AUDITORS REPORT To the Shareholders of TelecomAsia Corporation Public Company Limited I have audited the accompanying consolidated and company balance sheet of TelecomAsia Corporation Public Company Limited as at 31 December 2000, and the related consolidated and company statements of income (loss), changes in shareholders equity, deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Companys management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated and company financial position of TelecomAsia Corporation Public Company Limited as at 31 December 2000, and the consolidated and company results of operations and cash flows for the year then ended in accordance with generally accepted accounting principles. The consolidated and company financial statements of TelecomAsia Corporation Public Co., Ltd. for the year ended 31 December 1999, before restatement, were audited by another independent auditor whose report dated 16 February 2000 (except with respect to the matter concerning the share of loss of an associated company as to which the date was 24 February 2000) was qualified in respect of the limitation of audit scope concerning certain subsidiary and associated companies. The auditor was unable to satisfy herself regarding assets equivalent to 4.1% of total assets and liabilities equivalent to 0.9% of total liabilities in the consolidated balance sheet (before restatement), and the share of gain from subsidiaries and associates totalling Baht 588.6 million, or equivalent to 9.25% of net loss for the year (before restatement), included in the consolidated and company financial statements (before restatement). As stated in notes 4 and 5 to the consolidated and company financial statements, in the year 2000 the Company and its subsidiaries changed their accounting policies and also accounted for correction of errors in respect of: Note 4: Changes in accounting policies (a) Accounting for change of depreciation policy of network equipment; (b) Accounting for acquisition of equity investment; (c) Accounting for debt and equity issuance costs; (d) Accounting for borrowing cost; (e) Accounting for share issue with no cash; (f) Accounting for capitalizing drop wire; (g) Accounting for interest in joint venture; (h) Accounting for presentation of revenue and cost of services; and (i) Accounting for deferred income taxes Note 5: Correction of errors (5.1) Debt restructuring (5.2) Provisions and others The Company and its subsidiaries have accounted for these changes in accounting policies and correction of errors on a retrospective basis. Accordingly the consolidated and company financial statements for the year ended 31 December 1999, which are presented as comparatives, have been restated. I have examined the adjustments, set out in notes 4 and 5, relating to the restatement of the consolidated and company financial statements for the year ended 31 December 1999, and, in my opinion, the adjustments are appropriate and have been properly applied to restate those financial statements. SOMCHAI JINNOVART Certified Public Accountant (Thailand) No. 3271 PricewaterhouseCoopers ABAS Limited Bangkok 23 February 2001 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht ASSETS CURRENT ASSETS Cash and cash equivalents 9 1,054,621,457 1,297,871,976 153,811,825 65,604,752 Restricted cash 10 4,308,366,909 2,721,921,590 4,058,137,434 2,317,853,472 Available-for-sale securities 11 21,416,064 728,311,850 - - Short-term investments 12 17,158,787 1,780,745 - - Trade accounts receivable, net 13 5,834,253,003 5,606,484,279 5,723,964,912 5,223,333,665 Due from related parties 28 131,628,328 212,729,183 67,086,414 65,358,704 Inventories, net 14 875,720,727 689,203,076 529,425,032 305,380,694 Other current assets 15 1,358,012,881 2,322,372,419 1,063,164,943 1,712,387,725 Total Current Assets 13,601,178,156 13,580,675,118 11,595,590,560 9,689,919,012 NON-CURRENT ASSETS Available-for-sale security 11 3,960,783,332 - - - Investments in subsidiaries, associates and others 28 5,430,041,857 9,411,425,542 10,879,509,891 10,464,864,941 Investment property 16 57,972,973 63,898,148 - - Property, plant and equipment, net 17 64,262,597,055 70,252,927,332 50,627,073,770 55,528,714,642 Intangible asset, net 18 512,919,260 541,086,710 - - Other non-current assets 19 558,160,344 766,445,702 352,841,588 539,781,594 Total Non-Current Assets 74,782,474,821 81,035,783,434 61,859,425,249 66,533,361,177 TOTAL ASSETS 88,383,652,977 94,616,458,552 73,455,015,809 76,223,280,189 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht LIABILITIES CURRENT LIABILITIES Borrowings 20 1,782,478,411 4,228,289,295 - - Trade accounts payable 1,700,681,080 1,797,655,148 676,892,906 410,701,341 Accrued expenses 1,014,500,918 4,360,023,281 324,783,800 3,513,187,035 Due to related parties 28 83,132,827 45,483,082 1,616,825,030 983,562,453 Other current liabilities 21 1,519,981,495 1,461,058,742 1,354,139,542 1,298,379,289 Total Current Liabilities 6,100,774,731 11,892,509,548 3,972,641,278 6,205,830,118 NON-CURRENT LIABILITIES Borrowings 20 63,819,640,430 64,987,567,575 60,777,882,313 62,410,161,144 Long-term trade accounts payable 22 9,255,711,558 9,601,835,920 - - Other non-current liabilities 23 580,641,279 15,253,244 576,255,247 - Total Non-Current Liabilities 73,655,993,267 74,604,656,739 61,354,137,560 62,410,161,144 TOTAL LIABILITIES 79,756,767,998 86,497,166,287 65,326,778,838 68,615,991,262 SHAREHOLDERS EQUITY Share capital Authorized share capital 2,983.15 million shares Preferred shares 702 million shares issued and fully paid 24 7,020,000,000 - 7,020,000,000 - Common shares 2,223 million shares issued and fully paid 24 22,230,000,000 22,230,000,000 22,230,000,000 22,230,000,000 Discount on preferred shares 24 (1,498,478,153) - (1,498,478,153) - Premium on common shares 24 11,432,046,462 11,432,046,462 11,432,046,462 11,432,046,462 Appropriated legal reserve 25 34,880,969 34,880,969 34,880,969 34,880,969 Deficit (29,511,977,179) (26,203,827,034) (29,511,977,179) (26,203,827,034) Minority interests in subsidiaries 498,648,008 512,003,338 - - Unrealized gain (loss) on available-for-sale securities (1,682,579,258) 9,844,400 (1,682,579,258) 9,844,400 Cumulative translation adjustment 104,344,130 104,344,130 104,344,130 104,344,130 Total Shareholders Equity 8,626,884,979 8,119,292,265 8,128,236,971 7,607,288,927 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 88,383,652,977 94,616,458,552 73,455,015,809 76,223,280,189 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Income (Loss) For the years ended 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht Revenues 28 Revenues from telephone and other services 18,085,305,046 14,282,654,054 16,916,102,439 12,999,005,441 Revenues from product sales 1,302,258,537 660,316,055 110,774,706 202,144,349 Total revenues 19,387,563,583 14,942,970,109 17,026,877,145 13,201,149,790 Operating expenses 28 Cost of services 4 12,688,408,350 10,654,583,497 11,784,686,612 9,639,580,538 Cost of sales 1,119,159,026 374,278,859 141,243,863 205,617,593 Selling and administrative expenses 3,030,574,658 2,873,245,541 2,251,210,937 1,920,823,880 Directors remuneration 45,975,112 36,755,211 25,613,987 16,800,000 Total operating expenses 16,884,117,146 13,938,863,108 14,202,755,399 11,782,822,011 Operating profit 26 2,503,446,437 1,004,107,001 2,824,121,746 1,418,327,779 Gain on sale of investment 2,472,154,845 238,349,429 - - Interest income 23,382,612 123,913,130 10,099,937 78,719,427 Share of (loss) gain in subsidiaries and associates (1,128,453,711) (895,734,041) 2,107,068,609 (3,506,184,952) Interest expense (5,676,505,756) (5,921,905,547) (4,624,588,093) (5,078,424,660) Foreign exchange loss (2,642,423,012) (1,914,029,017) (4,747,039,313) (755,350,022) Other (expenses) income (174,718,341) (25,829,041) (255,868,769) 368,138,419 Loss before income tax (4,623,116,926) (7,391,128,086) (4,686,205,883) (7,474,774,009) Income tax (76,444,287) (115,458,619) - - Loss before extraordinary item (4,699,561,213) (7,506,586,705) (4,686,205,883) (7,474,774,009) Extraordinary item -Gain from debt restructuring 6 1,378,055,738 - 1,378,055,738 - Loss before minority interests (3,321,505,475) (7,506,586,705) (3,308,150,145) (7,474,774,009) Loss attributable to minority interests 13,355,330 31,812,696 - - Net loss for the year (3,308,150,145) (7,474,774,009) (3,308,150,145) (7,474,774,009) Basic and diluted loss per share 8 Loss from ordinary activities (2.35) (3.36) (2.35) (3.36) Extraordinary item - Gain from debt restructuring 0.62 - 0.62 - Net loss for the year (1.73) (3.36) (1.73) (3.36) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholders' Equity For the years ended 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht Preferred Shares 24 Beginning balance - - - - Increase during the year 7,020,000,000 - 7,020,000,000 - Decrease during the year - - - - Ending balance 7,020,000,000 - 7,020,000,000 - Common Shares 24 Beginning balance 22,230,000,000 22,230,000,000 22,230,000,000 22,230,000,000 Increase during the year - - - - Decrease during the year - - - - Ending balance 22,230,000,000 22,230,000,000 22,230,000,000 22,230,000,000 Discount on Preferred Shares 24 Beginning balance - - - - Increase during the year (1,498,478,153) - (1,498,478,153) - Decrease during the year - - - - Ending balance (1,498,478,153) - (1,498,478,153) - Premium on Common Shares 24 Beginning balance: - as previously reported 11,835,000,000 11,835,000,000 11,835,000,000 11,835,000,000 - prior year adjustments 4.1c) (402,953,538) (402,953,538) (402,953,538) (402,953,538) Beginning balance, as restated 11,432,046,462 11,432,046,462 11,432,046,462 11,432,046,462 Increase during the year - - - - Decrease during the year - - - - Ending balance 11,432,046,462 11,432,046,462 11,432,046,462 11,432,046,462 Appropriated legal reserve 25 Beginning balance 34,880,969 34,880,969 34,880,969 34,880,969 Increase during the year - - - - Decrease during the year - - - - Ending balance 34,880,969 34,880,969 34,880,969 34,880,969 Deficit Beginning balance: - as previously reported (21,924,581,069) (15,564,068,304) (21,924,581,069) (15,564,068,304) - prior year adjustments 5 (4,279,245,965) (3,164,984,721) (4,279,245,965) (3,164,984,721) Beginning balance, as restated (26,203,827,034) (18,729,053,025) (26,203,827,034) (18,729,053,025) Increase during the year - - - - Decrease during the year (3,308,150,145) (7,474,774,009) (3,308,150,145) (7,474,774,009) Ending balance (29,511,977,179) (26,203,827,034) (29,511,977,179) (26,203,827,034) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes Shareholders' (Continued) For the years ended 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht Minority Interests Beginning balance : - as previously reported 462,619,867 462,627,053 - - - prior year adjustments 5.3 49,383,471 87,648,981 - - Beginning balance, as restated 512,003,338 550,276,034 - - Increase during the year - - - - Share of net loss of subsidiaries (13,355,330) (31,812,696) - - Sale of subsidiary 28 - (6,460,000) - - Ending balance 498,648,008 512,003,338 - - Unrealized Gain (loss) on Available-for-Sale Securities Beginning balance 9,844,400 - 9,844,400 - Increase during the year 11 - 9,844,400 - 9,844,400 Decrease during the year 11 (1,692,423,658) - (1,692,423,658) - Ending balance (1,682,579,258) 9,844,400 (1,682,579,258) 9,844,400 Cumulative Translation Adjustment Beginning balance 104,344,130 68,374,188 104,344,130 68,374,188 Increase during the year - 35,969,942 - 35,969,942 Decrease during the year - - - - Ending balance 104,344,130 104,344,130 104,344,130 104,344,130 Total Shareholders Equity 8,626,884,979 8,119,292,265 8,128,236,971 7,607,288,927 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Deficit For the years ended 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Notes Baht Baht Baht Baht Deficit Beginning balance -as previously reported (21,924,581,069) (15,564,068,304) (21,924,581,069) (15,564,068,304) -prior year adjustments 5 (4,279,245,965) (3,164,984,721) (4,279,245,965) (3,164,984,721) Beginning balance, as restated (26,203,827,034) (18,729,053,025) (26,203,827,034) (18,729,053,025) Net loss for the year: -as previously reported - (6,360,512,764) - (6,360,512,764) -prior year adjustments: -accounting for amortization of network equipment 4.1a) (2,120,292,769) (1,945,699,500) -accounting for acquisition of equity investment 4.1b) - 17,220,630 - - -accounting for debt and equity issuance costs 4.1c) - (30,841,180) - (30,841,180) -accounting for borrowing costs capitalization 4.1d) - 59,029,993 - - -accounting for share issue with no cash 4.1e) - (2,904,950) - - -accounting for capitalized drop-wire 4.1f) - 7,998,403 - - -correction of errors - 955,528,628 - 608,961,735 -cumulative effect from the changes to the investment in subsidiaries - - - 253,317,700 Net loss for the year (3,308,150,145) - (3,308,150,145) - Net loss for the year, as restated (3,308,150,145) (7,474,774,009) (3,308,150,145) (7,474,774,009) Ending balance, as restated (29,511,977,179) (26,203,827,034) (29,511,977,179) (26,203,827,034) Appropriated legal reserve 34,880,969 34,880,969 34,880,969 34,880,969 Total Deficit (29,477,096,210) (26,168,946,065) (29,477,096,210) (26,168,946,065) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Cash Flows For the years ended 31 December 2000 and 1999 Consolidated Company (Restated) (Restated) Notes 2000 1999 2000 1999 Baht Baht Baht Baht Cash flows from operating activities 27 3,228,635,110 1,353,443,126 3,699,827,743 1,295,116,448 Cash flows from investing activities Deposit in restricted cash (98,651,382,367) (77,418,213,313) (96,621,255,311) (77,037,343,878) Deposit in time deposit (27,824,341) (9,936,238) - - Purchase of long-term investments - (500,653,659) - - Payments on liquidate subsidiaries (133,024) (12,365,536) - - Acquisition of property, plant and equipment (1,695,087,745) (1,278,743,274) (1,387,231,901) (957,183,383) Withdrawal from restricted cash 97,064,937,048 77,531,629,642 94,880,971,349 77,531,629,642 Proceeds from sale of available-for- sale securities 3,003,471,750 76,933,175 - - Withdrawal from time deposit 12,446,299 11,715,804 - - Proceeds from sale of subsidiary 28 - 131,956,370 - - Proceeds from sale of associate - 561,600,000 - - Proceeds from sale of other investment 37,016 561,954,544 - - Proceeds from disposal of property, plant and equipment 48,905,523 102,437,416 806,219 730,095 Dividend received - 556,000,000 - - Net cash (used in)/receipts from investing activities (244,629,841) 314,314,931 (3,126,709,644) (462,167,524) Cash flows from financing activities Issue of preferred shares 5,521,521,847 - 5,521,521,847 - Proceeds from borrowings 657,757,200 850,331,431 - - Loans made from long-term trade account payable - 191,030,141 - - Payment on long-term trade accounts payable (531,831,359) - - - Payment on banks overdrafts (107,468,670) (6,170,369) (107,422,898) (6,170,369) Payment on borrowings (8,767,234,806) (2,042,994,355) (5,899,009,975) (806,981,773) Net cash used in financing activities (3,227,255,788) (1,007,803,152) (484,911,026) (813,152,142) (Decrease) increase in cash and cash equivalents (243,250,519) 659,954,905 88,207,073 19,796,782 Beginning balance 1,297,871,976 637,917,071 65,604,752 45,807,970 Ending balance 1,054,621,457 1,297,871,976 153,811,825 65,604,752 Supplementary information for cash flows : Interest paid 4,757,844,192 4,919,698,917 4,038,709,968 4,000,995,369 Tax paid 287,782,807 110,373,963 133,877,127 103,523,901 Non cash transactions The principal non cash transactions are the acquisition of property, plant and equipment using finance leases amount of Baht 217.4 million. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 1. General information TelecomAsia Corporation Public Company Limited (the Company) is a public limited company and is incorporated and domiciled in Thailand. The registered office of the Company is located at 18 Telecom Tower, Ratchadaphisek Road, Huai Khwang, Bangkok, Thailand. The Company is listed on the Stock Exchange of Thailand. The Company and its subsidiaries, associates and other related companies (together the TelecomAsia Group, or the Group) are principally engaged in the telecommunications and diversified communications industries. The Group is engaged in its core business of providing telecommunications services and various value-added services, which include, among others, Digital Data Network (DDN), Public Telephone, Personal Communication Telephone (PCT) Service, Multimedia and Internet Service Provider (ISP). 2. Concession agreements Telephone services In August 1991, the Company entered into the Joint Operation and Joint Investment For Expansion of Telephone Services Agreement (the Concession) with the Telephone Organization of Thailand (TOT). The Concession, as amended and supplemented, granted the Company the right to construct and provide fixed line telephone services for up to 2.6 million new lines in the Bangkok Metropolitan Area. The Company was responsible for: 1) Procuring and constructing the expansion of the existing TOT network. 2) Upon completion of construction of the network expansion, transferring legal ownership of certain network assets, land and buildings to TOT. 3) In consideration for the transferred assets receiving an exclusive 25 years right to operate and maintain the network and provide certain services including: ? Fixed line telephone ? Personal Communication Telephone (PCT) ? Public telephone ? Digital Data Network (DDN) ? Acceptance of fault notification and drop wire maintenance ? Customer service center Under the provisions of the Concession, TOT and the Company share the gross revenues collected from operating the networks in the percentages stipulated. Additionally, as required by the Concession, the Company has placed letters of guarantee issued by certain local banks in favour of TOT totaling Baht 300 million to guarantee the Companys compliance with the terms of the Concession. Internet services In October 1996, the Group entered into the Joint Investment in the Internet Services Agreement (the Agreement) with the Communication Authority of Thailand (CAT) to provide commercial Internet services to users throughout Thailand for a 10 years term. Under the terms of the Agreement, the Group is required to provide its Internet service over facilities leased from CAT or authorities approved by CAT. Under the terms of the Agreement, the Group has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide Internet services. The legal ownership of the system assets is transferred to CAT as installations are completed. In consideration for the transferred system assets, CAT granted the Group a ten year exclusive right to provide Internet services and collect customer deposits, membership and other service fees as stipulated in the Agreement. The Group has placed letters of guarantee issued by certain local banks in favour of CAT totaling Baht 0.5 million to guarantee the Groups compliance with the terms of the Agreement. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies The principal accounting policies adopted in the preparation of these consolidated and Company financial statements are set out below: a) Basis of preparation The consolidated and Company financial statements are prepared in accordance with and comply with accounting principles generally accepted in Thailand. The consolidated and Company financial statements are prepared under the historical cost convention. b) Group accounting (1) Subsidiary undertakings Subsidiary undertakings, which are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations, are consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date of disposal. All intercompany transactions, balances and unrealized surpluses and deficits on transactions between group companies are eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. A listing of the Groups principal subsidiaries undertaking is set out in Note 28. (2) Associated undertakings Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings over which the Group has between 20% and 50% of the voting rights, or over which the Group exercises significant influence, but which it does not control. Provisions are recorded for long- term impairment in value. Equity accounting involves recognizing in the income statement the Groups share of the associates profit or loss for the year. The Groups interest in the associate is carried in the balance sheet at an amount that reflects its share of the net assets of the associated undertakings and includes goodwill on the acquisition. A listing of the Groups principal associated undertakings is set out in Note 28. (3) Joint venture The Groups interest in a jointly controlled entity is accounted for by proportionate consolidation. Under this method the Group includes its share of the joint ventures individual income and expenses, assets and liabilities in the relevant components of the financial statements. Further details about the joint venture are shown in Note 32. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies (Continued) (4) Foreign currencies Income statements of foreign entities are translated into the Groups reporting currency at average exchange rates for the year and the balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in foreign subsidiaries, have been recorded in the Cumulative Translation Adjustment in shareholders equity. On disposal of the foreign entity, such translation differences are recognized in the income statement as part of the gain or loss on sale or deemed disposal. Income statements of the foreign operations that are integral to the operations of the Group are translated into the Groups reporting currency at average exchange rates for the year and the monetary items are translated at the exchange rates ruling on 31 December, while the non monetary items are translated at the date of the transactions. Exchange differences arising from the translation have been recorded as income or expense for the year. Foreign currency transactions in Group companies are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognized in the income statement. Such balances are translated at year-end exchange rates unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used. c) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flows statement, cash and cash equivalents comprise cash in hand and at banks, with original maturities of three months or less. d) Investments Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest ratio, are classified as available-for-sale, these are included in non- current assets unless management has the express intention of holding the investment for less than 12 months, in which case they are included in current assets. Available-for-sale investments are originally recorded at cost and subsequently carried at fair value. Unrealized gain and losses arising from changes in the fair value of available-for-sale investments are included in shareholders equity. Short-term investments which comprise deposits with local banks are carried at fair value. Short-term investments have a maturity of three to twelve months. e) Trade accounts receivable Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables. The Group records an allowance for doubtful accounts which is equivalent to the estimated collection losses that may be incurred in the collection of all receivables. The estimated losses are based on historical collection experience combined with a review of the current status of the existing receivables at the balance sheet date. Bad debts are written off when identified. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies (Continued) f) Inventories Inventories are stated at the lower of cost or net realisable value. The Group values their supplies for network and merchandise inventories by the moving average cost method. Provision is made against cost where, in the opinion of the Directors, there is diminution in value arising on obsolete, slow-moving and defective inventories, or, is otherwise required by changes in circumstances. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses. g) Investment properties Investment properties, principally land, are carried at cost. Investment properties are not subject to depreciation. A review of impairment is periodically undertaken by the Company's management. On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement. h) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on a straight-line method to write-off the cost of each asset to its residual value, over the estimated useful lives of the respective assets, or if shorter, the lease term, based on the following useful lives : Years Land Nil Land improvement 10 Buildings and improvements 5 - 20 Leasehold building improvements Lease period Furniture, fixtures, tools and office equipment 5 - 10 Power supply and computer 5 Multimedia network 8 - 20 Vehicle 5 Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The Group assesses annually whether there is any indication that property, plant and equipment assets, may be impaired. The carrying value of property, plant and equipment is considered impaired when the anticipated discounted cash flow from such an asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized in the statement of income. Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amounts and are recognized as other income (loss) in the statement of income. Expenditures for additions, renewal and betterment, which result in a substantial increase in an assets current replacement value, are capitalized. Repair and maintenance costs are recognized as an expense when incurred. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies (Continued) h) Property, plant and equipment (Continued) Property, plant and equipment subject to the Concession and Agreement as described in Note 2 are depreciated over the shorter of their useful lives or the remaining concession period, as follows: Years Land Nil Land improvement 10 Buildings 10 - 20 Switching equipment 12 Transmission 10 Outside plant 10 - 25 Public phone 7 Power supply and computer 5 Network management systems 10 Borrowing costs to finance the construction of assets are capitalized as part of the cost of the asset during the period of time that is required to complete and prepare the property, plant and equipment for its intended use. i) Intangible asset (1) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net assets of the acquired associates at the date of acquisition. Goodwill on acquisitions is reported in the balance sheet as part of investment in associates, and is amortized using the straight- line method over its estimated useful life, 15 years. (2) Computer software development costs Generally, costs associated with developing or maintaining computer software programmes are recognized as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group and have probable economic benefit exceeding the cost beyond one year, are recognized as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of relevant overheads. (3) Other intangible assets Other intangible assets represent fair value of subsidiaries shares issued in exchange of right to operate Non-Pot and hang dropwire. This intangible asset is amortized using the straight-line method over its estimated useful life, ranging from 20 25 years. The carrying amount of intangible assets is reviewed annually when there is an impairment indication, and adjusted for impairment where it is considered necessary. j) Accounting for leases where a group company is the lessee Leases of equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowing. The interest element of the finance charge is charged to the income statement over the lease period. The property and equipment acquired under finance leasing contracts is depreciated over the shorter of the useful life of the asset or the lease term. Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies (Continued) k) Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. l) Deferred income taxes Provision is made for all taxes payable in respect of taxable profits earned in the year. Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. The principal temporary differences arise from depreciation of property and equipment under concession agreements, provisions and tax losses carried forward. Tax rate enacted or substantially enacted by the balance sheet date is used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilised. m) Revenue recognition Telephone usage revenues for local and domestic long distance calls are recognized based on completed call time at the tariffs set by TOT. Where a billing period does not coincide with a calendar month, the Company has estimated the local call usage based on historical usage. Telephone usage revenue earned but not billed is included in the balance sheets within accounts receivable. Inbound and outbound international long distance calls are connected through the CAT network. CAT bills the Companys customers directly for international calls. CAT pays each carrier Baht 6 per minute of inbound and outbound international traffic. The Company recognizes international long distance call revenue based on customer usage reported to the Company by CAT. Revenue from rental of fixed line, DDN, multimedia and PCT systems is recognized ratably over the service period. Annual revenues from DDN service billed but unearned are included in the balance sheets within other current liabilities. Revenue derived from the installation of fixed lines and the activation of PCT services is recognized upon the completion of installation services and service activated. Advance receipts but unearned are included in the balance sheets within other current liabilities. Revenues from public telephones are recognized based upon metered usage. Revenues from Internet services are recognized based on actual time incurred by the customer. Sales of telephone equipment and PCT handsets are recognized upon shipment in accordance with the terms of sale. In accordance with the Concession described in Note 2, TOT is entitled to receive a share of certain revenues generated by the Company. The Company presents revenue gross of the TOT share in the statements of income, which ranges from 16 % to 23.5% of revenues collected. The TOT share of revenue is included in cost of services. All revenues have been presented net of value added tax and cash discounts. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 3. Accounting policies (Continued) n) Financial instruments Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, trade creditors, lease and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The Group is also party to financial instruments that reduce exposure to fluctuations in foreign currency exchange. These instruments, which mainly comprise foreign currency forward contracts, are not recognised in the financial statement on inception. Foreign currency forward contracts protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset and liability will be settled. Any increase or decrease in the amount required to settle the asset or liability is off-set by a corresponding movement in the value of the forward exchange contract. The gains and losses are therefore off-set for financial reporting purposes and are not recognised in the financial statements. The fee incurred in establishing each agreement is amortised over the contract period, if any. Disclosures about financial instruments to which the Group is a party are provided in Note 29. o) Troubled debt restructuring - where the group company is the debtor When the Group transfers its assets or equities in settlement of its debts as part of the debt restructuring, the excess of the carrying amount of the payable settled (including accrued interest, unamortised premium or discount, finance charges, or issue costs) over the fair value of the assets or equities transferred to the lender is recognised as a gain on restructuring. Legal fees and other direct costs incurred in transferring equities is deducted from the amount recorded for that equity. All other direct costs affecting the debt restructuring are deducted in measuring gain on restructuring or included in expense for the period if no gain on restructuring is recognised. Where the debt restructuring involves modification of terms of payables, the Group accounts for the effects of the restructuring prospectively from the time of restructuring and does not change the carrying amount of the payable at the time of the restructuring, unless the carrying amount exceeds the total undiscounted future cash payment specified by the new terms. If it does exceed this, the carrying amount of payable is reduced to the amount equal to the total undiscounted future cash payments specified by the new terms and a gain on restructuring is recognised in the statement of income if the amount is determinable. p) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. In particular, the comparatives have been adjusted or extended to take into account the requirements of the following new accounting standards which the Group adopted in 2000. TAS 43 - Business Combinations TAS 44 - Consolidated Financial Statements and Accounting for Investment in Subsidiaries TAS 45 - Accounting for Investment in Associates TAS 46 - Financial Reporting for Interests in Joint Ventures TAS 47 - Related Party Disclosures TAS 48 - Financial Instruments : Disclosure and Presentation There are no changes in accounting policy that effect operating profits resulting from the adoption of the above standards in these financial statements except TAS 43 and TAS 46, as the Group was already following the recognition and measurement principles in those standards. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 4. Accounting changes 4.1 Change in accounting policies The Group has implemented certain new Thai Accounting Standards and Interpretations during the year ended 31 December 2000. As a result, the Group has changed some accounting policies and made some corrections to previously reported balances. The major changes and their impact on the financial statements include the following: a) Change of depreciation policy of network equipment The Group is engaged in providing telephone services under the concession granted by the Telephone Organization of Thailand (TOT). The Group is obligated to transfer the ownership of network equipment procured for the operation of the Groups business to TOT. Previously, the Group depreciated the cost of such network equipment by the straight-line method over the concession agreement period ending 30 September 2017. In the second quarter of fiscal year 2000, the Groups management reviewed its depreciation policies for the cost of telephone network. As a result of this review, the Groups management determined that the concession assets should be accounted for in substance as normal operating equipment to reflect the underlying risks and rewards arising under the concession agreement. Therefore, the Group has made a correction by depreciating the concession assets using the straight-line method over their estimated useful economic lives. For the year ended 31 December 1999, the effect of this adjustment was to increase net loss for the year of the Group and the Company by Baht 2,120.3 million and Baht 1,945.8 million, respectively. The revised economic useful lives are as follows: Years of Useful Lives Wireline Multimedia Wireless Outside Plant & Building 20 - 25 12 - 20 20 Cable & Drop Wire 13 - 15 5 - 13 15 Inside Plant 8 - 12 8 - 15 5 - 12 The effects of the change in accumulated depreciation for the year ended 31 December 1999 are as follows:- Consolidated Amount : Baht Million Wireline Multimedia Wireless Other Total Accumulated depreciation - previously stated 13,498.3 604.6 237.8 2.7 14,343.4 - as adjusted 22,034.3 1,334.8 140.3 1.8 23,511.2 Net increase (decrease) 8,536.0 730.2 (97.5) (0.9) 9,167.8 Company Amount : Baht Million Wireline Wireless Total Accumulated depreciation - previously stated 13,507.8 37.0 13,544.8 - as adjusted 22,083.4 44.8 22,128.2 Net increase (decrease) 8,575.6 7.8 8,583.4 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 4. Accounting changes (Continued) b) Acquisition of equity investment On 4 May 1998, the Group acquired a 49.45% equity interest in United Broadcasting Corporation Public Company Limited (UBC) in exchange for the Groups shares and assets of certain subsidiaries. Previously, the Group had reported a gain of Baht 876.6 million on the disposal of the subsidiaries and assets. The gain was calculated as the difference between the fair market value of the UBC common shares at the date the terms of the agreement were negotiated, and the Groups carrying value of the subsidiaries and assets. The market price of UBC shares quoted on the Stock Exchange of Thailand was Baht 15 per share at this date. TAS 43 and IAS 22 Business Combinations requires that the gain on disposal of the partial interest in the subsidiaries and assets should be calculated with reference to the quoted market price of UBC common shares at the closing date of this transaction. The quoted market price of UBC common shares at the closing date was Baht 34.75 per share, resulting in a total gain of Baht 7,701.7 million. Subsequently, in 1998 the Group suffered a dilution of its investment due to the issuance of new common shares by UBC. This dilution resulted in a loss of Baht 769.5 million. The Groups investment in UBC has been recorded using the fair value of the shares acquired plus the historical basis of the retained earnings in its subsidiaries and assets. The difference between the fair value of the shares acquired and the underlying assets in UBC resulted in goodwill of Baht 8,812.1 million which is being amortized by a straight-line basis over a period of 15 years. In 1999, the Group purchased additional UBC common shares from a third party at Baht 13.0 per share, resulting in additional goodwill of Baht 252 million. At 31 December 1999, deficit has been increased by Baht 73.4 million to reflect the amortization of goodwill. Accordingly, the Group has decreased deficit at 31 December 1999 and 1998 by Baht 4,462.59 million and Baht 4,445.37 million, respectively. c) Debt and equity issuance costs The Group previously treated the costs associated with the acquisition of corporate capital and acquisition of borrowings as organization costs which were capitalized and amortized over a period of five years. The Group changed its accounting policy for equity issuance costs by offsetting the costs against the related proceeds in accordance with IASC'S Standard Interpretation Committee No. 17. Debt issuance costs are amortized by an effective interest method over the terms of the related borrowings in accordance with the new Thai Accounting Framework. This change has the effect of a decrease of deficit at 1 January 1999 amounting to Baht 402.9 million and Baht 207.6 million for equity issuance costs and debt issuance costs, respectively. For the year ended 31 December 1999, the effect of this adjustment was to decrease net loss for the year by Baht 30.8 million. d) Borrowing costs capitalization One of the Groups subsidiaries previously expensed in the period incurred all interest costs on borrowings to finance the construction of its network and acquisition of an investment. This subsidiary changed its accounting policy to capitalize such cost in order to comply with guidance allowed under TAS 33 and IAS 23 Borrowing Costs and for consistency with the Groups policy to capitalize such interest costs. During the period of construction that is required to complete and prepare assets for intended use, interest costs on borrowings to finance the construction of assets are capitalized as part of the cost of the asset. Borrowing costs totaling Baht 345.7 million arising from financing entered into specifically for the construction of a network and investment are capitalized. This change has the effect of decreasing deficit at 1 January 1999 by Baht 286.76 and the loss for 1999 by Baht 59.03 million. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 4. Accounting changes (Continued) e) Share issue with no cash In 1996, a subsidiary, Telecom Holding Co., Ltd. entered into a shareholders agreement with Telephone Organization of Thailand (TOT) for providing multimedia network. Under the terms of the agreement, TOT received 40 million ordinary shares at par value of Baht 10 per share of Asia Multimedia Co., Ltd. (AM) for consideration. AM was subsequently granted a concession agreement from TOT for providing nationwide Non-Pots services. TOT received another 18.52 million ordinary shares of AM at par value of Baht 10 per share. The Group previously recorded assets and share capital for both transactions at par value, totaling Baht 585.25 million. The Groups management adopts IAS 38 Intangible Assets where the standard requires that the intangible assets and shares issued are recorded using fair value of the assets which is more clearly identifiable. The difference between fair value of the assets and the par value of the issued shares are recorded as share premium/discount under shareholders' equity. This change has an effect of an increase of deficit as at 1 January 2000 and a decrease of deficit as at 1 January 1999 by Baht 2.0 million and Baht 0.9 million, respectively. The net loss for the year ended 31 December 1999 increased by Baht 2.9 million. f) Capitalized dropwire A subsidiary operating the multimedia network recorded costs of dropwire installed for cable television subscribers as expense in the statement of income when it was installed for providing services to the subscriber. The Groups management reviewed the accounting policy for the telecom industry and determined to capitalize dropwire costs as operating network assets by depreciating it over its estimated useful life, or customer life, whichever one is shorter. The effect of this change was to decrease deficit as at 1 January 2000 and 1999 by Baht 173.7 million and Baht 165.7 million, respectively. The net loss for the year ended 31 December 1999 decreased by Baht 8.0 million. g) Proportional consolidation of one of the Groups investments In 1996, the Group entered into an agreement with the Communication Authority of Thailand (CAT) to establish a new company for the purpose of providing internet services. Under the terms of the agreement, the Group holds 65% of the common shares of this company with the remaining shares held by CAT and its employees. The agreement also provides CAT with veto rights over all significant operating and financial decisions of such company. These rights have never been exercised, nor does the Group anticipate that they will be exercised in the future. Previously, the Group had consolidated 100% of this company in its financial statements and reported CATs share of earnings as a minority interest. In accordance with TAS 46 and IAS 31 Financial Reporting of Interests in Joint Ventures the Groups interest in this company has now been proportionately consolidated. This change in accounting policy does not impact retained earnings for the years presented but the minority interests as at 1 January 2000 and 1999 increase by Baht 5.2 million. h) Presentation of revenue and cost of services a) Reporting revenue gross The presentation of revenue has been adjusted to reflect the gross receipt of telephone and related services due to the Company having assumed substantially all of the risks and rewards of providing such services in accordance with EITF issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. Revenue from telephone and other services are reported based on the total amount billed to customers. The amount representing TOTs share of revenues is treated as cost of services. Previously, the net of these two items was reported as revenue, with no recognition of expense. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 4. Accounting changes (Continued) h) Presentation of revenue and cost of services (Continued) b) Cash discounts net against installation revenue Installation revenue has been adjusted net of cash discounts and related cash-based promotions which were previously classified as selling and administrative expenses. The following table discloses the effects on revenue of Note a) and b) Consolidated Company 1999 1999 Original Restated Original Restated Baht Million Baht Million Baht Million Baht Million Revenue from telephone services 10,699.1 12,668.2 10,699.1 12,668.2 Other services 1,280.3 1,614.5 331.8 331.8 Total 11,979.4 14,282.7 11,030.9 13,000.0 c) Cost of services Cost of services account has been established to cover major operating and administrative expenses directly related to the provision of telephone and other services. Consolidated b Company 2000 1999 2000 1999 Baht Million Baht Million Baht Million Baht Million Cost of services: Revenue sharing 2,901.8 2,144.8 3,964.0 2,322.2 Network operating expenses 2,936.3 2,254.2 2,546.8 1,936.9 Effect from changes in estimation of network rental (Note 4.2) (685.2) - (685.2) - Depreciation 7,535.5 6,255.5 5,959.1 5,380.5 Total 12,688.4 10,654.5 11,784.7 9,639.6 There is no effect of these changes on presentation of operating income, net loss and balance sheet items. However, the revenue and cost accounts have changed significantly in equal, offsetting amounts as indicated above. These changes are reflected in the restated financial statements. i) Deferred income taxes The Group has implemented deferred taxation accounting in these financial statements in accordance with International Accounting Standard No. 12. Provision is made for all taxes payable in respect of taxable profits earned in the year. The Group also provides at current rates for taxation on all temporary differences between income for financial reporting and fiscal tax purpose under the liability method. Tax rate enacted or substantially enacted by the balance sheet date are used to determine deferred income tax. The principal temporary differences arise from depreciation of assets under concession agreements, provisions and tax losses carried forward. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available, against which the temporary differences and unused tax losses can be utilised. Management assesses the need for valuation allowance against deferred tax assets on an annual basis. No provision is made for taxes which may be withheld on possible future distribution of earnings retained by subsidiaries as there is no intention to distribute such retained earnings. The Group has not recognised the deferred taxation asset, as in managements estimate it is more likely than not that the deferred taxation asset will not be realized due to the historical operating losses incurred by the Groups operations and the time limits on the tax loss carried forward that arose on these losses. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 4. Accounting changes (Continued) 4.2 Change in accounting estimate Previously, the Company was under dispute with TOT on the tariff and the basis and methodology for computing rental charges for leased circuit and conduit. The Company claimed that rental as charged by TOT was not in compliance with a condition under the joint agreement with TOT, which allows TOT to charge the Company a reasonable and fair rental, considering the Company as a joint partner with TOT. In November 2000 the Board of TOT approved the tariffs of leased circuit and conduit rentals for the Company and they shall become effective as of the date of network utilization by the Company were overstated. As a result, the amount booked for the leased circuit and conduit rentals by the Company since 1992 decrease by Baht 685.21 million and was accordingly adjusted to the 2000 financial statements as a change in accounting estimation in accordance with TAS 39, Net Profit, or Loss for the Period, Fundamental Errors and Accounting Changes. The details of the amount of leased circuits and conduit rentals correctly recorded by the Company up to year ended 2000 and the amount of adjustment up to 31 December 1999 resulting from such tariff changes are as follows: Financial information ended 31 December 2000 Amount recorded Amount after adjustment Over recorded 1992-1999 2000 1992-1999 Baht million Baht million Baht million Leased circuit - direct route 501.49 145.92 337.88 Leased circuit - mixed traffic 412.61 66.95 138.52 Conduit rental 1,249.66 208.79 208.81 Total 2,163.76 421.66 685.21 5. Prior year adjustments Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht million Baht million Baht million Baht million Changes in accounting policies: (6,637.60) a) Changes in depreciation policy of network equipment (9,167.76) (7,047.18) (8,583.35) - b) Acquisition of equity investment 4,462.59 4,445.37 - 641.40 c) Debt and equity issuance costs 610.56 641.40 610.56 - d) Borrowing costs capitalization 345.79 286.76 - - e) Share issue with no cash (2.02) 0.89 - - f) Capitalized drop-wire 173.68 165.68 - 3,910.45 Cumulative effect from the changes to the investments in subsidiaries - - 4,163.82 Correction of errors: - 5.1 Debt restructuring 400.46 - - (1,079.24) 5.2 Provisions and others (1,102.55) (1,657.91) (470.28) (3,164.99) (4,279.25) (3,164.99) (4,279.25) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 5. Prior year adjustments (Continued) 5.1 Debt restructuring In 1999, one of the Groups subsidiaries had entered into a debt restructuring agreement with creditors for liability pertaining to the Personal Communication Telephone equipment, by which the subsidiary was liable to pay a debt restructuring fee at the amount as stipulated in the agreement, which is due on a quarterly basis from November 1999 to September 2004. The whole amount of the restructuring fee was charged to the statement of income for the year ended 31 December 1999. However, in the first quarter of year 2000, management made an adjustment of such transaction to comply with the Thai Accounting Standard No. 34 Accounting for Troubled Debt Restructuring (effective 30 September 1998). The adjustment had an effect to decrease the deficit as at 31 December 1999 by approximately Baht 400.5 million. 5.2 Provisions and others The Group reviewed the carrying value of certain assets and decided to establish appropriate provisions to reflect obsolete, impaired, and unutilized inventories, network equipment and other operating assets. Investments in certain subsidiaries and associates have also been reviewed for any impairment. The effects of these provisions are as follows: Consolidated Company 2000 1999 2000 1999 Baht Million Baht Million Baht Million Baht Million - Inventories (154.07) (6.02) (27.55) - - Network equipment (533.09) (1,103.66) (533.09) (1,103.66) - Other operating assets (5.97) (225.70) - - - Investments (104.21) (24.29) - - - Others (305.21) (298.24) 90.36 24.42 (1,102.55) (1,657.91) (470.28) (1,079.24) 5.3 Minority interests Consolidated (Restated) 2000 1999 Baht Baht Beginning balance, as previously reported 462,619,867 462,627,053 Prior year adjustments Effect from change in accounting policies - Change of depreciation policy of network equipment (90,042,145) (58,620,551) - Share issue with no cash 23,371,428 23,648,851 - Capitalized drop-wire 16,586,137 15,822,348 - Others (53,650,080) (32,720,533) Effect from correction of errors 153,118,131 139,518,866 Total prior year adjustments 49,383,471 87,648,981 Beginning balance, as restated 512,003,338 550,276,034 Increase during the year - - Share of net loss of subsidiaries (13,335,330) (31,812,696) Sale of subsidiary (Note 28) - (6,460,000) Ending balance 498,668,008 512,003,338 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 6. Debt restructuring 6.1 Debt restructuring of the Company On 22 December 1999, the Company signed Outline Term Sheet for Restructuring and the Company subsequently entered into debt restructuring agreements with its creditors, comprising both secured and unsecured creditors which became effective on 31 March 2000. The principal provisions include, among others, the following: Secured creditors (a) on 31 March 2000, the Company issued 702,000,000 convertible preference shares to a secured creditor for cash proceeds of U.S. dollars 150 million. The cash proceeds from the offering were used to repay unsecured liabilities under the debt restructuring plan. The preference shares have Baht 10 par value with conversion rights to common shares in the second to eighth year from issue at a ratio of 1:1. The preference shares are entitled to a dividend for the first eight years set at the rate of 10% per annum, cumulative plus dividend payable, if any, to the holders of common shares. With effect from the eighth anniversary of issue, the preference shares are entitled to a non- cumulative dividend at the rate of 0.1% per annum, plus dividend payable, if any, to the holders of common shares; (b) the secured creditors have agreed to defer the repayment term of their long-term loans. The repayment will be first due in the second quarter of the year 2002, and repaid through the year 2008. Interest rates were changed from the fixed rates to the rates based on the average MLR of the certain local banks plus 0.75% per annum for the Baht loans and on LIBOR plus agreed margins ranging from 1%-1.75% per annum for the U.S. Dollar loans, payable on a monthly basis; (c) the secured creditors agreed to extend the repayment term of their overdraft credit facilities to be due in December 2008. Interest rates are based on the average MOR of banks specified in the agreement; and (d) the Company was granted permission to withdraw the loan facility under a Standby Letter of Credit, which certain local banks issued to a subsidiary under the conditions of a joint-loan agreement entered into between the subsidiary and the said banks, of Baht 5,000 million to finance the Companys operations under certain conditions. Unsecured creditors Two options of repayment were offered to unsecured creditors, the principal terms were as follows: 1 the Company offered to repay unsecured creditors 50% of the principal amount outstanding with the condition that the remaining balance of principal and the defaulted accrued interest were waived; alternatively 2 the Company offered to repay the unsecured creditors 40% of the principal amount outstanding. The remaining 60% would be repaid in eight semi-annual installments starting from January 2014, with compound interest of 2% per annum. The remaining amount owing to the unsecured creditors is subordinated to the repayments of debt payable to the secured creditors and the preference dividend referred to above. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 6. Debt restructuring (Continued) 6.1 Debt restructuring of the Company (Continued) The financial results of the debt restructuring of the Company are summarized as follows: Secured creditors Debt before Debt after Restructuring Restructuring Currency Million Currency Million Loans in U.S. Dollars (U.S. Dollars) 770.5 770.5 Loans in Baht (Baht) 18,833.7 18,833.7 Restructuring of the secured liabilities represented changes to the terms of loan repayments and changes in interest rates only. Therefore, there has been no change in the carrying value of liabilities. Unsecured creditors Debt before Debt after Gain on Restructuring Restructuring Restructuring Baht Million Baht Million Baht Million Creditors without gain from restructuring 8,869.5 9,737.3 - Creditors with gain from restructuring 6,600.8 5,021.9 1,578.9 Gain from debt restructuring, net of related expenses 1,378.1 Gain from debt restructuring, net of related expenses per share (Baht) 0.6 Debt before restructuring included principal amount and accrued interest. Debt after restructuring represents principal amount payable at restructuring or to be paid after restructuring, future interest until full settlement and withholding taxes absorbed by the Company. 6.2 Debt restructuring of subsidiaries On 2 March 2000, a subsidiary of the Group entered into a debt restructuring agreement for the amount of Baht 4,033.2 million with certain local banks and financial institutions. The principal provisions included the following: - the group of creditors agreed to extend the repayment date to 31 December 2002, and to allow the due date to be extended on a yearly basis. The said extended date will not be extended beyond 31 December 2009. The subsidiary must pay for an extension fee of 0.5% - 2% of the loan as stipulated in the agreement; - the subsidiary agreed to pay interest at the rate of MLR + 2% (MLR being the average MLR of four principal banks) at the month end; and - under the provision of the debt restructuring agreement, the subsidiary has pledged the shares of its four subsidiaries as collateral. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 7. Segment information The Group has modified the presentation of segment information in order to provide more useful information to the users of these financial statements. Consolidated business segment Baht : Million For the year ended 31 December 2000 Wireline DDN Wireless Multimedia Internet Other Group Revenues 14,732 342 3,034 881 95 304 19,388 Segment result 5,003 151 318 104 40 (36) 5,580 Unallocated costs (3,077) Operating profit 2,503 Finance cost (5,823) Share of associates (1,129) Other income and other non operating expenses (174) Loss before tax (4,623) Income tax (76) Loss from ordinary activities (4,699) Extraordinary item 1,378 Loss before minority interest (3,321) Minority interest 13 Net loss for the year (3,308) Segment assets 51,371 773 14,655 4,317 47 2,433 73,596 Long-term investment in associates and other companies 9,391 Unallocated asset 5,397 Consolidated total assets 88,384 Segment liabilities 62,870 43 10,110 663 41 1,253 74,980 Unallocated liabilities 4,777 Consolidated total liabilities 79,757 Capital expenditure 858 1 178 61 9 256 1,363 Unallocated capital expenditure 676 Consolidated total capital expenditure 2,039 Depreciation and amortization (5,458) (67) (1,180) (575) (3) (245) (7,527) Unallocated depreciation and (181) amortization Consolidated total depreciation and amortization (7,708) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 7. Segment information (Continued) Baht : Million For the year ended 31 December 2000 Wireline DDN Wireless Multimedia Internet Other Group Revenues 12,497 195 843 905 76 427 14,943 Segment result 3,261 83 187 144 26 213 3,914 Unallocated costs (2,910) Operating profit 1,004 Finance cost (7,474) Share of associates (896) Other income and other non operating expenses (26) Loss before tax (7,392) Income tax (115) Loss from ordinary activities (7,507) Minority interest 32 Net loss for the year (7,475) Segment assets 56,944 462 14,019 5,089 35 2,935 79,484 Long-term investment in associates and other companies 9,411 Unallocated asset 5,721 Consolidated total assets 94,616 Segment liabilities 66,319 25 9,896 1,364 28 1,289 78,921 Unallocated liabilities 7,576 Consolidated total liabilities 86,497 Capital expenditure 864 1 109 78 4 107 1,163 Unallocated capital expenditure 157 Consolidated total capital expenditure 1,320 Depreciation and amortization (5,295) (39) (142) (562) (3) (239) (6,280) Unallocated depreciation and amortization (162) Consolidated total depreciation and amortization (6,442) TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 8. Loss per share Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the years (2,223 million shares for the years ended 31 December 2000 and 1999). 2000 1999 Baht Million Baht Million Net loss attributable to shareholder (3,308.15) (7,474.77) Cumulative dividend of preferred shares (529.38) - Net loss used to determine basic loss per share (3,837.53) (7,474.77) Weighted average number of ordinary shares in issue (million shares) 2,223 2,223 Basic loss per share (Baht per share) (1.73) (3.36) Diluted earnings (loss) per share for the years ended 31 December 2000 and 1999 does not include the effect of 702,000,000 shares of convertible preferred stock and 58,150,000 stock options on an as-if-converted method and treasury stock method respectively, as the effect of their inclusion is antidilutive. For the year ended 31 December 2000 and 1999, there were no potentially dilutive common equivalent shares. Supplementary earnings per share data excluding the extraordinary item (for this purpose the weighted average shares number is not changed). 2000 1999 Baht Million Baht Million Net loss attributable to shareholder (3,308.15) (7,474.77) Cumulative dividend of preferred shares (529.38) - Extraordinary item (Note 6) (1,378.05) - Net loss used to determine basic loss per share (5,215.58) (7,474.77) Weighted average number of ordinary shares in issue (million shares) 2,223 2,223 Basic loss per share excluding extraordinary item (Baht per share) (2.35) (3.36) 9. Cash and cash equivalents Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Cash on hand 14,764,092 13,625,226 13,694,676 11,764,606 Cash at banks 1,039,857,365 1,284,246,750 140,117,149 53,840,146 1,054,621,457 1,297,871,976 153,811,825 65,604,752 The interest rates on cash at banks deposits were ranging from 0.75% - 2.0% and 1.0 % - 5.0% during the years 2000 and 1999, respectively. 10. Restricted cash Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Saving and current accounts 4,058,137,434 2,025,335,174 4,058,137,434 1,865,968,984 Fixed deposit accounts 250,229,475 696,586,416 - 451,884,488 4,308,366,909 2,721,921,590 4,058,137,434 2,317,853,472 The interest rates for time deposit accounts ranged from 0.75% - 2.0% and 1.0 % - 5.0% during the years 2000 and 1999, respectively. Under the terms of loan and supplier agreements, the Company and certain subsidiaries have pledged the above bank accounts as collateral with the contracted parties. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 11. Available-for-sale securities Current: Consolidated At 31 December 2000 Paid-up % At Cost At Market Carrying Capital Ownership Method Price Value Business Relationship Thousand interest Baht000 Baht000 Baht000 Available-for-sale securities United Communication Industry Baht Public Company Limited Telecommunication Shareholder 2,339,623 0.21 86,269 17,477 17,477 Thai Orchid 2 Mutual Fund Shareholder 1,000,000 0.50 5,000 2,690 2,690 Others Shareholder 1,249 1,249 Total 91,269 21,416 21,416 Consolidated At 31 December 1999 Paid-up % At Cost At Market Carrying capital Ownership Method Price Value Business Relationship Thousand interest Baht000 Baht000 Baht000 Available-for-sale securities FLAG Telecom Holdings Limited Telecommunication Shareholder USD 80 10.92 707,197 707,197 707,197 United Communication Industry Baht Public Company Limited Telecommunication Shareholder 2,339,623 0.21 86,269 16,485 16,485 Thai Orchid 2 Mutual Fund Shareholder 1,000,000 0.50 5,000 4,629 4,629 Total 798,466 728,311 728,311 Non-current: At 31 December 2000 Consolidated Paid-up % At Cost At Market Carrying Capital Ownership Method Price Value Business Relationship Thousand interest Baht000 Baht000 Baht000 Available-for-sale security FLAG Telecom Holdings Limited Telecommunication Shareholder USD 80 10.92 2,871,638 3,960,783 3,960,783 Total 2,871,638 3,960,783 3,960,783 At 31 December 1999, a portion of the investment on FLAG Telecom Holdings Limited was classified as investment in subsidiaries and associates (Note 28) and the remaining portion intended to be sold was classified in available-for-sale securities in current assets. A subsidiary of Telecom Holding Company Limited has deposited 1,500,000 common shares of FLAG Telecom Holdings Limited (FLAG), which represents 10% of total investment in FLAG, in a Collateral Account with Credit Suisse First Boston International in accordance with the provisions stipulated in SAILS Pledge Agreement executed on 5 September 2000 (Note 20). The remaining investments in FLAG are pledged as collateral against borrowings (as mentioned in Note 30.6). TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 11. Available-for-sale securities (Continued) Movement of available-for-sale-securities: Consolidated For the years ended 31 December 2000 1999 Baht Baht Current: Opening net book amount 728,311,850 57,307,200 Reclassify (20,166,557) 707,197,250 Exchange differences (6,308,383) - Additions 1,249,564 - Disposals (680,722,310) (46,037,000) Revaluation surplus/(deficit) (948,100) 9,844,400 Closing net book amount 21,416,064 728,311,850 Non current: Opening net book amount - - Reclassify from investment in subsidiaries, associates and others 2,871,637,943 - Exchange differences 2,780,620,947 - Additions - - Disposals - - Revaluation surplus/(deficit) (1,691,475,558) - Closing net book amount 3,960,783,332 - Available-for-sale investments, comprising principally marketable equity securities, are fair valued annually at the close of business on 31 December. For investments traded in active markets, fair value is determined by reference to Stock Exchange quoted bid prices. For other investments, fair value is estimated by reference to the current market value of similar instruments or by reference to the discounted cash flows of the underlying net assets. Available-for-sale investments are classified as non-current assets, unless they are expected to be realised within twelve months of the balance sheet date or unless they need to be sold to raise operating capital. 12. Short-term investments Consolidated 2000 1999 Baht Baht Time deposit accounts 17,158,787 1,780,745 17,158,787 1,780,745 The interest rates on bank fixed deposits ranged from 0.75 - 2.0 % and 1.0 - 5.0 % during the years 2000 and 1999, respectively. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 13. Trade accounts receivable, net Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Receivable from TOT: - Invoiced 2,610,300,074 2,703,482,964 2,610,300,074 2,703,482,964 - Uninvoiced 885,252,818 515,555,666 885,252,818 515,555,666 Billed customers 2,512,019,615 2,291,776,585 2,512,019,615 2,291,776,585 Other accounts receivable 181,837,866 430,938,543 - - 6,189,410,373 5,941,753,758 6,007,572,507 5,510,815,215 Less: Allowance for doubtful accounts (355,157,370) (335,269,479) (283,607,595) (287,481,550) Trade accounts receivable, net 5,834,253,003 5,606,484,279 5,723,964,912 5,223,333,665 Outstanding trade accounts receivable as at 31 December can be analyzed as follows: Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Current 1,934,627,936 1,755,332,514 1,848,916,853 1,552,495,343 Less than 3 months 1,504,031,109 2,065,536,437 1,459,208,647 1,970,503,583 3 - 6 months 222,568,967 252,434,054 221,889,324 189,558,302 6 - 12 months 483,677,869 660,450,640 481,744,526 658,883,096 More than 12 months 2,044,504,492 1,208,000,113 1,995,813,157 1,139,374,891 6,189,410,373 5,941,753,758 6,007,572,507 5,510,815,215 Less: Allowance for doubtful account (355,157,370) (335,269,479) (283,607,595) (287,481,550) Trade accounts receivable, net 5,834,253,003 5,606,484,279 5,723,964,912 5,223,333,665 Outstanding trade accounts receivable aged more than 12 months include the amount of Baht 1,779.1 million (1999 : Baht 892.32 million) relating to disputed revenue sharing on value added tax, value added tax of assets transferred to TOT and the fault notification and dropwire maintenance services charged to TOT. These accounts receivable are expected to settle by the rental of equipment payables to TOT and hence no provision has been established against the outstanding amount. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Group's large number of customers, who are end users of telephone services, covering business and residential (other than TOT as mentioned above). The Group's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group's trade accounts receivable. 14. Inventories, net Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Spareparts for networks (at net realisable value) 497,055,987 397,974,240 405,644,503 291,228,934 Finished goods (at net realisable value) 357,293,518 82,790,186 109,439,350 12,214,760 Work in process (at cost) 14,376,672 2,057,276 14,341,179 1,937,000 Goods in transit (at net realisable value) 6,994,550 206,381,374 - - Inventories, net 875,720,727 689,203,076 529,425,032 305,380,694 Inventories of Baht 65.3 million (1999: nil) have been pledged as collateral for trust receipt. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 15. Other current assets Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Income tax deducted at source 515,714,355 359,115,944 492,726,436 358,853,939 Claimable value added tax 255,943,208 533,476,676 39,449,059 7,443,028 Interest receivable 130,671,502 127,019,171 126,621,015 123,546,854 Value added tax pending receipt of tax invoices 97,515,334 1,000,068,657 85,032,853 984,150,656 Others 358,168,482 302,691,971 319,335,580 238,393,248 1,358,012,881 2,322,372,419 1,063,164,943 1,712,387,725 16. Investment property Consolidated Year ended 31 December 2000 1999 Baht Baht Opening net book amount 63,898,148 92,789,180 Additions - - Disposals (7,400,000) - Reclassify (1,889,227) (17,499,819) Provision (reverse) for the year 3,364,052 (11,391,213) Closing net book amount 57,972,973 63,898,148 As at 31 December Cost 135,978,619 145,267,846 Allowance for decline in value (78,005,646) (81,369,698) Net book amount 57,972,973 63,898,148 17. Property, plant and equipment, net Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht Baht Baht Baht Network equipment Beginning balance - as previously reported 77,568,780,905 81,333,358,341 64,336,667,047 67,782,250,788 - prior year adjustments (9,425,230,778) (7,702,062,632) (9,121,941,532) (7,510,347,010) Beginning balance, as restated 68,143,550,127 73,631,295,709 55,214,725,515 60,271,903,778 Additions 1,104,455,205 1,023,536,796 858,747,320 865,915,754 Disposals (348,053,051) (1,845,911) (344,313,143) (1,237,681) Adjustments 118,234,993 (513,393,503) 148,426,648 (595,205,096) Depreciation charge (7,202,165,347) (5,996,042,964) (5,898,099,690) (5,326,651,240) Closing net book amount 61,816,021,927 68,143,550,127 49,979,486,650 55,214,725,515 Non-network equipment Beginning balance - as previously reported 2,110,295,802 2,505,630,642 327,818,924 422,647,734 - prior year adjustments (918,597) (18,135,294) (13,829,797) (13,811,648) Beginning balance, as restated 2,109,377,205 2,487,495,348 313,989,127 408,836,086 Additions 815,291,973 196,681,784 528,484,582 91,267,630 Disposals (11,280,230) (90,474,758) (4,171,469) (15,414,220) Adjustments (30,875,992) (58,608,510) (39,943,769) (26,815,573) Depreciation charge (435,937,828) (425,716,659) (150,771,351) (143,884,796) Closing net book amount 2,446,575,128 2,109,377,205 647,587,120 313,989,127 Total 64,262,597,055 70,252,927,332 50,627,073,770 55,528,714,642 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 17. Property, plant and equipment (Continued) Consolidated Network equipment Land & Land Building & Telephone Network Public Multi-Media Power Supply Work in And Improvement Improvement Equipment Phone Network Computer Progress Total Year ended 31 December 2000 Opening net book amount 1,867,629,316 1,602,396,658 57,793,946,906 277,486,940 3,619,160,769 2,022,541,918 960,387,620 68,143,550,127 Additions - - 484,227,330 748,603 59,336,372 - 560,142,900 1,104,455,205 Disposals - - (337,552,399) (6,760,744) (3,739,908) - - (348,053,051) Transfer to assets - 4,178,297 352,820,581 525,842,897 - 25,632,032 (908,473,807) - Adjustments - 284,762 493,336,391 286,851 (2,338,096) - (373,334,915) 118,234,993 Depreciation (charge)/reverse - (97,993,919) (6,062,458,324) (142,778,800) (537,321,197) (361,613,107) - (7,202,165,347) Closing net book amount 1,867,629,316 1,508,865,798 52,724,320,485 654,825,747 3,135,097,940 1,686,560,843 238,721,798 61,816,021,927 At 31 December 2000 Cost 1,867,629,316 1,938,640,515 78,902,507,903 976,047,848 5,007,440,896 3,528,798,189 238,721,798 92,459,786,465 Accumulated depreciation - (429,774,717) (26,178,187,418) (321,222,101) (1,872,342,956) (1,842,237,346) - (30,643,764,538) Net book amount 1,867,629,316 1,508,865,798 52,724,320,485 654,825,747 3,135,097,940 1,686,560,843 238,721,798 61,816,021,927 Year ended 31 December 1999 Opening net book amount 1,866,453,316 1,611,761,810 57,179,553,779 306,790,091 4,138,531,718 2,372,858,535 6,155,346,460 73,631,295,709 Additions - 19,286,982 403,032,586 - 50,794,621 - 550,422,607 1,023,536,796 Disposals - - (1,237,681) - (608,230) - - (1,845,911) Transfer to assets 1,176,000 64,798,946 4,949,663,082 34,441,413 - - (5,050,079,441) - Adjustments - 163,044,492 681,538 18,182,473 - (695,302,006) (513,393,503) Depreciation charge - (93,451,080) (4,900,109,352) (64,426,102) (587,739,813) (350,316,617) - (5,996,042,964) Closing net book amount 1,867,629,316 1,602,396,658 57,793,946,906 277,486,940 3,619,160,769 2,022,541,918 960,387,620 68,143,550,127 At 31 December 1999 Cost 1,867,629,316 1,934,177,457 78,066,402,713 461,356,319 4,953,927,516 3,503,166,157 960,387,620 91,747,047,098 Accumulated depreciation - (331,780,799) (20,272,455,807) (183,869,379) (1,334,766,747) (1,480,624,239) - (23,603,496,971) Net book amount 1,867,629,316 1,602,396,658 57,793,946,906 277,486,940 3,619,160,769 2,022,541,918 960,387,620 68,143,550,127 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 17. Property, plant and equipment (Continued) Consolidated Land and Furniture, Power Land Building & Fixture and Supply & Work in Non network equipment Improvement Improvement Equipment Computer Vehicle Progress Total Year ended 31 December 2000 Opening net book amount 194,688,310 1,128,043,972 504,552,158 137,719,936 124,502,015 19,870,814 2,109,377,205 Additions - 8,801,670 99,941,157 271,706,226 236,056,972 198,785,948 815,291,973 Disposals - (1,084,384) (7,844,811) (1,241,288) (1,109,747) - (11,280,230) Transfer to assets - 3,517,243 11,659,667 30,532,016 - (45,708,926) - Adjustments 540,000 1,349,227 7,178,550 64,863 - (40,008,632) (30,875,992) Depreciation charge (2,354,780) (90,136,243) (160,790,977) (95,622,213) (87,033,615) - (435,937,828) Closing net book amount 192,873,530 1,050,491,485 454,695,744 343,159,540 272,415,625 132,939,204 2,446,575,128 At 31 December 2000 Cost 206,391,167 1,611,289,266 1,355,748,737 1,006,248,551 610,817,982 132,939,204 4,923,434,907 Accumulated depreciation (13,517,637) (560,797,781) (901,052,993) (663,089,011) (338,402,357) - (2,476,859,779) Net book amount 192,873,530 1,050,491,485 454,695,744 343,159,540 272,415,625 132,939,204 2,446,575,128 Year ended 31 December 1999 Opening net book amount 180,763,834 1,218,800,628 692,093,610 180,417,295 183,142,454 32,277,527 2,487,495,348 Additions 555,130 11,684,466 45,240,387 51,427,196 73,368,687 14,405,918 196,681,784 Disposals (103,906) (12,208,826) (25,791,153) (593,069) (51,777,804) - (90,474,758) Transfer to assets - - - - - - - Adjustments 16,036,844 1,462,975 (49,295,698) - - (26,812,631) (58,608,510) Depreciation (charge)/reverse (2,563,592) (91,695,271) (157,694,988) (93,531,486) (80,231,322) - (425,716,659) Closing net book amount 194,688,310 1,128,043,972 504,552,158 137,719,936 124,502,015 19,870,814 2,109,377,205 At 31 December 1999 Cost 205,851,165 1,610,334,189 1,250,636,231 713,017,317 467,377,900 19,870,814 4,267,087,616 Accumulated depreciation (11,162,855) (482,290,217) (746,084,073) (575,297,381) (342,875,885) - (2,157,710,411) Net book amount 194,688,310 1,128,043,972 504,552,158 137,719,936 124,502,015 19,870,814 2,109,377,205 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 17. Property, plant and equipment (Continued) Company Telephone Public Power Supply Land & Land Building & Network And Work in Network equipment Improvement Improvement Equipment Phone Computer Progress Total Year ended 31 December 2000 Opening net book amount 1,867,629,316 1,602,396,658 48,484,283,063 277,486,940 2,022,541,918 960,387,620 55,214,725,515 Additions - - 297,855,817 748,603 - 560,142,900 858,747,320 Disposals - - (337,552,399) (6,760,744) - - (344,313,143) Transfer to assets - 4,178,297 352,820,581 525,842,897 25,632,032 (908,473,807) - Adjustments - 284,762 521,189,950 286,851 - (373,334,915) 148,426,648 Depreciation charge - (97,993,919) (5,295,713,863) (142,778,801) (361,613,107) - (5,898,099,690) Closing net book amount 1,867,629,316 1,508,865,798 44,022,883,149 654,825,746 1,686,560,843 238,721,798 49,979,486,650 At 31 December 2000 Cost 1,867,629,316 1,938,640,515 69,416,059,856 976,047,848 3,528,798,189 238,721,798 77,965,897,522 Accumulated depreciation - (429,774,717) (25,393,176,707) (321,222,102) (1,842,237,346) - (27,986,410,872) Net book amount 1,867,629,316 1,508,865,798 44,022,883,149 654,825,746 1,686,560,843 238,721,798 49,979,486,650 Year ended 31 December 1999 Opening net book amount 1,866,453,316 1,611,761,810 47,958,693,566 306,790,091 2,372,858,535 6,155,346,460 60,271,903,778 Additions - 19,286,982 296,206,165 - - 550,422,607 865,915,754 Disposals - - (1,237,681) - - - (1,237,681) Transfer to assets 1,176,000 64,798,946 4,949,663,082 34,441,413 - (5,050,079,441) - Adjustments - - 99,415,372 681,538 (695,302,006) (595,205,096) Depreciation charge - (93,451,080) (4,818,457,441) (64,426,102) (350,316,617) - (5,326,651,240) Closing net book amount 1,867,629,316 1,602,396,658 48,484,283,063 277,486,940 2,022,541,918 960,387,620 55,214,725,515 At 31 December 1999 Cost 1,867,629,316 1,934,177,457 68,718,051,445 461,356,319 3,503,166,157 960,387,620 77,444,768,314 Accumulated depreciation - (331,780,799) (20,233,768,382) (183,869,379) (1,480,624,239) - (22,230,042,799) Net book amount 1,867,629,316 1,602,396,658 48,484,283,063 277,486,940 2,022,541,918 960,387,620 55,214,725,515 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 17. Property, plant and equipment (Continued) Company Furniture, Power Work in Leasehold and Fixture and Supply & Non network equipment Improvement Equipment Computer Progress Total Year ended 31 December 2000 Opening net book amount 27,475,372 128,923,005 137,719,936 19,870,814 313,989,127 Additions 3,553,237 54,439,171 271,706,226 198,785,948 528,484,582 Disposals (1,084,384) (1,845,797) (1,241,288) - (4,171,469) Transfer to assets 3,517,243 11,659,667 30,532,016 (45,708,926) - Adjustments - - 64,863 (40,008,632) (39,943,769) Depreciation charge (7,553,105) (47,596,033) (95,622,213) - (150,771,351) Closing net book amount 25,908,363 145,580,013 343,159,540 132,939,204 647,587,120 At 31 December 2000 Cost 56,524,562 401,346,554 1,006,248,551 132,939,204 1,597,058,871 Accumulated depreciation (30,616,199) (255,766,541) (663,089,011) - (949,471,751) Net book amount 25,908,363 145,580,013 343,159,540 132,939,204 647,587,120 Year ended 31 December 1999 Opening net book amount 41,709,140 154,432,124 180,417,295 32,277,527 408,836,086 Additions 5,344,117 20,090,399 51,427,196 14,405,918 91,267,630 Disposals (12,208,826) (2,612,325) (593,069) - (15,414,220) Transfer to assets - - - - - Adjustments - (2,942) - (26,812,631) (26,815,573) Depreciation charge (7,369,059) (42,984,251) (93,531,486) - (143,884,796) Closing net book amount 27,475,372 128,923,005 137,719,936 19,870,814 313,989,127 At 31 December 1999 Cost 62,167,144 338,270,140 713,017,317 19,870,814 1,133,325,415 Accumulated depreciation (34,691,772) (209,347,135) (575,297,381) - (819,336,288) Net book amount 27,475,372 128,923,005 137,719,936 19,870,814 313,989,127 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 18. Intangible assets Consolidated Right to operate Right to hang Non-Pot Dropwire Total Year ended 31 December 2000 Baht Baht Baht Opening net book amount 339,525,210 201,561,500 541,086,710 Amortization charge (19,074,450) (9,093,000) (28,167,450) Closing net book amount 320,450,760 192,468,500 512,919,260 At 31 December 2000 Cost 381,489,000 227,325,000 608,814,000 Accumulated amortization (61,038,240) (34,856,500) (95,894,740) Net book amount 320,450,760 192,468,500 512,919,260 Year ended 31 December 1999 Opening net book amount 358,599,660 210,654,500 569,254,160 Amortization charge (19,074,450) (9,093,000) (28,167,450) Closing net book amount 339,525,210 201,561,500 541,086,710 At 31 December 1999 Cost 381,489,000 227,325,000 608,814,000 Accumulated amortization (41,963,790) (25,763,500) (67,727,290) Net book amount 339,525,210 201,561,500 541,086,710 19. Other non-current assets Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht Baht Baht Baht Value added tax pending receipt of tax invoices related to debt restructuring 323,087,370 - 322,787,370 - Prepaid withholding tax 188,683,035 - - - Advance to contractors - 550,036,089 - 502,972,412 Deposits 45,463,811 196,980,291 30,054,218 36,809,182 Others 926,128 19,429,322 - - Total 558,160,344 766,445,702 352,841,588 539,781,594 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 20. Borrowings Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht Baht Baht Baht Current - Bank overdrafts 152,525 45,772 - - - Bank and finance institution borrowings 1,735,017,300 4,228,243,523 - - - Finance leases 47,308,586 - - - Total Current 1,782,478,411 4,228,289,295 - - Non-Current - Bank overdrafts - 107,422,898 - 107,422,898 - Bank and finance institution borrowings 55,025,092,412 50,258,442,295 52,126,705,591 47,681,035,865 - Finance leases 143,371,296 - - - - Supplier Credit 8,651,176,722 14,621,702,382 8,651,176,722 14,621,702,381 Total Non-Current 63,819,640,430 64,987,567,575 60,777,882,313 62,410,161,144 Total Borrowings 65,602,118,841 69,215,856,870 60,777,882,313 62,410,161,144 The borrowings are mainly denominated in Thai Baht, United States Dollars and Japanese Yen. The Group has reclassified bank overdrafts and other current borrowings in the financial statements as at 31 December 1999 to non-current borrowings as a result of the debt restructuring agreements. In 2000, bank and finance institution borrowings under non-current liabilities included the secured loans amounting to Baht 21.66 billion (1999: Baht 18.78 billion) from Kreditanstalt Fuer Wiederaufbau (KfW) which as at March 2000 became a related party (Note 28). The borrowings include secured liabilities (leases and bank and finance institution borrowings) in total amount of Baht 35.29 billion (1999: Baht 54.49 billion) and Baht 30.47 billion (1999: Baht 47.68 billion) for the consolidated and the Company financial statements, respectively. The bank borrowings are secured over certain network property and equipment, land and building of the Group (as mentioned in Note 30.6). Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Telecom Holding Co., Ltd, a Companys subsidiary, is presently in the processess of negotiating with its Thai Bank lenders to extend the deadline for repayment of 60% of its total outstanding debts amounting to Baht 1,610.19 million included in current portion of borrowings, pursuant to the Debt Restructuring Agreement, from 30 December, 2000 to 30 December, 2001. The interest rate exposure of the borrowings of the Group is as follows: Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Total borrowings: - at fixed rates 8,841,856,605 - 8,651,176,722 - - at floating rates 54,977,783,825 69,215,856,870 52,126,705,591 62,410,161,144 63,819,640,430 69,215,856,870 60,777,882,313 62,410,161,144 Consolidated Company 2000 2000 Weighted average effective interest rates: - bank overdrafts 9.05% 9.05% - bank and finance institution borrowings 8.31% 8.24% - lease liabilities 10.78% - - supplier credit 1.00% 1.00% TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 20. Borrowings (Continued) The carrying amounts and fair values of certain non-current borrowings are as follows: Carrying amounts Fair values 2000 2000 Baht Baht Non-current bank borrowings 33,369,125,141 34,100,466,689 Loan from a related company (Note 28) 21,655,967,271 21,521,554,562 Supplier credit 8,651,176,722 7,950,739,962 The fair values are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date. The carrying amounts of short-term borrowings, lease obligations and the convertible bond approximate to their fair value. Maturity of non current borrowings (excluding finance lease liabilities): Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Between 1 and 2 years 1,483,026,110 8,245,024,664 973,990,880 7,561,856,874 Between 2 and 5 years 18,464,007,042 9,969,094,090 17,103,208,296 9,274,342,404 Over 5 years 43,729,235,982 46,773,448,821 42,700,683,137 45,573,961,866 63,676,269,134 64,987,567,575 60,777,882,313 62,410,161,144 Finance lease liabilities-minimum lease payments Consolidated 2000 1999 Baht Baht Not later than 1 year 66,017,154 - Later than 1 year and not later than 5 years 157,730,502 - Later than 5 year - - 223,747,656 - Future finance charges on finance leases (33,067,774) - Present value of finance lease liabilities 190,679,882 Representing lease liabilities: - - current 47,308,586 - - non current 143,371,296 - 190,679,882 The present value of finance lease liabilities is as follows: Consolidated 2000 1999 Baht Baht Not later than 1 year 47,308,586 - Later than 1 year and not later than 5 years 143,371,296 - Later than 5 year - - 190,679,882 - TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 20. Borrowings (Continued) The Group has the following undrawn committed borrowing facilities: Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Floating rate - expiring within one year - - - - - expiring beyond one year 5,120,000,000 5,012,577,102 5,120,000,000 5,012,577,102 Fixed rate - expiring within one year - - - - - expiring beyond one year - - - - 5,120,000,000 5,012,577,102 5,120,000,000 5,012,577,102 The movements in borrowings can be analyzed as follows: For the year ended Consolidated Company 31 December 2000 Baht Baht Opening amount, net 69,215,856,870 62,410,161,144 Additional borrowings 913,321,759 38,137,008 Repayment of long-term borrowings (8,874,703,476) (6,006,432,873) Haircut/Write-off (1,240,590,772) (1,240,590,772) Currency translation 4,782,078,815 4,766,889,619 Reclassification 778,792,521 778,792,521 Amortized debt issuance cost 30,925,666 30,925,666 Other adjustment (3,562,542) - Closing amount, net 65,602,118,841 60,777,882,313 For the year ended Consolidated Company 31 December 1999 Baht Baht Opening amount, net 69,594,685,644 62,452,053,396 Additional borrowings 856,501,800 - Repayment of long-term borrowings (2,055,335,094) (813,152,142) Currency translation 789,163,340 740,418,710 Amortized debt issuance cost 30,841,180 30,841,180 Closing amount, net 69,215,856,870 62,410,161,144 The borrowing amounts are net of unamortized debt issuance costs. On 5 September 2000, K.I.N. (Thailand) Company Limited (K.I.N.), registered under the laws of the British Virgin Islands, a subsidiary of Telecom Holding Company Limited, entered into the Terms and Conditions for Private SAILS (Shared Appreciation Income Linked Securities) and SAILS Pledge Agreement with Credit Suisse First Boston International (CSFBI) for the SAILS scheme in relation to 1,500,000 common shares of K.I.N. in FLAG Telecom Holdings Limited. The principal provisions include, among others, the following : (a) K.I.N. agreed to deposit in a Collateral Account with CSFBI 1,500,000 common shares of FLAG Telecom Holdings Limited, registered in the name of CSFBI, in exchange for the proceeds of 81.6% of the aggregate contract price, less 2.0% of the front end as stipulated in the contracts. The partial proceeds amount of US$ 13,500,000 was derived by K.I.N. on 6 September, 2000 and the remainder of the proceeds shall be paid to K.I.N. on the closing date. (b) K.I.N. agreed to assign and pledge 1,500,000 common shares to CSFBI and grant to CSFBI all of its rights, title and interest to such common shares including income, proceeds and collection received or to be received on the date the shares were delivered to the Custodian or anytime thereafter. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 20. Borrowings (Continued) On 3 October 2000, K.I.N. entered into two additional contracts with CSFBI, namely the SAILS Mandatorily Exchangeable Securities Contract and the Amended and Restated Pledge Agreement. The principal provisions include, among others, the following: (a) The Pledged Shares can be further pledged. (b) Unless K.I.N. has elected to exercise its Cash Settlement Option, K.I.N. shall on the maturity date of 11 October 2003 deliver to CSFBI 1,500,000 common shares in FLAG Telecom Holdings Limited. If K.I.N. fails to deliver the said shares, then delivery shall be effected by delivery of the pledged shares to CSFBI from the Collateral Account. (c) In the event K.I.N. exercises its Cash Settlement Opinion, it must deliver to CSFBI the Cash Settlement Amount in accordance with the provisions in the agreement on the maturity date. Therefore, the pledge over the said shares in favor of CSFBI would be released. (d) K.I.N has the right, in 3 years time, to receive a percentage of the proceeds from any appreciation in the price of the FLAG shares. If at the end of the 3 year period the price of the FLAG shares appreciates up to 120% of the initial sale price, then K.I.N will receive 100% of this gain. If the price of the shares appreciates beyond 120%, then K.I.N will receive an additional 16.67% of the gain over 120%. 21. Other current liabilities Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Other payable 958,289,068 839,025,199 905,999,202 816,495,150 Output VAT pending tax invoice 246,276,731 188,734,780 177,693,375 145,734,126 Unearned income 204,097,289 248,720,029 186,157,643 222,434,363 Others 111,318,407 184,578,734 84,289,322 113,715,650 Total 1,519,981,495 1,461,058,742 1,354,139,542 1,298,379,289 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 22. Long-term trade accounts payable This account represents trade accounts payable pertaining to supply and installation of PCT project and multimedia project. On 5 November 1999, three subsidiaries (consisting of Telecom Holding Co., Ltd. (TH), Tele Engineering and Services Co., Ltd. (TE), contracted parties, Asia Wireless Communication Co., Ltd. (AWC), operator of the Personal Communication Telephone System and obligor under debt restructuring agreements) and on 10 November 1999 another subsidiary namely Asia Multimedia Co., Ltd. (AM) contract party, entered into debt restructuring agreements with certain local and foreign creditors. As a result of this debt restructuring, there were no changes in the carrying amount of the debt payable at the time of the restructuring, since the total future cash payments exceed the carrying amount. The outstanding restructured trade accounts payable and terms of payment are as follows: Consolidated (Restated) 1999 2000 Foreign Foreign Currency Baht Currency Baht Million Million Interest rate Million Million USD 25.18 955.61 Average MLR USD 24.55 1,066.41 JPY 21,322.83 8,199.35 JLTPR + 0.5% & 2.0% JPY 19,575.27 7,439.51 Baht 446.87 446.87 Average MLR Baht 749.79 749.79 9,601.83 9,255.71 Under the provisions of the debt restructuring agreements, the subsidiaries have commitments to make full payment of the above principal and interest at the amounts per payment, interest rates and terms stipulated in the related agreements, covering the periods starting from November 1999 to August 2014. Moreover, the subsidiaries have to pledge their assets (Note 30.6) as specified in the agreements to the related contracted creditors as collateral. The debt restructuring agreements set forth certain conditions and restrictions with which these subsidiaries, as contracted parties, are required to comply. During the year 2000 two of subsidiaries, who are contract parties mentioned above, have performed their abilities to settle their debt before due date, and the amount paid is approximately Baht 912.03 million. The interest rate exposure and fair values of debt under restructuring agreements as at 31 December 2000 are as follows: 2000 Baht Million Total debt under restructuring exposure from interest rate - borrowing at floating rates 9,893.17 Weighted average effective interest rates - Denominated in Japan Yen 3.24% - Denominated in U.S. Dollars 7.85% - Denominated in Thai Baht 7.85% Fair values of non-current restructuring debts - Denominated in Japan Yen 7,729.24 - Denominated in U.S. Dollars 1,100.35 - Denominated in Thai Baht 764.88 9,594.47 The fair values of restructuring debts are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Company at the balance sheet date. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 23. Other non-current liabilities Consolidated Company 2000 1999 2000 1999 Baht Baht Baht Baht Valued added tax pending receipt of tax invoices related to debt restructuring 322,787,370 - 322,787,370 - Withholding tax related to debt restructuring 253,467,877 - 253,467,877 - Deposit received from customers 4,386,032 14,053,753 - - Others - 1,199,491 - - Total 580,641,279 15,253,244 576,255,247 - 24. Share capital, premium and discount on share capital Authorized Common Preferred Share Number of Shares Shares Premium Shares Baht Baht (Discount) Total Million Million Million Baht Million Baht Million At 31 December 1998 3,000 22,230 - 11,432 33,662 - - - - - At 31 December 1999 3,000 22,230 - 11,432 33,662 - Common shares (777) - - - - - Preferred shares 702 - 7,020 (1,498) 5,522 - Stock options 58 - - - - At 31 December 2000 2,983 22,230 7,020 9,934 39,184 On 14 February 2000, at the extraordinary shareholders meeting of 1/2000, the shareholders approved the following changes of capital: 1. To decrease of authorized share capital from 3,000 million common shares with par value of Baht 10 per share to 2,223 million common shares with par value of Baht 10 per share by canceling 777 million authorized but not issued common shares with a par value of Baht 10 per share. The Company registered the decreased share capital with the Ministry of Commerce on 22 February 2000. 2. To increase of authorized share capital of 2,223 million common shares with a par value of Baht 10 per share to 2,223 million common shares with par value of Baht 10 per share and 702 million preferred shares with par value of Baht 10 per share. The Company received a subscription to 702 million preferred shares at Baht 10 par value priced at Baht 8.068 per share on 30 March 2000 resulting in authorized and paid-up preferred share capital of Baht 7,020 million issued at a discount of Baht 1,498 million. The Company registered the increase of share capital with the Ministry of Commerce on 30 March 2000. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 24. Share capital, premium and discount on share capital (Continued) The preferred shares of the Company shall confer the following rights on the holders thereof: Dividends : Dividends for the first eight years are set at the rate of 10% p.a., cumulative plus the dividend payable to the holders of common shares, if any, and thereafter at the rate of 0.1% p.a. non-cumulative plus the dividend payable to the holders of common shares, if any. Liquidation : Upon liquidation or dissolution of the Company, any amount remaining after payment of preference, all amounts payable in respect of indebtedness and other obligations of the Company shall be divided among the holders of the preferred shares pro rata to the number of the preferred shares held by each holder and paid in equal amount per share to such holders of the preferred shares in priority to the holders of the common shares. Redemption : The preferred shares shall not be redeemable by the Company. Conversion : The preferred shares have a conversion right to common shares at ratio of 1:1 during any period from the 2nd to the 8th anniversary of the issuance of the preferred shares. To the extent that the preferred shareholders have not exercised, their conversion right will expire. Voting rights : Each preferred share shall carry the right to one vote at any meeting of the shareholders of the Company. Stock option plan At the annual general meeting of 1/2000 held on 27 April 2000, the shareholders approved the Companys Stock Option Plan 2000 (the Plan) and the increase of 58.15 million authorized common shares with value of Baht 10 per share. The Plan is open to senior executives and directors of the Company, and under the terms of the Plan non- transferable warrants in respect of 58.15 million shares will be issued to these senior executive and directors within the three year period commencing 27 April 2000. Stock options have been granted with an exercise price determined on one of the following two bases : a) Warrant group 1, amounting to 39.6 million with an exercise price of Baht 30; one third of these options vest on the last trading day of the second quarter of 2000, one third on the last trading day of the second quarter of 2001 and one third on the last trading day of the second quarter of 2002; and b) Warrant group 2, amounting to 18.55 million with an exercise price of Baht 51.55; one third of these options vest on the last trading day of the fourth quarter of 2000, one third on the last trading day of the fourth quarter of 2001 and one third on the last trading day of the fourth quarter of 2002. Stock option rights expire 10 years from the date of issuance of the options. Stock options which have not been exercised are subject to cancellation upon expiration or termination of employment. On 9 June 2000, 58.15 million options in respect of 58.15 million common shares had been issued. Movements in the number of stock options outstanding are as follows: 2000 In thousand At beginning of year - Granted 58,150 Exercised - Lapsed - At end of year 58,150 A compensation cost is not recognized in these financial statements for the fair value or the intrinsic value of share options granted. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 24. Share capital, premium and discount on share capital (Continued) Stock options outstanding at the end of the year have the following terms: Exercise price 2000 Expiry date Baht In thousand 30 June 2010 30.00 39,600 31 December 2010 51.55 18,550 58,150 Proposal swap for shares On 15 December 2000, the Company signed a Memorandum of Understanding on Strategic Alliance (MOU) regarding the proposed swap of shares in Wireless Communications Services Co., Ltd. (WCS) with Charoen Pokphan Group Co., Ltd. (the CP Group) and Bangkok Inter Teletec Co., Ltd. (BITCO). WCS is a party to an agreement with the Communication Authority of Thailand (CAT) dated 20 June 1996 authorizing WCS to install and operate a nation-wide GSM 1800 MHz mobile cellular telecommunication network and to provide services in connection therewith. The principal commercial terms of the MOU include, among others, the following: - CP Group offer to sell to the Company 600,000,000 common shares in BITCO representing 40% of the total issued and outstanding share capital of BITCO, - The Consideration for the shares shall be Baht 26.50 per one share of BITCO and CP Group will subscribe new common shares to be issued by the Company at a fair price to be agreed between the financial advisors, - The share swap transaction must be concluded and the consideration settled in full by 31 May 2001. The commercial terms of the MOU are not binding upon the Company and the terms of the MOU do not dictate that there be a swap of WCS shares with the CP Group at any specific ratio. The execution by the Company of the MOU entitles the Company to review the documents of WCS in order that it may appropriately consider the proposal by the CP Group. 25. Legal reserve The legal reserve of the Company was established in accordance with the provisions of the Public Company Limited Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income for the year until the reserve reaches 10% of the authorised share capital. This reserve is not available for dividend distribution. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 26. Operating profit The following items have been included in arriving at operating profit: Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht Baht Baht Baht Depreciation on property, plant and equipment (Note 17) - owned assets 7,551,069,560 6,341,982,301 6,048,871,041 5,470,536,036 - owned assets (vehicles) leased out under operating leases 73,977,175 80,231,322 - - - leased assets under finance lease 13,056,440 - - - (Profit)/loss on disposal of property, plant and equipment 307,845,209 (10,620,974) 347,711,160 16,001,660 Repairs and maintenance expenditure on property, plant and equipment 995,596,534 709,774,874 932,705,197 669,066,288 Amortisation of intangible assets (Note 18) 28,167,450 28,167,450 - - Operating lease rentals - building 289,455,487 262,926,255 378,404,280 367,354,784 - vehicle 116,785,042 105,068,013 129,708,688 110,381,347 Inventories - cost of inventories recognised as expense (include in cost of sales) 1,119,159,026 374,278,859 141,243,863 205,617,593 Trade receivables - bad and doubtful debts 132,742,049 352,784,537 106,328,637 52,420,864 Staff cost - Wages and salaries 1,764,951,994 1,404,396,173 1,211,710,095 972,093,481 - Social security cost 28,644,960 20,413,190 21,076,830 15,366,207 - Other benefits 177,665,758 116,486,746 165,778,343 110,802,945 The number of persons employed by the Group at the end of year are as follows: Consolidated Company 2000 1999 2000 1999 Full time 5,305 4,798 3,920 3,507 Part time 921 460 500 235 6,226 5,258 4,420 3,742 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 27. Cash flows from operating activities Reconciliation of net loss to cash flows from operating activities: Consolidated Company (Restated) (Restated) 2000 1999 2000 1999 Baht Baht Baht Baht Loss before minority interest (3,321,505,475) (7,506,586,705) (3,308,150,145) (7,474,774,009) Adjustments to reconcile net loss to net cash generated from operating activities: Depreciation and amortization 7,707,915,267 6,442,133,964 6,079,796,706 5,501,377,216 Loss (gain) on disposal of property, plant and equipment 307,845,209 (10,620,974) 347,711,160 16,001,660 Provision loss on decline in value of investment - 146,175,175 - - Provision for doubtful accounts 132,742,049 352,784,537 106,328,637 52,420,864 (Reverse) provision for loss on decline in investment property (3,364,052) 11,391,213 - - (Reverse)provision for loss on decline in value of property, plant and equipment (10,667,338) 39,561,256 - - Provision for loss on decline in value of inventories 17,232,885 195,716,347 - 27,552,771 Other operating asset (reverse) write-off (2,734,856) 57,356,532 - - Gain from sales of available-for-sale securities (2,472,154,845) (135,478,527) - - Gain from sales of investment in subsidiary (Note 28) - (102,870,902) - - Loss (gain) from liquidation of subsidiaries and other 1,522,252 (432,197) - - Unrealized loss on foreign exchange 2,526,566,189 1,863,802,495 4,779,238,526 743,779,750 Gain from debt restructuring (1,378,055,738) - (1,378,055,738) - Gain from forgivingness (26,528,236) (289,631,711) (26,528,236) (289,631,711) Reverse accrued rental of conduit and lease circuit (Note 4.2) (685,203,383) - (685,203,383) - Deferred interest on notes 38,137,008 - 38,137,008 - Share of loss (gain) in subsidiaries and associated companies 1,128,453,711 895,734,041 (2,107,068,609) 3,506,184,952 Changes in operating working capital - Trade accounts receivable (359,964,565) (1,690,851,189) (597,264,846) (1,417,095,499) - Due from related companies 82,488,741 303,536,984 (1,727,710) (4,877,419) - Inventories (189,655,230) (143,304,703) (224,044,338) 3,242,718 - Other current assets 376,202,770 165,701,333 56,509,828 (325,756,264) - Other non-current assets 33,812,450 190,597,394 6,754,965 120,517,280 - Trade accounts payable (218,664,229) 57,498,404 297,987,750 79,161,949 - Due to related parties 31,448,340 (55,248,637) 627,061,172 435,701,604 - Accrued expenses and other current liabilities (476,366,602) 570,208,114 (311,655,004) 321,310,586 - Other non-current liabilities (10,867,212) (3,729,118) - - Cash generated from operating activities 3,228,635,110 1,353,443,126 3,699,827,743 1,295,116,448 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions The following material transactions were carried out with related parties: i) Sales of goods and services Consolidated Company For the years ended 31 December 2000 1999 2000 1999 Baht000 Baht000 Baht000 Baht000 Sales of goods: Asia Wireless Communication Co., Ltd. - - 192.5 5,477.0 Asia Multimedia Co., Ltd. - - - 3.7 Wire & Wireless Co., Ltd. - - 962.8 136,819.6 W7 Rental Services Ltd. - - 42.1 - UBC Cable Network Public Co., Ltd. 1,344.8 282.1 - - CP Group of companies 4,539.0 406.6 - - 5,883.8 688.7 1,197.4 142,300.3 Sales of services: Asia Wireless Communication Co., Ltd. - - 5.8 7.5 Asia Infonet Co., Ltd. - - 142.5 213.3 Tele Engineering and Services Co., Ltd. - - - 9,278.2 Wire & Wireless Co., Ltd. - - 284.5 977.8 UBC Cable Network Public Co., Ltd. 866,498.1 894,013.6 63.8 - CP Group of companies 29,553.3 59,646.6 1,084.0 869.9 896,051.4 953,660.2 1,580.6 11,346.7 ii) Purchases of goods and services Consolidated Company For the years ended 31 December 2000 1999 2000 1999 Baht000 Baht000 Baht000 Baht000 Purchases of goods: Telecom Holding Co., Ltd. - - - 191.6 Asia Wireless Communication Co., Ltd. - - - 478.9 Tele Engineering and Services Co., Ltd. - - - 11,465.0 Yai Kaew Co., Ltd. - - 8,469.0 - Asia Multimedia Co., Ltd. - - 16.4 150.0 Wire & Wireless Co., Ltd. - - 20,796.8 3,418.2 Telecom Training and Development Co., Ltd. - - - 4,097.4 Interactive Media Services Co., Ltd. - - - 37.5 CP Group of companies 17,476.0 3,746.6 17,363.4 3,515.8 17,476.0 3,746.6 46,645.6 23,354.4 Purchases of services: Telecom Holding Co., Ltd. - - - 33.5 Asia Wireless Communication Co., Ltd. - - 1,062,193.3 131,648.9 Interactive Media Services Co., Ltd. - - 6,325.0 4,829.4 Nilubon Co., Ltd. - - 352,645.7 334,081.8 Telecom Training and Development Co., Ltd. - - 18,000.0 19,811.9 W7 Rental Services Ltd. - - 129,105.7 112,393.7 Asia Multimedia Co., Ltd. - - 9.7 48.1 Wire & Wireless Co., Ltd. - - 18,419.3 508.5 Asia Infonet Co., Ltd. - - 17,294.9 2,009.9 Telecom Equipment Manufacturing Co., Ltd. - - 54.5 - Verizon Group of companies 5,357.5 3,055.5 5,357.5 3,055.5 UBC Cable Network Public Co., Ltd. 1,520.7 131.8 45.0 - Yai Kaew Co., Ltd. - - - 7,400.0 CP Group of companies 50,000.8 42,994.8 36,218.1 29,889.0 56,879.0 46,182.1 1,645,668.7 645,710.2 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions (Continued) Sales and purchases of goods and services (Continued) A portion of the Companys and subsidiaries income and expenses arose from transactions with these related companies, These companies are related through common shareholdings and/or directorships. The principal transactions with these related companies arose in the ordinary course of business, or compliance with agreement entered into by the parties concerned, where market prices were not applicable. iii) Interest expense Consolidated Company For the years ended 31 December 2000 1999 2000 1999 Baht000 Baht000 Baht000 Baht000 Kreditanstalt Fuer Wiederaufbau 1,669,647.5 - 1,669,647.5 - iv) Outstanding balances arising from sales and purchases of goods and services Consolidated Company As at 31 December 2000 1999 2000 1999 Baht000 Baht000 Baht000 Baht000 Receivables from related parties: Telecom Holding Co., Ltd. - - 695.9 695.9 Asia Wireless Communication Co., Ltd. - - 18,045.0 18,133.5 Nilubon Co., Ltd. - - 46,825.0 46,039.5 Wire & Wireless Co., Ltd. - - 1,314.7 - W7 Rental Services Ltd. - - 45.1 - Asia Infonet Co., Ltd. 8,968.6 19,039.7 11.3 56.9 UBC Cable Network Public Co., Ltd. 96,173.1 169,863.1 56.9 - CP Groups of companies 9,338.6 415.3 92.5 97.6 Verizon Group of companies - 273.5 - 273.5 Others 17,148.0 23,137.6 - 61.8 131,628.3 212,729.2 67,086.4 65,358.7 Payables to related parties: Telecom Holding Co., Ltd. - - 231,460.4 192,843.9 Asia Wireless Communication Co., Ltd. - - 1,168,665.9 668,659.0 Interactive Media Services Co., Ltd. - - 650.2 1,476.6 Nilubon Co., Ltd. - - 51,008.2 45,033.8 Telecom Training and Development Co., Ltd. - - 1,605.0 3,543.7 Tele Engineering and Services Co., Ltd. - - 170.1 - W7 Rental Services Ltd. - - 37,870.4 23,690.5 Yai Kaew Co., Ltd. - - 15,450.0 14,381.0 Asia Multimedia Co., Ltd. - - - 16.9 Telecom Equipment Manufacturing Co., Ltd. - - 58.4 - Wire & Wireless Co., Ltd. - - 21,811.7 3,592.3 UBC Cable Network Public Co., Ltd. 2,040.9 235.3 - - Asia Infonet Co., Ltd. 6,409.0 2,367.6 17,505.7 2,912.6 CP Groups of companies 7,721.1 5,017.9 6,704.8 4,594.3 Verizon Group of companies 49,072.1 22,792.3 49,072.1 22,792.3 Kreditanstalt Fuer Wiederaufbau 14,792.1 - 14,792.1 - Others 3,097.6 15,070.0 - 25.5 83,132.8 45,483.1 1,616,825.0 983,562.4 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions (Continued) v) Principal subsidiary undertakings Name of subsidiaries Business Country incorporation Telecom Holding Co., Ltd. Holding company Thailand Asia Wireless Communication Co., Ltd. Communication Thailand Interactive Media Services Co., Ltd. Communication Thailand K.I.N. (Thailand) Co., Ltd. Holding company Thailand Nilubon Co., Ltd. Rental services Thailand Telecom International China Co., Ltd. Communication British Virgin Island Telecom Asia (China) Co., Ltd. Communication British Virgin Island Telecom Training and Development Co., Ltd. Training services Thailand Telecom International Co., Ltd. Communication Thailand Tele Engineering and Services Co., Ltd. Communication Thailand TA Orient Telecom Investment Co., Ltd. Communication British Virgin Island U-Net Co., Ltd. Communication Thailand W 7 Rental Services Ltd. Rental services Thailand Yai Kaew Co., Ltd. Communication Thailand Asia Multimedia Co., Ltd.(90.45%) Communication Thailand Asia DBS Public Company Limited(89.99%) Communication Thailand Wire & Wireless Co., Ltd.(87.50%) Communication Thailand Asia Infonet Co., Ltd.(65.00%) Internet provider Thailand Telecom Equipment Manufacturing Co., Ltd. (59.99%) Communication Thailand K.I.N. (Thailand) Co., Ltd. (BVI) Holding company British Virgin Island All subsidiaries, besides Telecom Holding Co., Ltd. which is 99.99% directly owned, are indirectly wholly owned by the Company unless otherwise stated. All holdings are in the ordinary share capital of the undertaking concerned and are unchanged from 1999, except for the disposal of Claybridge Enterprise Limited, Network Engineering Consultant Co., Ltd. and Asia Information Access Co., Ltd. The sales, results and net cash flows of these subsidiaries are as follows: TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions (Continued) v) Principal subsidiary undertakings (Continued) Proceeds from sales of subsidiaries: 1999 Baht Cash and cash equivalent 29,749,298 Trade accounts receivable 28,358,388 Inventory 41,584 Other current assets 15,003,919 Long term investment 36,152,712 Property, plant and equipment 8,651 Other non current assets 108,701 Due to related parties (5,505,552) Trade accounts payable (37,720,766) Other current liabilities (902,169) Minority interest (6,460,000) Net asset 58,834,766 Cash and cash equivalent (29,749,298) Net 29,085,468 Gain from sales of investment in subsidiaries 102,870,902 Proceeds from sales of investment in subsidiaries 131,956,370 vi) Investments in associates At 31 December 2000 Consolidated Investment- Investment- Paid-up At Cost At Equity Capital % Ownership Method Method Business Relationship Thousand interest Baht000 Baht000 Associated Companies UBC Public Company Limited Pay Television Shareholder Baht 7,407,736 40.96 4,619,750 5,405,005 Public Radio Network Co., Ltd. Telecommunication Shareholder Baht 10,000 32.00 3,200 - Other Telecommunication Shareholder - - 59,000 25,037 Total 4,681,950 5,430,042 At 31 December 1999 Consolidated (Restated) Paid-up % Investment- Investment- Capital Ownership At Cost At Equity Method Method Business Relationship Thousand interest Baht000 Baht000 Associated Companies UBC Public Company Limited Pay Television Shareholder Baht 7,407,736 40.96 4,619,750 6,533,459 FLAG Telecom Holdings Telecommunication Shareholder USD 80 10.92 2,851,430 2,851,430 Chongqing Communication Equipment Co., Ltd. Telecommunication Shareholder RMB 292,986 38.21 506,884 - Public Radio Network Co., Ltd. Telecommunication Shareholder Baht 10,000 32.00 3,200 - Others Telecommunication Shareholder - - 60,500 26,536 Total 8,041,764 9,411,425 TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions (Continued) vi) Investments in associates (Continued) At 31 December 2000 Company Investment Investment Paid-up % -At Cost -At Equity Capital Ownership Method Method Business Relationship Baht000 interest Baht000 Baht000 Subsidiary Telecom Holding Co., Ltd. Investment Holding Shareholder 12,000,000 99.99 12,000,000 10,879,510 Total 12,000,000 10,879,510 At 31 December 1999 Company (Restated) Investment - Investment- Paid-up % At Cost At Equity Capital Ownership Method Method Business Relationship Baht000 interest Baht000 Baht000 Subsidiary Telecom Holding Co., Ltd. Investment Holding Shareholder 12,000,000 99.99 12,000,000 10,464,865 Total 12,000,000 10,464,865 vii) Loans from a related party Consolidated and Company 2000 1999 Baht Baht Loans from Kreditanstalt Fuer Wiederaufbau 21,655,967,271 - - The secured loans from Kreditanstalt Fuer Wiederaufbau (KfW), the Companys preferred shareholders ranks pari passu with other secured lenders. The loans are denominated in United States Dollars and carries interest at the rate between LIBOR +1% - 1.75% per annum (See Note 20). The related interest expense was Baht 1,669.6 million. Maturity of loans from related party: Consolidated and Company 2000 1999 Baht Baht Between 1 and 2 years 414,002,892 - Between 2 and 5 years 7,102,374,600 - Over 5 years 14,139,589,779 - 21,655,967,271 - TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 28. Related party transactions (Continued) viii) Directors and key managements remuneration Directors and key management of the Company are listed in the 2000 Annual Report. In 2000 the total remuneration of the directors of the Company and the Group were Baht 25.6 million and Baht 46.0 million (1999: Baht 16.8 million and Baht 36.7 million), respectively. Set aside from directors fee as present in the profit and loss statements, the key management of the Company management have salaries and other benefits paid in 2000 and 1999 of Baht 81.9 and 68.4 million, respectively. ix) Share option granted to directors and senior executives The aggregate number of stock options granted to directors and senior executives of the Company during year 2000 was 58.15 million shares. (1999: nil). The stock options were offered to directors and senior executives on the same terms and conditions (Note 24). The outstanding number of stock options granted to directors and senior executives of the Company at the end of year was 42.25 million shares (1999: nil). 29. Financial instruments In order to manage the risks arising from fluctuations in currency exchange rates, the Company and its subsidiaries adopt the following foreign currency risk management practices: ? Entering into forward foreign exchange contracts ? Negotiating payment terms for foreign currency settlements on an individual transaction basis ? Negotiating with foreign suppliers to share the foreign exchange exposure Transactions risk is calculated in each foreign currency and is projected six months forward. Exchange rates are monitored and forecasting information supplied by recognized research and financial analysis is used to estimate the future exchange rates. These are compared against premiums on forward exchange contracts, and after making adjustments for the related risk, a decision is taken on whether to cover foreign currency transactions. Transactions, if hedged with forward exchange contracts, are not hedged on a net basis, but rather on a transaction by transaction basis. At 31 December 2000 and 1999 The Company and its subsidiaries had outstanding foreign currency assets and liabilities as follows: Consolidated Company 2000 1999 2000 1999 Currency Currency Currency Currency Million Million Million Million Assets US dollars 91.4 108.9 - - Liabilities US dollars 814.1 864.0 770.5 770.5 Japanese Yen 43,619.1 22,556.8 22,763.5 - Foreign currency assets represents investment in other company whilst the above foreign currency liabilities represent trade accounts payable, long-term trade accounts payable, borrowings and other payables. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 29. Financial instruments (Continued) i) Forward foreign exchange contracts Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rates on specific transactions. A subsidiary's policy is to enter into forward foreign exchange contracts for 100% of short-term loans anticipated in each month over the following six months. At 31 December 2000, the settlement dates on open forward contracts ranged between 1-5 months. The Baht amounts to be received and contractual exchange rates of the Company's outstanding contracts were: Consolidated 2000 1999 Baht Baht United States dollars 1.48 million, at rates averaging USD Baht 41.49 - 43.49/USD 61,289,847 - Net fair values The net fair values of the Company's derivative financial instruments at the balance sheet date were: Consolidated 2000 1999 Million Baht Million Baht Unfavorable forward foreign exchange contracts 2.4 - The fair values of forward foreign exchange contracts have been calculated based on rates quoted by the Company's lending bankers at balance sheet date. ii) Other interest rate exposures Refer to borrowings Note 20 for details on the average interest rates and maturities of these balances. iii) Credit risk The Company has no significant concentrations of credit risk (other than TOT which represents 43% of receivables overdue, as discussed in Note 13). The credit exposure of derivatives are represented by the net fair values of the contracts, as disclosed above. iv) Other fair values Certain financial assets and liabilities which are accounted for at historical cost are carried at values which may differ materially from the fair value. The carrying amounts of cash, trade receivables, trade payables, other payables, short-term borrowings, floating rate long-term borrowings, preference shares and dividends payable approximate to their fair values. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 30. Contracts and commitments 30.1 The Company entered into the agreement for Joint-Operation and Investments for Expansion of 2.6 million lines Telephone Services with TOT and other supplements to the Agreement for the following services: - Wireline Services - Value Added Services - Personal Communication Telephone Services - Public Telephone Services - Receiving telephone service orders, and receiving payment for installation charges, deposits and monthly usage - Fault notification and dropwire maintenance - TOT lease of fibre optic network from a subsidiary in order to sublease to the Company - Personal Communication Telephone Service for TOT subscribers Under the provisions of the Agreement, the Amendment and the Supplementary Agreements, TOT and the Company will share the gross revenues collected from operating the telephone network in accordance with the percentages stipulated in the agreements. Among the Companys responsibilities are the acquisition, installation, project management, operation and maintenance of the system as set forth in the agreements. In addition, the Company is required to transfer to TOT certain equipment pertaining to such system together with the land and buildings acquired by the Company related to the project. In compliance with the terms of the agreements, the Company has placed letters of guarantee issued by certain local banks in favor of TOT totaling Baht 300 million. 30.2 Two subsidiaries have agreements with state enterprises, namely the Communication Authority of Thailand (CAT) and the Telephone Organization of Thailand (TOT) to provide internet service and the lease of long distance circuits, respectively. Under the terms of the agreements, the subsidiaries have certain commitments to acquire, install, manage and maintain all equipment. The subsidiaries are also committed to transfer to TOT and CAT all equipment pertaining to such systems as the installations are completed. During the term of the agreements, the subsidiaries are entitled to collect the deposits, membership fees and other service fees from customers as stipulated in the agreements. In addition, the subsidiaries were contingently liable to certain local banks for letters of guarantee totaling Baht 5.5 million issued by said banks in favor of TOT and CAT. The letters of guarantee covered the guarantee for the subsidiaries in compliance with the provisions of the agreements referred to above. 30.3 The Company and its subsidiaries were contingently liable to certain local banks for letters of guarantee in favor of certain government agencies, certain state enterprises and companies amounting to Baht 391.8 million for the Company and Baht 52.2 million for the subsidiaries. 30.4 The Company had issued a letter to a finance company to support the business of one of its subsidiaries (wholly owned by the Company) and to confirm to that finance company that the Company holds 99.99% of the total shares in said subsidiary. The Company has also committed that the Company and/or its affiliates will maintain their holding percentage in the subsidiary at no less than 51% of the total shares until all obligations of the subsidiary liable to the said finance company are settled. As at 31 December 2000, the subsidiarys credit line with the finance company amounted to Baht 300 million. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 30. Contracts and commitments (Continued) 30.5 A subsidiary entered into a credit facility agreement with certain local banks for the latter to issue a Standby Letter of Credit in the amount of Baht 5,000 million to finance the Companys project. The Company is required to reimburse the subsidiary all expenses incurred related to the loan. The Companys investment in shares in this subsidiary of 1,199,999,994 shares (carrying value amounted to Baht 10,879.5 million at 31 December 2000 at equity in the balance sheet of the Company). Up to 31 December 2000, the subsidiary had not utilized this facility. 30.6 Under the terms of various agreements, the Companys and certain subsidiaries assets have been pledged and/or mortgaged as collateral with the contracted parties, details of which are as follows: Carrying Value at 31 December Consolidated Company Mortgaged Value 1999 2000 1999 2000 1999 2000 Baht Baht Baht Baht Baht Baht Million Million Million Million Million Million 2,317.85 Fixed and savings deposits 4,308.37 2,721.92 - - 4,058.14 Investment in available-for-sales - security 3,960.78 707.20 - - - Investment in shares of 5,430.05 - - subsidiaries and associates (excluding investment in shares of certain subsidiaries pledged as collateral, which have been eliminated in the consolidated 10,464.86 financial statements) 9,411.43 10,879.51 - Land, building and machinery 1,007.02 1,072.27 1,000.00 1,000.00 - 30.7 The Company has entered into contracts with various contractors to supply and install additional network and expansion of network equipment capability. Total commitment as at 31 December 2000 is approximately Baht 830.4 million. In addition the Company has commitments with the TOT to construct and transfer building and network equipment amounting to approximately Baht 247.5 million. 31. Contingencies Agreement for PCT operation The Company is finalizing terms to enter into an agreement with one of its subsidiaries to jointly implement and operate the PCT network by which the subsidiary will invest in and maintain the major portion of PCT network. The Company has agreed to share revenue with the subsidiary out of the revenue sharing, which the Company receives from TOT. Such agreement is under consideration for consent of the Companys secured creditors and expected to be completed within the first quarter of year 2001. TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2000 and 1999 32. Interest in joint venture The Group has a 65% interest in a joint venture, Asia Infonet Co., Ltd., which operates as an Internet provider. The following amounts represent the Groups share of the assets and liabilities and revenue and expenses of the joint venture and are included in the consolidated balance sheet and income statement: 2000 1999 Baht Baht Property, plant and equipment 16,411,756 10,351,259 Current assets 41,766,596 25,272,762 58,178,352 35,624,021 Current liabilities (97,636,989) (85,513,640) Net assets (39,458,637) (49,889,619) Sales 97,732,202 77,987,266 Profit (loss) before tax 10,430,983 (1,297,011) Income tax - - Profit (loss) after tax 10,430,983 (1,297,011) Proportionate interest in joint venture commitments (%) 65 65 There are no contingencies relating to the Groups interest in the joint venture. The number of employees in the joint venture in 2000 was 96 (1999: 63). 33. Concession conversion In November 1997, the Thai Government adopted the Telecommunications Master Plan that calls for several liberalization initiatives. Amongst those are the privatization of TOT and CAT and conversion of the concessions under their operation. In responding to the request of the Concession Conversion Sub-Committee appointed by the Ministry of Transportation and Communication, the Company submitted a letter stating that its interest in the concession conversion on terms and conditions, which would be mutually acceptable, and later presented detailed conversion proposals to the Sub-Committee. The process of concession conversion involved comprehensive negotiation with the TOT commencing in November 2000. According to the official timetable, the Sub- Committee planned to finish all concession conversion exercises by the end of 2000. However, none of the concessions qualified for conversion could be concluded within the given time, including the Companys own. Therefore, the Sub-Committee decided to extend the conversion exercise to the end of February 2001. Since the concession conversion shall be on a voluntary basis, the Company will choose to convert the concession into a license if, and only if, it is advantages to do so. 34. Post balance sheet event On 23 February 2001, TelecomAsia Corporation Public Company Limited Group's Board of Directors authorised these financial statements for issue. TelecomAsia Corporation Public Company Limited Financial Statements 31 December 2000 9 2 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 3 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 4 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 5 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 6 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 7 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 8 The notes to the consolidated and Company financial statements on pages 10 to 56 form an integral part of these financial statements. 9