15. LONG-TERM LOANS In Thousand Baht Consolidated For the Company 1998 1997 1998 1997 Loan from foreign banks - 190,224 - 190,224 Syndicated loan 772,915 772,915 772,915 772,915 Loan from local bank 1,421,694 1,486,877 - - Total 2,194,609 2,450,016 772,915 963,139 Less current portion 2,194,609 747,101 772,915 190,224 Long-term loans-net - 1,702,915 - 772,915 The Company has long-term loan with a foreign bank totalling approximately Baht 190 million (U.S. Dollars 4 million). The loan bears interest at the rate based on London Inter Bank Offer Rate (LIBOR). The Company has settled the loan in full amount in December 1998. Under the loan agreement, the Company and subsidiaries shall not create or have outstanding any security on or over their assets and the Company shall not pay dividend more than its consolidated net income, etc. - 15 - The Company has a syndicated loan agreement with a group of foreign financial institutions totalling approximately Baht 773 million (U.S. Dollars 30 million). This loan bears interest at the rate based on Singapore Inter Bank Offer Rate (SIBOR) and will be repayable in full amount in September 1999. Under the agreement, the Company undertook among other things, the maintenance of debt to equity ratio, the ratio of their consolidated total borrowings to the consolidated shareholders funds and will not create more commitment on or over the Company and subsidiaries operating assets, etc. As at December 31, 1998, the Companys debt to equity ratio was 2.0 and the ratio of total borrowings to the shareholders funds was 1.0 computed based on the consolidated financial statements. The Company hedges its foreign exchange risk by entering into swap agreements with a foreign bank to fix foreign currency exchange rate of U.S. Dollars 30 million to Baht 773 million. These swap agreements had premium amounting to approximately Baht 33 million (approximately U.S. Dollars 0.8 million) per year up to September 1999. However, the Company will be liable to the lender if the foreign bank can not repay the loan to lender. Since 1995, a subsidiary has a long-term loan with a local bank with credit line amounting to Baht 1,500 million, bearing interest at minimum loan rate per annum, with condition to repay in seven (7) semi-annual installments starting from June 1997. Due to the unstable economic situation and restriction of credit from commercial banks, the lease receivables cannot obtain funds to pay their debts to the subsidiary. Hence, the subsidiary cannot settle the past due loan to the bank. The bank issued the letter dated June 5, 1998, to postpone the first due loan of Baht 500 million until December 1998, with the decrease in balance to Baht 300 million, including an extension of the repayment schedule from 7 installments to 12 installments. As at December 31, 1998, the subsidiary has not settled a portion of the first due loan of Baht 222 million. The subsidiary is in the process of loan settlement within March 1999, by increasing share capital of Baht 200 million and waiting for the approval of credit to its lease receivables from the same bank, to settle its debt. In addition, the subsidiary has not received any letter from the bank related to default on the loan and is still servicing interest at minimum loan rate (normal rate) during negotiations with the bank. The subsidiary always pays interest to the bank consistently. The management believes that the subsidiary will receive the approval letter from the bank. However, because the subsidiary has not received the second formal approval letter from the bank, the subsidiary presents the balance of the loan totalling Baht 1,422 million as current portion of long-term loan. The loan is secured by the mortage of the subsidiarys land and the existing construction and/or the future construction thereon and certain directors. - 16 - 16. EURO CONVERTIBLE BONDS In April 1996, the Company issued Euro Convertible Bonds to be offered in the Luxembourg Stock Exchange amounting to U.S. Dollars 50 million (divided into 50,000 bonds at U.S. Dollars 1,000 par value). The bonds shall be effective for a period of five (5) years (up to April 2001). The bonds bear interest at the rate of 2.75% per annum payable annually through maturity on 11th April, 2001 and can be converted at the ratio of 1 bond : 245 common shares at the price Baht 103 per share (subject to adjustment in the circumstances described under terms and conditions of the Bonds- Conversion), with a fixed rate of exchange on conversion of Baht 25.235 = U.S. Dollars 1. The bondholders may exercise conversion rights from June 11, 1996 up to March 27, 2001. In addition, under certain conditions, the Company may mandatorily redeem all or some of the bonds at the par value plus redemption premium at any date after 11th April, 1999. At the maturity date, all remaining bonds will be redeemed at U.S. Dollars 1,320 per share. As at December 31, 1998, the Company provided financial expense of redemption premium amounting to U.S. Dollars 320 per share by the straight-line method over a period of the bonds. In respect of the issuance of the bonds as referred to above, the Company increased its authorized share capital of 21 million shares in order to reserve the shares for the exercise of conversion rights of the bondholders. In 1998, the Company purchased and cancelled the bonds referred to above, in a nominal value totalling of U.S. Dollars 11 million (divided into 10,951 bonds at U.S. Dollars 1,000 par value). The Company has gain on bond purchase amounting to approximately Baht 264.6 million. The Company presented it separately in the statements of income. 17. RESERVE FUND Under the provision of the Limited Public Company Act B.E. 2535, the Company is required to appropriate at least 5% of its annual net income after deduction of the deficit brought forward (if any) as reserve fund until the reserve reaches 10% of the authorized capital. The reserve fund is not available for dividend distribution. 18. EMPLOYEES PROVIDENT FUND The Company established a provident fund for its employees. Membership to the Fund is compulsory upon completing one year of service. The Company and employees contribute the same amount to the fund at 3%, 5% and 10% of the employees monthly salaries, depending on the length of employment. The Company appointed a fund manager to manage the fund in accordance with the terms and conditions described in the Provident Fund Act B.E. 2530 issued under the Revenue code governing provident funds. The Companys contribution charged to operations in 1998 and 1997 amounted to Baht 1,638,980 and Baht 2,567,652, respectively. - 17 - 19. AGREEMENTS 19.1 Lease agreements Central Pattana Central Pattana Central Pattana Land Lease Public Company Focus Holding Chonburi Ko Raj Agreements Limited Co., Ltd. Co., Ltd. Co., Ltd. Number of agreement 2 agreements 2 agreements 1 agreement 2 agreements Objective To construct shopping center for lease Contractual party Central Department Person and a Person Thai Sa-nguan Stores Co., Ltd. group of Services person Co., Ltd. Period of the 30 years 30 years 30 years 3 years and agreement 30 years Expiry date December 2023 August 2025 May 2027 February 1999 and December and June 2030 and February 2024 2029 Advance rental per agreement (Million Baht) 438.8 266.8 12.6 320.0 Actual paid up to December 31, 1998 (Million Baht) 438.8 244.8 12.6 80.0 Present under Assets for Lease Cost of Project Development Other Assets Guarantee for leasehold rights per agreement (Million Baht) - 298.6 - - Actual paid up to December 31, 1998 (Million Baht) - 298.6 - - Present under - Other Assets - - Year of receive guarantee for leasehold rights - 21st up to 30th - - Monthly rental per year (Million Baht) - 13.9 to 119.0 0.6 to 1.0 2.4 Renewal the agreement By giving written notice not less than 1 year before the expiry dates The rights of the buildings and improvements thereon will be delivered to the lessors on expiry dates. - 18 - 19.2 Sub-lease of Land Agreement Sub-lease of Land Agreement Central Pattana Public Company Limited Number of agreement 1 agreement Objective To construct shopping center for lease Contractual party Central Pattaya Co., Ltd. Period of the agreement 21 years and 6 months Expiry date April 2015 Guarantee for leasehold rights per agreement Baht 61.7 million Present under Other Assets Monthly rental per year Baht 2 million to Baht 10 million Renewal the agreement Can be renewed for a period of 10 years. The rights of the buildings and improvements thereon will be dilivered to the lessor or the landlord on expiry date. (More)