notes to financial statement
DESCRIPTION
TRANSCRIPT
NATIONAL FINANCE PUBLIC COMPANY LIMITEDAND ITS SUBSIDIARY COMPANIES
NOTES TO INTERIM FINANCIAL STATEMENTS1.GENERAL INFORMATION
1. 1 The Company and its subsidiary companies’ informationThe Company was incorporated as a public limited company under Thai laws and operates its business in Thailand, it has been licensed by the Ministry of Finance to operate a finance business. The Company’s registered address is at 444 MBK Tower, 10-12, 12A, 15-17, 19 and 20 Floor, Phayathai Road, Wangmai, Pathumwan, Bangkok including its nationwide branch offices.Every subsidiary companies are registered company limited or public company limited under Thai laws and operate in Thailand. Their businesses are commercial bank (restricted bank) business, securities business, non-performing assets management business, leasing and hire-purchase business, non-life insurance business, fund management business, property management business, and other areas.
1.2 The Economic SituationAlthough Thailand’s economic crisis has eased to a certain extent in the current period, financial restructuring within the business community is still prevalent and subject to readjustment. The residual effects of the crisis could affect the recoverable value of assets and the collection of loans and receivable. However, the accompanying financial statements reflect management’s current
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assessment of the impact to date of the economic situation on the financial positions of the Company and its subsidiary companies. Actual results could differ from management’s current assessments.
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2.PLAN TO ESTABLISH A RESTRICTED BANKThe Company has merged its operations with five other financial institutions (Ekachart Finance Plc., NF Finance Co., Ltd., Bangkok Home Co., Ltd., Sinkahakarn Credit Foncier Co., Ltd. and Vanit Credit Foncier Co., Ltd.) (“National Group”) by virtue of acquiring almost all of the share capital of those financial institutions, for the purpose of upgrading the status of Ekachart Finance Plc. (“Ekachart”) to a restricted bank, which the principal parts are that when Ekachart is upgraded to a bank, the Company is to maintain its status as the holding company, and that while it can continuing to operate finance business which does not overlap with that of the new bank.During 2001, the Company and the financial institutions within the group have entered into an agreement to transfer rights of collection over debts, and transferred assets between them in accordance with the plan. All such assets transferred are recognised as true sales because the transferor’s control over the assets has already been surrendered. The value of the assets transferred was determined in accordance with the pricing methods for the transfer of assets among the National Group which in the view of a financial advisor, is fair value, with settlement from the transfers at these values being made in cash. Such fair values have been used in recognising the sales, and the values of assets transferred. The fair value of the assets transferred during 2001 is as follows :-
(Unit : Million Baht)Transferee
Asset Manageme
ntTransferor The Ekachart Company
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Company
Loans and receivablesNational Finance Plc. - 16,615 9,631Ekachart Finance Plc. - - 3,022Loans and receivable of Ekachart Finance Plc. transferred from the Company and Ekachart Finance Plc. directly tranferred to the Asset Management Company
- - 1,204
Sinkahakarn Credit Foncier Co., Ltd.
- 190 437
Bangkok Home Co., Ltd. - 44 74Vanit Credit Foncier Co., Ltd.
- 8 38
NF Finance Co., Ltd. 74 - -
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(Unit : Million Baht)TransfereeEkachart Asset
Management
Transferor The Compan
y
Finance Plc.
Company
Property foreclosedNational Finance Plc. - - 701Ekachart Finance Plc. - - 238Sinkahakarn Credit Foncier Co., Ltd.
- - 43
Bangkok Home Co., Ltd. - - 18
Intercompany gains on the transfer of loans, receivable and property foreclosed, which amount to approximately Baht 1,200 million, have been eliminated in the consolidated financial statements for the year ended 31 December 2001 (for the six-month period ended 30 June 2001 : intercompany gain amount to approximately Baht 1,900 million).In addition, during the six-month period ended 30 June 2002, the financial institutions within the group have additional transferred non-performing assets of which the fair value, as calculated with the same basis and conditions, amounted to Baht 877 million to N.F.S. Asset Management Co., Ltd. with no gain (loss) on the transfer.On 3 January 2002, Ekachart received a Commercial Banking License from the Ministry of Finance in the name of “Thanachart Bank Public Company Limited” (“the Bank”) ordering it to comply with commercial banking laws and the Notification of the Ministry of Finance. The significant conditions is that the Bank may conduct commercial banking business, but may
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not accept current account deposits and its various types of operations are to be introduced in ordered stages in accordance with the 28 December 1998 Notification of the Ministry of Finance concerning applications to establish restricted banks and amendments, as follows :-(1) Fixed deposits may be accepted immediately.(2) Savings deposits may be accepted after the
restricted bank has operated for 1 year. If there are any branches, the Bank of Thailand (“the BOT”) must give prior approval that the restricted bank has an efficient on-line system in place linking the branch and the head office.
(3) Initially no more than 5 branches may be opened. If the restricted bank subsequently wishes to open further branches, an application must be made to the BOT.
(4) Business related to overseas payments may be commenced when the BOT approves the restricted bank’s readiness in terms of its personnel and its risk management system.
On 21 April 2002, the financial institutions within the group returned their finance and credit foncier licenses (5 licenses) to the Ministry of Finance. Meanwhile Ekachart changed its operations from a finance business to be a restricted bank, and commenced its operations under the name of “Thanachart Bank Public Company Limited” on 22 April 2002.
3.RECEIVABLE FROM THE TRANSFER OF NON-PERFORMING LOANS TO THAI ASSET MANAGEMENT CORPORATION
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These represent receivables from transfer of non-performing loans to Thai Asset Management Corporation (“TAMC”) under the Emergency Decree. After agreement is reached on the price, the transferor (the Company and its subsidiary companies) will receive non-transferable, 10-year promissory notes avaled by the Financial Institutions Development Fund, on which TAMC will pay interest annually in the form of either promissory notes or cash, at the average deposit rate. Any future profits and losses from the non-performing assets are to be shared.The outstanding receivables arise from the transfer of non-performing loans amounting to approximately Baht 3,152 million to TAMC by the Company and its two subsidiary companies (Thanachart Bank Plc. and N.F.S. Asset Management Co., Ltd.) at the end of 2001, at the transfer price of Baht 3,229 million stipulated in accordance with the Emergency Decree. The gain on transfer of Baht 77 million was recorded in the statement of earnings for the year 2001 (the Company only : outstanding loans and receivable amounting to approximately Baht 628 million and a loss of approximately Baht 39 million). Currently, Baht 2,473 million of the receivables have been already confirmed by TAMC, while the remaining portion of Baht 756 million is still pending confirmation of transfer price by TAMC (the Company Only : Baht 584 million and Baht 5 million, respectively). The management of the Company and its subsidiary companies believe that any such transactions (if any) would not have significant effect on the financial statement as at 30 June 2002.
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The Company and its subsidiary companies also have joint responsibility with TAMC to share future profits and losses arising from TAMC’s management of the non-performing assets. In case of losses, the Company and its subsidiary companies are liable for all initial losses up to 20 percent of the transfer price. Future losses of up to another 20 percent of the transfer price are to be shared equally between the Company and its subsidiary companies and TAMC. TAMC is liable for all remaining losses. The amount of such loss cannot be estimated, and therefore no liability has been provided for in the accounts.
4.BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
4.1 Basis of preparation of the financial statements
These interim financial statements have been prepared in accordance with Thai Accounting Standard No.41 “Interim financial statements”, like an annual financial statements, a full presentation has been selected for an interim financial statements. The financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified Accountants and Auditors of Thailand, which are effective under the Accounting Act B.E. 2543, with reference to the principles stipulated by the Bank of Thailand.
4.2 Basis of preparation of the consolidated financial statements
These consolidated financial statements include the balance sheets as at 30 June 2002 and
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31 December 2001 and the related statements of earnings for three-month and six-month periods ended 30 June 2002 and 2001 of National Finance Public Company Limited (hereinafter referred to as “the Company”) and the following subsidiary companies (hereinafter referred to as “the subsidiary companies”) which were incorporated as a limited company under Thai laws. The Company and its subsidiary companies operate in Thailand in the commercial bank business, finance business, securities business, non-performing asset management business, credit fonciers business, leasing and hire-purchase business, non-life insurance business, fund management business, property management business and other areas as follows :-.
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Percentage of shares
Percentage of shares held
held by the Company
by the subsidiary companies
30 June 31 Decem
ber
30 June 31 Decem
ber2002 2001 2002 2001
Subsidiary companies directly held by the CompanyThanachart Bank Public Company Limited
98.89 98.89 - -
(Formerly known as “Ekachart Finance Plc.”)N.F.S. Asset Management Co., Ltd.
100.00 100.00
- -
Max Asset Management Co., Ltd.
58.45 58.45 - -
National Securities Co., Ltd. 100.00 100.00
- -
National Insurance Co., Ltd. 70.00 70.00 9.89 9.89Pasara Co., Ltd. 100.00 100.0
0- -
(Formerly know as “NF Finance Co., Ltd.”)National Asset Management Co., Ltd.
75.00 75.00 - -
N.F.S. Capital Co., Ltd. 100.00 100.00
- -
Thiravanit Co., Ltd. 99.90 99.90 - - (Formerly know as “Vanit Credit Foncier Co., Ltd.”)Sinkahakarn Co., Ltd. 95.12 95.12 - - (Formerly known as “Sinkahakarn Credit Foncier Co., Ltd.”)Bangkok Home Co., Ltd. 99.87 99.87 - -National Group Leasing Co., Ltd.
100.00 66.67 - 32.96
Plan Estate Co., Ltd. 59.00 59.00 40.54 40.54- 10 -
Thanachart Management and Services Co., Ltd.
100.00 100.00
- -
Thanachart Legal and Appraisal Co., Ltd.
100.00 100.00
- -
Subsidiary companies indirectly held by the CompanyLan Bangna Co., Ltd. 10.00 10.00 80.84 80.84National Leasing 2000 Co., Ltd.
- - 99.99 99.62
G. Business Line Co., Ltd. - - 99.49 99.49National Leasing Co., Ltd. - - 100.0
099.62
Plan and Build Co., Ltd. - - 78.64 78.64
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During March 2002, there was a change in the shareholding structure of National Group Leasing Company Limited, from being previously held by the Company and a subsidiary company (Thanachart Bank Public Co., Ltd.) to be 100 percent direct ownership by the Company, following its purchase of approximate 12 million ordinary shares (33 percent of total shares) for Baht 139 million. The price was determined based on the net asset value as of 31 December 2001.Total assets and total income of the significant subsidiary companies which are included in the consolidated financial statements as at 30 June 2002 and 31 December 2001 and for the six-month periods ended 30 June 2002 and 2001 are as follows :-
(Unit : Million Baht)Total income for the
six-monthTotal asset periods ended 30
June30 June 2002
31 December
2001
2002 2001
Thanachart Bank Plc.
39,498 36,154 1,178 1,172
N.F.S. Asset Management Co., Ltd.
16,203 16,869 637 58
Max Asset Management Co., Ltd.
2,930 3,059 164 362
National Securities Co., Ltd.
1,456 1,916 244 100
a) The consolidated financial statements as at 30 June 2002 and 31 December 2001 did not include the financial statements of Glas Haus Building Co., Ltd., in which the Company acquired it through troubled
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debt restructuring and intends to hold as temporary investments. As at 30 June 2002 and 31 December 2001, such investment was valued at zero in the Company’s accounts.
b) The consolidated financial statements as at 30 June 2002 and 31 December 2001 did not include the financial statements of Zurich National Life Assurance Co., Ltd., in which the Company holds 50 percent of shares, because the Company has no control over the management and operations of that company. As at the balance sheet date, such investment was recorded as an investment in an associated company.
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c) Outstanding balances between the Company and its subsidiary companies (including intercompany gain on the outstanding loans and assets transferred within the group), significant intercompany transactions, investments in subsidiary companies as recorded in the Company’s and its subsidiary companies’ book of account, and the shareholders’ equity of the subsidiary companies have been eliminated from the consolidated financial statements.
5.SIGNIFICANT ACCOUNTING POLICIESThe financial statements have been prepared in accordance with accounting standards pronounced by the Institute of Certified Accountants and Auditors of Thailand, which are effective under the Accounting Act B.E. 2543, with reference to the principles stipulated by the Bank of Thailand.Significant accounting policies adopted by the Company and its subsidiary companies are summarised below :-5.1 Revenue recognition
a) Interest and discounts on loansInterest of the Company and its subsidiary companies which are financial institutions is recognised as income on an accrual basis and is based on the amount of principal outstanding. Interest on hire purchase receivable is recognised based on the sum-of-the-year-digits method. For loans and receivable on which principal or interest payments have been defaulted on for more than three months past the due date, the Company and its subsidiary
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companies cease accrual of interest income, and already recorded accrued interest is reversed from their accounts. Interest is then recognised as income on a cash basis.In the first quarter of year 2002, two subsidiary companies have changed revenue recognition method of hire-purchase agreement according to accrual basis from effective rate to sum-of-the-year-digits which is harmonizing with the accounting policies of the Company. The accumulation of that change from the past to end of the year 2001 of the subsidiary company has no significant effect so it shows as revenue in the income statement for the six-month period ended 30 June 2002 and has no retroactive adjustment to the previous financial statement.
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Interest on financial lease agreement is recognised based on the effective rate. The subsidiary company cease accrual of interest income of financial lease agreement on which payments have been defaulted on for more than three months past the due date.The Company and its subsidiary companies recognise interest income on restructured loans on the same accrual basis used for loans discussed above, with the exception of loans that are subject to monitoring for compliance with restructuring conditions, the Company and its subsidiary companies recognise interest income on a cash basis until the receivable have been able to comply with the restructuring conditions for a period of no less than three months or three installments, whichever is longer.Interest on loans acquired from financial institutions before the effective date of the Institution of Certified Accounting and Auditors of Thailand accounting practice on transferring/transferred of financial assets is recognised at the effective yield rate which is determined based on the acquisition cost of the outstanding loans. Interest on restructured loans is recognised on an accrual basis based on the balance of outstanding principal, and recognition on such basis is discontinued if principal or interest payments are more than three months past due.The subsidiary companies recognise interest income on investments in purchased/transferred loans for which loan repayment was received
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during the period using the effective yield rate of the portfolio, determined based on the acquisition cost of the outstanding loans. Interest on investments in purchased/transferred loans for which have been restructured and which loan repayment was received during the period is recognised under the effective interest rate method.Interest or discounts already included in the face value of notes receivable or loans are recorded as deferred interest and taken up as income evenly throughout the term of the notes or loans.
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Deferred interest income on hire-purchase represents discounted on interest given to debtors by dealers and is recognised based on the sum-of-the-year-digits method, in the same manner as interest income recognition on hire-purchase receivables.
b) Interest and dividends on investment in securitiesInterest on investment is recognised as income on an accrual basis. Dividends from securities are recognised as income when the dividends are declared.
c) Brokerage fee incomeBrokerage fee charged on securities trading are recognised as income on the transaction dates.
d) Interest on securities loansInterest on securities loans is recognised as income over the term of the loans based on the amount of principal outstanding. No accrual has been made for certain loans which under Notification No. Kor. Thor. 33/2543 dated 25 August 2000 which is updated by Notification No. Kor. Thor. 5/2544 dated 15 February 2001 of the Office of the Securities and Exchange Commission, are not qualified for recognition of interest on an accrual basis.
e) Gains (losses) on investmentGains (losses) on investment are recognised as income/expenses on the transaction dates.
f) Fees and service income- 18 -
Fees and service income are recognised as income on an accrual basis.
g) Project management incomeProject management income is recognised as income when service is rendered.
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h) Insurance income- For insurance policies of which the coverage
periods are less than 1 year, premium income is recognised on the date the insurance policy comes into effect, after deducting premium ceded and cancelled. For long-term insurance policies of which the coverage periods are longer than 1 year, related revenues and expenses are recorded as unearned and prepaid items. The subsidiary company recognises unearned and prepaid items as income and expenses over the annual coverage period.
- Reinsurance premium income is recognised when the reinsurer places the reinsurance application or statement of accounts with the subsidiary company.
5.2 Interest expensesInterest expenses are charged to earnings on an accrual basis. Interest on notes payable included in the face value is recorded as deferred interest and amortised to expenses evenly throughout the term of the notes.
5.3 Unearned premium reserveUnearned premium reserve of a subsidiary company is set aside in compliance with the Notification of the Ministry of Commerce regarding the appropriation of unearned premium reserve as follows :-Fire, marine (hull), motors and
- Monthly average basis (the one-twenty
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miscellaneous (except for travel accident)
fourth basis)
Marine and transportation (cargo)
- Net premium written for the last ninety days
Travelling accident - Net premium written for the last thirty days
5.4 Recognition and amortisation of customer depositsMoney/assets which customers have placed with a subsidiary company in cash accounts for securities trading is recorded as an asset of a subsidiary company for internal control purposes. As at the balance sheet date, a subsidiary company write these amounts off from both assets and liabilities and presents only assets which belong to a subsidiary company.
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5.5 Investments Investments in securities held for trading are determined at fair value. Gains or losses arising from changes in the value of such securities are included in determining earnings.Investments in available-for-sale securities, both held for short-term and long-term investments, are determined at fair value. Changes in the value of the securities are shown as a separate items in shareholders’ equity until the securities are sold, when the changes are included in determining earnings.Investments in debt securities, both due within one year or expected to be held to maturity, are determined at cost after amortisation.The premium/discount on debt securities of the Company and its subsidiary companies is amortised by the effective rate method with the amortised amount presented as an adjustment to the interest income.The fair value of marketable securities is based on the latest bid price of the last working day of the period as quoted on the Stock Exchange of Thailand. The fair value of government bonds, state enterprise securities and private sector debt instruments are determined using the formula quoted by the Bank of Thailand, which is based on the yield rate quoted by the Thai Bond Dealing Center or other financial institutions adjusted with the appropriate risk factors. The fair value of unit trusts is determined based on their net asset value.
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Investments in non-marketable equity securities which are classified as other investments are valued at cost. Losses on impairment (if any) of the investments are included in determining earnings. The weighted average method is used for computation of the cost of investments.
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In event of the Company and its subsidiary companies, transferring of investment portfolio, the investments are valued at their fair value prevailing on the transferred date. Difference between the carrying amount of the investments and their fair value on that date are recorded as gains (losses) in determining earnings or surplus (deficit) from revaluation of investments, presented as a separate items in shareholders’ equity, and amortised over the remaining period to maturity of the debt security, as the case may be.
5.6 Investments in receivables purchased and allowance for impairmentInvestments in receivables purchased which are classified as other investments are valued at acquisition cost net of allowance for impairment (if any). Losses on impairment of investments are included in determining earnings.Allowance for impairment of investments in receivables purchased is set up in accordance with the guidelines and regulations of the BOT, together with an analysis of the payment ability and status of each debtor, using experience to consider the level of recovery risk and the value of collateral.Such provisions are made in accordance with the guideline laid down by the BOT in relation to the classification of loans, provisioning rates and valuation of collateral which is used to deduct from the outstanding loan balance for determining provisions for impairment. The provisioning rates are based on the aging of the debt and the value of collateral.
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5.7 Investments in subsidiary and associated companiesInvestments in subsidiary and associated companies are accounted for under the equity method. Under this method, investments are initially recorded at acquisition cost and are adjusted to reflect the attributable share of the earnings from the operations of each subsidiary and associated company, in proportion to the investment. The excess (discount) of the cost of the investment over (under) the net book value at the acquisition date is amortised over a period of 5 - 10 years.
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Excess of losses of the subsidiary companies over the investment value is presented as liabilities under the caption “provision for losses on investments in the subsidiary companies”. The Company does not recognise such losses on an investment in a subsidiary received as a result of trouble debt restructuring which will be held temporarily, and to which the Company has no commitment and contingent liabilities.If the Company has no commitments or guarantees to its associated companies, losses are recognised only to the extent that they do not exceed the outstanding balance of investments.
5.8 Loans and receivablesLoans and receivables of the Company and its subsidiary companies are presented at principal balances, excluding accrued interest receivables. Unrecognised deferred income/discount on loans are deducted from loans balance.
5.9 Allowances for doubtful accounts and losses from troubled debt restructuringThe Company and its subsidiary companies provide allowances for doubtful accounts and losses from troubled debt restructuring in accordance with the notifications of the BOT (except for the classification of receivables which according to the BOT is to be done by contract, but which the Company and its subsidiary companies have classified their debts by customer, so as to comply with generally accepted accounting principles) or the SEC, as the case may be, and adjust these by the additional amount which are expected not to be collectible, based on
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the evaluation of the current status of the debtors, which takes into consideration the recovery risk and the value of collateral. Such provisions are made in accordance with the guideline laid down by the BOT in relation to the classification of loans, provisioning rates consideration for each class of debtor, and valuation of collateral which is used to deduct from the outstanding loan balance for determining provisions for doubtful debts and reclassification of restructured loans as normal debt.Amounts written off as bad debts are deducted from the allowance for doubtful accounts and in case of recovery of bad debt being made, the recovered amount is added to the allowance for doubtful accounts.
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5.10 Troubled debt restructuringThe Company and its subsidiary companies record troubled debt restructuring transactions in accordance with Thai Accounting Standard No. 34 “Accounting for Troubled Debt Restructuring” as pronounced by the Institute of Certified Accountants and Auditors of Thailand, which has not yet become effective under the Accounting Act B.E. 2543, and with reference to the BOT’s regulations. In cases where the debt restructuring involves modifications of the terms of repayment, the fair value of the receivables after restructuring is based on the net present value of expected future cash flows, determined using the lending market interest rate as being base on the rate as quoted to the debtors at the restructuring date. The Company and its subsidiary companies record the differences between the fair value of receivables as of the restructuring date and the previous book value as “Revaluation allowance for debt restructuring”, as an expense in the statement of earnings. Such allowance is amortised to recognise as income in the statement of earnings over the remaining period of payment under the restructured agreements.Losses arising from debt restructuring through waiver of part of the principal or recorded accrued interest receivable are recognised, less the recorded allowance, in the statement of earnings when incurred.
5.11 Property foreclosedBefore 2002, property foreclosed was stated at the lower of cost (net book value of the outstanding
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loans, excluding interest of which recognition has ceased) or net realisable value with reference to the latest appraisal value, whichever was lower. Since 1 January 2002, the Company and its subsidiary companies have changed their accounting treatment of property foreclosed received from 2002 onwards as a result of debt restructuring. In order to comply with the statement made by the Institute of Certified Auditors and Accountants of Thailand (“ICAAT”), assets are recorded at their fair value (based on the value as appraised by internal appraisers or external independent appraisers) less estimated selling expenses, provided this does not exceed the outstanding balance of debt per the legal claims.Gains on the disposal of property foreclosed are recognised in the earnings statement in proportion to the amount received. Losses on disposal and impairment loss are recognised as expenses when incurred.
5.12 Land, premises and equipment, depreciation and amortisationa) Premises and equipment are stated at cost less
accumulated depreciation and allowance for impairment of assets. Depreciation is calculated by reference to cost on a straight-line method over the following estimated useful lives (with the exception as listed below) :-
Buildings - 20 yearsBuilding improvement - 5 – 10
yearsFurniture, fixtures and equipment
- 5 – 10 years
Motor vehicles - 5 years- 29 -
Land are stated at cost and depreciation is not provided.Depreciation of computers and related equipment of a subsidiary company acquired between 1 July 1995 and 30 June 2001 is calculated by the sum-of-the-year-digits method over estimated useful lives of 5 years.
Depreciation of the assets of a subsidiary, which have been impaired is calculated on the reappraised value, and the loss on impairment are recorded as expenses in the statement of earnings.
b) Leasehold rights on land and building are amortised as expenses on a straight-line basis over the lease period.
c) Fees for non-life insurance operating license are deferred and amortised over a period of ten years on a straight-line basis.
5.13 Financial leaseThe Company and its subsidiary companies record vehicles under financial leases as assets and liabilities at the fair value of leased assets on the commencing date of the lease or present value of minimum lease payment whichever is lower. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease. The interest charge is recorded to period during the lease terms on the remaining balance of the lease payable for each period.
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5.14 Sales of commercial paperCommercial paper without an aval or acceptance which is sold with recourse, is recorded as a liability, under the caption of “Liabilities from sale of commercial paper”. Commercial paper sold at a discount with recourse, which is avaled by or has acceptance from a commercial bank or other finance company, is recorded by crediting the notes receivable account, and the obligations disclosed as part of “Contingent liabilities”.
5.15 Loss reserve and outstanding claimsOutstanding claims have been provided upon receipt of claims advices from the insured. Loss reserve has been provided based on estimates made by the subsidiary company’s management. In addition, the subsidiary company additionally set up a provision for losses incurred but not yet reported (IBNR).
5.16 Premium due and uncollectedPremium due and uncollected is carried at its net realisable value. A subsidiary company provides an allowance for doubtful accounts based on the estimated loss that may be incurred in the collection of the premium due, on the basis of collection experience and a review of current status of the premium due as at the balance sheet date.
5.17 Foreign currenciesForeign currency transactions occurred during the period have been translated into Baht at the rates ruling on the transaction dates. Assets and liabilities in foreign currencies outstanding on the balance
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sheet date have been translated into Baht at the rates ruling on the balance sheet date with the exception of those covered by forward exchange contracts with banks, which are translated at the agreed rates.Exchange gains and losses are included in determining earnings.
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5.18 Financial instrumentsThe Company and its subsidiary companies do not speculate or trade in any derivative financial instruments.Financial instruments presented in the balance sheets comprise of cash and deposits at financial institutions, loans to financial institutions, securities purchased under resale agreements, investments, loans and receivables, trading transactions with securities companies, receivables from the transfer of non-performing loans to TAMC, borrowings and deposits, securities sold under repurchase agreements, securities trading payables and debentures. Accounting policy for each transaction is separately and individually disclosed.
5.19 Earnings per shareEarnings (loss) per share as determined in the statement of earnings is basic earnings (loss) per share which is calculated by dividing net earnings (loss) for the period by the weighted average number of ordinary shares in issue during the period.Diluted earnings (loss) per share is calculated by dividing net earnings (loss) for the period by the total sum of the weighted average number of ordinary shares in issue during the period plus the weighted average number of ordinary shares to be issued upon conversion of all potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the period or on the date the potential ordinary shares were issued.
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5.20 Use of accounting estimatesPreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities. Actual results may differ from those estimates.
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6. CASH AND DEPOSITS AT FINANCIAL INSTITUTIONS(Unit : Thousand
Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Cash 14,275 541 45 45Cash at banks 2,095,1
35470,929 270,240 123,947
Negotiable certificates of deposit - net of deferred amortisation
744,570
1,396,980
364,606 827,336
Total cash and deposits at financial institutions 2,853,9
801,868,4
50634,891 951,328
Outstanding balance of deferred
2,543 5,549 2,543 4,813
Amortisation during the period
3,006 4,635 2,270 4,576
As at 30 June 2002, negotiable certificates of deposits of Baht 502 million (31 December 2001 : Baht 502 million) have been issued by a local bank under a scheme for exchanging the payable bills of defunct finance companies and carry interest at the rate of 2 percent per annum. It also has other negotiable certificates of deposits of Baht 242 million have been issued by a local bank under a scheme for exchanging the bills of defunct finance companies and carry interest at floating rates (The Company only : Baht 122 million and Baht 242 million, respectively). All its negotiable certificates of deposits will mature in the year 2002 – 2003.
7.LOANS TO FINANCIAL INSTITUTIONS(Unit : Thousand
- 35 -
Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decemb
er2002 2001 2002 2001
Call loans 84,714 90,725 - -Term loans 131,196 109,101 - - Total loans to financial institutions
215,910 199,826 - -
Add : Accrued interest receivable
368 175 - -
Less : Allowances for doubtful accounts
(80,914)
(85,725)
- -
Loans to financial institutions - net
135,364 114,276 - -
As at 30 June 2002, a subsidiary company had loans to defunct financial institutions amounting to approximately Baht 81 million (31 December 2001 : Baht 86 million) for which interest recognition has ceased and full allowance for doubtful accounts has been provided.
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8.SECURITIES PURCHASED UNDER RESALE AGREEMENTS
(Unit : Thousand Baht)
Consolidated The Company Only
30 June
31 Decem
ber
30 June
31 Decem
ber2002 2001 2002 2001
Government bonds 320,000
- - -
Financial Institution Development Fund's bonds
2,755,000
2,300,000
- 150,000
State enterprises securities 225,000
- - -
Total 3,300,000
2,300,000
- 150,000
9.INVESTMENTS 9.1 Classified by type of investment
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Cost/ Cost/book value
Fair value
book value
Fair value
Current investments :Trading securities Government and state enterprise securities
- - 2,049,646
2,170,479
Add : Allowance for change in value
- 120,833
- 2,170,479
Available-for-sale securities Government and state enterprise securities
480,634 496,878 1,576,670
1,660,431
Private debt securities 15,954 16,076 90,008 90,685 Domestic marketable equity securities
28 28 27,799 28,351
496,616 512,982 1,694,477
1,779,467
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Add : Allowance for change in value
16,366 84,990
512,982 1,779,467
Held-to-maturity debt securities - due within 1 year Government and state enterprise securities
- 2,342,329
Total current investments - net
512,982 6,292,275
- 38 -
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Cost/ Cost/book value
Fair value
book value
Fair value
Long-term investments :Available-for-sale securities Government and state enterprise securities
9,739,009
9,918,840
5,131,403
5,475,555
Private debt securities 2,269,075
2,338,542
1,961,221
1,984,001
Domestic marketable equity securities
2,232,336
2,470,808
1,914,312
1,830,986
14,240,420
14,728,190
9,006,936
9,290,542
Add : Allowance for change in value
548,795 369,277
Less : Allowance for impairment
(61,025) (85,671)
14,728,190
9,290,542
Held-to-maturity debt securities Government and state enterprise securities
8,598,774
5,927,997
Private debt securities 43,956 69,681 Foreign debt securities Subordinated convertible debentures
1,700,884
1,547,860
Subordinated debentures
938,547 -
11,282,161
7,545,538
Less : Allowance for impairment
(28,087) (28,087)
11,254,074
7,517,451
Other investments Non-marketable equity securities Domestic 375,653 352,253 Foreign 70,102 70,102 Investments in receivables
3,435,461
3,648,936
3,881,21 4,071,29- 39 -
6 1 Less : Allowance for impairment
(340,574)
(235,879)
3,540,642
3,835,412
Total long-term investments - net
29,522,906
20,643,405
- 40 -
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Cost/ Cost/book value
Fair value
Book value
Fair value
Current investments :Trading securities Government and state enterprise securities
- - 1,424,982
1,506,950
Add : Allowance for change in value
- 81,968
- 1,506,950
Available-for-sale securities Government and state enterprise securities
475,857 491,838 1,572,416
1,655,785
Private debt securities 15,954 16,076 90,008 90,685 Domestic marketable equity securities
- - 14,854 15,839
491,811 507,914 1,677,278
1,762,309
Add : Allowance for change in value
16,103 85,031
507,914 1,762,309
Total current investments - net
507,914 3,269,259
Long-term investments :Available-for-sale securities Government and state enterprise securities
5,596,573
5,747,144
4,638,620
4,950,172
Private debt securities 4,506,958
4,561,238
4,527,287
4,546,017
Domestic marketable equity securities
996,618 1,149,289
727,937 747,915
11,100,149
11,457,671
9,893,844
10,244,104
Add : Allowance for change in value
360,722 353,460
Less : Allowance for impairment
(3,200) (3,200)
11,457,671
10,244,104
Held-to-maturity debt - 41 -
securities Government and state enterprise securities
5,885,897
3,837,730
Private debtor securities 19,770 45,494 Foreign debt securities Subordinated convertible debentures
648,523 541,053
Subordinated debentures
715,543 -
7,269,733
4,424,277
Less : Allowance for impairment
(19,293) (19,293)
7,250,440
4,404,984
- 42 -
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Cost/ Cost/book value
Fair value
Book value
Fair value
Other investments Non-marketable equity securities Domestic 259,833 259,833 Foreign 49,376 49,376
309,209 309,209 Less : Allowance for impairment
(62,978) (49,024)
246,231 260,185Total long-term investments - net
18,954,342
14,909,273
During the six-month period ended 30 June 2002, the Company and a subsidiary company recategorised investments in debt securities, with fair value amounting to Baht 2,169 million at the transfer date, from trading securities to held-to-maturity debt securities (the Company only : Baht 1,507 million). In addition, the Company recategorised long-term available-for-sale securities with a fair value of Baht 536 million at the transfer date as held-to-maturity debt securities, with a revaluation surplus as a result of the investment transfer amounting to Baht 36 million at the transfer date, being presented in shareholders’ equity. During the year 2001, there were purchases/sales of debt securities between the Company and a subsidiary company totaling Baht 15,766 million. Most of such investments had previously been classified as available-for-sale securities by the seller, but the purchased debt securities were recorded as trading securities in the purchaser’s books of account, to accord with the objective of the investment. The respective
- 43 -
intercompany gains on the sales of approximately Baht 535 million and Baht 328 million are presented as part of gain from investments in the consolidated and the Company’s earnings statements. Such gains are not eliminated from the consolidated financial statements as the Company regards the transactions as reclassification of investments.As at 30 June 2002, the Company and its subsidiary companies have a revaluation surplus amounting to Baht 26 million as a result of the recategorisation from available-for-sale debt securities to held-to-maturity debt securities in year 2001, and this has been presented in shareholders' equity (the Company only : Baht 9 million).
- 44 -
9.2 Classified by due date of debt securities
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Maturity Maturity
Over Over Over Over1 year 1-5
years5 years Total 1 year 1-5
years5 years Total
Trading securitiesGovernment and state enterprise securities
- - - - 41 700,202
1,349,403
2,049,646
Add (less) : Allowance for change in value
- - - - (1) 32,530 88,304 120,833
Total - - - - 40 732,732
1,437,707
2,170,479
Available-for-sale securitiesGovernment and state enterprise securities
46,493
605,140
9,568,010
10,219,643
164,572
833,789
5,709,712
6,708,073
Private debt securities
51,285
2,118,061
115,683
2,285,029
122,578
1,812,969
115,682
2,051,229
Total 97,778
2,723,201
9,683,693
12,504,672
287,150
2,646,758
5,825,394
8,759,302
Add : Allowance for change in value
805 80,154 184,705
265,664
699 50,805 399,866
451,370
Total 98,583
2,803,355
9,868,398
12,770,336
287,849
2,697,563
6,225,260
9,210,672
Held-to-maturity debt securitiesGovernment and state enterprise securities
- 2,420,869
6,177,905
8,598,774
2,342,329
1,733,034
4,194,963
8,270,326
Private debt securities
- 11,533 32,423 43,956 - 10,000 59,681 69,681
Foreign debt securities
- 2,639,431
- 2,639,431
- 1,547,860
- 1,547,860
Total - 5,071,833
6,210,328
11,282,161
2,342,329
3,290,894
4,254,644
9,887,867
Less : Allowance for impairmen - (1,533) (26,554 (28,087 - - (28,087 (28,087
- 45 -
t ) ) ) )Total - 5,070,
3006,183,7
7411,254,
0742,342,
3293,290,
8944,226,5
579,859,7
80Total debt securities
98,583
7,873,655
16,052,172
24,024,410
2,630,218
6,721,189
11,889,524
21,240,931
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Maturity Maturity
Over Over Over Over1 year 1-5
years5 years Total 1 year 1-5
years5 years Total
Trading securitiesGovernment and state enterprise securities
- - - - - 700,202
724,780
1,424,982
Add : Allowance for changes in value
- - - - - 32,530 49,438 81,968
Total - - - - - 732,732
774,218
1,506,950
- 46 -
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Maturity Maturity
Over Over Over Over1 year 1-5
years5 years Total 1 year 1-5
years5 years Total
Available-for-sale securitiesGovernment and state enterprise securities
- 293,326
5,779,104
6,072,430
94,807 737,588
5,378,641
6,211,036
Private debt securities
47,336
1,359,893
3,115,683
4,522,912
121,129
1,380,484
3,115,682
4,617,295
Total 47,336
1,653,219
8,894,787
10,595,342
215,936
2,118,072
8,494,323
10,828,331
Add : Allowance for change in value
122 64,551 156,281
220,954
694 42,396 371,238
414,328
Total 47,458
1,717,770
9,051,068
10,816,296
216,630
2,160,468
8,865,561
11,242,659
Held-to-maturity debt securitiesGovernment and state enterprise securities
- 1,335,830
4,550,067
5,885,897
- 605,411
3,232,319
3,837,730
Private debt securities
- 1,533 18,237 19,770 - - 45,494 45,494
Foreign debt securities
- 1,364,066
- 1,364,066
- 541,053
- 541,053
Total - 2,701,429
4,568,304
7,269,733
- 1,146,464
3,277,813
4,424,277
Less : Allowance for impairment - (1,533) (17,760
)(19,293
)- - (19,29
3)(19,293)
Total - 2,699,896
4,550,544
7,250,440
- 1,146,464
3,258,520
4,404,984
Total debt securities
47,458
4,417,666
13,601,612
18,066,736
216,630
4,039,664
12,898,299
17,154,593
9.3 As at 30 June 2002 and 31 December 2001, the Company and its subsidiary company have investments amounting to Baht 578 million in debt
- 47 -
securities under the conditions of the Ministry of Finance’s Tier II capital support scheme. These debt instruments are 10 year government bonds which bear interest at rates of 2.5 – 4.0 percent per annum (the Company only : Baht 473 million).
9.4 As at 30 June 2002 and 31 December 2001, the Company’s investments in private debt securities include a Baht 3,000 million investment in the unsecured subordinated debentures of a subsidiary company, Thanachart Bank Plc..
- 48 -
9.5 As at 30 June 2002, a subsidiary’s investments in government and state enterprise bonds, costing approximately Baht 20 million, have been placed as collateral for a loan from a commercial bank and as security with the Insurance Registrar, and amounting to approximately Baht 2 million have been placed as bail bonds for insured person in cases where charges are being brought (31 December 2001 : Baht 20 million and Baht 2 million, respectively and another government bonds amounting to approximately Baht 38 million were placed as collateral for litigation against a government agency which has already been redeemed during 2002).
9.6 As at 30 June 2002, the Company and a subsidiary company’s investments in equity securities, amounting to approximately Baht 32 million (at cost) (the Company only : Baht 13 million) were received as a result of debt restructuring or in settlement of debt, which the debtors may purchase back at stipulated prices within a specific period or to which debtors have first right of purchase (31 December 2001 : Baht 69 million and Baht 50 million respectively).
9.7 The following are investments where the Company and its subsidiary companies hold not less than 10 percent of the equity of the investees but which were not recorded as investments in subsidiary and associated companies :-
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Net Unpaid Perce
ntageNet Unpaid Perce
ntageName Nature of
businessbook value
amount
of holding
book value
amount of holdin
g % %
- 49 -
Manufacturing and commercial industriesPatum Rice Mill and Granary Public
Production and
225,352
- 16.32 249,847
- 16.32
Company Limited distribution of packagedrice and rice products
Thai Heat Exchange Public Company
Production and
5,350 - 10.11 - - 13.40
Limited (ordinary and preference shares)
distribution of air
conditionersSiam Press Company Limited
Publication 10,512 - 15.00 - - -
Burapa Steel Industry Company Limited
Production and distribution of steel bar
- - 11.43 - - 11.43
Property development and constructionMBK Properties and Development
Shopping mall
1,091,433
- 18.51 891,645
- 18.51
Public Company LimitedHTR Corporation Limited
Office building &
40,985 - 19.10 40,985 - 19.10
property development
Prosperity Industrial Estate Company
Property development
37,981 - 18.49 45,685 - 18.49
LimitedRNS Holding Company Limited
Property development
- - 19.50 - - 19.50
Preecha Group Public Company Limited
Property development
- - 12.95 - - 19.35
- 50 -
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Net Unpaid Perce
ntageNet Unpaid Perce
ntageName Nature of
businessbook value
amount
of holding
book value
amount of holdin
g % %
Utilities and servicesSCB Research Institute Company Limited
Economic research center
3,750 1,250 10.00 3,750 1,250 10.00
Sima Thani Company Limited
Hotel - - 10.00 - - 10.00
OthersSCB Base Stocks Open Ended Fund
Unit trusts 204,262
- 12.67 243,425
- 17.06
Nasset Poon Phol (Auto Redemption)
Unit trusts 72,194 - 41.56 73,084 - 41.56
FundSaturn Inc. Joint venture 70,094 - 12.49 70,094 - 12.49Thanasarn Open-Ended Fund
Unit trusts 15,648 - 14.85 15,293 - 22.68
Saturn International Management Inc.
Holding 173 - 12.64 173 - 12.64
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Net Unpai
dPercentage
Net Unpaid
Percentage
Name Nature of business
book value
amount
of holdin
g
book value
amount
of holdin
g % %
Manufacturing and Commercial IndustriesPatum Rice Mill and Granary Public
Production and
135,137
- 9.79 149,825
- 9.79
Company Limited distribution of packagedrice and rice products
Thai Heat Exchange Public Company
Production and
5,350 - 7.54 - - 9.99
Limited (ordinary and preference shares)
distribution of air
conditioners
Property
- 51 -
development and constructionMBK Properties and Development
Shopping mall
365,736
- 6.20 298,788
- 6.20
Public Company LimitedHTR Corporation Limited
Office building &
9,488 - 10.00 9,488 - 10.00
property development
Prosperity Industrial Estate Company
Property development
30,816 - 8.44 38,520 - 8.44
LimitedRNS Holding Company Limited
Property development
- - 19.50 - - 19.50
Preecha Group Public Company Limited
Property development
- - 12.95 - - 19.35
Utilities and servicesSCB Research Institute Company Limited
Economic research center
3,750 1,250 10.00 3,750 1,250 10.00
Sima Thani Company Limited
Hotel - - 10.00 - - 10.00
- 52 -
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Net Unpai
dPercentage
Net Unpaid
Percentage
Name Nature of business
book value
amount
of holdin
g
book value
amount
of holdin
g % %
OthersSCB Base Stocks Open Ended Fund
Unit trusts 114.461
- 7.10 93,153 - 6.53
Nasset Poon Phol (Auto Redemption)
Unit trusts 72,194 - 41.56 73,084 - 41.56
FundSaturn Inc. Joint venture 49,368 - 9.90 49,368 - 9.90Thanasarn Open-Ended Fund
Unit trusts 15,648 - 14.85 15,293 - 22.68
Saturn International Management Inc.
Holding 45 - 8.90 45 - 8.90
9.8 Investments in receivablesInvestments in receivables represent loan receivables purchased by bid from local financial institutions. The outstanding balances of loan receivables as at 30 June 2002 and 31 December 2001 can be summarised as follow :-
(Unit : Thousand Baht)Consolidated The Company Only
30 June 31 Decembe
r
30 June 31 Decemb
er2002 2001 2002 2001
Investments Investments in receivables
3,435,461
3,648,936
- -
Less : Allowance for impairment
(249,946)
(158,905)
- -
Investments in receivables - net
3,185,515
3,490,031
- -
30 June 2002 31 December 2001Balan
ceBalan
ceNumber
ofper Purch
aseNumber of
per Purchase
customers
agreement
price Yield customers
agreement
price Yield
- 53 -
Million Million % Million Million %Baht Baht Baht Baht
ConsolidatedTotal investments in receivables 569 21,29
64,862 6.5 –
37.32565 20,88
74,819 9 – 15
Outstanding investments in receivables as at the balance sheet date
472 13,785
3,435 489 14,921
3,649
- 54 -
During 2002, the subsidiary companies have restructured loans by transferring assets, modification of the terms of repayments, or both transferring assets and modification of the terms of repayments, of totaling 59 troubled receivables, which had the book balance before restructuring of approximately Baht 448 million. The following is the debt restructuring table during the six-month period ended 30 June 2002 :-
Outstanding loan
Number of
balance before
Type of assets
Fair value of
Type of restructuring
receivable
restructuring
transferred transferred assets
Million Baht
Million Baht
Transfer of assets 1 1 Land and building
-
Transfer of securities (conversion of debt to equity)
2 - Common shares
1
Modification of terms
4 38
Transfer of assets and/or securities and/or modification of terms
52 409 Land and building
103
Total 59 448
For the debt restructured during the period, subsidiary companies have assets expected to be received which are still, at present, in process amounting to Baht 141 million.Supplemental information for the six-month period ended 30 June 2002, relating to debt restructuring
- 55 -
in the consolidated financial statements are as follow :-
(Unit : Million Baht)Interest income recognised in statement of earnings
157
Gain on debt repayment recognised in statement of earnings
58
Cash repayment from receivables
382
As at 30 June 2002, there were outstanding debt restructuring agreements of 171 receivables, amounting to Baht 1,373 million. The outstanding balance of these receivables net of collateral amounted to Baht 189 million.
- 56 -
The outstanding balances of the debt are classified in accordance with the BOT’s guidelines, with the allowance for impairment in value based on the provisioning guideline as laid down by the BOT. As at 30 June 2002 and 31 December 2001 these are as follows :-
(Unit : Million Baht)ConsolidatedPercent
ageAllowance for impairment
Investments Debt balance after
required by
Amount to be provided
Amount
in receivables
collateral BOT(1) under BOT requirements
provided in the accounts
30 31 30 31 30 31 30 31June Dece
mberJune Dece
mberJune Dece
mberJune Decem
ber200
22001 2002 2001 2002 2001 2002 2001
Normal 610 531 98 83 1 1 1 1 1Special mention
87 310 26 39 2 1 1 1 1
Substandard 160 243 6 28 20 1 6 1 6Doubtful 161 53 - 9 50 - 4 - 4Bad debt 2,41
72,512 247 147 100 247 147 247 147
Total 3,435
3,649 377 306 250 159 250 159
(1) The provisioning rates required by BOT’s guidelines for investments in receivables taking into consideration the value of collateral. In the year 2002, BOT issued new guidelines on provisioning rates for debt classification, whereby provision is to be made for normal debt at rates of at least 1 or 2 percent respectively, or at a lower rate calculated in accordance with guidelines and conditions stipulated by the BOT. However, the subsidiary companies are still setting aside provision for such debt at rates of 1 or 2 percent, in accordance with the previous guidelines.
9.9 As at 30 June 2002 and 31 December 2001, investments in securities of the Company and its subsidiary companies which are financial institutions (commercial bank business, finance business, credit foncier business and asset management business) include investments in the securities of companies with weak financial positions and operating results. These are summarised below :-
- 57 -
- 58 -
ConsolidatedAllowance for possible loss
Number of debtors
Cost Fair value provided in the accounts
30 June
31 Decemb
er
30 June
31 Decem
ber
30 June
31 Decemb
er
30 June
31 Decembe
r2002 2001 2002 2001 2002 2001 2002 2001
Million Baht
Million Baht
Million Baht
Million Baht
Million Baht
Million Baht
Debt instruments - debentures / bill of exchange1. Closed financial institutions
- 2 - 75 - 75 - -
2. Financial institutions taken
1 1 16 15 16 16 - (1)
over by the government and required to reduce or increase their share capital3.
Companies which have loan
3 3 34 34 6 6 28 28
settlement problems or have defaulted
Equity securities - common shares1. Closed financial institutions
1 1 - - - - - -
2. Financial institutions taken
1 2 - - - - - -
over by the government and required to reduce or increase their share
- 59 -
capital3. Listed companies vulnerable
4 4 9 9 - - 9 9
to delisting from the SET 4. Non-listed companies with
1 - - - - - - -
similar operating results and
financial positions to listed
companies vulnerable to
delisting from the SET5. Companies which have loan
1 2 17 19 - 1 17 18
settlement problems or have defaulted6.
Companies whose auditors’
11 8 161 127 86 73 75 54
reports cite going concern issues
- 60 -
ConsolidatedAllowance for possible loss
Number of debtors
Cost Fair value provided in the accounts
30 June
31 Decemb
er
30 June
31 Decem
ber
30 June
31 Decemb
er
30 June
31 Decembe
r2002 2001 2002 2001 2002 2001 2002 2001
Million Baht
MillionBaht
Million Baht
Million Baht
Million Baht
Million Baht
Investments in receivables1. Closed financial institutions
2 2 - - - - - -
2. Listed companies vulnerable
5 3 44 19 19 19 - -
to delisting from the SET3.
Companies which have loan
204 173 1,776
1,450
1,611
1,347
164 103
settlement problems or have
defaulted4. Non-listed companies with
3 8 6 - - - - -
similar operating results and
financial positions to listed
companies vulnerable to
delisting from the SET
The Company OnlyAllowance for possible loss
Number of debtors
Cost Fair value provided in the accounts
30 June
31 Decemb
er
30 June
31 Decemb
er
30 June
31 Decemb
er
30 June
31 Decemb
er2002 2001 2002 2001 2002 2001 2002 2001
Million Baht
MillionBaht
Million Baht
Million Baht
Million Baht
Million Baht
- 61 -
Debt instruments – debenture/bill of exchange1. Closed financial institutions
- 2 - 75 - 75 - -
2. Financial institutions taken
1 1 16 15 16 16 - (1)
over by the government and required to reduce or increase their share capital3.
Companies which have loan
3 3 19 19 - - 19 19
settlement problems or have
defaulted
Equity securities - common shares 1. Listed companies vulnerable
1 1 4 4 - - 4 4
to delisting from the SET2.
Companies which have loans
1 2 13 14 - 1 13 13
settlement problems or have
defaulted3. Companies whose auditors’
7 6 133 109 84 74 49 35
reports cite going concern issues
- 62 -
10. INVESTMENTS IN SUBSIDIARY AND ASSOCIATED COMPANIES10.1 As at 30 June 2002 and 31 December 2001, the
Company and its subsidiary companies have the following investments in subsidiary and associated companies :-
(Unit : Million Baht)Nature of Natur
e of Paid-up Percenta
geInvestment value Dividend
incomeCompany’s
namebusiness relatio
nshipShare capital
of holding (%)
Cost method
Equity method (1)
received for the
30 31 30 31 30 31 30 31 six-month periods
June
December
June
December
June
December
June
December
ended 30 June
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
Subsidiary companies directly held by the CompanyThanachart Bank Plc.
Bank business(2)
Shareholding
8,102
8,102
98.89
98.89
9,703
9,703
7,809
7,564
- -
N.F.S. Asset Management
Non-performing
Shareholding
1,000
1,000
100.0
0
100.0
0
1,000
1,000
(73)
(158)
- -
Co., Ltd. assets management
Max Asset Management
Non-performing
Shareholding
572
572
58.45
58.45
334
334
261
263
- -
Co., Ltd. assets management
National Securities Co., Ltd.
Securities business
Shareholding
1,500
1,500
100.0
0
100.0
0
1,500
1,500
1,893
1,695
- -
National Insurance Co., Ltd.
Non-life insurance
Shareholding
300
300
70.00
70.00
210
210
187
214
- -
Pasara Co., Ltd. Finance business(3)
Shareholding
150
150
100.0
0
100.0
0
300
300
365
339
- -
National Asset Management
Assets management
Shareholding
100
100
75.00
75.00
113
113
121
120
22 22
Co., Ltd.N.F.S. Capital Co., Ltd.
Cease operation
Shareholding
100
100
100.0
100.0
100
100
99 98 - -
- 63 -
0 0Thiravanit Co., Ltd.
Credit Fonciers(3)
Shareholding
100
100
99.90
99.90
128
128
135
134
- -
Sinkahakarn Co., Ltd.
Credit Fonciers(3)
Shareholding
125
125
95.12
95.12
104
104
122
120
- 25
Bangkok Home Co., Ltd.
Credit Fonciers(3)
Shareholding
100
100
99.87
99.87
131
131
90 86 - -
National Group Leasing
Leasing and hire
Shareholding
360
360
100.0
0
66.67
360
221
402
258
- -
Co., Ltd. purchase
Plan Estate Co., Ltd.
Property development
Shareholding
200
200
59.00
59.00
20 20 31 19 - -
Thanachart Management and
Services Shareholding
6 6 100.0
0
100.0
0
8 8 14 11 - -
Services Co., Ltd.Thanachart Legal and
Legal services
Shareholding
10 10 100.0
0
100.0
0
10 10 12 12 - -
Appraisal Co., Ltd.Lan Bangna Co., Ltd.
Warehouse services
Shareholding
116
116
10.00
10.00
- - 23 (10)
- -
Subsidiary company directly held by the Company - exclude from consolidationGlas Haus Building Co., Ltd.
Office building rental
Shareholding
195
195
100.0
0
100.0
0
- - - - - -
14,02
1
13,88
2
11,49
1
10,76
5
22 47
(1) Calculated including shares of profits of the subsidiary and associated companies in which the Company has indirect holdings.
(2) Authorised to operate commercial banking business on 3 January 2002 and return the Certificate of operating finance business to the Ministry of Finance on 21 April 2002, and has commenced its banking operations since 22 April 2002.
(3) Returned the certificate of operating finance and credit foncier business to the Ministry of Finance on 21 April 2002 and have already registered the change of its status to a limited company.
- 64 -
(Unit : Million Baht)Nature of Natur
e of Paid-up Percenta
geInvestment value Dividend
incomeCompany’s
namebusiness relatio
nshipShare capital
of holding (%)
Cost method
Equity method (1)
received for the
30 31 30 31 30 31 30 31 six-month periods
June
December
June
December
June
December
June
December
ended 30 June
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
Associated companies directly and indirectly held by the CompanyZurich National Life
Life-insurance
Shareholding
500
500
50.00
50.00
250
250
291
286
- -
Assurance Co., Ltd.Puen Pob Paet Co., Ltd.
Clinic Shareholding
1 1 28.50
28.50
- - 1 1 - -
Siam Media and Communications
Shareholding
700
700
33.07
33.07
- - - - - -
Communication Co., Ltd.Maxwin Property Co., Ltd.
Serviced Shareholding
284
284
47.65
47.65
- - - - - -
apartment business
T.A. Fitas (Thailand) Co., Ltd.
Computer software
Shareholding
20 20 45.00
45.00
9 9 - - - -
development
259
259
292
287
- -
14,28
0
14,14
1
11,78
3
11,05
2
22 47
Add : Provision for loss on investment in subsidiary companies presented as liabilities
- - 73 168
Total 14,28
0
14,14
1
11,85
6
11,22
0 (1) Calculated including shares of profits of the subsidiary and associated companies in which the
Company has indirect holdings.(2) Authorised to operate commercial banking business on 3 January 2002 and return the Certificate
of operating finance business to the Ministry of Finance on 21 April 2002, and has commenced its banking operations since 22 April 2002.
- 65 -
(3) Returned the certificate of operating finance and credit foncier business to the Ministry of Finance on 21 April 2002 and have already registered the change of its status to a limited company.
10.2The consolidated financial statements as at 30 June 2002 and 31 December 2001 did not include the financial statements of a subsidiary company, Glas Haus Building Co., Ltd., which the Company intends to hold as a temporary investments. The Company has no outstanding guarantees or commitments to give financial support to such company and the investment is therefore recorded at cost, which a full provision, of approximately Baht 0.2 million, had been made. As at 30 June 2002, that subsidiary company has total assets of approximately Baht 165 million, total liabilities of Baht 530 million and a capital deficit of Baht 365 Million (31 December 2001 : total assets of Baht 180 million, total liabilities of Baht 531 million and a capital deficit of Baht 351 million).
- 66 -
10.3The share of profit from an associated company, Puen Pob Paet Co., Ltd., for the six-month period ended 30 June 2002 which was presented under the equity method based on financial statements which have not yet been audited by its auditor. The share of profit represents 0.009 percent of the net earnings per the consolidated and the Company’s statements of earnings (2001 : 0.01 percent).
10.4As at 30 June 2002 and 31 December 2001, the Company did not record its investment in three associated companies, Siam Media and Communication Co., Ltd., Maxwin Property Co., Ltd. and T.A. Fitas (Thailand) Co., Ltd., under the equity method since the Company has already recorded shares of loss equal to the value of investments or recognised full allowance for permanent diminution in the value of the investments.
10.5 Cash flow information of asset management companies which are subsidiary companiesCash flow information of asset management companies which are subsidiary companies for the six-month periods ended 30 June 2002 and 2001 is as follows :-
(Unit : Million Baht)N.F.S. Asset Max Asset
Management Co., Ltd.
Management Co., Ltd.
2002 2001 2002 2001Cash flows from operating activities :
Net earnings (loss) 20 (53) 4 (13)Adjustments to reconcile net
earnings (loss) to net cash providedby (used in) operating activities :-Gain on assets transfer (134) - (81) -Gain on disposal of investments (12) - - -
- 67 -
Loss on diminution in value of investments
18 - - -
Loss on diminution in value of investments in receivable (reversal) (3) 13 94 185Allowance for doubtful accounts 104 39 - -Loss on debt restructuring 52 - - -Loss on diminution in value of property foreclosed
4 - 8 -
Gain on disposal of property foreclosed
(15) - (10) -
Allowance for diminution in value of other assets
- - 5 -
Decrease (increase) in accrued interest receivable
(23) (2) 1 (1)
Increase (decrease) in accrued interest payable
(389) 8 (1) 158
Earnings (loss) from operating activities before changes in
operating assets and liabilities (378) 5 20 329
- 68 -
(Unit : Million Baht)N.F.S. Asset Max Asset
Management Co., Ltd.
Management Co., Ltd.
2002 2001 2002 2001Decrease (increase) in operating
assetsLoans to financial institutions (1,24
8)(890) 35 (463)
Loans and receivables (674) (13,359)
- -
Investments in receivables 76 235 82 156Property foreclosed 175 (999) 36 -Other assets (9) (1) (4) (4)
Increase in operating liabilitiesAmount due to parent company - 125 - -Other liabilities 3 4 7 9 Net cash flows provided from
(used in) operating activities(2,05
5)(14,8
80)176 27
Cash flows from investing activities :
Decrease in investments 1,228 - - -Cash paid for purchase of equipment - - - (1)
Net cash flows provided from (used in) investing activities
1,228 - - (1)
Cash flows from financing activities :
Increase (decrease) in borrowings 889 14,047
(170) (34)
Cash received from paid-up capital - 750 - -Net cash flows provided from (used
in) financing activities889 14,79
7(170) (34)
Net increase (decrease) in cash and cash equivalents
62 (83) 6 (8)
Cash and cash equivalents at beginning of the period
53 91 13 21
Cash and cash equivalents at end of the period
115 8 19 13
- 69 -
11. LOANS, RECEIVABLE AND ACCRUED INTEREST RECEIVABLE
11.1 Classified by loan type
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decembe
r
30 June 31 Decembe
r2002 2001 2002 2001
Finance business loans and receivableLoans 33,630,
11336,300,
6032,301,0
942,848,8
80Notes receivable 2,084,0
462,485,9
1315,247,
69315,276,
360Hire-purchase receivable
23,028,503
15,505,127
22,887,327
15,363,913
Financial lease receivable
46,575 27,452 - -
Total finance business loans and receivable
58,789,237
54,319,095
40,436,114
33,489,153
Add : Accrued interest receivable
419,735 437,601 42,915 433,559
Less : Allowance for doubtful accounts
(1,561,541)
(1,386,979)
(689,564)
(633,196)
Less : Revaluation allowance for debt restructuring (482,24
9)(485,08
9)- -
Finance business loans and receivable and accrued interest receivable - net
57,165,182
52,884,628
39,789,465
33,289,516
Securities business receivableCustomer’s accounts 475,633 310,307 - -Margin loans 38,980 22,744 - -Other receivables 508,007 508,603 - -Total securities business 1,022,6 841,654 - -
- 70 -
receivable 20Add : Accrued interest receivable
8,595 8,594 - -
Less : Allowance for doubtful accounts
(491,919)
(492,425)
- -
Securities business receivable and accrued interest receivable - net
539,296 357,823 - -
Loans, receivable and accrued interest receivable - net
57,704,478
53,242,451
39,789,465
33,289,516
- 71 -
11.2 Classified by remaining period of contract (Unit : Thousand
Baht)Consolidated The Company Only
30 June 31 December
30 June 31 December
2002 2001 2002 2001Finance business loans and receivable At call 1,198,46
51,125,45
3529,827 538,344
Not over 1 year 3,581,197
10,584,024
769,983 14,596,775
Over 1 year 55,526,450
44,193,771
39,179,219
18,787,593
Total finance business loans and receivable
60,306,112
55,903,248
40,479,029
33,922,712
Less : Intercompany profits from loans and receivable transferred
(1,097,140)
(1,146,552)
- -
Finance business loans, receivable and accrued interest receivable
59,208,972
54,756,696
40,479,029
33,922,712
11.3 Classified by currency and country As at 30 June 2002 and 31 December 2001, all outstanding loans and receivables are in Baht loans to domestic receivables.
11.4 Classified by type of business and loan classification
(Unit : Thousand Baht)Consolidated30 June 2002
Special-
Sub- Bad
Normal
mention
standard
Doubtful
debt Total
Agricultural and mining 89,345
868 53,089
130,546
10,770
284,618
Manufacturing and 8,385, 1,145, 81,67 777,0 288,7 10,67- 72 -
commerce 570 300 7 24 92 8,363Real estate and construction
2,843,477
60,619
238,999
661,622
1,015,730
4,820,447
Public utilities and services
11,986,325
30,874
13 451,802
224,415
12,693,429
Hire purchase business 284,500
- - - - 284,500
Personal use Housing loans 3,294,
589283,2
07192,9
91401,1
97547,0
144,718,
998 Securities 515,3
64- 36,22
9- 479,6
221,031,
215 Hire purchase 21,90
5,4741,020,
87677,07
944,22
327,42
623,075,078
Others 961,256
30,151
28,288
62,982
20,429
1,103,106
Others 761,395
47,94
3
539,8
37
927,8
71
370,5
27
2,647,573
Total loans, receivable and accrued interest receivable
51,027,295
2,619,838
1,248,202
3,457,267
2,984,725
61,337,327
Less : Intercompany profits from loans and receivable transferred
(1,097,140)
Total loans, receivable and accrued interest receivable 60,24
0,187
- 73 -
(Unit : Thousand Baht)Consolidated
31 December 2001Speci
al-Sub- Bad
Normal
mention
standard
Doubtful
debt Total
Agricultural and mining 87,633
915 90,839
51,868
1,455 232,710
Manufacturing and commerce
8,042,988
1,229,061
844,033
285,721
178,811
10,580,614
Real estate and construction
5,804,213
202,154
653,477
835,913
413,805
7,909,562
Public utilities and services
11,559,649
228,634
686,529
477,855
20,359
12,973,026
Hire purchase business 433,800
- - - - 433,800
Personal use Housing loans 2,368,
072455,6
29445,2
52738,2
4743,57
84,050,
778 Securities 333,0
51- 32,77
9- 484,4
18850,24
8 Hire purchase 14,79
1,968658,1
6744,09
927,38
312,60
115,534
,218 Others 1,126,
128288,1
22936,5
751,032,
27016,23
43,399,
329Others 789,2
11- - - - 789,21
1Total loans, receivable and accrued interest receivable 45,33
6,7133,062,
6823,733,
5833,449,
2571,171,
26156,753
,496Less : Intercompany profits from loans and receivable transferred
(1,146,552)
Total loans, receivable and accrued interest receivable 55,606
,944
(Unit : Thousand Baht)The Company Only
30 June 2002Speci
al-Sub- Bad
Norm menti standa Doubt debt Total
- 74 -
al on rd fulSubsidiary companies - asset management company 17,49
1,562- - - - 17,49
1,562Hire purchase business 22,50
0- - - - 22,50
0Personal use Housing loans 51,45
9653 386 522 - 53,02
0 Hire purchase 21,73
8,7721,011,
31475,37
944,22
317,63
922,887,327
Others 4,505 110 - - 5 4,620Others 20,00
0- - - - 20,00
0Total loans, receivable and accrued interest receivable 39,32
8,7981,012,
07775,76
544,74
517,64
4 40,479,029
- 75 -
(Unit : Thousand Baht)The Company Only31 December 2001
Special-
Sub- Bad
Normal
mention
standard
Doubtful
Debt Total
Subsidiary companies - asset management company 18,04
2,435- - - - 18,04
2,435Hire purchase business 433,8
00- - - - 433,8
00Personal use Housing loans 62,55
9- - - - 62,55
9 Hire purchase 14,64
3,377649,7
0742,32
726,91
21,590 15,36
3,913 Others - - - - 5 5Others 20,00
0- - - - 20,00
0Total loans, receivable and accrued interest receivable 33,20
2,171649,7
0742,32
726,91
21,595 33,92
2,712
11.5 As at 30 June 2002 and 31 December 2001, the Company and its subsidiary companies engaging in finance business (bank business, finance business, credit foncier business and assets management business) have loans and receivables for which income recognition under an accrual basis has been discontinued in accordance with the BOT’s regulation (principal or interest overdue by more than three months past the due date, considered on an account by account basis) and the SEC, as follow :-
(Unit : Million Baht)Consolidated The Company
Only30 June 31
December
30 June 31 Decemb
er- 76 -
2002 2001 2002 2001Loans and receivables for which income recognition is discontinued (excluding accrued interest receivable) Finance business - BOT’s guideline
115 1,122 115 71
Banking business - BOT’s guideline
894 - -
-
Asset management business – BOT’s guideline 8,117 8,607
-
- Securities business – SEC’s guideline
507 509 -
-
- 77 -
Loans and receivable for which income recognition under an accrual basis has been discontinued as at 30 June 2002 do not include loans amounting to approximately Baht 422 million in the consolidated financial statements which carry interest at a rate of not over 3 percent per annum (below market rate) (31 December 2001 : excluded Baht 363 million of loans to debtors in the consolidated financial statements which interest charged not over 3 percent per annum).
11.6 As at 30 June 2002 and 31 December 2001, unearned income can be summarised as follows :-
(Unit : Million Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decemb
er2002 2001 2002 2001
Unearned interest income 1,054 1,054 - -Unearned income from hire purchase
2,795 1,993 2,775 1,974
11.7 Troubled Debt RestructuringConsolidated financial statementsDuring the six-month period ended 30 June 2002, the Company and its subsidiary companies have restructured the loans of 152 troubled debt receivables under various types of restructuring with book balances before restructuring amounting to approximately Baht 2,369 million (including 41 restructured receivables amounting to approximately Baht 755 million which entered into debt restructuring agreements, were unable to make payment, and so entered into new debt restructuring agreements).
Outstanding loan
Fair value
Number of
balance before
Type of asset
of transferr
ed
- 78 -
Type of restructuring
receivables
restructuring (1)
transferred assets
Million Baht
Million Baht
Transfer of assets 7 18 Land and premises
72
Transfer of securities
4 7 Ordinary shares
59
Modification of terms
139 2,339
Transfer of assets and/or securities
2 5 Ordinary shares,
29
and/or modification of terms
land and premises
Total 152 2,369
(1) Outstanding balance includes both principal and interest receivable.
- 79 -
The Company OnlyDuring the six-month period ended 30 June 2002, no debt restructuring is made for the Company.Supplemental information for the six-month period ended 30 June 2002 relating to restructured receivable is as follows :-
(Unit : Million Baht)Consolidat
edInterest income recognised in statements of earnings
394
Gain on debt repayment recognised in statement of earnings
58
Loss on debt restructuring recognised in statements of earnings 3Cash repayment from receivables 961Additionally, the Company and its subsidiary companies cannot estimate the contingent loss of restructuring loans and receivables.As at 30 June 2002, the Company and its subsidiary companies have the following restructured receivable balance (principal and interest receivable) as follows :-
Thanachart Bank N.F.S. Asset Management
Public Company Limited
Company Limited (1)
Total
Number of
Number of
Number of
receivables
Amount receivables
Amount receivables
Amount
(Million Baht)
(Million Baht)
(Million Baht)
Outstanding balance of restructured loans
698
8,807
187
4,001
885
12,808
Balance of calculated net of
- 80 -
collateral 2,097
1,569
3,666
(1)Due to a limitations on information, such amount includes only debts restructured under a restructuring agreement with Asset Management Company and excludes debts restructured prior to transfer.
- 81 -
11.8 Loans transferred from other financial institutions within the groupAs discussed in Note 2, during the year 2001 the Company received hire-purchase loans of approximately Baht 74 million from a subsidiary under the group restructuring plan. The Company records such transferred loans as a part of loans and receivable at their purchase price, which is considered to be fair value. In addition, the Company and its financial business subsidiary companies sold loan and interest receivables with book values amounting to Baht 15,657 million, and for which they had already set up provisions amounting to Baht 1,992 million to N.F.S. Asset Management Co., Ltd., a subsidiary company in which the Company holds a 100 percent interest, for approximately Baht 14,406 million (the Company Only : book value of Baht 10,332 million for which provision of Baht 1,400 million had been set up, at a price of Baht 9,631 million). The outstanding balance of such receivables is presented in the consolidated financial statements at the purchase price net of intercompany gains.During year 2002, a subsidiary company transferred additional loans of Baht 877 million to N.F.S. Asset Management Co., Ltd., as disclosed in Note 2.
11.9 As at 30 June 2002, included in the Company’s receivable are loans to the assets management companies in the National Group, as follows :-
Outstanding
Company Type of credit
Contract period
Interest rate Balance
Million
- 82 -
BahtN.F.S. Asset Management Co., Ltd.
Promissory note
Not over 5 years(2)
5.25% per annum(1) 14,749
(Revolving loans)
Max Asset Management Co., Ltd.
Long-term loan
5 years MLR plus and fixed at 11.51% per annum(1)
2,700
Total 17,449
(1) For parts guaranteed by promissory notes, interest is charged at the rate of the promissory note plus 1% per annum.(2) Thanachart Bank, the other creditor, has the preferential right to receipt of principal repayment over the Company.
11.10 Classification of loans under the Bank of Thailand’s guidelinesAs at 30 June 2002 and 31 December 2001, the Company and its subsidiary companies which are financial institutions (banking business, finance business, credit foncier business and asset management business) classified their loans and receivable and made allowances against those in accordance with the Bank of Thailand’s guidelines, as summarised below :-
- 83 -
(Unit : Million Baht)Consolidated (1)
Percentage
Allowance for doubtful accounts
Debt balance after
Required
Minimum amount to be provided
Amount
Debt balance/book
value
collateral by BOT (2)
under BOT’s guidelines
provided in the accounts
30 June
31 Decemb
er
30 June
31 Decem
ber
30 June 31 Decemb
er
30 June
31 Decem
ber2002 2001 2002 2001 2002 2001 2002 2001
Loans, receivable and accrued interest receivable ( including loans to financial institutions ) ( 3)
Normal 45,160
40,591
29,536
25,715
1 295 257 295 257
Special mention 1,678
2,460 1,280
1,491
2 26 30 26 30
Substandard 548 420 106 95 20 21 19 21 19Doubtful 323 711 85 94 50 43 47 43 47Bad debt 271 68 32 2 100 32 2 32 2Total 47,9
8044,25
031,0
3927,3
97417 355 417 355
Revaluation allowance for debt restructuring (334
)(360)
Additional allowance for possible uncollectability debts
686 677
Total 47,646
43,890
1,103 1,032
Loans and receivable - N.F.S. Asset Management Co., Ltd., which transferred from National Group(4)
Normal 4,857
4,010 1,644
1,503
1 16 15 92 59
Special mention 886 499 630 116 2 13 2 16 2Substandard 662 3,278 93 211 20 19 42 19 49Doubtful 3,13 2,738 155 301 50 77 151 134 162
- 84 -
5Bad debt 2,22
4608
153- 100 15
3- 153 37
Total 11,764
11,133
2,675
2,131
278 210 414 309
Additional allowance for possible uncollectability debts
- - 33 33
Total 11,764
11,133
447 342
Revaluation allowance for debt restructuring (148
)(125)
11,616
11,008
Total 59,262
54,898
Less : Intercompany gain
(1,097)
(1,147)
Total loans, receivable and accrued interest 58,1
6553,75
11,550 1,37
4
(1) Only the Company and those subsidiary companies overseen by BOT.(2) The provisioning rates required by BOT guidelines for loans and receivables taking into
consideration the value of collateral. In the year 2002, BOT issued new guidelines on provisioning rates for debt classification, whereby provision is to be made for normal debt at rates of at least 1 or 2 percent respectively, or at a lower rate calculated in accordance with guidelines and conditions stipulated by the BOT. However, the Company is still setting aside provision for such debt at rates of 1 or 2 percent, in accordance with the previous guidelines.
(3) Debt balance/book value of normal and special mention loans excludes accrued interest receivable.
(4) For NFS AMC only, aging was started from the transfer date for the purpose of debt classification under the BOT guideline as they have been transferred at fair value (If aged based on the previous due date, most of the special mention, substandard and doubtful debt would be classified as Doubtful and Bad debt).
- 85 -
(Unit : Million Baht)The Company Only
Allowance for doubtful accounts
Percentage
Minimum amount
Debt balance after
required to be provided Amount
Debt balance/book
value
collateral by BOT (1)
under BOT’s guidelines
provided in the accounts
30 June
31 Decembe
r
30 June
31 Decembe
r
30 June
31 Decemb
er
30 June
31 Decemb
er2002 2001 2002 2001 2002 2001 2002 2001
Loans, receivable and accrued interest ( including loans to financial institutions)(2)Normal 39,2
8632,76
836,9
3331,43
51 218 146 218 146
Special mention 1,012
650 1,012
650 2 20 13 20 13
Substandard 76 42 75 42 20 15 9 15 9Doubtful 44 27 44 27 50 22 13 22 13Bad debt 18 2 18 2 100 18 2 18 2Total 40,4
3633,48
938,0
8232,15
6293 183 293 183
Additional allowance for possible uncollectability debts
- - 397 450
Total 40,436
33,489
690 633
(1) The provisioning rates required by BOT guidelines for loans and receivables taking into consideration the value of collateral. In the year 2002, BOT issued new guidelines on provisioning rates for debt classification, whereby provision is to be made for normal debt at rates of at least 1 or 2 percent respectively, or at a lower rate calculated in accordance with guidelines and conditions stipulated by the BOT. However, the Company is still setting aside provision for such debt at rates of 1 or 2 percent, in accordance with the previous guidelines.
(2) Debt balance/book value of normal and special mention loans is excluding accrued interest receivable.
The aforementioned loans classifications are in accordance with the asset classification reports which the Company and its subsidiary companies have prepared and submitted to the BOT. Such report included loans to financial institutions, loans
- 86 -
and receivable, accrued interest receivable. The allowance for doubtful accounts for the “normal loans” in the Company’s financial statements excluded loans to subsidiary companies (with principal amounting to Baht 17,449 million), for which no allowance for doubtful accounts is provided under the BOT’s guidelines since the Company recorded those investments under the equity method. Allowances for doubtful accounts have been determined after taking into account the value of collateral, in accordance with the BOT’s guidelines (most collateral comprises land, buildings and premises which are appraised by external independent appraisers or internal appraisers, as per the BOT’s guidelines).
- 87 -
The following portions of the above classified loans and receivable in the consolidated financial statements (including loans to financial institutions but excluding hire purchase receivable) are debts due from companies with weak financial positions and poor operating results :-
ConsolidatedAllowance for
doubtfulaccounts as
required by BOT Number of
debtorsDebt
balanceCollateral
valueand provided in
the accounts30 31 30 31 30 31 30 31
June December
June December
June
December
June December
2002
2001 2002
2001 2002
2001
2002 2001
Million
Million
Million
Million
Million Million
Baht
Baht Baht
Baht Baht Baht
1.Closed financial institutions
5 4 - - - - - -
2. Listed companies vulnerable to
4 8 913 974 938 899 1 2
delisting from the SET3.Non - listed companies with similar
61 75 3,938
5,718
5,486
4,476
23 151
operating results and financial positions to listed companies vulnerable to delisting from the SET4. Companies which have
163 157 2,919
2,439
3,308
2,342
157 47
loan settlement problems or have defaulted5.Companies whose 2 7 3 461 - 546 3 4
- 88 -
auditors’ reports cite going concern
issues
11.11 Classification of securities business receivables in accordance with the Notification of the Office of the Securities and Exchange CommissionAs at 30 June 2002 and 31 December 2001, a subsidiary company operating in the securities business classified its securities business receivable and accrued interest receivable and provided related allowance for doubtful accounts in accordance with the notification of the Office of the Securities and Exchange Commission (SEC) No. Kor Thor. 33/2543 governing accounting for the doubtful debts of securities companies, dated 25 August 2000 and the related amendment in accordance with the notification No. Kor. Thor. 5/2544 dated 15 February 2001, as follows :-
- 89 -
(Unit : Million Baht)
Allowance for Allowance for doubtful
Receivable and doubtful accounts
accounts provided in
accrued interest
receivable
as required by SEC
the accounts
30 June
31 Decem
ber
30 June 31 Decem
ber
30 June
31 Decemb
er2002 2001 2002 2001 2002 2001
Normal 515 333 - - - -Substandard
36 33 - - - -
Doubtful 480 484 480 484 480 484Total 1,031 850 480 484 480 484General reserve
12 8
Total allowance for doubtful accounts provided in the accounts
492 492
The above substandard debt represents receivable balances with a value equivalent to that of their collateral.
11.12 Hire-purchase receivable/financial lease receivableAs at 30 June 2002 and 31 December 2001, hire-purchase and financial lease receivables of three subsidiary companies which operated in hire-purchase and financial lease business can be classified by the due date of the contracts as follows :-
(Unit : Million Baht)30 June 31
- 90 -
December2002 2001
Current or overdue less than 90 days
176 156
Overdue 91 - 365 days 2 2Debtors under legal actions 10 11Total 188 169
- 91 -
12. ALLOWANCE FOR DOUBTFUL ACCOUNTS(Unit : Thousand Baht)
ConsolidatedFor the six-month period ended 30 June 2002
Special Sub - Bad GeneralNormal mention standar
dDoubtful debts reserve Total
Balance – beginning of the period
317,928 32,317 68,606 209,023 542,027 709,503 1,879,404
Add : Increase (decrease) during the period
70,942 10,134 123,560 (24,886) 137,498 9,551 326,799
Bad debt recovery
- - - - 10,142 17 10,159
Less : Bad debt written – off
(164) - - (187) (2,240) - (2,591)
Reversal from debt restructuring
- (619) - (32) - - (651)
Reversal from loans and receivable transferred
- - (151,805)
(7,855) - - (159,660)
Balance – end of the period
388,706 41,832 40,361 176,063 687,427 719,071 2,053,460
(Unit : Thousand Baht)Consolidated
For the year ended 31 December 2001Special Sub - Bad General
Normal mention standard
Doubtful debts reserve Total
Balance – beginning of the year
129,291 20,960 86,085 1,201,503
513,453 28,048
1,979,340
Add : Increase during the year
256,748 15,803 321,322 351,116 214,555 683,872 1,843,416
Bad debt recovery
- - - - 259,552 - 259,552
Less : Bad debt written – off
- - - - (266,557)
- (266,557)
Reversal from debt restructuring
(1,717) (137) (52,741) (19,028) 1,916 (420) (72,127)
Reversal from loans and receivable transferred
(66,394) (4,309) (286,060)
(1,324,568)
(180,892)
(1,997) (1,864,220)
Balance – end of the year
317,928 32,317 68,606 209,023 542,027 709,503 1,879,404
(Unit : Thousand Baht)The Company Only
For the six-month ended 30 June 2002Special Sub - Bad General
Normal mention standard
Doubtful debts reserve Total
Balance – beginning of the period
146,691 12,994 8,465 13,456 1,590 450,000
633,196
Add : Increase 70,988 7,234 6,610 8,487 14,236 (53,000) 54,555
- 92 -
(decrease) during the period Bad debt recovery
- - - - 1,813 - 1,813
Balance – end of the period
217,679 20,228 15,075 21,943 17,639 397,000 689,564
(Unit : Thousand Baht)The Company Only
For the year ended 31 December 2001Special Sub - Bad General
Normal mention standard
Doubtful debts reserve Total
Balance – beginning of the year
150,401 17,881 71,004 900,213 4,794 - 1,144,293
Add : Increase (decrease) during the year
63,398 (685) 111,252 152,886 64,649 450,000 841,500
Bad debt recovery
- - - - 206,225 - 206,225
Less : Bad debt written - off
- - - - (129,206)
- (129,206)
Reversal from debt restructuring
(1,501) - (41,533) (126) (33) - (43,193)
Reversal from loans and receivable transferred
(65,607) (4,202) (132,258)
(1,039,517)
(144,839)
- (1,386,423)
Balance – end of the year
146,691 12,994 8,465 13,456 1,590 450,000 633,196
- 93 -
The Company and its subsidiary companies set up provision for bad debts in accordance with the guidelines laid down by the BOT, with additional adjustment made for debts that might not be collectible. However, during 2002, the BOT amended its guidelines on the classification of receivables and the provisioning rates corresponding to each class of receivable, and cancel the writing-off the portion of doubtful debts for which a 100 percent provision has been set aside. However, the Company and its subsidiary companies still apply the previous provisioning rates and guidelines in setting provision for bad debt, and although, in compliance with BOT guidelines they have not written-off the portion of doubtful debt for which a 100 percent provision has been made during the current period, they have not reversed the accounts already written off prior to the year 2002.
13. REVALUATION ALLOWANCE FOR DEBT RESTRUCTURING
(Unit : Thousand Baht)Consolidated The Company Only
For the six-
month
For the For the six-
month
For the
period ended
year ended
period ended
year ended
30 June 2002
31 Decembe
r 2001
30 June 2002
31 December
2001Balance - beginning of the
period485,0
89535,74
1- 452,4
61Add : Increase during the period
26,310
26,353 - 293
Allowance for revaluation adjustment for receipt of transfer receivables - 390,56
9- -
Allowance for
- 94 -
revaluation adjustment for receivable transferred from allowance for doubtful accounts 651 11,425 - -Less : Reversal from troubled debt restructuring
(25,823)
(79,240)
- (40,783)
486,227
884,848
- 411,971
Less : Reversal from loans and receivable transferred
(3,978)
(399,759)
- (411,971)
Balance – end of the period 482,249
485,089
- -
- 95 -
14. CLASSIFICATION OF ASSETS The quality of assets is classified in accordance with the announcements of the Bank of Thailand. These are as follows :-
(Unit :Million Baht)Consolidated30 June 2002
Loans, receivable
and accrued
Property
interest receivable
Investments
foreclosed
Other assets
Total
Normal 50,01
7
610 - 8 50,635
Special mention
2,564
87 - 6 2,657
Substandard 1,210 160 - 1 1,371Doubtful
3,458161 - 4 3,623
Bad debts 2,495
2,570 334 88 5,487
Total 59,74
4
3,588 334 107 63,773
Less: Intercompany gain
from loans and receivables transferred
(1,097)
Revaluation allowance from
debt restructuring
(482)
58,16
5
- 96 -
(Unit :Million Baht)Consolidated
31 December 2001Loans,
receivableand
accrued Property
interest receivable
Investments
foreclosed
Other assets
Total
Normal 44,601
531 - 6 45,138
Special mention
2,959 310 - 4 3,273
Substandard 3,698 243 - - 3,941Doubtful
3,44953 - - 3,502
Bad debts 676 2,660 307 24 3,667Total 55,383 3,797 307 34 59,52
1Less: Intercompany gain
from loans and receivables transferred
(1,147)
Provision allowance from
debt restructuring
(485)
53,751
(Unit :Million Baht)The Company Only
30 June 2002Loans,
receivableand
accrued Property
interest receivable
Investments
foreclosed
Other assets
Total
Normal 39,286 - - 7 39,293Special 1,012 - - 5 1,017
- 97 -
mentionSubstandard 76 - - 1 77Doubtful 44 - - 3 47Bad debts 18 92 82 84 276Total 40,436 92 82 100 40,71
0
- 98 -
(Unit :Million Baht)The Company Only 31 December 2001
Loans, receivable
and accrued
Property
interest receivable
Investments
foreclosed
Other assets
Total
Normal 32,768 - - 5 32,773Special mention
650 - - 3 653
Substandard 42 - - - 42Doubtful 27 - - - 27Bad debts 2 111 38 16 167Total 33,489 111 38 24 33,662
15. PROPERTY FORECLOSEDProperty foreclosed represents property transferred in settlement of debts and hire purchase receivables when debtors had defaulted on their repayment obligations under the loan contracts or property received as a result of the restructuring of debt or the purchase of mortgaged assets of receivables by bid on the open market.
(Unit : Thousand Baht)Consolidated
31 Decemb
er30 June 2002 2001
Balance -
Balance -
beginning of
end of
the period
Additions
Disposals the period
Assets transferred in settlement of debts Immovable assets 8,447,8
35331,64
5(382,763
)8,396,7
178,447,8
35 Movable assets 100,21
813,824 (12,566) 101,476 100,218
- 99 -
Assets foreclosed from purchase by bid on the open market Immovable assets 50,891 40,546 (8,419) 83,018 50,891Total property foreclosed
8,598,944
386,015
(403,748)
8,581,211
8,598,944
Less : Allowance for impairment
(327,229)
(59,294)
21,137 (365,386)
(327,229)
Property foreclosed - net
8,271,715
326,721
(382,611)
8,215,825
8,271,715
- 100 -
(Unit : Thousand Baht)The Company Only
31 Decemb
er30 June 2002 2001
Balance -
Balance -
beginning of
end of
the period
Additions
Disposals the period
Assets transferred in settlement of debts Immovable assets 4,307,1
492,852 (88,667) 4,221,3
344,307,1
49 Movable assets 26,397 13,824 (12,566) 27,655 26,397Assets foreclosed from purchase by bid on the open market Immovable assets 42,158 18,865 (7,220) 53,803 42,158Total property foreclosed
4,375,704
35,541 (108,453)
4,302,792
4,375,704
Less : Allowance for impairment
(38,429)
(46,901)
3,417 (81,913) (38,429)
Property foreclosed - net
4,337,275
(11,360)
(105,036)
4,220,879
4,337,275
As at 30 June 2002, the Company and its subsidiary companies had obligations with regard to property foreclosed received in settlement of debt. For Baht 100 million of the outstanding property, the debtors must repurchase the properties at prices and within periods specified in the agreements (mostly at the transfer prices plus interest at MLR plus a margin), while for another Baht 184 million, the debtors have a buy back option (this amount includes an office building with a net book value of Baht 171 million which one subsidiary company is obliged to lease back to the debtor under a lease agreement at a mutually agreed price for a period of 3 years, from the debt restructuring agreement date until the expiration of the
- 101 -
agreement in 2003) and for a further Baht 1,518 million, the debtors have first right of purchase (the Company Only : Baht 645 million).As at 30 June 2002, sales agreements have been made with customers for approximately Baht 399 million (at cost) of the properties foreclosed of Company and its subsidiary companies (the Company Only : Baht 84 million), under which the sales value is higher than the book value, but for which the payment of installments or transfer of ownership rights is still in the progress. Nevertheless, the Company and its subsidiary companies have not recognized any revenue and these assets are still recorded as their assets.
- 102 -
16. LAND, PREMISES AND EQUIPMENT(Unit : Thousand Baht)
ConsolidatedBuildin
gFurnitur
e,Furniture and
and buildin
g
fixtures and
fixtures in
Land improvement
equipment
Vehicles
progress
Total
Cost : 31 December 2001 327,70
1234,50
8628,37
8127,05
91,154 1,318,
800 Additions 55 47 57,971 20,550 1,264 79,887 Disposals - - (15,839
)(18,07
2)- (33,91
1) 30 June 2002 327,75
6234,55
5670,51
0129,53
72,418 1,364,
776Accumulated depreciation : 31 December 2001 - 61,734 420,17
144,330 - 526,23
5 Disposals - - (15,457
)(13,48
2)- (28,93
9) Depreciation during the period
- 5,436 30,884 11,932 - 48,252
30 June 2002 - 67,170 435,598
42,780 - 545,548
Allowance for impairment : 31 December 2001 57,897 46,444 - - - 104,34
1 Increase (decrease) - - - - - - 30 June 2002 57,897 46,444 - - - 104,34
1Net book value : 31 December 2001 269,80
4126,33
0208,20
782,729 1,154 688,22
4 30 June 2002 269,85
9120,94
1234,91
286,757 2,418 714,88
7
Depreciation charge included in the earnings statements for the six-month periods ended 30 June :- 2001 35,757
- 103 -
2002 48,252
- 104 -
(Unit : Thousand Baht)The Company Only
Furniture,
Furniture and
fixtures and
fixtures in
Land Building
equipment
Vehicles
progress
Total
Cost : 31 December 2001 22,092 41,359 244,98
952,080 1,154 361,67
4 Additions 55 - 18,168 6,053 1,264 25,540 Disposals - - (4,088) (5,286
)- (9,374
) 30 June 2002 22,147 41,359 259,06
9 52,847
2,418 377,840
Accumulated depreciation : 31 December 2001 - 7,704 187,37
814,227 - 209,30
9 Disposals - - (4,043) (2,156
)- (6,199
) Depreciation during the period
- 1,034 8,648 5,300 - 14,982
30 June 2002 - 8,738 191,983
17,371 - 218,092
Net book value : 31 December 2001 22,092 33,655 57,611 37,853 1,154 152,36
5 30 June 2002 22,147 32,621 67,086 35,476 2,418 159,74
8
Depreciation charge included in the earnings statements for the six-month periods ended 30 June :- 2001 11,183 2002 14,982
As at 30 June 2002, the Company and its subsidiary companies have vehicles, acquired under financial leases with net book values amounting to approximately Baht 55 million (the Company only : Baht 20 million). The ownership of these fixed assets is
- 105 -
to be transferred to the Company and its subsidiary companies upon completion of payment and exercise of purchase rights.
- 106 -
17. OTHER ASSETS
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decem
ber
30 June 31 Decem
ber2002 2001 2002 2001
Notes receivable from disposal of property foreclosed 141,23
5- 141,23
5-
Premium receivable from direct insurance - net
112,857
87,370 - -
Assets transferred from debtors or assets acquired at public auctions pending transfer of right
80,384 97,420 60,980 79,516
Unearned income from Department of Legal Execution from disposal of property foreclosed 78,763 83,735 74,966 83,735Other receivables 72,537 69,034 40,879 32,080Prepaid income tax 66,504 55,629 50,020 35,033Estimated claim receivable from reinsured
66,050 44,462 - -
Income receivables 60,195 22,989 36,195 366Receivable from sales of housing loans to Secondary Mortgage Corporation
49,459 51,630 41,470 42,608
Others 260,961
197,195
63,232 42,077
Total other assets 988,945
709,464
508,977
315,415
During April 2002, the Company sold land which was property foreclosed to a juristic person at a price of
- 107 -
approximately Baht 175 million, with the gain on the disposal amounting to Baht 151 million. Such amount has been partly settled in cash and the rest of approximately Baht 140 million settled by promissory notes avaled by a local commercial bank. Gain on disposal of this, amounting to Baht 30 million, was recognised in the statement of earnings, in proportion to the amount of cash settlement received. The remaining gain amount of Baht 121 million has been recorded as deferred revenue to be amortised in proportion to cash inflows from the promissory notes in accordance with the Bank of Thailand’s regulation.
- 108 -
During the years 1999 and 2000, the Company and a subsidiary company entered into agreements to sell housing loans with balances of approximately Baht 276 million and Baht 223 million (principal only), per the consolidated financial statements and the Company’s financial statements, respectively, to the Secondary Mortgage Corporation (“the Corporation”). The Corporation is to pay 80 percent of the loan value with the Corporation’s bonds, with payment of the remaining 20 percent to be deferred under the Participating Obligations Agreement (PO). This is the maximum amount for which the Company and its subsidiary are responsible if the Corporation suffers any loss as a result from those debtors. The amount of the retention will decrease in proportion to the amounts of payment made by the debtors to the Corporation and the Corporation will return it to the Company and its subsidiary company. As at 30 June 2002, the outstanding balances of approximately Baht 49 million and Baht 41 million were recorded in the consolidated financial statements and the Company’s financial statements, respectively.
18. BORROWINGS AND DEPOSITS18.1 Classified by source of borrowings and deposits
(Unit : Thousand Baht)Consolidated
30 June 2002 31 December 2001Negotia
bleNegotiable
certificates of
certificates of
Promissory notes
deposit Others Total Promissory notes
deposit Others Total
From public 70,387,566
10,828,736
213,458
81,429,760
73,462,740
60,000
213,458
73,736,198
From financial institutions
3,535,868
438,506
98,611
4,072,985
3,921,155
- 1,011,329
4,932,4
84From foreign countries
82,283 - - 82,283 77,759 - - 77,759
- 109 -
Total borrowings and deposits
74,005,717
11,267,242
312,069
85,585,028
77,461,
654
60,000
1,224,787
78,746,441
(Unit : Thousand Baht)The Company Only
30 June 2002 31 December 2001Negotia
bleNegotiable
certificates of
certificates of
Promissory notes
deposit Others Total Promissory notes
deposit Others Total
From public 54,412,550
- - 54,412,550
48,520,423
- - 48,520,423
From financial institutions
2,717,000
- 88,305
2,805,305
2,062,136
- 999,546
3,061,682
From foreign countries
80,987 - - 80,987 76,347 - - 76,347
Total borrowings and deposits
57,210,537
- 88,305
57,298,842
50,658,906
- 999,546
51,658,452
- 110 -
18.2 Classified by the remaining period of contract
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decemb
er
30 June 31 Decemb
er2002 2001 2002 2001
At call* 4,078,813
2,084,893
6,397,799
2,195,040
Not over 1 year 68,013,169
65,342,725
41,752,961
42,911,021
Over 1 year 13,493,046
11,318,823
9,148,082
6,552,391
Total borrowings and deposits
85,585,028
78,746,441
57,298,842
51,658,452
*Include expired contracts18.3 Classified by borrowing currency and location
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decemb
er
30 June 31 Decemb
er2002 2001 2002 2001
Baht - Local 85,502
,74578,668
,68257,217
,85551,582
,105 - Foreign 82,283 77,759 80,987 76,347
85,585,028
78,746,441
57,298,842
51,658,452
19. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
- 111 -
As at 30 June 2002 and 31 December 2001, the outstanding balances of securities sold under repurchase agreements of the Company are the State enterprise securities all.
- 112 -
20. DEBENTURESAs at 30 June 2002 and 31 December 2001, the outstanding debentures were as follows :-
(Unit : Thousand Baht)Consolidated The Company Only
30 June 31 Decemb
er
30 June 31 Decemb
er2002 2001 2002 2001
Debentures (due in 2003 with interest at the rate of 6.5 percent per annum and at average interest MLR less 2 percent per annum)
872,000
872,000
872,000
872,000
Subordinated debentures issued under the scheme to increase Tier II capital (due in 2009 with interest at a rate equal to the Tier II’s government bonds plus 1 percent per annum or 4.5-5.0 percent per annum) 309,00
0309,00
0258,00
0258,00
0Subordinated debentures issued under the scheme to increase Tier II capital (due in 2010 with interest at a rate equal to the Tier II’s government bonds plus 1 percent per annum or 3.5-3.75 percent per annum) 269,00
0269,00
0215,00
0215,00
0Total 1,450,0
001,450,
0001,345,0
001,345,0
00
DebenturesOn 14 March 2000, the Company’s Board of Directors approved the issue of unsecured unsubordinated registered, 3-year debentures in an amount not more
- 113 -
than Baht 3,000 million (comprising 3 million units at a par value of Baht 1,000 each) to be redeemed upon maturity. The debentures were to be offered in a single or multiple offerings through private placement to the 17 categories of investors stipulated in the Securities and Exchange Commission notification, with interest to be paid not more than four times per annum ; at a fixed rate of 6.5 percent per annum for not more than 1 million debentures, and the average MLR of four commercial banks less 2 percent per annum for not more than 2 million debentures. As at 31 December 2000, the Company had issued Baht 1,500 million of such debentures. During 2001, the Company made early redemption Baht 628 million of such debentures at their face value. As at 30 June 2002, the outstanding balance of such debenture is Baht 872 million.
- 114 -
Subordinated DebenturesOn 28 January 1998, the Company’s Board of Directors approved to issue of not more than Baht 1,000 million of 10-year subordinated debentures with face value of Baht 1 million each, in multiple offerings to the Ministry of Finance under their Tier-II capital fund assistance program. The debentures cannot be redeemed prior to the maturity date unless approval is obtained from the Bank of Thailand. The debentures are to carry interest at a fixed rate of 1 percent per annum above the interest rate of the government bonds offered to the Company under the Tier-II capital fund assistance program, and such interest is to be paid on an annual basis. As at 30 June 2002, the Company had issued Baht 473 million of such subordinated debentures, and invested all cash received from such issued in the government bonds issued by the Ministry of Finance under the Tier II capital fund assistance program.In addtion, in April 1999, the Board of Directors of a subsidiary company approved the issuance of Baht 200 million of subordinated, 10-year debentures with a face value of Baht 1 million each. Such debentures were to be offered to the Ministry of Finance under the Tier II capital fund assistance program and cannot be redeemed prior to maturity date unless approval is obtained from the Bank of Thailand. The debentures bear interest at the rate of 1 percent per annum plus the interest rate of government bonds offered to the Bank under the Tier II capital fund assistance program. As at 30 June 2002, the subsidiary company had issued Baht 105 million of such subordinated debentures, and invested all cash received from such issued in the government bonds issued by the Ministry
- 115 -
of Finance under the Tier II capital fund assistance program.
- 116 -
21. OTHER LIABILITIES
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decem
ber
30 June 31 Decem
ber2002 2001 2002 2001
Insurance reserve 190,285
144,112
- -
Losses incurred of direct insurance
181,906
132,527
- -
Deferred gain on disposal of property foreclosed
135,041
8,089 120,784
-
Amounts withheld on reinsurance treaties
89,536 71,230 - -
Unearned income from hire purchase
80,981 52,496 80,981 52,496
Accrued personnel expenses
61,590 45,157 15,449 13,647
Specific business tax payable
45,488 46,064 16,572 20,553
Matured debentures 30,874 30,874 - -Others 230,92
9148,43
785,713 58,720
Total 1,046,630
678,986
319,499
145,416
As at 30 June 2002 and 31 December 2001, a subsidiary company has liabilities amounting to approximately Baht 20 million from the issue of debentures to a defunct financial institution. It planned to offset against the amount receivable from that financial institution. The Appellate Court has dismissed lawsuit requesting the offsetting of these debts and the subsidiary company therefore still records this liability, together with interest at the highest rate that the subsidiary may have to pay, amounting to Baht 31
- 117 -
million, in the balance sheets and it has set up a full provision for its investment in that financial institution since 1999. However during July 2002, a subsidiary company requested a composition of its debts with that financial institution, in accordance with the basis of composition proposed by the Financial Institution Development Fund in its role as creditor and plaintiff. The proposal consisted of the payment of outstanding debt at a rate of 80 percent, excluding outstanding interest. A subsidiary made such payment subsequent to the balance sheet date and the above financial institution accepted that it still has liabilities of Baht 40 million to the subsidiary for unsecured, subordinated debentures on which interest is to be charged at a rate of 5 percent per annum. Such the financial institution is currently in the process of liquidation.
- 118 -
22. SHARE CAPITAL During the six-month period ended 30 June 2002, preference shareholders gave notification of their intention to exercise their rights to convert preference shares to 30 ordinary shares, whereby each preference share is convertible to 1 ordinary share, free of charge. As at 30 June 2002, 20,406 preference shares remain unconverted. The conversion rights are unconditional and do not expire.On 28 May 2002, the Annual General Meeting of Shareholders of the Company had approved the offset of all statutory reserve of Baht 296,625,244 and certain part of premium on share capital of Baht 6,420,385,089 against the deficit, of which the outstanding balance as at 31 December 2001 was Baht 6,717,010,333. So that after the offset transactions, the Company will have balance of share premium of Baht 2,065,644,888, and no effect to the outstanding balance of shareholders’ equity.
23. REVALUATION SURPLUS (DEFICIT) ON INVESTMENTS
(Unit : Thousand Baht)
Consolidated The Company Only
30 June 31 Decem
ber
30 June 31 Decem
ber2002 2001 2002 2001
Revaluation surplus on investments :- Available -for-sale securities Debt securities 273,59
6474,72
4224,61
5437,68
1 Equity securities 335,73 80,639 401,90 137,64
- 119 -
8 6 7 Held-to-maturity investments
69,796 38,324 52,609 18,359
Total 679,130
593,687
679,130
593,687
Revaluation deficit on investments :- Available -for-sale securities Debt securities (7,932) (23,35
4)(3,661) (23,35
3) Equity securities (24,12
0)(69,59
0)(28,39
1)(69,59
1) Held-to-maturity investments
(8,003) (8,513) (8,003) (8,513)
Total (40,055)
(101,457)
(40,055)
(101,457)
Revaluation surplus on investments
639,075
492,230
639,075
492,230
- 120 -
24. STATUTORY RESERVEUnder the Public Company Limited Act B.E. 2535, the Company is required to set aside as a statutory reserve at least 5 percent of its net profit, after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of its registered share capital.On 28 May 2002, the Annual General Meeting of Shareholders of the Company had approved the offset of all statutory reserve against the deficit.
25. CAPITAL FUNDSAs at 30 June 2002 and 31 December 2001, the capital funds maintained by the Company in accordance with Section 4 of the Act on Undertaking of Finance Business, Finance and Securities Business and Credit Foncier Business B.E. 2522 were as follows :-
(Unit : Thousand Baht)
The Company Only30 June 31
December
2002 2001Tier IIssued and paid up share capital 13,331,
54013,331,
540Premium on share capital 2,065,6
458,486,0
30Issued and paid up share capital and premium on share capital from swap for ordinary share of Thanachart Bank Public Company Limited
- (1,491,011)
Statutory reserve - 296,62
- 121 -
5Deficit - (7,243,
876)Total 15,397,
18513,379,
308Less : Investments in ordinary shares of
Thanachart Bank Public Company Limited
(7,809,202)
-
7,587,983
13,379,308
Tier IISubordinated debentures 457,82
0457,82
0Reserve for loans classified as normal 217,75
2146,74
5Total 675,57
2604,56
5Total Tier I and Tier II 8,263,5
5513,983,
873Less : Other assets (28,39
1)(69,59
1)Total capital funds 8,235,1
6413,914,
282
The capital funds as stated above are calculated based on the Bank of Thailand’s regulations.The Company received approval from the Ministry of Finance to increase its share capital in order to swap ordinary shares with Thanachart Bank Public Company Limited, a subsidiary company, on the condition that the Company does not include this issued and paid up share capital and any related premiums on such share capital in its capital funds until that subsidiary company ceases its finance business activities or is liquidated. Currently, as at 30 June 2002 after Thanachart Bank Public Company Limited has commenced its operations, the Company is thus able
- 122 -
to include the above issued and paid up share capital and related premiums as its capital funds, but to deduct the value of the Company's investment in the Bank under the equity method from the Company’s capital funds.The Company’s capital ratio, calculated based on the Bank of Thailand’s regulation, is as follows :-
The Company Only30 June 2002 31 December 2001
Minimum
Minimum
Capital ratio of
requirement
Capital ratio of
requirement
the Compan
y
by BOT the Compan
y
by BOT
Total capital to risk assets (%)
15.75 8.00 25.76 8.00
26. BAD DEBTS AND DOUBTFUL ACCOUNTSBad debts and doubtful accounts in the statement of earnings for the six-month periods ended 30 June 2002 and 2001 consist of :-
(Unit : Thousand Baht)
Consolidated The Company Only
2002 2001 2002 2001Bad debts and doubtful accounts of Loans to financial institutions
(4,811)
1,000 - (8,700)
Loans 326,799
1,164,305
54,555 714,228
Total bad debts and doubtful accounts
321,988
1,165,305
54,555 705,528
- 123 -
27. GAIN ON INVESTMENTSGain on investments for the six-month periods ended 30 June 2002 and 2001 consists of the following :-
(Unit : Thousand Baht)
Consolidated The Company Only
2002 2001 2002 2001Unrealised gains (loss) on valuation adjustment
(1,471) (209,278)
82 (164,742)
Reversal of provision for impairment (allowance for impairment)
10,992 52,947 (13,954)
60,625
Reversal of provision for impairment of transferred investment in receivable (allowance for impairment)
(91,041)
(193,844)
- 3,761
Realised gains on trading of securities Trading securities 2,068 46,931 - - Available-for-sale securities
160,356
1,139,272
148,564
837,125
Held-to-maturity securities
(15,672)
- (15,672)
-
Other securities (22) 170 - 17065,210 836,19
8119,02
0736,93
9
During the six-month period ended 30 June 2002, the losses arising from the sales of held-to-maturity investments relate to the sales of debt securities of approximately Baht 26 million to minimise risk, as the chance of recovering such amount was small.
- 124 -
For the year 2001, a gain was recognised in the Company’s financial statements, mainly arising from sales of debt securities between the Company and its subsidiary. Such gain was not eliminated from the consolidated financial statements since the transaction was deemed to be a reclassification of investment.
28. GAIN ON PROPERTY FORECLOSEDGain on property foreclosed for the six-month periods ended 30 June 2002 and 2001 consists of the following :-
(Unit : Thousand Baht)Consolidated The Company
Only2002 2001 2002 2001
Realised gains on disposal of property foreclosed 164,39
2192,31
7132,23
92,566
Reversal of provision for impairment (allowance for impairment)
(38,157)
28,415 (34,363)
140,465
Total 126,235
220,732
97,876 143,031
29. NUMBER OF EMPLOYEES Consolidated The Company
Only2002 2001 2002 2001
Number of employees as at 30 June (persons)
2,130 1,679 730 682
Personnel expenses for the six-month periods ended 30 June (Thousand Baht)
382,887
285,817
115,788
115,202
30. DIRECTORS’ REMUNERATIONDirectors’ remuneration represents the benefits paid to the Company’s directors in accordance with Section 90
- 125 -
of the Public Company Limited Act, exclusive of salaries and related benefits payable to directors who hold executive positions.
31. DEBT COMPOSITION EXPENSEOn 1 August 2001, the Civil Court ordered the Company to pay Baht 306 million for the redemption of debentures to a financial institution with interest charged at the rate of 10.8 percent per annum counting from 11 December 1997 onwards until the full debt repayment. The Court ruled that the Company is not allowed to settle its debt from the debentures issued with the Baht 200 million promissory notes and related interest of Baht 42 million, and with the Baht 80 million unsecured, subordinated debentures and related interest of Baht 6 million, from that financial institution (as the Company did in 1998). However, during March 2002, the Company and that financial institution have mutually signed on a memorandum of debt composition agreement for debt settlement, covering debentures issued by the Company and promissory notes issued by the financial institution, including all outstanding accrued interest. The Company already paid the difference arising from the debt settlement and all related expenses totaling approximately Baht 109 million and the financial institution has recognised the outstanding debt from unsecured, subordinated debentures amounting to approximately Baht 81 million, with interest charged at the rate of 3.75 percent per annum, counting from 15 March 1997 onwards, to the Company, until the asset receiving date. This financial institution is currently in the process of liquidating its business.
- 126 -
32. CORPORATE INCOME TAXCorporate income tax has been calculated based on the earnings for the period after adding back disallowable expenses and provisions deducting taxable expenses and tax-exempted income.No corporate income tax is payable on the net earnings of the Company for the six-month period ended 30 June 2002 and 2001 since the Company has tax losses brought forward from previous years in excess of net earnings for the period. (As at 31 December 2001, the Company has tax loss carried forward from previous periods of not more than 5 years, as per the corporate income tax return, amounting to approximately Baht 4,104 million).
33. PROVIDENT FUNDThe Company, certain of its subsidiaries and their employees have jointly registered provident funds scheme under the Provident Fund Act B.E. 2530. The fund is contributed to by both the employees and the companies at the rate of 5 percent of the employee’s salary. The fund will be paid to the employees upon termination in accordance with the rules of the funds. During the six-month period ended 30 June 2002, Baht 11 million has been contributed to the funds by the Company and its subsidiaries (the Company only : Baht 4 million).
34. RECONCILIATION OF DILUTED EARNINGS PER SHARE
ConsolidatedFor the six-month periods ended 30 June
Weighted average
Net earnings number of ordinary shares
Earnings per share
2002 2001 2002 2001 2002 2001
- 127 -
Thousand
Baht
Thousand
Baht
Thousand shares
Thousand shares
Baht Baht
Basic earnings per shareNet earnings 1,042,
718460,82
71,333,
1341,333,
1290.78 0.35
Effect of dilutive securitiesPreference shares convertible to ordinary shares - - 20 25
Diluted earnings per shareNet earnings of ordinary shareholders assuming conversion of dilutive securities
1,042,718
460,827
1,333,154
1,333,154
0.78 0.35
ConsolidatedFor the three-month periods ended 30 June
Weighted average
Net earnings (loss)
number of ordinary shares
Earnings(loss) per share
2002 2001 2002 2001 2002 2001Thousan
d Baht
Thousand
Baht
Thousand shares
Thousand shares
Baht Baht
Basic earnings per shareNet earnings (loss)
668,753
(188,044)
1,333,134
1,333,129
0.50 (0.14)
Effect of dilutive securitiesPreference shares
- 128 -
convertible to ordinary shares - - 20 25
Diluted earnings per shareNet earnings (loss) of ordinary shareholders assuming conversion of dilutive securities
668,753
(188,044)
1,333,154
1,333,154
0.50 (0.14)
The Company OnlyFor the six-month periods ended 30 June
Weighted average
Net earnings number of ordinary shares
Earnings per share
2002 2001 2002 2001 2002 2001Thousan
d Baht
Thousand
Baht
Thousand shares
Thousand shares
Baht Baht
Basic earnings per shareNet earnings 1,042,
718495,96
41,333,
1341,333,
1290.78 0.37
Effect of dilutive securitiesPreference shares convertible to ordinary shares - - 20 25
Diluted earnings per shareNet earnings of ordinary shareholders assuming conversion of dilutive securities
1,042,718
495,964
1,333,154
1,333,154
0.78 0.37
- 129 -
The Company OnlyFor the three-month periods ended 30 June
Weighted average
Net earnings (loss)
number of ordinary shares
Earnings (loss) per share
2002 2001 2002 2001 2002 2001Thousan
d Baht
Thousand
Baht
Thousand shares
Thousand shares
Baht Baht
Basic earnings per shareNet earnings (loss)
668,753
(188,044)
1,333,134
1,333,129
0.50 (0.14)
Effect of dilutive securitiesPreference shares convertible to ordinary shares - - 20 25
Diluted earnings per shareNet earnings (loss) of ordinary shareholders assuming conversion of dilutive securities
668,753
(188,044)
1,333,154
1,333,154
0.50 (0.14)
35. CASH AND CASH EQUIVALENTSFor the purpose of the statements of cash flows, cash and cash equivalents represent cash in hand and all types of bank deposits, except negotiable certificates of deposit.Cash and cash equivalents as reflected in the statements of cash flows for the six-month periods
- 130 -
ended 30 June 2002 and 2001 consist of the following :-
(Unit : Thousand Baht)Consolidated The Company
Only2002 2001 2002 2001
Cash 14,275 462 45 56Cash at banks and negotiable certificates of deposit 2,839,
7051,964,
005634,84
61,203,
5732,853,
9801,964,
467634,89
11,203,
629Less : Negotiable certificates of deposit
(744,570)
(1,383,390)
(364,606)
(975,029)
Total cash and cash equivalents
2,109,410
581,077
270,285
228,600
- 131 -
36. RELATED PARTY TRANSACTIONSDuring the periods, the Company and its subsidiary companies had significant business transactions with its subsidiary, associated and related companies (related by way of common shareholders and/or common directors). Such transactions which have been concluded on the terms and basis as determined by the Company, its subsidiary companies and those companies, are summarized below :-
(Unit : Thousand Baht)Consolidated The Company
OnlyPricing Policies
2002 2001 2002 2001 (For the period 2002)
Transactions occurred during the
three-month periods ended 30 June
Subsidiary companies :-
Sales of debt securities (with gain on sales of
- - 3,154,416
1,795,406
At market price
Baht 66 million) (2001 : Baht 168 million)
Purchased of debt securities
- - 352,830
13,383,489
At market price
Purchased of subsidiary companies
- - - 760,000
Sales of loans and receivable (2001: with gain
- - - 27,142,059
on sales of Baht 1,884 million)
Sales of property foreclosed (2001: based on
- - - 700,099
net book value )Interest income from
loans- - 237,2
73104,2
97At interest rate of 2.0 – 11.51 percent per annum
Interest income from investments - debentures
- - 67,315
67,315
At interest rate of 9 percent per annum
- 132 -
Dividend income - - 22,500
47,003
As declared
Rental and other service income
297 270 14,622
10,020
At the rate determined under the contract between related parties
Fees and other income - - 4,481 2,286 At the rate determined under the contract between related parties
Interest expenses - 50 13,887
11,698
At interest rate of 1.0 – 2.5 percent per annum
Rental and other service expenses
2,569 706 18,247
9,727 At the rate determined under the contract between related parties
Project management expenses
- - 5,283 4,433 At the rate agreed under the contract which based on the estimated time spent
Insurance expenses - - 1,614 1,209 At insurance policy
- 133 -
(Unit : Thousand Baht)Consolidated The Company
OnlyPricing Policies
2002 2001 2002 2001 (For the period 2002)
Associated companies :-
Interest income 33 - - - At interest rate of 10.11 percent per annum
Other income 343 1,562 109 109
Interest expenses 701 1,428 309 319 At interest rate of 1.25 – 5.25 percent per annum
Insurance expenses 368 821 431 362 At insurance policy
Other expenses 504 580 107 416Related companies:-Dividend income 37,09
55,012 19,667 - As declared
Interest income 30,219
5,207 - 2,206 At interest rate of 0.25 - 8.95 percent per annum
Other income 2,926 4,945 1,461 614Interest expenses 10,06
312,47
457 1,155 At interest rate of
1.0 – 11.51 percent per annum
Other expenses 9,581 8,492 9,015 8,221
Transactions occurred during the
six-month periods ended 30 June
Subsidiary companies :-
Sales of debt securities (with gain on sales of
- - 3,635,929
6,339,531
At market price
Baht 91 million) (2001 : Baht 496 million)
Purchased of debt securities
- - 1,466,340
13,383,489
At market price
Purchased of subsidiary companies
- - 139,207
6,235,977
At net assets value as at 31 December 2001
- 134 -
Sales of loans and receivable (2001: with gain
- - - 27,142,059
on sales of Baht 1,884 million)
Sales of property foreclosed (2001: based on
- - - 700,099
net book value)Interest income from
loans- - 477,1
76208,576
At interest rate of 2.0 – 11.51 percent per annum
Interest income from investments - debentures
- - 133,890
133,890
At interest rate of 9 percent per annum
Dividend income - - 22,500
47,003
As declared
Rental and other service income
567 547 28,156
17,071
At the rate determined under the contract between related parties
- 135 -
(Unit : Thousand Baht)Consolidated The Company
OnlyPricing Policies
2002 2001 2002 2001 (For the period 2002)
Fees and other income - - 8,144 7,098 At the rate determined under the contract between related parties
Interest expenses - 77 25,087
17,111
At interest rate of 1.0 – 2.5 percent per annum
Rental and other service expenses
5,429 3,746 33,499
16,627
At the rate determined under the contract between related parties
Project management expenses
- - 10,247
9,927 At the rate agreed under the contract which based on the estimated time spent
Insurance expenses - - 2,233 1,966 As insurance policy
Associated companies :-
Interest income 68 91 - - At the rate of 10.11 percent per annum
Other income 846 1,698 218 218
Interest expenses 1,417 1,463 604 663 At interest rate of 1.25 – 5.25 percent per annum
Insurance expenses 738 821 431 362 As insurance policy
Other expenses 735 643 437 416
Related companies:-Dividend income 37,09
536,99
819,66
712,39
8As declared
Interest income 42,326
7,340 - 4,339 At interest rate of 0.25 – 7.5 percent per annum
Other income 20,198
8,613 15,482
2,469
Interest expenses 22,48 19,20 309 1,155 At interest rate of
- 136 -
9 1 1.5 – 11.51 percent per annum
Other expenses 13,414
9,412 12,405
8,221
- 137 -
The outstanding balances of the above transactions during the six-month periods ended 30 June 2002 and 2001 are below shown at the average month end balance :-
(Unit : Thousand Baht)Consolidated The Company
Only2002 2001 2002 2001
Subsidiary companiesLoans to financial
institutions- - - 470,85
7Loans and receivable - - 17,514
,5537,155,
647Debentures - - 3,000,
0003,000,
000Borrowings and
deposits- - 3,334,
1052,336,
653
Associated companiesLoans and receivable 1,333 1,519 - -Borrowings and
deposits70,429 61,867 29,714 35,000
Related companiesLoans and receivable 1,244,
226399,17
2- 269,30
0Borrowings and
deposits1,010,
834767,82
827,469 59,073
The outstanding balances of the above transactions are as follow:-
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Investments in debt securities
Subsidiary company :-
- 138 -
Thanachart Bank Plc. - - 3,000,000
3,000,000
Related company :-Siam City Bank Plc. 16,07
6- 16,07
6-
Advance Info Service Plc. 23,403
3,832 - -
Government Housing Bank 6,292
56,149
- -
45,771
59,981
16,076
-
45,771
59,981
3,016,076
3,000,000
- 139 -
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Loans and receivableSubsidiary companies :-N.F.S. Asset Management
Co., Ltd.- - 14,74
8,69214,738,897
Max Asset Management Co., Ltd.
- - 2,700,000
2,870,000
- - 17,448,692
17,608,897
Associated company :-Zurich National Life
Assurance Co., Ltd. (Loan in the form of
financial lease)1,214 1,449 - -
Related companies :-Digital Phone Co., Ltd. 1,098,
347500,0
00- -
(Loan in the form of long-term contract and
promissory note, five years, with interest rate of
5.62 – 6.87 percent per annum, debt : capital not
over 1.75 : 1 and DSCR not under 1.25 : 1)
Patum Rice Mill and Granary Plc.
615,000
315,000
- -
(Loan in the form of promissory note, at call,
with interest rate of 3.25 percent per annum)
Fuel Pipeline Transportation Ltd.
170,210
- - -
(Loan in the form of long-term contract and
debt restructuring agreement, thirteen
- 140 -
years, with interest charged at MLR
but actual paid at the rate of 1 percent per
annum) Advance Info Service Plc. 20,74
89,351 - -
(Loan in the form of financial lease)
Other related companies 12,319
- - -
1,916,624
824,351
- -
Total 1,917,838
825,800
17,448,692
17,608,897
- 141 -
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Accrued interest receivable from investments
Subsidiary company :-Thanachart Bank Plc. - - 66,575 67,315Related companies :-Other related companies 1,026 213 738 -Total 1,026 213 67,313 67,31
5
Accrued interest receivable from loansSubsidiary companies :-N.F.S. Asset Management
Co., Ltd.- - 1,491 390,9
89Max Asset Management Co.,
Ltd.- - 41,37
842,54
9- - 42,869 433,53
8Related companies :-Other related companies 508 1,245 - -Total 508 1,245 42,869 433,53
8
Other assetsSubsidiary companies :-Glas Haus Building Co., Ltd. 19,674 20,544 - -Thanachart Management
and Services Co., Ltd.- - - 2,700
Other subsidiary companies - - 402 37819,674 20,544 402 3,078
- 142 -
Associated companies :-Other associated companies 925 264 427 2Related companies :-MBK Properties and
Developments Plc.211 2,095 130 130
Patum Rice Mill and Granary Plc.
5 2,754 - 14
Other related companies 4,230 888 54 544,446 5,737 184 198
Total 25,045 26,545 1,013 3,278
- 143 -
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Borrowings and depositsSubsidiary companies :-N.F.S. Asset Management
Co., Ltd.- - 1,555,
000307,00
0National Securities Co., Ltd. - - 1,015,
132158,48
1Max Asset Management Co.,
Ltd.- - 504,00
0539,50
0Pasara Co., Ltd. - - 216,13
2-
National Leasing 2000 Co., Ltd.
- - 134,500
42,500
N.F.S. Capital Co., Ltd. - - 48,757 48,038National Group Leasing Co.,
Ltd.- - 36,500 60,500
Sinkahakarn Co., Ltd. - - 35,300 -Thiravanit Co., Ltd. - - 34,500 -National Insurance Co., Ltd. - - 38,000 30,000Bangkok Home Co., Ltd. - - 15,800 -Glas Haus Building Co., Ltd. 8,000 - 8,000 -Plan Estate Co., Ltd. - - 3,000 -Lan Bangna Co., Ltd. - - 2,000 4,000Thanachart Legal and
Appraisal Co., Ltd.- - 2,000 -
8,000 - 3,648,621
1,190,019
Associated companies:-Zurich National Life
Assurance Co., Ltd.66,000 69,000 31,000 34,000
Maxwin Properties Co., Ltd. - 6,000 - -66,000 75,000 31,000 34,000
Related companies :-Advance Wireless Marketing
Co., Ltd.- 500,00
0- -
MBK Properties and Development Plc.
213,458
433,458
- 110,000
Seacon Development Co., 40,000 100,00 - -- 144 -
Ltd. 0Fuel Pipeline Transportation
Ltd.28,262 28,300 21,262 12,500
Siam G.A. Co., Ltd. - 2,700 - 2,700281,72
01,064,458
21,262 125,200
Total 355,720
1,139,458
3,700,883
1,349,219
- 145 -
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Accrued interest payableSubsidiary companies :-National Securities Co., Ltd. - - 1,027 80Max Asset Management Co.,
Ltd.- - 1,153 2,277
Other subsidiary companies 69 - 2,458 2,15469 - 4,638 4,511
Associated companies:-Zurich National Life
Assurance Co., Ltd.1,796 1,415 414 401
Maxwin Properties Co., Ltd. - 40 - -1,796 1,455 414 401
Related companies :-MBK Properties and
Developments Plc.8,212 9,382 - 561
Advance Wireless Marketing Co., Ltd.
- 1,860 - -
Other related companies 192 436 - 788,404 11,678 - 639
Total 10,269 13,133 5,052 5,551
Other liabilitiesSubsidiary companies :-National Securities Co., Ltd. - - 23,406 2,003National Leasing Co., Ltd. - - 20,131 17,448Thanachart Management
and Services Co., Ltd.- - 4,327 3,833
National Leasing 2000 Co., Ltd.
- - 3,282 3,690
Thanachart Bank Plc. - - 107 2,504Other subsidiary companies 279 234 2,345 1,094
279 234 53,598 30,572Associated companies :-Other associated company 165 781 163 764
Related companies :-
- 146 -
Other related companies 1,253 1,058 1,166 960Total 1,697 2,073 54,927 32,296
- 147 -
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Guarantees of loansSubsidiary companies :-National Securities Co., Ltd. (Guarantee of bank credit
facility, with fee charged at rates of 0.75 - 1.50
percent per annum, at call)
- 205,000
- 205,000
Plan Estate Co., Ltd. (Guarantees provided to
government agencies, with
fee charged at rate of 0.5 percent per annum, at call)
1,272 1,272 1,272 1,272
1,272 206,272
1,272 206,272
Related company :-Patum Rice Mill and Granary
Plc. (Guarantee of bank
overdraft facility, with fee charged at rates of 2
percent per annum, at call)
10,000 10,000 10,000 10,000
Total 11,272 216,272
11,272 216,272
As at 30 June 2002, the Company and its subsidiary companies have investments amounting to approximately Baht 1,511 million (the Company only : Baht 633 million) in companies to which they are related by means of members of their management being shareholders and/or directors of those companies.
- 148 -
As at 30 June 2002, the Company and its subsidiary companies have no loans, deposits and commitments to business in which the Company or executives from department manager level up have combined shareholdings of more than 10 percent of paid up capital, but have had the following related parties transactions with executive employees for department manager level up :-
(Unit : Thousand Baht)Consolidated The Company
Only30
June31
December
30 June
31 Decem
ber2002 2001 2002 2001
Loans and receivable 697 837 - -Deposits 24,04
6113,2
363,081 85,87
7Commitments - - - -
- 149 -
37. FINANCIAL INFORMATION BY SEGMENTFinancial information relating to the finance business, bank business, securities business and other business segments as at 30 June 2002 and 31 December 2001 and for the three-month and six-month periods ended 30 June 2002 and 2001 is summarised below :-
(Unit : Million Baht)For the three-month periods ended 30 June
Finance business
Bank business
Securities business
Other business
Eliminations
Total
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
Net interest and dividend income after bad debt and doubtful accounts and loss on debt restructuring
308 217 242 - 28 5 13 (4) (9) 34 582 252
Gain (loss) on equity
301 (1) - - - - - - (307)
1 (6) -
Non-interest income
436 1,987
31 - 148 68 152 54 (15) (1,957)
752 152
Operating expenses
(335)
(395)
(129)
- (83) (68) (136)
(43) 37 (69) (646)
(575)
Corporate income tax
1 - - - (12) 2 (1) 4 - - (12) 6
Minority interest in net earnings in subsidiary companies
- - - - - - - - (1) (23) (1) (23)
Net earnings (loss)
711 1,808
144 - 81 7 28 11 (295)
(2,014)
669 (188)
(Unit : Million Baht)For the six-month periods ended 30 June
Finance business
Bank business
Securities business
Other business
Eliminations
Total
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
2002
2001
Net interest and dividend income after bad debt and doubtful accounts and loss
- 150 -
on debt restructuring
597 (40) 448 - 34 23 42 14 (60) 25 1,061
22
Gain (loss) on equity
388 (78) - - - - - - (386)
78 2
-
Non-interest income
810 3,193
36 - 304 153 263 138 (57) (1,993)
1,356
1,491
Operating expenses
(733)
(715)
(246)
- (161)
(129)
(276)
(132)
98 (47) (1,318)
(1,023)
Corporate income tax
(5) (1) - - (37) (14) (12) (13) - 1 (54) (27)
Minority interest in net earnings in subsidiary companies
- - - - - - - - (4) (2) (4) (2)
Net earnings 1,057
2,359
238 - 140 33 17 7 (409)
(1,938)
1,043
461
- 151 -
(Unit : Million Baht)As at
Finance business
Bank business
Securities business
Other business
Eliminations
Total
30 31 30 31 30 31 30 31 30 31 30 31June Dece
mberJune Dece
mberJune Dece
mberJune Dece
mberJune Dece
mberJune Dece
mber200
2200
1200
2200
1200
2200
1200
2200
1200
2200
1200
2200
1Investments - Net
34,534
40,005
8,996
- 656 1,463
844 383 14
,702
(14,628)
30,328
27,223
Loans, receivable and accrued interest receivable - Net (including loans to financial institutions)
53,275
75,214
27,780
- 1,714
618 496 208 (25,425)
(22,683)
57,840
53,357
Land, premises and equipment - Net
166 273 114 - 62 54 373 361 -
- 715 688
Other assets 11,779
16,672
6,903
- 249 120 605 419 (144)
(104)
19,392
17,107
Total assets 99,754
132,164
43,793
- 2,681
2,255
2,318
1,371
(40,271)
(37,415)
108,275
98,375
38. COMMITMENTS AND CONTINGENT LIABILITIESAs at 30 June 2002 and 31 December 2001, commitments and contingent liabilities which are significant consist of :-38.1
(Unit : Thousand Baht)
Consolidated30 June 2002 31 December 2001
Foreign
Foreign
Baht currency
Total Baht currency
Total
Guarantees of loans 10,000
3,112 13,112
40,000
- 40,000
Other guarantees 60,282
3,146 63,428
259,131
- 259,131
Other commitments
- 152 -
Obligation amounting to USD 30 million under sales of forward exchange contracts and currency and interest rate swap contracts
- 1,271,346
1,271,346
- - -
Total contingencies and commitments
70,282
1,277,604
1,347,886
299,131
- 299,131
- 153 -
(Unit : Thousand Baht)
The Company Only30 June 2002 31 December 2001
Foreign
Foreign
Baht currency
Total Baht currency
Total
Guarantees of loans 10,000
- 10,000
40,000
- 40,000
Other guarantees 5,612 3,145 8,757 210,612
- 210,612
Other commitments Obligation amounting to USD 23 million under sales of forward exchange contracts and currency and interest rate swap contracts
- 982,259
982,259
- - -
Total contingencies and commitments
15,612
985,404
1,001,016
250,612
- 250,612
38.2 During 2001, the Company and its subsidiary companies have entered into agreements to sell loans and receivables with a transfer price of approximately Baht 3,229 million to the TAMC. The TAMC is in the process of examining the qualifications and fixing the price of the certain part of the receivables transferred. As at the balance sheet date, the Company and its subsidiaries are still jointly liable for a share of the gains or losses arising from TAMC’s management of the non-performing assets to be calculated, at the end of fifth and tenth years, counting from 1 July 2001. In case of losses, the Company and its subsidiary companies are liable for all initial losses up to 20 percent of the transfer price, the next 20 percent losses are to be shared equally between the Company or subsidiary companies and TAMC. TAMC is liable for all remaining losses. Such gains or losses will be determined from the accumulated
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value of the collections made on the assets as at the date of determination, minus transfer costs and all operating expenses of TAMC, including interest on the debt instruments issued to purchase the receivables. The gain or loss cannot be estimated at this stage.
38.3 The Company and a subsidiary company have entered into agreements to sell housing loans/transfer housing right to the Secondary Mortgage Corporation, under which they are committed to compensate the Corporation for losses from uncollected housing loan up to a maximum of 20 percent of the valuation of the said receivables, or approximately Baht 49 million (the Company Only : Baht 41 million).
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38.4 The Company and its subsidiary companies are obliged to make contributions to the Financial Institutions Development Fund, at the rate of 0.2 percent of the total outstanding balance of the Company and its subsidiary companies’ deposits, borrowings and liabilities arising from borrowings, as of the last day of the previous six-month period before the contributions are to be made, every 30 June and 31 December of the year.
38.5 A subsidiary company is required to pay a membership fee to the Stock Exchange of Thailand on a monthly basis, at a rate of 0.005 percent of the trading volume of its stock.
38.6 As at 30 June 2002, the Company and its subsidiaries have obligations to pay service, construction and decoration expenses related to the development and improvement of property foreclosed, approximately Baht 55 million, to other companies and have commitments to pay system development expense under a work system development contract amounting to approximately Baht 6 million (the Company only : Baht 2 million and nil, respectively). In addition, the Company and its subsidiary companies have commitments in respect of office rental and related service fees under long-term rental agreements as follows :-
(Unit : Million Baht)Year Consolidated The Company
Only2002 16 12003 30 1
2004 – 2015 23 438.7 As at 30 June 2002, the Company has
commitments to pay service, construction and
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decoration expense in relation to the development of properties foreclosed, approximately Baht 20 million, to a subsidiary company. In addition, the Company has commitments to pay legal and appraisal service fees to another subsidiary company amounting to Baht 6 million.
39. LITIGATIONAs at 30 June 2002, the Company and its subsidiary companies have contingent liabilities of approximately Baht 936 million from litigation (the Company only : Baht 442 million). However, the Company's management expects that no loss will result and therefore no liabilities are currently recorded.
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40. BANK GUARANTEEAs at 30 June 2002, there were outstanding bank guarantees of approximately Baht 10 million (the Company only : Baht 5 million) issued by banks on behalf of the Company and its subsidiaries for electricity facility, rental of land and property and utilities management.
41. FINANCIAL INSTRUMENTSFinancial instruments are any contracts which give rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.As at 30 June 2002, the Company and its subsidiary companies have no policy to speculate or trade in any derivative financial instruments.41.1 Credit risk
Credit risk is the risk that the party to a financial instrument will fail to fulfil an obligation causing the Company and subsidiary companies to incur a financial loss. The amount of maximum credit risk exposure is the carrying amount of the financial assets less provision for losses as stated in the balance sheet and the off-balance sheet transactions of aval and other guarantees.In addition, the Company and its subsidiary companies manage credit risk by the following means, in through careful consideration of credit approval process, analysis of the risk factors and the ability to service debt of customers and credit review process, which examines and reviews the
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quality of loans so as to prevent and provide a remedy for problem loans in the future.
41.2 Interest rate riskInterest rate risk is the risk that the value of financial instruments will change as a result of future changes in market interest rates.
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(Unit : Million Baht)Consolidated The Company Only
Outstanding balances of financial instruments
Outstanding balances of financial instruments
Floating
Fixed Without
Floating
Fixed Without
interest
rate
interest
rate
interest
Total interest
rate
interest
rate
interest
Total
Financial assets Cash and deposits at financial institutions
172 829 1,853
2,854
- 364 271 635
Loans to financial institutions
5 130 81 216 - - - -
Securities purchased under resale agreements - 3,30
0- 3,30
0- - - -
Investments 3,626
23,757
2,810
30,193
- 17,845
13,182
31,027
Trading transactions with securities companies - receivable
- - 2 2 - - - -
Loans and receivable (include intercompany gain on loan transferred)
23,452
36,924
538 60,914
1,201
39,215
20 40,436
Receivables from the transfer of non-performing loans to TAMC
- 3,229
- 3,229
- 589 - 589
Financial liabilitiesBorrowings and deposits
99 85,486
- 85,585
88 57,211
- 57,299
Securities sold under repurchase agreements
- 1,170
- 1,170
- 1,170
- 1,170
Trading transactions with securities companies – payable
- - 285 285 - - - -
Securities business payable
- - 215 215 - - - -
Debentures - 1,450
- 1,450
- 1,345
- 1,345
The outstanding balances of loans and receivable which have floating interest rates or fixed interest rates include loans and receivable on which interest
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recognition has been ceased, and are presented before deducting provisions.With respect to financial instruments that carry fixed interest rates, the periods from the balance sheet date to the repricing or maturity dates (whichever is the earlier) are presented below :-
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(Unit : Million Baht)Consolidated
Repricing or maturity date Weighted 0-3 3-12 1 –
5Over
5average
Transactions At call
months
months
years
years
Total
interest rates
percentage
Financial assetsCash and deposits at financial institutions - 254 575 - - 829 0.25-2.53Loans to financial institutions
4 50 50 26 - 130 1.40-3.35
Securities purchased under resale agreements
- 3,300
- - - 3,300
1.80
Investments - 72 49 7,760
15,876
23,757
4.13-6.50
Loans and receivables (Include intercompany gain on loan transferred)
386 416 1,720
26,291
8,111
36,924
5.56-9.30
Receivables from the transfer of non-performing loans to TAMC
- 3,229
- - - 3,229
1.95
Financial liabilitiesBorrowings and deposits
3,980
29,568
38,445
13,493
- 85,486
2.19-3.30
Securities sold under repurchase agreements
- 1,170
- - - 1,170
1.81
Debentures - 572 300 - 578 1,450
3.50-6.50
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(Unit : Million Baht)The Company Only
Repricing or maturity date Weighted 0-3 3-12 1 - 5 Ove
r 5average
Transactions At call
months
months
years
years
Total
interest rates
percentage
Financial assetsCash and deposits at financial institutions - 242 122 - - 364 2.15Investments - 71 - 4,32
913,445
17,845
6.31
Loans and receivables
628 75 671 37,738
103 39,215
8.15
Receivables from the transfer of non-performing loans to TAMC
- 589 - - - 589 1.95
Financial liabilitiesBorrowings and deposits
6,310
19,359
22,394
9,148
- 57,211
2.91
Securities sold under repurchase agreements
- 1,170
- - - 1,170
1.81
Debentures - 572 300 - 473 1,345
5.11
In addition, the monthly average balance of performing financial assets and financial liabilities of the Company and its subsidiary companies for the six-month period ended 30 June 2002, and the average rate of interest and dividend income, are summarised as follow :-
(Unit : Million Baht)Consolidated The Company Only
Average Interest Average Average Interest Average
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balance and dividend
rate balance and dividend
rate
Performing financial assets
Cash and deposits at financial institutions
1,738 22 2.53 553 11 2.15
Securities purchased under resale agreements
2,083 22 2.11 69 2 1.80
Investments 24,775 795 6.39 29,954 548 6.31Loans and receivables (include loans to financial institutions)
46,195 1,900 8.24 36,695 1,236 6.74
Receivables from the transfer of non-performing loans to TAMC
3,229 32 1.95 589 5 1.95
Performing financial liabilities
Borrowings and deposits
80,558 1,315 3.26 54,243 840 3.10
Securities sold under repurchase agreements
991 9 1.82 991 9 1.81
Debentures 1,450 37 5.10 1,345 34 5.06
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41.3 Liquidity riskCounting from the balance sheet date, the periods to maturity of financial instruments held as at 30 June 2002 are as follows :-
(Unit : Million Baht)Consolidated The Company Only
Less than
Over Less than
Over
Transactions At call
1 year
1 year
Unspecified
Total
At call
1 year
1 year
Unspecified
Total
Financial assets :-Cash and deposits at
financial institutions 2,0
24829 1 - 2,8
54271 364 - - 635
Securities purchased under resale
agreement - 3,300
- - 3,300
- - - - -
Investments 2,270
419 24,883
2,621
30,193
- 47 17,881
13,099
31,027
Trading transactions with securities
companies - receivable
- 2 - - 2 - - - - -
Loans and receivables, including
loans to financial institutions
(part of these are due, and including
intercompany gain on loan transferred)
9,496
4,100
47,453
81 61,130
629 769 39,038
- 40,436
Receivables from the transfer of
non-performing loans to TAMC
- - 3,229
- 3,229
- - 589 - 589
Financial liabilities :-
Borrowings and deposits
4,079
68,013
13,493
- 85,585
6,398
41,753
9,148
- 57,299
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Securities sold under repurchase
agreement- 1,1
70- - 1,1
70- 1,1
70- - 1,1
70Trading transactions
with securities
companies - payable
- 285 - - 285 - - - - -
Securities business payable
- 215 - - 215 - - - - -
Debentures - 872 578 - 1,450
- 872 473 - 1,345
Off - balance sheet items :-
Guarantee of loans 10 3 - - 13 10 - - - 10Other guarantees 6 44 6 8 64 6 3 - - 9Other commitments - 114 1,1
57- 1,2
71- 97 885 - 982
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41.4 Foreign exchange riskAs at 30 June 2002, the Company and its subsidiary companies have no significant balances of financial instruments in foreign currencies except for investments of approximately Baht 70 million in securities, Baht 2,639 million (USD 89.3 million) in foreign debentures and interest receivable of approximately Baht 62 million (the Company only : Baht 49 million, Baht 1,364 million and Baht 32 million, respectively) and for which the Company and its subsidiary companies have entered into forward exchange and currency swap contract to hedge the foreign exchange risk of foreign debentures (as mentioned in Note 38) and follows :- For investments in convertible subordinated
debentures amounting to USD 68.5 million (the Company only : USD 26 million) which the issuer is entitled to enforce conversion, under stipulated conditions, or redemption prior to maturity, with the prior approved of the BOT. Payment of principal will be made to the Company and its subsidiaries applying of forward exchange rates stipulated by the issuers, of Baht 25.28-25.55/US dollar. In addition, the Company has entered into forward sales contracts to hedge the exchange rate risk arising from the future interest receivable until the maturity date, amounting to USD 3.7 million (a subsidiary company entered into forward contract covering future interest receivable amounting to USD 3.6 million subsequent to the balance sheet date, and a further USD 0.2 million is still unhedged).
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- For investments in subordinated debentures amounting to USD 20.8 million, the Company entered into a forward sales contract for USD 5 million of the debentures, and the Company and its subsidiary company have entered into a cross currency swap agreements for the principal and interest rate for the remaining USD 15.8 million (of the subordinated debentures, swapping exchange rates of approximately Baht 41.76-43.60/US dollar), and swapping interest rates of 7.50-8.75 percent for rates of 5.60-8.65 percent per annum (the Company only : amount of USD 11 million swapping exchange rates of Baht 42.20-43.60/US dollar and swapping an interest rate of 7.50 percent for rates of 5.60-7.25 percent per annum).
Principal and interest are recorded using the agreed forward rates.
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41.5 Fair valueFair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The Company and its subsidiary companies have estimated the fair value of financial instruments as follows :-a) Financial assets
The method used for determining the fair value is dependent upon the characteristics of the financial instruments. The fair values of most financial assets, including cash, deposits at banks, loans to financial institutions, loans and receivables and investments in receivables are considered to approximate their respective carrying values since the financial instruments are predominantly subject to market interest rates. Financial instruments that have standard terms and conditions which are traded on an active and liquid market, such as investments, have their fair values determined based on the quoted market price.
b) Financial liabilitiesThe fair values of financial liabilities, including borrowings and deposits and debentures, are considered to approximate their respective carrying values for the same reasons as described above.
As at 30 June 2002, there are no material differences between the book values of financial instruments and their fair values.
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The fair values of off-balance sheet items cannot be reasonably determined and thus have not been disclosed.
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42. PRESENTATIONThe presentation of the financial statements has been made in compliance with the requirement of the Notification of the Bank of Thailand relating to the format of the financial statements of finance, finance and securities and credit foncier companies dated 10 May 2001.Certain amounts in the financial statements as at 31 December 2001 and for the three-month and six-month periods ended 30 June 2001 have been reclassified to conform to the current year’s classifications, with no effect on previously reported net loss and shareholders’ equity.
43. APPROVAL OF FINANCIAL STATEMENTSThese interim financial statements have been approved by the Company’s directors.
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