- 12 - The Company has both local and foreign sales in USD currency, which result in revenues and accounts receivable in the same currency. In addition, the Company has accounts payable, loans and interest expense in USD currency. Thus, the Company believes it is able to manage currency exchange risk by matching cash receipt with the debts and interest in foreign currencies. The following summarizes the contractual amounts of the forward exchange contracts as at March 31, 1999. CONSOLIDATED THE COMPANY Contract Amount Fair Value Contract Amount Fair Value Baht Baht Baht Baht USD Equivalent Equivalent USD Equivalent Equivalent Purchase forward contracts 8,396,459 360,208,095 359,704,307 8,396,459 360,208,095 359,704,307 Foreign currency amounts are translated at the forward rate for the remaining maturing. 11.3 Fair values of financial assets and liabilities The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the economic entity approximates their carrying value. The net fair value of other monetary financial assets and financial liabilities is based upon market values. Equity investments traded on organized markets have been value by reference to market prices prevailing at balance date. For non-traded equity investments, the net fair value is an assessment by the directors based on the underlying net assets, future maintainable earnings and special circumstances pertaining to a particular investment. 11.4 Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial loss to the Company. The Company has the credit risk management policy to obtain collateral from the customers before commencing the trade. The collateral may include bank guarantee or cash guarantee. In the case of recognized financial assets, the carrying amount of the assets recorded in the consolidated balance sheet, net of a portion of allowance for doubtful debts, represents the Company maximum exposure to credit risk. /13 - 13 - 11.5 Interest rate risk Interest rate risk in the balance sheet arises from the potential for a change in interest rates to have an adverse effect on the net interest earnings of the Company in the current reporting period and in future years. 12. COMMITMENTS AND CONTINGENCIES 12.1 As at March 31, 1999 and 1998, a subsidiary which operates in real estate business has commitments under a Joint Cooperation Agreement for the Padaeng Industry Park project as follows: - Baht 567,252 per annum payable for service and operation support and a 5% increase every 5 years commencing from September 7, 1992, and the annual compensation on wharf usage as specified in the agreement. 12.2 As at March 31, 1999 and 1998, the Company and a subsidiary have contingent liabilities for letters of guarantee issued by banks of approximately Baht 114.30 million and Baht 130.38 million respectively. 12.3 As at March 31, 1999 and 1998, the Company have unused letters of credit amounting to approximately Baht 157.21 million and Baht 325.11 million respectively. 12.4 In December 1995, the Company received the notice of income tax assessment from the Revenue Department in respect of income tax, penalties and surcharge totalling Baht 31.72 million. In February 1996, the Company has submitted an appeal to cancel such income tax assessment, waive and reduce such penalties and surcharge. As at March 31, 1999, result of such appeal has not yet been finalized. 12.5 Capital commitments: Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognized as liabilities on March 31, 1999 are as follows: CONSOLIDATED THE COMPANY Baht Baht Not later than 1 year 13,989,365 13,989,365 Later than 1 year - - 13,989,365 13,989,365 For the interim financial statements as at March 31, 1998, the Company could not conveniently obtain the information for comparison. /14 - 14 - 12.6 Purchase commitments: Commitments for the purchase of raw materials contracted for at the reporting date but not recognized as liabilities on March 31,1999 are as follows: CONSOLIDATED THE COMPANY Baht Baht Not later than 1 year 56,461,122 56,461,122 Later than 1 year but no later than 2 years 191,296,383 191,296,383 Later than 2 year but no later than 5 years 2,882,155 2,882,155 Later than 5 years - - 250,639,660 250,639,660 For the interim financial statements as at March 31, 1998, the Company could not conveniently obtain the information for comparison. 13. COMMITMENTS WITH A GOVERNMENT AGENCY The Company has commitments under a contract with a Government Agency in respect of zinc mining and construction of zinc refinery plant, including certain conditions for sales of zinc metal and zinc remelt and payments of special benefits and special bonus. 14. TRANSACTIONS BETWEEN RELATED COMPANIES Transactions between related companies which have to be disclosed in accordance with the regulation of The Stock Exchange of Thailand regarding the basis, conditions and procedure for preparation and submission of financial statements and reports on financial position and result of operations of the listed companies are as follows: Transactions and balance with related companies consist mainly of the following: CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht Baht Baht Baht Trade accounts and notes receivable (See*1) - - 47,928,641 53,788,631 Current loans to subsidiaries 252,436 32,372 1,038,595 518,081 and associated companies - 64,403 - 64,403 252,436 96,775 1,038,595 582,484 /15 - 15 - CONSOLIDATED THE COMPANY 1999 1998 1999 1998 Baht Baht Baht Baht Current loans and advances from related companies 108,151,267 130,182,998 - - Non current loans and advances to a subsidiary (See *5) - - 8,000,000 476,235,630 Non current loans from a subsidiary (See * 2) - - 161,800,000 146,400,000 Investments 1,491,469 6,465,720 530,192,410 623,266,706 Trade accounts payable (see*4) - - 85,920,928 67,374,591 Sales (see *3) - - 300,208 3,789,367 Commission paid (See *4) - - - 24,540,991 Interest paid (See*2) - - 3,097,896 4,147,644 Accrued interest (See *2) - - 4,932,827 7,559,501 * 1. As at March 31, 1999, the Company has trade accounts and notes receivable from related companies that have difficulties in repayments amounting to Baht 46.81 million (see Note 4). * 2. Loans from a subsidiary company that are at call and term promissory notes. (Interest rate 5-8.5% per annum for 1999, 10-11.50% per annum for 1998 and no collateral) * 3. Sales to the subsidiary company are based on a negotiated price. The Company has no available market price for comparison. * 4. Sales commission paid to a subsidiary at 1.5% of sale amount in Baht. At March 31, 1999, the Company did not renew the commission agreement with such subsidiary. The Company has no available information of commission paid in the market. * 5 On September 1, 1998 the Company entered into an amendment to the loan agreement with a subsidiary to convert the US $14,614,412 loan into Baht 616,241,546 loan by using the reference rate quoted by the Bank of Thailand as at August 31, 1998 which was US $1 = Baht 42.1667. The amendment agreement specified that interest would cease accruing from August 31, 1998. As at March 31, 1999, such loans and advances to subsidiary have the outstanding balances of Baht 1,202,566,170 (principal Baht 997,605,545 and interest and penalty fees Baht 204,960,625) and as at March 31, 1998, USD 14,614,412 and Baht 276,300,000. /16 (More)