,100 - - - - 8. Nr. Sirin Nimmanahaeminda - - 80,000 - - - - 10. Mr. Olarn Chaipravat Ph.D. ------
47 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
THE COMPANY AND SUBSIDIARIES (As at March 31, 1998)
Company Nature of Business Registered Paid Up Par Value Issued Share % Capital Capital (Baht) Shares Amount Investment (Million Baht) (Million baht) (Share) (Share) Shin Corporations Plc. Holding Company 3,000 138.6 10 138,600,000 - - 414 Phaholyathin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5224 Advanced Info Service Plc. Operator of mobile telephone system 5,000 2,700 10 270,000,000 109,710,80 40.63 414 Phaholyathin Rd. Samsennai at 900 MHz 0 Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5224 Shinawatra Setellite Plc. Operator of Satellites lease 5,000 3,500 10 350,000,000 195,000,00 55.71 414 Phaholyathin Rd. Samsennai transponders to Public and private 0 Phayathai Bangkok 10400 telecom and broadcasters Tel : 299-5000 Fax : 299-5224 Shenington Investment (B.V.I.) Pte. International Telecommunications M38USD M38USD 1USD 38,000,000 38,000,000 100 414 Phaholyathin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5224 Shinawatra Directories Co.,Ltd. Publish the White and Yellow 800 800 10 80,000,000 40,799,958 50.99 414 Phaholyathin Rd. Samsennai pages telephone directories and Phayathai Bangkok 10400 distribute them throughout Tel : 299-5000 Fax : 299-5224 Thailand
Shinawatra Infermation Technology Distributor of computer Peripherals 100 100 10 10,000,000 9,999,940 99.99 Co.,Ltd. and telecom Equipment 414 Phaholyathin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5224 SC Matchbox Co.,Ltd. A full-service advertising Agency 9 9 10 900,000 674,996 74.97 414 Phaholyathin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5224
31 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
DIRECTORS AND MANAGEMENT TEAM
Name Age Title Share- Relationship Education Experience Illegal holding with Record Status Management in past (%) 10 years Mr.Bhanapot Damapong 49 Chairman of the 1.47 Khun Potjaman’s M.A. (Sociology) 1987-1991 Senior Executive Vice President – none Board relative Texas Southern State Operations University, 1991-1995 Executive Directors Texas, USA Shinawatra Group 1995-present Chairman of the Board Director Mr. Paiboon 57 Director none none Ph.D. (Electrical 1998-1992 Managing Director, Telephone none Limpaphayom (Ph.D.) Engineering) Organization of Thailand Iowa State University 1992-1993 Advisor of Telephone Organization of Thailand 1993-present Director and Executive Committee Mr. Boonklee Plangsiri 47 Director none none M.A. of Computer 1993-1994 President of Shinawatra Group none Chairman of the Engineering 1995-1996 Vice Chairman Shinawatra Executive University of Illinois Group Committee USA 1997-present Director and Executive Committee Mrs. Siripen 50 Director, none none M.B.A. Wichita State 1991-1993 Executive vice President none Sitasuwan Executive University, Shinawatra Committee, Chief Wichita Kansas USA Group Finance Officer of 1994-present Executive Committee, Chief the Group Finance Officer of the Group Shinawatra Group Mr. Lee Shin Koi 58 Director none none Degree in Accountancy, 1992-1998 Executive Vice President & Chief none University of Singapore Executive-Singpost 1998-present Executive Vice President & Consumer Business Mr. Paron Isarasena 71 Director none none Electronic Engineering 1969-1992 President and Chief Executive none
33 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Na Ayudhaya Chulalongkorn University Officer The Siam Cement Co.,Ltd. 1992-present Director and Chairman of the Board of Director Shinawatra Satellite Plc. Mr. Olan Chaiprawat 55 Independent none none Ph.D. Economics, 1990-1992 Director and Deputy Managing none Directors Massachusetts Director Siam Commercial Bank Institute of Technology, Plc. (M.I.T.) 1992-present Managing Director Siam USA Commercial Bank Plc.
34 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Name Age Title Share- Relationship Education Experience Illegal holding with Record Status Management in past (%) 10 years Mr. Thanong Bidaya 51 Independent none none Ph.D. Management 1988-1990 First Senior Vice President The Thai none Ph.D. Director NorthWestern University, Military Bank Ltd. USA 1991-present Director Shinawatra Computer & Communications Plc. Managing Director The Thai Military Bank Ltd. Mr. Sirin 51 Independent none none M.B.A. Stanford 1979-1991 Vice President – Finance andAccounting none Nimanahaemin Director University, Palo Alto, Petrolium Authority of Thailand California, USA 1992-present Managing Director Krung Thai Bank Plc. Mrs. Busaba Damapong 44 Executive 0.01 Wife of M.B.A. 1991-1992 Executive Vice President – Finance none Committee Chairman of Kasetsart University 1993-1994 Senior Executive Vice President – the Board Finance 1994 President SC Asset Group 1995-present Executive Committee Shinawatra Group Mr. Somkeit 58 Executive none none M.A. Electrical 1990-1991 Vice President Broadcasting none Phaloprakarn Committee Engineering (Honor Rolls) Shinawatra Group Oregon State University, 1991-1992 Vice President Administration USA Shinawatra Group 1992-1993 President SC Asset Group 1994-present Directors and Executive Committee Mr. Arak Chonlatanon 49 Executive none none Electronic Engineering 1991-1993 President Advanced Info Service Plc. none Committee Chulalongkorn University 1995-1996 Assistant Vice President Financial Planning and Budgeting Department 1996-1998 Vice President – Finance 1999-present Executive Committee Shinawatra Group Mrs. Jurairat Uhaka 33 Executive none none Ph.D.Candidate National 1991-1994 Senior Manager, Financial Planning none Committee Institute Of Development 1995-1996 Assistant Vice President Financial Administration Planning and Budgeting Department 1996-1998 Vice President – Finance 1999-present Executive Vice President Portfolio Management
33 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Name Age Title Share- Relationshi Education Experience Illegal holding p with Record Status Management in past (%) 10 years Mr. Somprasong 43 Chairman of the none none Master of Engineering 1991-1992 IMA Manager, Report to General none Boonyachai Executive Asian Institute of Manager IBM Thailand Committee - Technology (AIT) 1992-1993 Executive Vice President – Operation Wireless 4 Shinawatra Group Communications 1993 President Advanced Info Service Plc. 1993-1994 President Shinawatra Satellite Plc. 1994-1995 President Advanced Info Service Plc. 1995-1996 Senior President Advanced Info Service Plc. 1997-1998 Chairman of the Executive Committee IT Business 1999-present Chairman of the Executive Committee - Wireless Communications Mr. Dumrong Kasemset 44 Chairman of the none none Ph.D. Electronic 1986-1989 Manager, GaAs IC Materials none Executive Engineering Siements, New Jersey, USA Committee – Massachusetts Institute of 1989-1991 Project Manager Intedrated Satellite Technology Optoelectronic, GE 1992-1993 General Manager International Broadcasting Corporation Plc. 1993-1994 President of International Broadcasting Corporation Plc. 1994-1998 President of Shinawatra Satellite Plc. 1999-present Chairman of the Executive Committee - Satellite Mr. Niwat Boonsong 50 Chairman of the none none M.A. Computer Science , 1993-1995 President of Shinawatra Computer none Executive Chulalongkorn University and Communications Plc. Committee –Media 1995-present Chairman of the Executive and Advertising Committee -Media and Advertising Business Total Staffs (As at December 31, 1998) : 349 Total Staffs in Shinawatra Group : 3,417
35 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
AUDITORS’ REPORT
To the Shareholders Shinawatra Computer and Communications Public Company Limited
We have audited the consolidated balance sheet of Shinawatra Computer and Communications Public Company Limited and subsidiaries as at December 31, 1998, and the related consolidated statements of income, changes in shareholders' equity, retained earnings and cash flows for the year then ended, and the separate financial statements of Shinawatra Computer and Communications Public Company Limited for the year then ended. The management of Shinawatra Computer and Communications Public Company Limited are responsible for the correctness and completeness of information presented in these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of Shinawatra Computer and Communications Public Company Limited and subsidiaries and the separate financial statements of Shinawatra Computer and Communications Public Company Limited for the year ended December 31, 1997 were audited by other auditors of the same office whose report dated February 23, 1998, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Shinawatra Computer and Communications Public Company Limited and subsidiaries at December 31, 1998, and the consolidated results of their operations and their cash flows for the year then ended, and the separate financial position and results of operations and cash flows of Shinawatra Computer and Communications Public Company Limited for the year then ended, in conformity with generally accepted accounting principles.
Without qualifying our opinion, we draw attention to Note 1 to the financial statements. The operations of Shinawatra Computer and Communications Public Company Limited and 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.
Nirand Lilamethwat Certified Public Accountant Registration Number 2316
KPMG Audit (Thailand) Limited Bangkok, February 15, 1999
35 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Thailand. The standards, procedures and practices to audit these financial statements are those generally accepted and applied in Thailand.
BALANCE SHEETS
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES AS AT DECEMBER 31, 1998 AND 1997
Consolidated Company's Separate Balance Sheets (Baht) Balance Sheets (Baht)
1998 1997 1998 1997
ASSETS
CURRENT ASSETS
Cash in hand and at banks 3,227,677,559 1,584,053,617 588,050,396 456,365,727
Short-term investments (Notes 6) 3,245,209,778 5,080,287,254 263,250,857 600,001,260
Accounts and notes receivable, including accrued
service and rental income-net (Notes 4 3,827,453,532 5,144,910,733 488,449,910 707,595,294 & 7) Accounts and notes receivable (including accrued
service and rental income) from
related parties (Note 3) 53,505,580 140,060,897 57,411,137 349,142,286
Short-term loans and advances to
related parties - net (Note 3) 187,432,466 340,329,416 1,425,095,980 1,483,853,801
Inventories - net (Notes 4 & 8) 870,261,330 1,446,072,416 67,329,775 843,265,467
Other current assets (Note 9) 1,436,231,874 1,591,358,573 177,561,039 156,079,692
Total Current Assets 12,847,772,119 15,327,072,906 3,067,149,094 4,596,303,527
INVESTMENTS (Notes 4, 10 & 11)
Related parties 733,366,578 4,564,462,127 4,491,074,774 6,282,632,577
Others 201,412,500 2,297,877,819 201,412,500 99,837,500
Total Investments 934,779,078 6,862,339,946 4,692,487,274 6,382,470,077
PROPERTY AND EQUIPMENT
- net (Notes 4 &12) 3,185,260,295 2,798,602,510 344,513,183 388,972,362 OTHER ASSETS
Costs of telecommunication projects under
concession agreements – net (Notes 2 & 38,352,051,806 32,907,294,526 - - 4) Deferred charges - net (Note 4) 1,319,422,935 1,174,337,856 - -
Goodwill - net (Note 4) 966,314,733 576,020,162 - -
Others 182,312,748 270,033,905 132,703,035 27,462,493
Total Other Assets 40,820,102,222 34,927,686,449 132,703,035 27,462,493
Total Assets 57,787,913,714 59,915,701,811 8,236,852,586 11,395,208,459
See notes to financial statements
36 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
BALANCE SHEETS
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES AS AT DECEMBER 31, 1998 AND 1997
Consolidated Company's Separate
Balance Sheets (Baht) Balance Sheets (Baht)
1998 1997 1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans from financial institutions (Note 13) 2,162,022,209 7,561,175,115 248,228,461 2,602,385,272
Accounts and notes payable and
accrued expenses (Notes 3 & 14) 10,170,770,034 9,362,594,841 405,415,777 700,938,506
Current portion of long-term liabilities
(Notes 15 & 19) 8,184,066,325 7,233,429,440 1,647,604,040 1,011,518,685
Short-term loans and advances from
related parties (Note 3) 16,736,428 91,959,584 625,000,000 9,122,683
Short-term bonds (Notes 3 & 16) 2,000,000,000 1,600,000,000 - -
Other current liabilities (Note 17) 6,950,996,318 2,060,600,717 158,970,750 142,667,487 Total Current Liabilities 29,484,591,314 27,909,759,697 3,085,219,028 4,466,632,633
LONG-TERM BONDS (Notes 3 & 18) 5,000,000,000 1,600,000,000 2,000,000,000 600,000,000
LONG-TERM LIABILITIES - net (Notes 15 & 19) 8,672,385,420 17,147,464,670 295,217,118 2,533,881,959
OTHER LIABILITIES (Note 20) 3,449,953,485 4,156,608,043 147,150,000 - Total Liabilities 46,606,930,219 50,813,832,410 5,527,586,146 7,600,514,592
MINORITY INTERESTS IN SUBSIDIARIES 8,471,717,055 5,307,175,534 - - SHAREHOLDERS' EQUITY
Share capital
Authorized 300,000,000 common shares,
Baht 10 par value 3,000,000,000 3,000,000,000 3,000,000,000 3,000,000,000
Issued 138,600,000 common shares,
fully paid 1,386,000,000 1,386,000,000 1,386,000,000 1,386,000,000
Premium on share capital 1,224,000,000 1,224,000,000 1,224,000,000 1,224,000,000
Unrealized losses from the valuation of long-term
investments in marketable securities - (101,575,000) - (101,575,000) (Note 11) Retained earnings
Appropriated to legal reserve (Note 28) 300,000,000 300,000,000 300,000,000 300,000,000
Unappropriated (deficit) (165,697,882) 922,343,989 (165,697,882) 922,343,989
Exchange rate adjustments derived from the
translation of foreign subsidiaries'
financial statements (Note 4) (35,035,678) 63,924,878 (35,035,678) 63,924,878 Total Shareholders' Equity 2,709,266,440 3,794,693,867 2,709,266,440 3,794,693,867
Total Liabilities and Shareholders' 57,787,913,714 59,915,701,811 8,236,852,586 11,395,208,459 Equity See notes to financial statements 37 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
STATEMENTS OF INCOME
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Consolidated Company's Separate
Statements of income (Baht) Statements of income (Baht)
1998 1997 1998 1997
REVENUES
Revenues from services, hire of works, equipment installation and equipment rental (Note 4) 18,126,843,823 17,666,384,909 560,514,926 544,003,973 Sales of merchandise equipment (Note 4) 4,679,972,706 6,786,884,164 1,593,664,693 5,834,988,317 Net result of investments in subsidiaries (in the Company's separate statements of income) and associates (Note 4) (2,292,942,593) (975,383,328) (2,577,314,762) (4,534,436,595) Gain on exchange 5,177,276,984 - 317,414,941 - Other income (Note 21) 3,241,679,643 1,531,950,854 2,188,200,625 374,901,770 Total Revenues 28,932,830,563 25,009,836,599 2,082,480,423 2,219,457,465 EXPENSES
Costs of services, hire of works, equipment installation and equipment rental 10,394,206,468 8,724,030,035 313,578,148 518,005,889 Cost of merchandise equipment sold 3,423,944,904 4,626,519,590 1,571,500,134 3,806,603,901 Selling and administrative expenses 5,269,513,611 4,778,730,738 492,630,322 1,077,201,201 Loss on exchange - 125,115,444 - 29,709,182 Interest expense 2,554,089,677 1,803,890,028 553,342,034 489,367,482 Directors' remuneration (Note 22) 5,830,000 4,117,325 240,000 198,000 Other expenses (Note 23) 4,384,117,171 456,563,488 51,663,475 973,776 Total Expenses 26,031,701,831 20,518,966,648 2,982,954,113 5,922,059,431 Net income (loss) before income tax and adjustment of net effect derived from the change in exchange rate system 2,901,128,732 4,490,869,951 (900,473,690) (3,702,601,966) Income tax (Note 24) (1,875,209,093) (2,596,298,197) (187,568,181) (781,237,697) Net income (loss) before adjustment of net effect derived from the change in exchange rate 1,025,919,639 1,894,571,754 (1,088,041,871) (4,483,839,663) system Adjustment of net effect derived from the change in exchange rate system (net of income tax effect) (Notes 24 & 26) - (9,088,972,536) - (1,158,726,296) Net income (loss) before considering minority interests in subsidiaries 1,025,919,639 (7,194,400,782) (1,088,041,871) (5,642,565,959) Less Share of net income (loss) of subsidiaries to minority interests 2,113,961,510 (1,551,834,823) - - Net loss (1,088,041,871) (5,642,565,959) (1,088,041,871) (5,642,565,959)
See notes to financial statements
38 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
STATEMENTS OF INCOME
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Consolidated Company's Separate
Statements of income (Baht) Statements of income (Baht)
1998 1997 1998 1997
Loss per share (Note 4)
Earnings (loss) per share before adjustment of net effect derived from the change in exchange rate system 7.40 13.67 (7.85) (32.35) Adjustment of net effect derived from the change in exchange rate system - (65.58) - (8.36) Earnings (loss) per share before considering minority interests in subsidiaries 7.40 (51.91) (7.85) (40.71) Less Share of net income (loss) of subsidiaries to minority interests 15.25 (11.20) - - Loss per share (7.85) (40.71) (7.85) (40.71)
See notes to financial statements
39 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997 Baht Baht
Share capital Common shares Balance at beginning of year 1,386,000,000 1,386,000,000 Increase during the year - - Decrease during the year - - Balance at end of year 1,386,000,000 1,386,000,000 Premium on share capital Balance at beginning of year 1,224,000,000 1,224,000,000 Increase during the year - - Decrease during the year - - Balance at end of year 1,224,000,000 1,224,000,000 Unrealized losses from the valuation of long-term
Investments in marketable securities - (101,575,000) Retained earnings
Appropriated to legal reserve Balance at beginning of year 300,000,000 300,000,000 Increase during the year - - Decrease during the year - - Balance at end of year 300,000,000 300,000,000 Unappropriated Balance at beginning of year 922,343,989 7,447,904,330 Increase during the year - - Decrease during the year 1,088,041,871 6,525,560,341 Balance at end of year (165,697,882) 922,343,989 Exchange rate adjustments derived from the translation of foreign subsidiaries' financial statements Balance at beginning of year 63,924,878 (1,219,628) Increase during the year - 65,144,506 Decrease during the year 98,960,556 - Balance at end of year (35,035,678) 63,924,878 Total Shareholders' Equity 2,709,266,440 3,794,693,867
See notes to financial statements
40 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
STATEMENTS OF RETAINED EARNINGS
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997 Baht Baht Unappropriated retained earnings
Balance at the beginning of year 922,343,989 7,447,904,330 Cumulative effect of adjustment derived from the status of investments in other companies to become investments in associated companies (Note 11) - (51,394,382) Appropriation of retained earnings in prior year Dividend (Note 27) - (415,800,000) Net loss for the year (1,088,041,871) (5,642,565,959) Interim dividend payment (Note 27) - (415,800,000) Balance at end of year (165,697,882) 922,343,989 Appropriated retained earnings
Legal reserve (Note 28) 300,000,000 300,000,000 Exchange rate adjustments derived from the translation of foreign subsidiaries' financial statements Balance at the beginning of year 63,924,878 (1,219,628) Adjustments during the year (98,960,556) 65,144,506 Balance at end of year (35,035,678) 63,924,878 Total Retained Earnings 99,266,440 1,286,268,867
See notes to financial statements
41 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
STATEMENTS OF CASH FLOWS
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 Consolidated Company's Separate Statements of Cash Flows Statements of Cash Flows (Baht) (Baht) 1998 1997 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (1,088,041,871 (5,642,565,959) (1,088,041,871) (5,642,565,959) ) Reconcile to net cash provided by operating activities Depreciation and amortization of property and equipment 746,888,083 440,690,302 87,117,968 83,391,779 Amortization of costs of telecommunication projects 2,391,722,752 1,662,382,859 - - Amortization of deferred charges 138,911,862 117,301,150 - - Amortization of goodwill 70,115,524 50,531,199 - - Losses from written-down values of investments 2,589,020,135 45,908,687 - - Amortization of the excess of book values of investments in subsidiaries over costs (71,221,304) (82,374,949) - - Provision for losses on guaranteeing associated companies 1,459,696,011 - - - Additions to bad debt and doubtful accounts 1,489,175,098 608,269,883 - - Unrealized net loss (gain) on exchange (4,515,768,830 7,463,166,168 (329,709,809) 1,299,959,914 ) Additions to allowance for obsolete 7,728,943 42,388,017 - 16,000,000 inventories Increase (decrease) in allowance for obsolete equipment (5,392,000) 7,192,000 - - Net result of investments in subsidiary and associated companies 2,292,942,593 975,383,328 2,577,314,762 4,534,436,595 Net cash from participated operations of subsidiaries sold - 408,805,169 - - Net cash from operations of minority interests in subsidiaries before selling of - 171,597,808 - - investments Net income (loss) of minority interests in subsidiaries 2,113,961,510 (1,551,834,823) - - Amortization of deferred income - - (14,850,000) - Decrease (increase) in accounts and notes receivable 51,226,849 (978,145,327) 219,145,384 522,654,323 Decrease (increase) in accounts and notes receivable from related parties 76,712,429 (106,598,538) 291,731,149 51,062,325 Decrease (increase) in inventories 568,082,142 (529,638,070) 775,935,693 (231,733,501) Decrease (increase) in advances to related parties (31,555,662) 56,495,198 22,413,733 (38,844,925) Decrease (increase) in other current assets 206,749,970 (521,165,613) 68,773,652 (97,114,160) Decrease (increase) in deposits and others 78,995,670 (130,232,545) (105,240,543) 4,820,450 Increase (decrease) in accounts and notes payable and accrued expenses 1,132,599,693 2,383,956,279 (282,169,125) (443,511,086) Increase (decrease) in advances from 42 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC. related parties (1,675,223,155 13,574,686 (9,122,683) (94,310,787) ) Increase (decrease) in other current liabilities 1,231,565,844 (1,395,959,302) 16,303,264 10,033,859
Consolidated Company's Separate Statements of Cash Flows Statements of Cash Flows (Baht) (Baht) 1998 1997 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in deposits from (346,093,376) 451,892,303 - - customers Increase in deferred income - - 162,000,000 - Transfer dividend received to investing activities - (8,896,875) - (8,896,875) Gains on sales of investments in shares (2,217,787,537) (539,538,884) (1,700,041,888) (182,486,572) Loss (gain) on sales of equipment (429,665) (1,069,458) 576,850.00 472,815.00 Exchange rate adjustments derived from the translation of foreign subsidiaries' financial statements (73,042,731) 169,230,305 - - Loss from written-down value of unviable project cost 8,723,745 11,621,149 - - Net Cash From Operating 6,630,262,722 3,592,366,147 692,136,536 (216,631,805) Activities CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in short-term investments 1,530,896,645 (1,658,988,631) 336,750,403 (123,097,105) Net decrease (increase) in loans to related parties - 120,442,806 540,953,062 (858,569,496) Additions to investments in shares (826,846,292) (2,177,557,926) (2,857,049,584) (1,434,547,615) Proceeds from sales of investments in shares 4,848,975,384 1,509,363,392 2,973,921,585 277,482,469 Additions to property and equipment (1,155,885,146) (2,001,885,044) (60,436,619) (106,901,594) Proceeds from sales of equipment 28,160,943 23,960,753 17,200,980 15,149,072 Dividend received from associates and - 8,896,875 193,843,400 888,265,125 others Proceeds from decrease in share capital of a subsidiary company - - - 600,000,000 Additions to investments in costs of telecommunication projects (7,890,032,913) (11,303,383,624 - - ) Additions to investments in deferred (429,282,039) (319,940,269) - - charges Net Cash From Investing Activities (3,894,013,418 (15,799,091,668) 1,145,183,227 (742,219,144) ) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in loans from banks (2,797,173,144) 1,570,648,251 (2,348,748,791) 1,293,322,548 Net decrease in loans from finance (2,326,452,695) - - - companies Net increase(decrease) in long-term loans (4,102,783,522) 8,852,201,849 (1,381,886,303) 162,351,136 Additions to loans from an other company 2,864,840,599 612,151,855 - - Net increase in loans from related parties 4,500,000 - 625,000,000 - Net increase in short-term and long-term bonds 5,400,000,000 3,200,000,000 1,400,000,000 600,000,000 43 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Payments of dividend to minority interests in subsidiaries (135,556,600) (705,474,562) - - Dividend and interim dividend payments - (831,600,000) - (831,600,000) Net Cash From Financing (1,092,625,36 12,697,927,393 (1,705,635,094) 1,224,073,684 Activities 2) NET INCREASE IN CASH 1,643,623,942 491,201,872 131,684,669 265,222,735 CASH AT BEGINNING OF YEAR 1,584,053,617 1,129,967,370 456,365,727 191,142,992 CASH AT BEGINNING OF YEAR OF A SUBSIDIARY WHICH ITS RELATED SHARE CAPITAL WAS SOLD ON SEPTEMBER 30, 1997 - (37,115,625) - - CASH AT END OF YEAR 3,227,677,559 1,584,053,617 588,050,396 456,365,727
See notes to financial statements
44 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Definition of Cash Cash shown in the accompanying statements of cash flows represents cash in hand and at banks as defined in the Thai Accounting Standard with respect to the preparation of the statement of cash flows which is in line with the definition prescribed in the regulation relating to the financial statements issued under the Ministerial Regulation No. 7 (B.E. 2540), under the Public Company Limited Act B.E. 2535.
Interest Expense and Income Tax Paid During the Years
Consolidated Company's Separate Statements of Cash Flows Statements of Cash Flows (Baht) (Baht) 1998 1997 1998 1997
Interest expense 3,032,554,218 1,713,353,185 617,526,494 461,849,380 Income tax 584,055,558 2,126,833,199 169,088,630 343,290,954
Non-Cash Investing Activities in 1998 and 1997 in the Consolidated Statements of Cash Flows Additions to investments in buildings, leasehold improvements and equipment for general business operations, which are included in property and equipment, and additions to investments in equipment for the operations under concession agreements of which their ownerships have been or have to be transferred to the relevant government agencies, which are included in costs of telecommunication projects, amounted to approximately Baht 9,045.92 million in 1998 and Baht 13,305.27 million in 1997. Certain portions of debts incurred from the aforesaid investments in 1997, amounting to approximately Baht 1,559.26 million were converted to long-term loans, and amounting to approximately Baht 520.14 million were converted to short-term loans.
Outstanding debts in the balance sheets relating to the aforesaid investments, other than those converted to long-term loans and short-term loans, amounting to approximately Baht 6,258.61 million in 1998 and Baht 4,861.75 million in 1997 are included in accounts and notes payable, amounting to approximately Baht 69.54 million in 1997 are included in advances from related parties, and amounting to approximately Baht 54.85 million in 1998 and Baht 109.05 million in 1997 are included in other current liabilities. Non-Cash Investing Activities in 1998 and 1997 in the Company's Separate Statements of Cash Flows Additions to investments in equipment for general business operations, which are included in property and equipment, amounted to approximately Baht 60.44 million in 1998 and Baht 106.90 million in 1997.
As at December 31, 1997, outstanding debts in the balance sheets relating to the said investments amounting to approximately Baht 10.63 million are included in other current liabilities.
During the year ended December 31, 1997, Shinawatra Satellite Public Company Limited, which is the Company's subsidiary, sold its subsidiary, Satellite Service Company Limited. Book values of assets and liabilities of subsidiary sold during the year then ended were as follows: Baht
Cash in hand and at banks 170,993,861 Short-term investments 240,957,346 Accounts receivable and accrued service income - net 88,928,373 Short-term loans and advances to related parties 27,570,639 Inventories - net 159,802,277 Other current assets 7,729,254 Equipment - net 1,253,970,737 Deferred charges - net 16,292 Other assets 214,712
45 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Accounts payable and accrued expenses (158,853,524) Accounts payable and accrued expenses - related parties (9,593,019) Other current liabilities (359,608) Deferred income - net (528,709,800)
Minority interests in subsidiary (377,838,930) Gain on sale of investment in subsidiary 357,052,313 Proceed from sale of investment in subsidiary 1,231,880,923
See notes to financial statements
46 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTES TO FINANCIAL STATEMENTS SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED AND SUBSIDIARIES DECEMBER 31, 1998 AND 1997
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 financial statements of Shinawatra Computer and Communications Public Company Limited (" the Company ") and subsidiaries for the years ended December 31, 1998 and 1997 and the separate financial statements of the Company for the years then ended have been presented on a going concern basis and in conformity with generally accepted accounting principles practiced in Thailand 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 July 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 years ended December 31, 1998 and 1997 and the separate financial statements of the Company for the years then ended 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 consolidated financial statements of the Company and its subsidiaries and the separate 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 years ended December 31, include the financial statements of the Company and the following subsidiaries:
% Holdings 1998 1997
Advanced Info Service Public Company Limited 49.81 54.34 Shinawatra Directories Company Limited 50.99 99.99 Shinawatra Satellite Public Company Limited 55.71 57.86 SC Matchbox Company Limited 74.97 74.97 ICSI Limited Partnership 90.00 90.00 Shinawatra Information Technology Company Limited 99.99 99.99 Shenington Investments (B.V.I.) Pte. Ltd. 100.00 - Shenington Investments Pte. Ltd. 100.00 - Shinawatra Computer Company Limited and AT&T World Service Incorporation Consortium - 100.00 Shinawatra (BVI) Limited - 100.00 Shinawatra Wireless Marketing Company Limited - 99.99 Shinawatra International Public Company Limited - 79.99
All significant intercompany transactions between the Company and its subsidiaries have been eliminated in the preparation of these consolidated financial statements.
On March 25, 1998, Shinawatra Computer Company Limited and AT&T World Service Incorporation Consortium, a dormant subsidiary of the Company, was liquidated in accordance with the resolution of the Company's Directors held on July 1, 1997.
47 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
On March 26, 1998, Shinawatra (BVI) Limited, a wholly owned subsidiary of the Company, was liquidated in accordance with the resolution of the shareholders of Shinawatra (BVI) Limited at the Shareholders' Meeting held on March 9, 1998.
On December 1, 1998, Shinawatra International Public Company Limited (" INT ") sold all of its investment in common shares of Shenington Investments Pte. Ltd., a wholly owned subsidiary of INT, to the Company in the amount of Baht 0.44 million.
48 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
On December 22, 1998, the Company sold all of its investment in common shares of Shinawatra Wireless Marketing Company Limited (23,999,994 common shares) to Advanced Info Service Public Company Limited, which is a subsidiary company, in the amount of Baht 600.00 million. Revenues and expenses of such company or net result from investment occurred before or after selling of investment in share capital of such company have been included in these financial statements.
On December 24, 1998, the Company sold all of its investment in common shares of Shinawatra International Public Company Limited (439,999,994 common shares) to Shenington Investments (B.V.I.) Pte. Ltd., a wholly owned subsidiary of the Company, in the amount of approximately Baht 2,200.00 million. Revenues and expenses of such company or net result from investment occurred before or after selling of investment in share capital of such company have been included in these financial statements.
On October 11, 1998, October 27, 1998 and November 11, 1998, the Company sold 439,600 common shares of Advanced Info Service Public Company Limited (" AIS ") to other parties, in the amount of approximately Baht 122.77 million. As a result, the Company's shareholding in AIS had been reduced from 54.34% to 54.15% as at November 11, 1998.
On December 21, 1998 and December 24, 1998, the Company sold 10,148,000 common shares of Advanced Info Service Public Company Limited (" AIS ") to Shenington Investments (B.V.I.) Pte. Ltd. (" Shenington BVI "), a wholly owned subsidiary of the Company, in the amount of approximately Baht 2,140.94 million. As a result, the Company's shareholding in AIS has been reduced from 54.15% to 49.81%. Revenues and expenses of AIS or net result from investment occurred before or after selling part of investment in AIS to Shenington BVI, have been included in these financial statements.
As part of the agreement dated July 1, 1998 between the Company, Shinawatra Directories Company Limited (" SDY ") and the Telephone Organization of Thailand (" TOT "), on August 25, 1998, SDY issued 27,200,000 common shares, Baht 10 par value, and 12,000,000 preferred shares, Baht 10 par value, to TOT. As a result, the Company's shareholding in SDY has been reduced from 99.99% to 50.99%, while TOT had 49% shareholding in SDY at December 31, 1998.
On December 18, 1998, the Company sold 15,000,000 common shares of Shinawatra Satellite Public Company Limited (" SSA ") to Shenington Investments (B.V.I.) Pte. Ltd. (" Shenington BVI "), a wholly owned subsidiary of the Company, in the amount of Baht 270.00 million. As a result, the Company's shareholding in SSA has been reduced from 57.86% to 55.71%. On December 22, 1998, Shenington BVI sold 14,782,031 common shares of SSA to other parties in the amount of approximately Baht 266.08 million.
NOTE 2 - GENERAL INFORMATION OF SHINAWATRA COMPUTER AND COMMUNICATIONS GROUP
The Company, its subsidiaries and other related companies are principally engaged in telecommunications and diversified computer industries. The Group is engaged in trading cellular telephone equipment and providing nationwide network services, providing paging and data transmission services, rendering satellite transponder services and services relating to satellite business, trading computer hardware and software and rendering related services, advertising and publishing telephone directory. The principal business units are Shinawatra Computer and Communications Public Company Limited, Advanced Info Service Public Company Limited and Shinawatra Satellite Public Company Limited.
49 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The Shinawatra Computer and Communications Group has obtained concessions from the government agencies both in Thailand and in other countries such as the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM and a DIGITAL DISPLAY PAGING SYSTEM in Thailand, the operations of a domestic mobile phone network in Cambodia using Wireless Local Loop technology, the operations of satellites and transponder services, and the publishing of telephone directory. Periods of concessions are ranging from 10 - 35 years. Under the concession agreements obtained by the Shinawatra Computer and Communications Group, certain companies in the Group have to pay annual fees to the relevant government agencies based on certain percentage of certain service income or at the minimum fees as specified in the relevant agreements, whichever is higher. In addition, the relevant companies in the Group, according to certain concession agreements, have to procure certain property and equipment for their operations and have to transfer their ownership of such property and equipment to the relevant government agencies within the specified periods.
As at December 31, 1998 and 1997 the aforementioned property and equipment and expenditure relating to certain project arrangements are presented as costs of telecommunication projects under other assets in the consolidated balance sheets. Only those property and equipment and expenditure relating to certain project arrangements, which have been transferred to and/or their installation are complete and have to be transferred to the relevant government agencies, are amortized over the estimated useful lives of assets and over the remaining period of each agreement.
As at December 31, net book values of the aforementioned property and equipment and expenditure relating to certain project arrangements presented in the consolidated financial statements are as follows:
Million Baht 1998 1997
Net book values of property and equipment and expenditure relating to certain project arrangements which have been transferred to and/or their installation are complete and have to be transferred to the relevant government agencies 38,080.49 31,863.45 Costs of property and equipment and expenditure relating to certain project arrangements under construction and installation 271.56 1,043.84 Total 38,352.05 32,907.29
As at December 31, costs of telecommunication projects under concession agreements in the consolidated financial statements, which are shown net of amortization, are presented by type of projects as follows:
Concession's Million Baht Type of Projects Expiry Date 1998 1997
Satellite projects (Thailand) September 10, 2021 8,144.38 8,885.92 Mobile phone network project (Thailand) September 30, 2015 29,019.63 22,936.85 Mobile phone network project (Cambodia) March 4, 2028 512.66 347.66 Pager network project (Thailand) June 11, 2005 776.18 859.85 Adjustments of intercompany transactions (100.80) (122.99) Total 38,352.05 32,907.29
As part of the agreement dated July 1, 1998 between the Company, Shinawatra Directories Company Limited (" SDY ") and the Telephone Organization of Thailand (" TOT "), on August 25, 1998, 50 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
SDY issued 27,200,000 common shares, Baht 10 par value, and 12,000,000 preferred shares, Baht 10 par value, to TOT without cash payment from TOT. The value of the said common shares and preferred shares of SDY are shown as goodwill in the consolidated balance sheet. Under the aforesaid agreement, TOT has agreed to reduce annual fee, which will be received from SDY, from the rates ranging from 70% - 71.5% of certain service income of SDY to 30% of certain service income of SDY or at the minimum fee as specified in the agreement, whichever is higher.
51 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
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 December 31, are summarized as follows:
- Accounts and notes receivable, including accrued service and rental income from related parties comprise:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Subsidiary companies - - 32.72 343.45 Other related companies 69.42 146.28 24.69 5.69 69.42 146.28 57.41 349.14 Less Allowance for doubtful accounts derived from balances receivable from other related companies 15.91 6.22 - - Total 53.51 140.06 57.41 349.14
- Accounts payable and accrued expenses, as referred to in Note 14 to the financial statements, include balances with related parties as follows:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Subsidiary companies - - 6.84 47.32 Other related companies 9.68 11.89 1.46 0.26 Accrued interest on long-term bonds payable (Note 18) - A major shareholder of the Company 61.50 7.10 22.49 2.51 Accrued interest on short-term bonds payable (Note 16) - A major shareholder of the Company 2.74 114.67 - - - An executive of the Company and a director of an other related company 0.54 - - - 3.28 114.67 - - Total 74.46 133.66 30.79 50.09
52 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
- Short-term loans and advances to related parties comprise:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Short-term loans to subsidiary - - 532.42 419.06 companies Short-term loans to other related 218.94 223.44 - - companies Investment in bill of exchange issued by a subsidiary - - - 127.94 Investment in short-term bonds issued by a subsidiary - - - 529.31 Amounts receivable from a subsidiary - - 871.20 363.62 company Advances to subsidiary companies - - 1.73 32.69 Advances to other related companies 148.38 97.97 19.75 11.24 Amounts received from customers by other related companies on behalf of a subsidiary such as deposits, registration fees, service fees and sales of pagers 0.37 19.23 - - 367.69 340.64 1,425.10 1,483.86 Less Allowance for loss on collection of advances and loans to other related parties 180.26 0.31 - -
Total 187.43 340.33 1,425.10 1,483.86
Short-terms loans to subsidiary and other related companies represent Baht loans with interest at the approximate minimum rate of bank overdraft and loan from bank.
In 1997, short-term loan to a subsidiary through bill of exchange, issued by the said subsidiary, is shown net of discount, determined from the remaining period of that bill of exchange and at the discount rate of 15.30% per annum, amounting to approximately Baht 1.89 million.
Amounts receivable from a subsidiary company as at December 31, 1997 arose from the transfer of investment in 7.85 million shares of Advanced Info Services Public Company Limited (" AIS ") made by the Company to Shinawatra (BVI) Limited, a wholly owned subsidiary of the Company, on December 26 and 30, 1997 in the amount of approximately Baht 1,805.50 million. The said balance is shown net of unrealized gain on sale of investment in accordance with the equity method of accounting. As at December 31, 1997, Shinawatra (BVI) Limited still held the aforesaid 7.85 million shares of Advanced Info Services Public Company Limited. The aforesaid common shares of AIS was sold to other parties by Shinawatra (BVI) Limited in the first quarter of 1998 in the amount of approximately Baht 2,249.62 million.
Amounts receivable from a subsidiary company as at December 31, 1998 arose from the transfer of investments in 10,148,000 shares of Advanced Info Services Public Company Limited and 15,000,000 shares of Shinawatra Satellite Public Company Limited made by the Company to Shenington Investments (B.V.I.) Pte. Ltd., a wholly owned subsidiary of the Company, as referred to in Note 1 to financial statements. The said balance is shown net of unrealized gain on sale of investment in accordance with the equity method of accounting. 53 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Advances to subsidiary and other related companies mainly derived from payments made by the Company on behalf of those companies.
- Short-term loan and advances from related parties comprise:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Short-term loan from a subsidiary - - 625.00 - company Advances from subsidiary companies - - - 9.12 Advances from other related companies 3.64 84.53 - - Amounts received from customers on behalf of an other related company relating to sales of pagers 13.10 7.43 - -
Total 16.74 91.96 625.00 9.12
Short-term loan from a subsidiary company represents Baht loan. Interest on loan is at the approximate minimum rate of bank overdraft and loan from bank.
Advances from subsidiary and other related companies mainly derived from payments made by those companies on behalf of the Company.
- Short-term bonds, as referred to in Note 16 to the financial statements, include unsecured bonds held by related parties as follows:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Shinawatra Computer & Communications Public Company Limited (" the Company ") - 530.00 - - A major shareholder of the Company 102.80 1,600.00 - - A executive of the Company and a director of an other related company 20.10 - - - 122.90 2,130.00 - - Elimination of bonds held by the - (530.00) - - Company
Total 122.90 1,600.00 - -
- Long-term bonds as shown in Note 18 to the financial statements include balance held by a major shareholder of the Company in the consolidated balance sheets as at December 31, 1998 and 1997 amounting to Baht 4,430.55 million and Baht 1,600.00 million, respectively, and in the Company's separate balance sheets as at December 31, 1998 and 1997 amounting to Baht 2,000.00 million and Baht 600.00 million, respectively.
54 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Significant transactions with related parties for the years ended December 31, are summarized as follows:
Million Baht Consolidated Company's Separate Financial Statements Financial Statements 1998 1997 1998 1997 Subsidiary companies Revenues - Sales of merchandise - - 1,032.30 2,144.96 equipment - Computer services - - 313.71 148.38 - Consulting and management services - - 348.51 237.00 - Interest - - 247.92 37.19 - Operating equipment sold - - 17.79 11.74 - Sale total investment in Shinawatra Wireless Marketing Company Limited (Note 1) - - 600.00 - - Sale total investment in Shinawatra International Public Company Limited (Note 1) - - 2,200.00 - - Sale a portion of investment in Advanced Info Service Public Company Limited (Note 1) - - 2,140.94 1,805.50 - Sale a portion of investment in Shinawatra Satellite Public Company Limited (Note 1) - - 270.00 - Expenses - Advertisement - - 8.09 140.04 - Consulting and management services - - 91.13 - - Marketing consulting - - 1.20 4.80 - Sale promotion - - - 128.96 - Rental and other services - - 50.91 22.75 - Interest - - 10.81 19.82 Purchase of investment in Shenington Investments Pte. Ltd. (Note 1) - - 0.44 - Purchases of merchandise equipment - - - 195.86 An associated company
Revenues - Rental and other services 180.56 - - -
- Computer services 5.86 - 5.86 - - Advertisement 5.57 - - - - Interest 4.84 - 4.84 - - Sale of investment in Satellite Service Company Limited - 1,231.88 - -
55 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Other related parties
Revenues - Consulting and management service 40.89 19.78 8.01 11.98 - Interest 38.27 42.26 3.87 - - Rental and other services 367.97 364.54 - - - Computer service 11.00 11.38 11.00 11.38 - Advertisement 10.56 57.95 - - - Sales of merchandise equipment 5.08 12.67 - - Expenses - Rental and other services 538.70 532.18 99.39 102.10 - Consulting and management 10.00 11.21 - - services - Interest on bonds payable to a major shareholder 583.68 163.47 193.92 2.51 - An executive of the Company 2.72 - 2.72 - and a director of an other related company - Other related companies - 7.76 - - Purchases of property, equipment and Other assets - 218.84 - -
On September 30, 1997, Shinawatra Satellite Public Company Limited sold all of its investment in common shares of Satellite Service Company Limited (111,999,993 common shares) to an associated company, namely International Broadcasting Corporation Public Company Limited, at the sale value of approximately Baht 1,231.88 million.
Transactions other than those mentioned previously are as follows:
- The Company and a subsidiary have issued Letters of Comfort to banks to support credits obtained by certain subsidiaries and an other related company amounting to Baht 5,108.62 million.
- A subsidiary has entered into agreements with another two subsidiary companies to hire them for the construction and installation of equipment for the operations of mobile phone network, and to receive satellite transponder services. As at December 1, 1998, the said subsidiary was committed to pay for the construction, installation and transponder services in the total amount of Baht 185.71 million.
- The Company has entered into agreements with its subsidiaries and other related companies to render consulting and management services and other central services for periods ranging from 10 months to 12 months. Those subsidiaries and other related companies are committed to pay for services in respect of the said agreements to the Company amounting to approximately Baht 31.90 million per month.
- At December 31, 1998, the Company and its subsidiaries were contingently liable to banks, finance companies and other companies for guaranteeing certain subsidiaries and other related companies in respect of their credit facilities, payments for purchases made with overseas suppliers, and other business contracts in the following amounts:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets For guaranteeing subsidiary companies 5,507.32 5,507.32 For guaranteeing other related companies 1,328.98 - Total 6,836.30 5,507.32
56 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
- The Company and its subsidiaries have entered into lease and related service agreements with other related companies, covering their office spaces, cars and spaces for base stations for periods ranging from 4 months to 17 years with options to renew. As at December 31, 1998, the Company and its subsidiaries were committed to pay for rental and related services in respect of the said agreements as follows:
Million Baht Per Month
Committed by the Company 8.05 Committed by the Company and subsidiaries 34.14
57 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Revenue Recognition
- Revenues from mobile phone and pager services are recognized when said services are rendered to customers.
- Revenues from other services are recognized when services are rendered to customers.
- Revenues from hire of works and equipment installation works are recognized upon the completion of jobs or installation.
- Revenue from equipment rental is recognized over the period of and at the rate prescribed in each agreement.
- Sale of merchandise equipment is recognized when merchandise is delivered to customer, while sale of merchandise equipment, of which the installation service is required and the period for installation overlaps the fiscal periods, is recognized by using the percentage of completion method which is based on the ratio of actual cost incurred to the total estimated cost of the relevant contract.
The Company and its subsidiaries have set up an allowance to cover estimated loss for equipment supply and installation contract, when the total estimated cost of the said contract is over the contract amount.
Short-term Investments Marketable equity securities are valued at the lower of cost or market, determined at the balance sheet date.
Accounts and Notes Receivable The Company and its subsidiaries provide an allowance for doubtful accounts equivalent to the estimated collection losses. The estimated losses are based on a review of the current status of the existing accounts receivable, collection experience and the management estimates.
Inventories Inventories on hand are valued at the lower of cost or net realizable value. Costs of inventories on hand are determined as follows:
- Mobile phone equipment and spare parts are determined on the first-in, first-out method.
- Pagers and spare parts are determined by the moving average method.
- Equipment for supply and installation contracts are determined by the specific identification method.
- Other inventories are determined on the first-in, first-out method.
Inventories in transit are stated at invoice values and include other acquisition costs incurred.
In considering the net realizable value, due allowance is made for all obsolete and slowing moving items.
Investments Equity method of accounting
Investments in subsidiary and associated companies in the Company's separate financial statements and investments in associated companies in the consolidated financial statements are recorded by using the equity method net of adjustments relating to the written-down values of investments in associated companies, determined from their results of operations, financial status, estimated
58 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
returns on investments, cash flows and economic environments in countries where those businesses are located.
Differences between costs of investments in subsidiary and associated companies and their book values at the dates near the acquisition are included in investments, and are amortized by the straight-line method over periods ranging from 15 - 20 years but not exceeding the remaining period of concession agreement obtained by each company, and written off to expense in the period which it becomes known that future return on relevant investments is not viable.
The proportionate share in net income or net losses of subsidiary and associated companies for the years ended December 31, 1998 and 1997, after eliminating all significant gains or losses deriving from intercompany transactions incurred among the Company and its subsidiary and associated companies, less or add the amortization of differences between costs of investments in subsidiary and associated companies and their book values at the dates near the acquisition, are shown as net result of investments in subsidiary and associated companies in the statements of income.
59 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The recording of investments in subsidiary and associated companies by using the equity method has been made for the purpose of reflecting the status of and return on investments in those companies. Accordingly, the net result of investments in subsidiary and associated companies for the years ended December 31, 1998 and 1997 had not been considered in the income tax computation for each year.
Cost method of accounting
Investments in other related companies and other companies, which are marketable securities, are valued at the lower of aggregate cost or market value, while investments in other related companies and other companies without significant management influence from the Company and subsidiaries, which are not marketable securities, are recorded by using the cost method net of adjustments relating to the decline in values or written-down values of investments, determined from their results of operations, financial status, estimated returns on investments, cash flows and economic environments in countries where those businesses are located.
A subsidiary company has to transfer its shareholding in an associate in Laos to the government of Lao People's Democratic Republic on the expiry date of the concession agreement. The period of agreement is 25 years commencing the date of agreement. The value of investment in the said associate has been appraised and written-down based on cash flow from investment over the concession period, and provision for the transfer of shareholding in the said associate to the Lao government is therefore considered not necessary.
Gains on sales of investments for the year ended December 31, 1997 represent differences between the sale values and the values of investments in subsidiary and associated companies sold, at the dates near their selling dates. Investments sold represent investment in Rural Telephone Service Company Limited (6,000,000 shares, at the sale value of Baht 96.0 million), a portion of investment in Shinawatra Satellite Public Company Limited (7,500,000 shares, at the sale value of approximately Baht 181.48 million) and investment in Satellite Service Company Limited (see detail in Note 3), which is a former subsidiary of Shinawatra Satellite Public Company Limited. Values of investments sold were calculated by using the equity method.
Gains on sales of investments for the year ended December 31, 1998 represent differences between the sale values and the values of investments in subsidiary and other companies sold, at the date near their selling dates. Investments in subsidiaries sold represent 8,289,600 common shares of Advanced Info Service Public Company Limited (comprise 7.85 million shares sold by Shinawatra (BVI) Limited and 439,600 shares sold by the Company) and 14,782,031 common shares of Shinawatra Satellite Public Company Limited (See more details in Notes 1 & 3). Values of investments in subsidiaries sold were calculated by using the equity method. Other sale on investment represents sale of investment in I-Co Global Communications Company Limited. Cost of the said investment sold was determined net from cost of the right to operate Global Mobile Personal Communication by Satellite which has been acquired as part of the total cost of investment in I-Co Global Communications Company Limited.
Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed by the straight-line method based on the estimated useful lives of assets of 1 - 10 years for equipment, 5 - 20 years for buildings and leasehold building improvements, and over the lease period of 27.5 years for leasehold land. In considering the recoverability of equipment, due allowance is made to certain equipment items.
Depreciation and amortization for the years ended December 31, are summarized as follows:
Million Baht 1998 1997
Recorded in the consolidated statements of income 746.88 440.69 Recorded in the Company's separate statements of income 87.12 83.39
60 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
The Company and its subsidiaries have entered into a number of financial lease agreements to obtain vehicles for its business operations. For the financial reporting purpose, vehicles under each financial lease and its related obligation are recorded at the discounted minimum lease amount, using the discount rate as prescribed in each lease agreement, or the fair market value at the date of each agreement, whichever is lower. Depreciation of vehicles under financial leases is computed by the straight-line method based on the estimated useful lives of vehicles of 5 years.
61 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Depreciation of vehicles under financial leases for the years ended December 31, which are included in the total depreciation and amortization as disclosed in the preceding paragraph, are summarized as follows:
Million Baht 1998 1997
Recorded in the consolidated statements of income 3.10 3.04 Recorded in the Company's separate statements of income 1.45 1.45
Goodwill Goodwill in the consolidated balance sheets comprises:
- The excess of the costs of investments in shares of subsidiaries over their book values at the dates near the acquisition. Goodwill derived from each investment is amortized by the straight-line method over a period of 15 years.
- The value of common shares and preferred shares of a subsidiary issued to the Telephone Organization of Thailand (" TOT ") with respect to terms and conditions of a concession agreement without cash payment from TOT. Goodwill derived from the issuance of common shares and preferred shares to TOT is amortized by the straight-line method over a period of 20 years
Amortization of goodwill in the consolidated statements of income for the years ended December 31, 1998 and 1997 amounted to approximately Baht 70.12 million and Baht 50.53 million, respectively.
Costs of Telecommunication Projects under Concession Agreements Costs of telecommunication projects under concession agreements in the consolidated balance sheets represent costs of certain equipment and other assets which have been or have to be transferred to the relevant government agencies and expenditure relating to certain project arrangements as mentioned in Note 2 to the financial statements. Costs of certain equipment and other assets, which have been or have to be transferred to the relevant government agencies and expenditure relating to certain project arrangements, are amortized over the useful lives of assets and the remaining period of each concession agreement. Amortization of costs of telecommunication projects under concession agreements for the years ended December 31, 1998 and 1997 amounted to approximately Baht 2,391.72 million and Baht 1,662.38 million, respectively.
A subsidiary company has capitalized interest incurred relating to the acquisition of satellites, telemetry tracking, command and monitoring stations and other operating equipment which have to be transferred to the Ministry of Transport and Communications. Interest capitalized to costs of aforesaid assets as from January 1, 1997 up to May 22, 1997 (the date of transferring the ownership of Thaicom 3 project to the Ministry of Transport and Communications) amounted to approximately Baht 68.94 million.
Deferred Charges Deferred charges in the consolidated balance sheets represent pre-operating expenses, expenditure in relation to the increase of share capital, commitment fees of long-term loans, costs of long-term leases for spaces for base stations, expenditure relating to the increase of power of electricity at base station, expenditure relating to the improvement project of mobile phone service network, costs of equipment provided to certain overseas customers in connection with the utilization of transponder services, cost of additional supplementary equipment for the operation of pager network other than those specified in the concession agreement and have been transferred to the Telephone Organization of Thailand, and cost of the right to operate Global Mobile Personal Communication by Satellite. The following amortization methods are used:
62 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
- Pre-operating expenses and expenditure in relation to the increase of share capital are amortized over a period of 5 years.
- Commitment fees of long-term loans are amortized over the period of each loan agreement.
- Costs of long-term leases for spaces for base stations are amortized over the period of each lease agreement.
- Expenditure relating to the increase of power of electricity at base stations and expenditure relating to the improvement project of mobile phone service network are amortized over the remaining period of concession agreement.
- Costs of equipment provided to certain overseas customers in connection with the utilization of transponder services are amortized over the period of each service agreement.
- Cost of additional supplementary equipment for the pager network, other than those specified in the concession agreement and have been transferred to the Telephone Organization of Thailand, are amortized over a period of 5 years. - Cost of the right to operate Global Mobile Personal Communication by Satellite will be amortized over the beneficial periods after the ventures started in different countries.
Cost of the right to operate Global Mobile Personal Communication by Satellite of a subsidiary, which has been acquired together with the investment in share capital of I-Co Global Communications Company Limited, is determined separately from the total cost of investment in common shares of the said company. To determine cost of the right, the management has made certain analyses based on information received from I-Co Global Communications Company Limited and including the management forecast on the returns of future business operations before the final decision on investment was duly made.
Interest and other expenses, relating to the acquisition of such right for the years ended December 31, 1998 and 1997, which had been capitalized to cost of the said right, comprise:
Million Baht 1998 1997
Interest expense 60.17 48.22 Effect of translation of foreign currency loans obtained to pay for cost of the right (142.54) 304.34 Other acquisition costs 1.44 1.06
Total (80.93) 353.62
Amortization of deferred charges in the consolidated balance sheets for the years ended December 31, 1998 and 1997 amounted to approximately Baht 138.91 million and Baht 117.30 million, respectively.
Deferred Income Deferred income which was included in other liabilities at December 31, 1998, in the Company's separate balance sheet, represents management and consulting services relating to computer software rendered to related parties, and is amortized to service income by using the straight-line method over the service period of 10 years.
Amortization of deferred income to service income in the Company's separate statements of income for the year ended December 31, 1998 amounted to approximately Baht 14.85 million.
Excess of Book Values of Investments in Subsidiaries Over Costs Excess of book values of investments in subsidiaries over costs, in the consolidated balance sheets, at the dates near the acquisition and the amounts derived from increases in share capital of subsidiaries for selling to public or selling specifically to new strategic partners at the prices higher
63 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
than book value per share of those subsidiaries at the selling dates, are amortized by the straight-line method over periods of 15 years. Amortization in the consolidated statements of income for the years ended December 31, 1998 and 1997 amounted to approximately Baht 71.22 million and Baht 82.37 million, respectively.
64 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Foreign Currency Transactions Foreign currency transactions are recorded in Baht at the rates of exchange ruling on the transaction dates. Outstanding assets and liabilities in foreign currencies at the balance sheet date are translated into Baht at the exchange rates ruling on that date. Translation gain or loss is included as revenue or expense in the statements of income. The Company's forward exchange contracts are intended to hedge the risks of changes in foreign currency exchange rates. Forward exchange contract receivables and payables are recorded in Baht at the spot rate on the date of contract inception, and the balances on the balance sheet date are translated into Baht at the prevailing spot rate. Premiums or discounts under forward exchange contracts for hedging losses on assets and liabilities in foreign currencies are amortized to the profit and loss accounts over the period of the forward exchange contract.
Assets and liabilities of foreign subsidiaries are translated into Baht at exchange rates ruling at the balance sheet date. Results of operations for the reporting periods are translated into Baht at the average exchange rates of the relevant years. Differences derived from the translation of foreign subsidiaries' financial statements are shown separately as exchange rate adjustments under the shareholders' equity.
Loss Per Share - Loss per share in the consolidated financial statements for the years ended December 31, 1998 and 1997 is computed by dividing consolidated net loss for each year, after considering minority interests in subsidiaries, by the number of common shares outstanding at the end of each year.
- Loss per share in the Company's separate financial statements for the years ended December 31, 1998 and 1997 is computed by dividing net loss for each year by the number of common shares outstanding at the end of each year.
NOTE 5 - SEGMENT INFORMATION
The business operations of the Company and its subsidiaries, as reflected in the consolidated financial statements, are classified into four major segments comprise: 1) sales and services relating to mobile phone and pager businesses; 2) satellite transponder services and related businesses; 3) information technology business; and 4) advertising and media businesses. The accompanying consolidated financial statements do not provide information of business operations in foreign countries as the relevant financial information are not significant comparing to the operations in Thailand.
Financial information by business segment for the years ended December 31, 1998 and 1997 are shown as follows: Million Baht 1998 1997
Revenues from Services, Hire of Works, Equipment Installation, and Equipment Rental Income Mobile phone and pager businesses 15,101.02 15,183.09 Satellite transponder services and related businesses 2,415.59 1,620.33 Advertising and media businesses 714.12 1,167.52 Information technology business 430.41 505.67 Others 362.41 249.16 Adjustments of intercompany transactions (896.71) (1,059.39) Total 18,126.84 17,666.38
65 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Million Baht 1998 1997
Revenues from Sales of Merchandise Equipment Mobile phone and pager businesses 4,544.35 7,604.32 Satellite transponder services and related businesses - 275.29 Information technology business 1,368.06 1,203.59 Adjustments of intercompany transactions (1,232.44) (2,296.32) Total 4,679.97 6,786.88
Total Revenues from All Segments Mobile phone and pager businesses 19,645.37 22,787.41 Satellite transponder services and related businesses 2,415.59 1,895.62 Advertising and media businesses 714.12 1,167.52 Information technology business 1,798.47 1,709.26 Others 362.41 249.16 Adjustments of intercompany transactions (2,129.15) (3,355.71) Total 22,806.81 24,453.26
Operating Profit (loss) Mobile phone and pager businesses 3,603.75 6,878.58 Satellite transponder services and related businesses 642.25 (215.84) Advertising and media businesses (81.38) (89.03) Information technology business (133.51) (207.46) Others (42.09) (172.21) Adjustments of intercompany transactions (269.86) 129.95 Total 3,719.16 6,323.99
Net result of investments in associated companies (2,292.95) (975.38) Gain (loss) on exchange 5,177.28 (125.12) Other income 3,241.68 1,531.95 Interest expense (2,554.09) (1,803.89) Directors' remuneration (5.83) (4.12) Other expenses (4,384.12) (456.56) Net income before income tax and adjustment of net effected derived from the change in exchange rate system 2,901.13 4,490.87 Income tax (1,875.21) (2,596.30) Net income before adjustment of net effect derived from the change in exchange rate system 1,025.92 1,894.57 Adjustment of net effect derived from the change in exchange rate - (9,088.97) system Net income (loss) before considering minority interests in subsidiaries 1,025.92 (7,194.40) Less Share of net income (loss) of subsidiaries
to minority interests 2,113.96 (1,551.83)
66 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Net loss (1,088.04) (5,642.57)
Classification of assets by business segment as at December 31,
Million Baht 1998 1997
Property and Equipment net
Segment - Mobile phone and pager businesses 2,115.49 1,817.98 Segment - Satellite transponder services and related businesses 756.72 585.55 Segment - Advertising and media businesses 116.84 103.46 Segment - Information technology business 139.42 292.65 Others 66.31 13.55 Adjustments of intercompany transactions (9.52) (14.59) Property and Equipment-net 3,185.26 2,798.60
Other Assets
Net book values of costs of telecommunications projects under concession agreements Mobile phone and pager businesses 30,308.47 24,144.36 Satellite transponder services and related businesses 8,144.38 8,885.92 Adjustments of intercompany transactions (100.80) (122.99) 38,352.05 32,907.29 Other assets 16,250.60 24,209.81 Total Assets 57,787.91 59,915.70
Operating profit (loss) by each segment represents revenues by each segment less the related cost of revenues and selling and administrative expenses. There is no intertransaction among those segments.
Property and equipment by segment are those assets used in the operations of each segment. Other than costs of telecommunication projects under concession agreements, other assets comprise: cash in hand and at banks, short-term investments, accounts and notes receivable, accounts and notes receivable - related parties, short-term loans and advances to related parties, inventories, other current assets, investments, deferred charges, goodwill and other assets.
NOTE 6 - SHORT-TERM INVESTMENTS
Short-term investments at December 31, 1998 and 1997 comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Time deposits with banks 2,503.89 3,020.87 63.25 600.00 Time deposits with other financial 535.00 - 200.00 - institutions Investments in bills of exchange - 2,059.42 - - Investment in marketable equity securities 206.32 - - - Total 3,245.21 5,080.29 263.25 600.00
67 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Investments in bills of exchange as at December 31, 1997 in the consolidated balance sheet are shown net of discount, determined from the remaining periods of those bills of exchange at the discount rates ranging from 11.00 - 13.25% per annum, amounting to approximately Baht 20.58 million.
Investment in marketable equity securities in the consolidated balance sheet is valued at cost which was lower than market price at the balance sheet date.
68 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 7 - ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable, including accrued service and rental income, at December 31, were shown net of allowance for doubtful accounts as follows:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Accounts and notes receivable, including accrued service and rental income 5,006.92 508.78 727.93 5,769.10 Less Allowance for doubtful accounts 1,179.47 624.19 20.33 20.33 Accounts and Notes Receivable - net 3,827.45 5,144.91 488.45 707.60
Trade notes receivable at December 31, 1998 and 1997 do not exceed 20% of total accounts and notes receivable as shown above.
Balances of accounts and notes receivable at December 31, 1998, which are overdue more than 3 months, are summarized as follows:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets
Balances overdue more than 3 months but not exceeding 6 months 365.88 4.62 Balances overdue more than 6 months but not exceeding 12 months 469.12 - Balances overdue more than 12 months 369.56 0.90 Total 1,204.56 5.52
Allowance for doubtful accounts for the above overdue balances 771.01 5.52
The difference between allowance for doubtful accounts and those balances which are overdue more than three months mainly arose from the Company's subsidiary, Advanced Info Service Public Company Limited (" AIS "). Allowance for doubtful accounts for those accounts and notes receivable at December 31, 1998 which are overdue more than three months in the AIS's accounts was set up to cover risk from bad debts by considering in conjunction with deposits received from those customers who associated with the above overdue balances.
Certain subsidiaries also set up allowance for doubtful accounts for accounts receivable which are overdue less than three months but the risk from bad debts is high.
69 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 8 - INVENTORIES
Inventories at December 31, comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997 Merchandise equipment for sale 709.40 1,174.55 85.25 781.24 Jobs in progress 23.08 224.05 12.10 66.66 Paper, supplies and spare parts 172.31 51.67 2.67 3.15 Inventories in transit 33.14 31.19 0.00 24.90 937.93 1,481.46 100.02 875.95 Less Allowance for obsolescence 67.67 35.39 32.69 32.69 Inventories - net 870.26 1,446.07 67.33 843.26
NOTE 9 - OTHER CURRENT ASSETS
Other current assets at December 31, comprise:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Other receivables 819.28 442.69 8.64 8.96 Prepaid expenses 198.65 291.86 3.73 5.22 Premiums under forward exchange contracts net of amortization (Note 4) 159.56 1.73 101.90 1.73 Prepaid income tax 127.01 76.70 0.07 0.25 Advanced payments for purchases of inventories 62.43 63.73 61.01 63.73 Refundable value added tax 34.45 475.08 0.20 23.57 Interest receivables 10.21 73.76 0.76 50.11 Others 96.04 165.81 1.25 2.51 1,507.63 1,591.36 177.56 156.08 Less Allowance for unclaimed taxes 52.19 - - - 1,455.44 1,591.36 177.56 156.08 Less Allowance for loss on collection from other receivables 19.21 - - - Total 1,436.23 1,591.36 177.56 156.08
Other receivables mainly comprise service cost to be reimbursed by international network operators; value added tax to be claimed from the Telephone Organization of Thailand; claims made to a supplier relating to a telecommunication project; amounts receivable from dealers who received deposits, registration fees, service fees and etc. on behalf of a subsidiary; and amounts receivable from government agency in Laos with respect to the sale of a portion of investment in an associate in Laos.
NOTE 10 - ASSETS PLEDGED AS COLLATERAL
70 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
In the consolidated financial statements as at December 31, 1998, total investments in Isla Communications Company Incorporation and Fascel Limited, which are associated companies, (at the total cost of Baht 3,816.86 million) were pledged as collateral for short-term loans from an other company as shown in Note 17 to the financial statements, and short-term loan from foreign bank obtained by an associated company.
71 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 11 - INVESTMENTS
Investments in the consolidated balance sheets at December 31, 1998 comprise long-term investments in the following companies' share capital and unit trust: Values (Million Baht) % Paid-up Cost Equity Recorded Dividend Related Parties Holdin Capital Method Method Values Income g Associated Companies
Lao Shinawatra Telecom Company Limited 49.00 US$5.0M 127.34 - - - Lao Telecommunications Company Limited 49.00 US$91.84M 1147.19 325.28 325.28 - Kalamazoo IT Company Limited 44.99 12.00 5.40 - - - Microwave Communications Limited (include prepayment on share capital of Baht 98.09 million) 40.00 INR272.50 180.63 - - - M Fascel Limited 33.00 INR3,500M 859.16 - - -
Isla Communications Company, Incorporation 30.00 PHP1,728M 2957.70 - - - Shinawatra Datacom Company Limited 27.86 457.52 176.66 122.12 122.12 -
Other Related Company
United Broadcasting Corporation Public Company Limited (Formerly: International Broadcasting Corporation Public Company Limited) 13.95 7,407.74 285.97 - 285.97 - Total Investments in Related Parties 733.37
Others
Fonepoint (Thailand) Company Limited 17.80 15.00 49.70 - - - Technology Ratanakosin Company 5.00 100.00 5.60 - 5.60 - Limited Samart Corporation Public Company Limited 3.69 741.08 168.81 - 168.81 - Imperial Technology Management Services Public Company Limited 3.28 761.35 25.00 - 25.00 - Thai Orchid Fund 2 0.20 1,000.00 2.00 - 2.00 - Total Investments in Other Companies 201.41
The Company and its subsidiaries do not have significant influence in the management of other related companies and other companies.
72 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Investments in the Company's separate balance sheets at December 31, 1998 comprise long-term investments in the following companies' share capital and unit trust:
Values (Million Baht) % Paid-up Cost Equity Recorded Dividend Related Parties Holdin Capital Method Method Values Income g Subsidiary Companies Shenington Investments (B.V.I.) 100.00 US$0.02M 0.37 (4,072.23) (4,072.23) - Pte.Ltd. Shenington Investments Pte. Ltd. 100.00 S$0.02M 0.44 (0.01) (0.01) - Shinawatra Information Technology Company Limited 99.99 100.00 99.15 42.12 42.12 - ICSI Limited Partnership 90.00 10.00 9.00 (0.08) (0.08) - SC Matchbox Company Limited 74.97 9.00 45.00 37.73 37.73 53.98 Shinawatra Satellite Public Company Limited 55.71 3,500.00 2,134.74 1,097.70 1,097.70 - Shinawatra Directories Company Limited 50.99 800.00 788.00 299.74 299.74 - Advanced Info Service Public Company Limited 49.81 2,340.00 2,069.60 6,800.13 6,800.13 139.87 Other Related Company
United Broadcasting Corporation Public Company Limited (Formerly: International Broadcasting Corporation Public Company Limited) 13.95 7,407.74 285.97 - 285.97 - Total Investments in Related Parties 4,491.07
Others
Technology Ratanakosin Company Limited 5.00 100.00 5.60 - 5.60 - Samart Corporation Public Company Limited 3.69 741.08 168.81 - 168.81 - Imperial Technology Management Services Public Company Limited 3.28 761.35 25.00 - 25.00 - Thai Orchid Fund 2 0.20 1,000.00 2.00 - 2.00 - Total Investments in Other Companies 201.41
The Company does not have significant influence in the management of other companies.
73 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Investments in the consolidated balance sheets at December 31, 1997 comprise long-term investments in the following companies' share capital and unit trust :
Values (Million Baht) % Paid-up Cost Equity Recorded Dividend Related Parties Holdin Capital Method Method Values Income g Associated Companies
Lao Shinawatra Telecom Company 49.00 US$5.0M 127.34 0.52 0.52 - Limited Lao Telecommunications Company 49.00 US$91.84M 1,147.19 1,237.37 1,237.37 - Limited Microwave Communications Limited 40.00 INR272.50 82.54 - - - M International Broadcasting Corporation Public Company Limited) 34.61 2,430.00 1,148.48 454.52 454.52 - Fascel Limited (include prepayment on share capital of Baht 760.69 million) 33.00 INR383.74 843.55 629.87 629.87 - M Isla Communications Company, incorporation 30.00 PHP1,728M 2,957.70 2,177.78 2,177.78 - Shinawatra Datacom Company Limited 18.00 695.30 125.15 64.40 64.40 - Total Investments in Related Parties 4,564.46 Others
Fonepoint (Thailand) Company Limited 17.80 15.00 49.70 - 0.00 - Technology Ratanakosin Company 5.00 100.00 5.60 - 5.60 - Limited Samart Corporation Public Company Limited 3.69 741.08 168.81 - 67.44 8.90 Services Public Company Limited 3.33 750.00 25.00 - 25.00 - I-Co Global Communications Limited 5.02 US$14.2M 2,198.04 - 2,198.04 - Thai Orchid Fund 2 0.20 1,000.00 2.00 - 1.80 - Total Investments in Other Companies 2,297.88
The Company and its subsidiaries do not have significant influence in the management of other companies.
74 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Investments in the Company's separate balance sheets at December 31, 1997 comprise long-term investments in the following companies' share capital and unit trust: :
Values (Million Baht) % Paid-up Cost Equity Recorded Dividend Related Parties Holdin Capital Method Method Values Income g Subsidiary Companies
Shinawatra Computer Company Limited and AT & T World Service Incorporation Consortium 100.00 5.00 5.00 (2.98) (2.98) - Shinawatra (BVI) Limited 100.00 0.47 0.47 0.47 0.47 - Shinawatra Information Technology Company Limited 99.99 100.00 99.15 (47.30) (47.30) - Shinawatra Directories Company 99.99 350.00 588.00 582.96 582.96 - Limited Shinawatra Wireless Marketing Company Limited (Formerly: Shinawatra Telewiz Company Limited) 99.99 240.00 319.20 391.27 391.27 - ICSI Limited Partnership 90.00 10.00 9.00 26.33 26.33 - Shinawatra International Public Company Limited 79.99 3,000.00 2,400.00 (812.70) (812.70) - SC Matchbox Company Limited 74.97 9.00 45.00 75.79 75.79 16.27 Shinawatra Satellite Public Company Limited 57.86 3,500.00 2,025.00 (276.19) (276.19) 52.50 Advanced Info Service Public Company Limited 54.34 2,340.00 2,076.78 5,890.46 5,890.46 810.00 Associated Company International Broadcasting Corporation Public Company Limited) 34.61 2,430.00 1,148.48 454.52 454.52 - Total Investments in Related 6,282.63 Parties Others
Technology Ratanakosin Company 5.00 100.00 5.60 - 5.60 - Limited Samart Corporation Public Company Limited 3.69 741.08 168.81 - 67.44 8.90 Imperial Technology Management Services Public Company Limited 3.33 750.00 25.00 - 25.00 - Thai Orchid Fund 2 0.20 1,000.00 2.00 - 1.80 - Total Investments in Other Companies 99.84
The Company does not have significant influence in the management of other companies.
Businesses of those related parties invested by the Company are summarized as follows:
Subsidiary Companies 75 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Shinawatra Computer Company Limited and AT&T World Service Incorporation Consortium This dormant consortium was liquidated on March 25, 1998 as described in Note 1 to the financial statements.
76 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Shinawatra (BVI) Limited This company was liquidated on March 26, 1998 as described in Note 1 to the financial statements.
Shenington Investments (B.V.I.) Pte. Ltd. This company is engaged in foreign investments in telecommunication projects.
Shenington Investments Pte. Ltd. This company is engaged in foreign investments in telecommunication projects.
Shinawatra Information Technology Company Limited This company is engaged in trading hardware and software and rendering services relating to telecommunication projects being operated by both state and private enterprises.
Shinawatra Directories Company Limited This company is engaged in publishing telephone directory under a concession received from the Telephone Organization of Thailand.
Shinawatra Wireless Marketing Company Limited This company is engaged in trading telecommunication equipment, providing telecommunication equipment for rent and rendering repair services for telecommunication equipment. On December 22, 1998, the Company sold all of its investment in common shares of the said company to Advanced Info Service Public Company Limited, which is the Company's subsidiary, as described in Note 1 to the financial statements.
ICSI Limited Partnership This entity is engaged in trading mobile phone equipment and rendering computer services.
Shinawatra International Public Company Limited This company is engaged in foreign investments in telecommunication projects in Cambodia, Laos, Philippines and India. On December 24, 1998, the Company sold all of its investment in common shares of the said company to Shenington Investments (B.V.I.) Pte. Ltd., which is the Company's wholly owned subsidiary, as described in Note 1 to the financial statements.
SC Matchbox Company Limited This company is engaged in providing advertising services as well as producing advertising spots for radio and television broadcasting programs.
Shinawatra Satellite Public Company Limited This company is engaged in operating and administering the Communication Satellite Projects and rendering transponder services for domestic and international communications.
Advanced Info Service Public Company Limited This company is engaged in the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM under a concession received from the Telephone Organization of Thailand.
77 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Associated Companies Kalamazoo IT Company Limited This company is engaged in trading software relating to the management system of automobile dealer and rendering services relating to the aforesaid software.
Lao Shinawatra Telecom Company Limited No major business operation.
Lao Telecommunications Company Limited This company is engaged in the operations of telecommunications network in Laos.
Microwave Communications Limited This company is engaged in the operations of paging network in India.
Fascel Limited This company is engaged in the operations of telephone network in India.
Isla Communications Company, Incorporation This company is engaged in the operations of telecommunication networks in Philippines.
Shinawatra Datacom Company Limited This company is engaged in the operations of simultaneous voice and data transfer system known as Datanet.
Other Related Company United Broadcasting Corporation Public Company Limited (Formerly: International Broadcasting Corporation Public Company Limited) The company is engaged in the operations of a subscriber-based television network under the concession received from the Mass Communication Organization of Thailand. Certain directors of United Broadcasting Corporation Public Company Limited are having their directorship in Shinawatra Computer and Communications Public Company Limited.
Other Information
Investments of three subsidiary companies in seven associated companies (Kalamazoo IT Company Limited, Lao Shinawatra Telecom Company Limited, Lao Telecommunications Company Limited, Microwave Communications Limited, Fascel Limited, Isla Communications Company, Incorporation and Shinawatra Datacom Company Limited)
as at December 31, 1998, and investments of a subsidiary company in four associated companies (Lao Shinawatra Telecom Company Limited, Lao Telecommunications Company Limited, Microwave Communications Limited and Fascel Limited) (from total seven associated companies) as at December 31, 1997, with their book values as at December 31, 1998 and 1997 amounting to approximately Baht 447.40 million and Baht 1,867.76 million, respectively, were recorded by using the equity method of accounting based on the related financial information of the financial statements for the years ended December 31, 1998 and 1997 prepared by the management of those associated companies and had not been audited or reviewed by the auditors, and shown net of adjustments relating to written-down values of investments. The related unaudited or reviewed proportionate share of net operating losses from the said associated companies for the years ended December 31, 1998 and 1997 amounted to approximately Baht 1,507.13 million and Baht 107.35 million, respectively.
As at December 31, 1998 and 1997, investments in share capital of Lao Shinawatra Telecom Company Limited, Lao Telecommunications Company Limited, Microwave Communications Limited, Fascel Limited, Isla Communications Company Incorporation and Fonepoint (Thailand) Limited are shown net of adjustments relating to the decline in values or written-down values of the said investments, amounting to approximately Baht 2,321.48 million and Baht 49.70 million, respectively, determined from results of their operations, their financial status, estimated returns on investments, cash flows and economic environments in countries where those businesses are located.
78 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
Unrealized losses from the valuation of long-term investments in marketable securities as at December 31, 1997, amounting to approximately Baht 101.57 million, represent unrealized losses on investments in Samart Corporation Public Company Limited and unit trust of Orchid Fund 2 which were not considered as permanent diminution in value and were presented as a separate caption in the shareholders' equity.
Investments in other companies in the consolidated financial statements at December 31, 1997 include investment of a subsidiary in share capital of I-Co Global Communications Limited, which is in the process of preparing its operations in accordance with major business plan. Acquisition costs and interest expense, relating to such investment for the year ended December 31, 1997, which had been capitalized to cost of the said investment, amounted to approximately Baht 1,028.71 million. The said investment was sold in the third quarter of 1998. Acquisition costs and interest expense which had been capitalized to cost of investment up to the selling date in 1998 amounting to approximately Baht 106.12 million.
79 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
In September 1997, the Company exercised its right to acquire the newly issued share capital of International Broadcasting Corporation Public Company Limited which subsequently changed its name to United Broadcasting Corporation Public Company Limited (" UBC "). As a result, the Company's shareholding in UBC increased from 18.08% to 34.61%. Accordingly, the Company is required to record such investment by using the equity method of accounting commencing September 1997 and the financial statements for the year ended December 31, 1997 have to be adjusted retroactively from the cost method to the equity method. Investments in associated companies and the Company's shareholders' equity as at December 31, 1997 were equally decreased by approximately Baht 536.40 million and net loss for the year ended December 31, 1997 was increased by approximately Baht 485.41 million, while loss per share for the year ended December 31, 1997 was increased by approximately Baht 3.52. As of April 30, 1998 the Company shareholding in UBC was decreased from 34.61% to 18.50% and the value of investment in the said company which was calculated by using the equity method as of April 30, 1998 became the new value under cost method at that date, due to the Company does not have significant influence in the management of UBC as from May 1, 1998. As of December 31, 1998, the Company's shareholding in UBC had been reduced from 18.50% to 13.95% which was mainly caused by the issuance of new shares specifically sold to strategic partners and institution investors.
In December 1998, Advanced Info Service Public Company Limited (" AIS "), which is a subsidiary company, acquired additional investment in common share capital of Shinawatra Datacom Company Limited (6,449,176 shares at the value of Baht 51,508,548), and AIS's shareholding in Shinawatra Datacom Company Limited therefore increased from 13.77% to 27.86%. Accordingly, AIS is required to record such investment by using the equity method of accounting for the year ended December 31, 1998 and the financial statements for the year ended December 31, 1997 have to be adjusted retroactively from the cost method to the equity method. As a result, investments in subsidiary (in the Company's separate financial statements) and associated company (in the consolidated financial statements), the Company's shareholders' equity and minority interests in subsidiaries as at December 31, 1998 and 1997, the results of the Company's operations and loss per share for the years ended December 31, 1998 and 1997 are effected as follows:
Effect on the consolidated financial statements
- Investments in associated company, the shareholders' equity and minority interests in subsidiaries as at December 31, 1998, were increased by approximately Baht 6.20 million, Baht 3.37 million and Baht 2.83 million, respectively, and net loss for the year ended December 31, 1998, was decreased by approximately Baht 3.37 million. Loss per share for the year then ended was decreased by approximately Baht 0.02.
- Investments in associated company, the shareholders' equity and minority interests in subsidiaries as at December 31, 1997, were increased by approximately Baht 2.03 million, Baht 1.10 million and Baht 0.93 million, respectively, and net loss for the year ended December 31, 1997 was decreased by approximately Baht 1.52 million. Loss per share for the year then ended was decreased by approximately Baht 0.01.
Effect on the Company's separate financial statements
- Investment in subsidiary company and the Company's shareholders' equity as at December 31, 1998 were equally increased by approximately Baht 3.37 million while net loss for the year then ended was decreased by the same amount. Loss per share for the year then ended was decreased by approximately Baht 0.02. - Investment in subsidiary company and the Company's shareholders' equity as at December 31, 1997, were equally increased by approximately Baht 1.10 million. Net loss for the year ended December 31, 1997 was decreased by approximately Baht 1.52 million, while loss per share for the year then ended was decreased by approximately Baht 0.01.
80 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 12 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, comprise:
Million Baht Consolidated Company's Separate Estimated Useful Balance Sheets Balance Sheets Lives (Years) 1998 1997 1998 1997
Land 10.97 10.97 - - Leasehold land and Improvements 10 - 27.5 24.93 20.59 - - Buildings and improvements 5 – 20 72.92 69.62 6.78 6.78 Leasehold building 5 – 15 272.17 237.52 134.23 128.34 Improvements Computer, software and equipment for rent 5 – 10 124.15 146.88 50.19 50.57 Operating equipment 5 – 10 775.49 467.17 - - Furniture, fixtures and office equipment 5 – 10 3,535.31 3,000.48 789.62 807.12 Vehicles 5 73.36 49.01 7.45 6.95 Vehicles under financial leases 5 12.00 15.50 7.23 7.23 Assets under construction and installation 446.78 416.98 31.47 151.83 5,348.08 4,434.72 1,026.97 1,158.82 Less Accumulated depreciation and amortization 2,161.02 1,628.93 682.46 769.85 3,187.06 2,805.79 344.51 388.97 Less Allowance for obsolete equipment 1.80 7.19 - - Property and Equipment – net 3,185.26 2,798.60 344.51 388.97
As at December 31, 1998, land purchased by a subsidiary from an other related company, at the value of approximately Baht 5.05 million, was in the process of transferring the ownership.
81 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 13 - LOANS FROM FINANCIAL INSTITUTIONS
Loans from financial institutions at December 31, comprise:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Banks overdraft 2.24 - - - Short-term loans from banks 1,383.00 6,522.85 200.00 618.23 Short-term loans from finance companies 514.90 618.23 - 1,875.26 Liabilities under trust receipts 262.47 420.09 48.23 108.89 2,162.61 7,561.17 248.23 2,602.38 Less Excess of the current value of purchased Currency, for future repayments of above Liabilities, over the value under Contracted forward exchange rates 0.59 - - - Total 2,162.02 7,561.17 248.23 2,602.38
At December 31, 1998, Advanced Info Service Public Company Limited (" AIS "), which is a subsidiary, had outstanding loan balance obtained from a foreign bank under a short-term loan agreement in the amount of US dollar 5 million and is repayable within December 1999. Shinawatra Computer and Communications Public Company Limited (" the Company "), as stipulated under the said loan agreement, is required to have its shareholding in AIS for at least 51% of total issued shares of AIS. On January 6, 1999, the Board of Directors of the Company passed a resolution to approve the sale of 14,300,000 common shares of AIS to Singapore Telecom International, and on the same day the Board of Directors of AIS passed a resolution to approve the issuance of 36,000,000 common shares to sell specifically to Singapore Telecom International. The Company's shareholding in AIS, after the completion of exercises which were approved by the Board of Directors of the Company and AIS as discussed previously, will be lower than the levels stipulated in the aforesaid loan agreements. On January 21, 1999, the aforesaid foreign bank had officially confirmed to AIS that it agreed to make an allowance in respect of the required level of holding in AIS's share capital to be maintained by the Company.
NOTE 14 - ACCOUNTS AND NOTES PAYABLE AND ACCRUED EXPENSES
Accounts and notes payable and accrued expenses at December 31, comprise: Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Related parties (Note 3) 74.46 133.66 30.79 50.09 Notes payable to other suppliers 1,418.23 - - - Balances with other suppliers and accrued Expenses 8,889.76 9,232.40 374.63 651.01 10,382.45 9,366.06 405.42 701.10 Less Excess of the current value of purchased currency, for future repayments of above liabilities, 82 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
over the value under contracted forward exchange rates 211.68 3.46 - 0.16 Total 10,170.77 9,362.60 405.42 700.94
83 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
NOTE 15 - UNUTILIZED LOAN FACILITIES
Unutilized loan facilities of the Company and its subsidiaries as at December 31, 1998 are classified by type of currencies as follows: Million Baht Consolidated Company's Separate Financial Financial Statements Statements Short-term Baht 5,454.10 4,192.99 US dollar 22.96 - Long-term US dollar 41.96 - Deutschmark 73.74 -
Terms and conditions of unutilized long-term loan facilities are similar to those long-term loans described in Note 19, while terms and conditions of unutilized short-term loans facilities are not currently specified and subject to mutual agreement between the Company, its subsidiaries and lenders if required.
NOTE 16 - SHORT-TERM BONDS
Short-term bonds at December 31, 1998 represent unsecured bonds totaling 2,000,000 units, Baht 1,000 per unit, issued by Advanced Info Service Public Company Limited (" AIS "). The said short-term bonds are repayable on October 11, 1999 with the fixed interest rate at 12%. AIS has entered into an agreement with Bangkok First Investment and Trust Public Company Limited to appoint the said company as bonds registrar and paying agent, and AIS has also entered into an agreement with Merrill Lynch Phatra Securities Company Limited to authorize the said company to offer and sell the aforesaid unsecured bonds. AIS agrees to pay fees and other expenses to both companies in accordance with terms and conditions prescribed in both agreements.
Short-term bonds at December 31, 1997 represent unsecured bonds totaling 2,130,000 units, Baht 1,000 per unit, issued by Advanced Info Service Public Company Limited (" AIS "). The said short-term bonds are repayable as from February 16, 1998 through March 27, 1998 with the fixed interest rate at 13% per annum. Under the agreements between AIS and the Thai Farmers Bank Public Company Limited, whereas the latter has been appointed as bonds registrar and has been authorized to offer and to sell the said short-term unsecured bonds, AIS agrees to pay fees and other expenses to the said bank as prescribed in those agreements.
Holders of short-term bonds issued by AIS as at December 31, are summarized as follows:
Million Baht Consolidated Company's Separate Balance Sheets Balance Sheets 1998 1997 1998 1997
Related parties (Note 3) 122.90 2,130.00 - - Other bondholders 1,877.10 - - - 2,000.00 2,130.00 - - Elimination of intercompany - (530.00) - - transactions (Note3)
Total 2,000.00 1,600.00 - -
84 ANNUAL REPORT 1998 SHIN CORPORATIONS PLC.
85