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-7- 5. INVENTORIES consist of the following : (BAHT) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Finished goods 3,941,641 2,659,272 - - Untransmitted programmes 182,092 270,965 - - Other goods 14,245 - - - TOTAL 4,137,978 2,930,237 - - 6. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE AND INVESTMENTS DEFICIENCY (BAHT) % HOLDING COST METHOD EQUITY METHOD 1998 1997 1998 1997 1998 1997 SUBSIDIARIES 1. THE BANGKOK ENTERTAINMENT CO., LTD. 99.99 99.99 299,999,200 299,999,200 1,222,842,555 1,439,618,174 2. RUNGSIROJVANIT CO., LTD. 99.99 99.99 34,999,510 34,999,510 1,049,781,909 683,959,858 3. NEW WORLD PRODUCTION CO., LTD 99.99 99.99 59,999,160 59,999,160 856,687,067 603,072,277 4. ARIYAWATANA CO., LTD. 99.99 99.99 42,996,990 42,996,990 601,620,007 494,747,807 5. YOU & I CORPORATION CO., LTD 99.99 99.99 34,999,300 34,999,300 (72,157,992) 13,578,491 6. 3 MEDIA CO., LTD. 99.99 99.99 29,999,930 29,999,930 12,044,116 4,825,568 7. BEC STUDIO CO., LTD. 99.99 99.99 4,999,930 4,999,930 6,290,963 5,771,081 8. BEC INTERNATIONAL DISTRIBUTION CO., LTD. 99.99 99.99 4,999,930 4,999,930 2,170,507 9,865,933 9. BEC NEWS BUREAU CO., LTD. 99.99 99.99 4,999,930 4,999,930 6,289,125 5,769,173 10. BANGKOK CABLE TELEVISION SYSTEMS CO., LTD. 99.99 99.99 4,999,930 4,999,930 (74,044,092) (49,559,078) 11. BANGKOK SATELLITE & TELECOMMUNICATION CO., LTD 99.99 99.99 24,999,930 24,999,930 32,393,625 29,537,822 12. SATELLITE BROADCASTING SYSTEM CO., LTD. 99.99 99.99 999,930 999,930 1,138,861 1,066,148 13. SATELLITE TV BROADCASTING CO., LTD. 99.99 99.99 999,930 999,930 724,598 724,647 14. BEC-TERO ENTERTAINMENT CO., LTD. 59.99 - 8,116,158 - (5,036,251) - TOTAL INVESTMENTS IN SUBSIDIARIES 558,109,758 549,993,600 3,791,983,333 3,292,536,979 TOTAL INVESTMENTS DEFICIENCY - - (151,238,335) (49,559,078) ASSOCIATE 1.CVD ENTERTAINMENT PUBLIC COMPANY LIMITED 20.00 20.00 328,847,535 328,847,535 265,383,587 323,207,375 TOTAL INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE 886,957,293 878,841,135 4,057,366,920 3,615,744,354 TOTAL INVESTMENTS DEFICIENCY - - (151,238,335) (49,559,078) -8- Due to some subsidiary companies have capital deficiency on December 31, 1998 and 1997, therefore, the amount of investments in subsidiaries by equity method will be presented in liabilities under "investments deficiency". The 1998 financial statements of CVD Entertainment Public Company Limited are based on the report of other certified public accountant. For 1997 financial statements are based on financial data provided by the management of such company without any examination of auditors. The Company's portion amount recorded in the consolidated financial statements and the Company only is immaterial. The Company invested in stocks of CVD Entertainment Public Company Limited which is the listed company in the Stock Exchange of Thailand amount of 7.20 million shares. The market value as at December 31, 1998 is equal to Baht 43.92 million. The Company invested in BEC-TERO Entertainment Company Limited of 599,995 ordinary shares at Baht 10 each with the acquisition expenses of Baht 2.12 million, totalling investments are Baht 8.12 million. (BAHT) TYPE OF RELATIONSHIP PAID-UP CAPITAL DIVIDENDS BUSINESS 1998 1997 1998 1997 SUBSIDIARIES 1. THE BANGKOK ENTERTAINMENT Broadcasting radio and common 300,000,000 300,000,000 399,998,933 - CO., LTD. Thai TV Channel 3 shareholders/ directors 2. RUNGSIROJVANIT CO., LTD. Sourcing, Producing common 5,000,000 5,000,000 - - TV programs and shareholders/ Sell air time directors 3. NEW WORLD PRODUCTION Sourcing, Producing common 5,000,000 5,000,000 - - CO., LTD TV programs and shareholders/ Sell air time directors 4. ARIYAWATANA CO., LTD. Sourcing, Producing common 1,000,000 1,000,000 - - TV programs and shareholders/ Sell air time directors 5. YOU & I CORPORATION CO., Producing radio common 35,000,000 35,000,000 - - LTD. programs and shareholders/ Operating radio stations directors producing pictures 6. 3 MEDIA CO., LTD. Sourcing and common 30,000,000 30,000,000 - - Sell air time , sell shareholders/ equipment and Electronics advertising directors media services -9- (BAHT) TYPE OF RELATIONSHIP PAID-UP CAPITAL DIVIDENDS BUSINESS 1998 1997 1998 1997 7. BEC STUDIO CO., LTD. ( * ) Producing programs common 5,000,000 5,000,000 - - and Studio equipment shareholders/ services directors 8. BEC INTERNATIONAL Sourcing and Producing common 5,000,000 5,000,000 - - DISTRIBUTION CO., LTD. TV programs shareholders/ directors 9. BEC NEWS BUREAU CO., LTD. Producing news common 5,000,000 5,000,000 - - ( * ) programs shareholders/ directors 10. BANGKOK CABLE TELEVISION Pay TV operator common 5,000,000 5,000,000 SYSTEMS CO., LTD. ( * ) shareholders/ directors 11. BANGKOK SATELLITE & Satellite uplink- common 25,000,000 25,000,000 - - TELECOMMUNICATION downlink services shareholders/ CO., LTD. ( * ) directors 12. SATELLITE BROADCASTING Satellite uplink- common 1,000,000 1,000,000 SYSTEM CO., LTD. ( * ) downlink services shareholders/ directors 13. SATELLITE TV Satellite uplink- common 1,000,000 1,000,000 - - BROADCASTING CO., LTD. ( * ) downlink services shareholders/ directors 14. BEC-TERO ENTERTAINMENT Sourcing and Pro- common 10,000,000 - - - CO., LTD. ducing TV programs shareholders/ and Sell air time for directors TV advertising Pro- ducing and Promot- ing songs for concert ASSOCIATE 1. CVD ENTERTAINMENT PUBLIC COMPANY LIMITED Producing video tape common 360,000,000 360,000,000 3,240,000 - and lazer disc, distri- shareholders/ buting and renting directors video tape * NOT YET OPERATING 7. INVESTMENTS IN LAND Certain subsidiary invested in land with structure but will not utilize such structure, due to the situation of uncover cost of repair which may arise. Therefore, the total acquisition was recorded to cost of land. This subsidiary is considering for making use on such land. So, it is shown under investments in land. -10- 8. EQUIPMENTS consist of the following : (BAHT) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Office furniture and appliances 233,653,160 229,713,325 24,993,980 19,331,710 Studio furniture 2,901,145 - - - Audio equipments 14,242,979 13,868,050 - - Production equipments 2,931,758 2,931,758 - - Assets for leasing and selling air time for advertising 13,909,875 14,599,780 - - Motor vehicles 176,777,097 174,558,048 34,632,753 34,982,753 Tools and equipments for producing plays 4,645,478 4,604,579 - - Total 449,061,492 440,275,540 59,626,733 54,314,463 Less Accumulated depreciation (289,754,333) (232,489,208) (36,416,022) (28,431,145) Equipments-net 159,307,159 207,786,332 23,210,711 25,883,318 Depreciation for the year 64,710,275 57,294,950 8,334,875 6,196,394 9. DEFERRED RIGHT TO USE PROPERTY consist of the following : (BAHT) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Building 80,500,885 80,500,885 - - Building improvement 13,386,710 10,331,227 - - Color TV and radio transmission 193,997,805 193,997,805 - - Color TV and radio equipments 397,723,668 344,443,654 - - TV relay vehicles 11,562,675 11,536,115 - - Equipments under installation - 15,441,317 - - Right of network expansion project 1,518,101,042 1,508,809,688 - - Total 2,215,272,785 2,165,060,691 - - Less Accumulated amortization (940,851,453) (808,731,416) - - Deferred Right to Use Property-net 1,274,421,332 1,356,329,275 - - Deferred right to use property for the year 132,120,037 116,225,725 -11- 10. DEFERRED PICTURES RENTAL, PICTURE PRODUCTS, PLAYS AND COPYRIGHT CHARGES consist of the following : (BAHT) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Deferred Pictures Rental, Picture Products, Plays and Copyright Charges-net brought forward 1,147,755,144 863,893,421 378,816,504 244,798,224 Add Increase during the year 841,696,547 704,551,257 375,201,075 323,477,665 Less Decrease during the year (184,593) (24,857,037) - (24,000,000) Total 1,989,267,098 1,543,587,641 754,017,579 544,275,889 Less Amortization during the year (484,781,094) (395,832,497) (204,768,267) (165,459,385) Deferred Pictures Rental, Picture Products, Plays and Copyright Charges-net carried forward 1,504,486,004 1,147,755,144 549,249,312 378,816,504 11. LONG-TERM LEASE PAYABLE consist of the following : (BAHT) CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Long-term lease payable 370,646 593,033 - - Less Current portion of long-term lease payable (222,388) (203,855) - - Long-term lease payable-net 148,258 389,178 - - Current portion of long-term lease payable due within one year has been shown under current liabilities. -12- 12. LEGAL RESERVE In compliance with the Public Company Act B.E 2535, the Company has appropriated the legal reserve at least 5% on annual net income until the reserve reaches 10% of the authorized share capital. The Company has fully appropriated for legal reserve in 1997. 13. DIVIDENDS PAYMENT AND DIRECTORS' REMUNERATION On February 25, 1998, the Board of Directors' Meeting was held and approved to pay dividends at Baht 6.00 per share to the shareholders of 200 million shares, totalling Baht 1,200 million. On April 29, 1998, the Ordinary General Shareholders' Meeting for 1998 was held and approved to pay such proposed dividends and directors' remuneration amounting to Baht 12 million by fixing the payment date for dividends on May 20, 1998. On March 18, 1997, the Board of Directors' Meeting was held and approved to pay dividends at Baht 5.42 per share to the shareholders of 200 million shares, totalling Baht 1,084 million. On April 29, 1997, the Ordinary General Shareholders' Meeting for 1997 was held and approved to pay such proposed dividends and directors' remuneration amounting to Baht 12 million by fixing the payment date for dividends on May 7, 1997. 14. TRANSACTIONS WITH RELATED PARTIES The Company and subsidiaries have certain transactions of assets, liabilities, revenues and expenses arose from transactions with the related parties through the common shareholders and/or directors. Such transactions incur in normal business at market price which are comparable to the business transactions with others. The effects of these transactions were reflected in the accompanying financial statements on the bases mutually determined by the Company and subsidiaries and parties concerned. -13- The significant transactions with related parties are as follows : (BAHT) 1998 1997 Trade accounts receivable 7,342,682 - Loans extended 47,475,038 42,450,034 Interest receivable 3,952,134 2,986,971 Copyright charge of song in process 1,727 - Purchase of office equipments 6,060,848 6,064,655 Trade accounts payable 123,171 - Revenues 9,771,142 - Interest income 6,878,780 5,181,206 Cost of sales 1,787,425 - Expenses 15,531,145 13,623,613 15. FINANCIAL INFORMATION BY SEGMENT The Company and its subsidiaries are engaged in the business of procurement of moving pictures, plays, producing television programmes and selling air time for advertisement through channel 3 color Thai TV station. Besides these, some subsidiaries are granted the right for transmission through TV and radio stations, and generated income from selling of advertisement and services, producing pictures, selling of video wall equipment. As mentioned in the preceding paragraph, the Company and its subsidiaries operate in one industrial segment, that is the business of entertainment in one geographical area, Thailand. All revenues, income and assets shown in the financial statements are related to the aforementioned industrial segment and geographical area. -14- 16. COMMITMENTS As at December 31, 1998 and 1997, the Company and its subsidiaries have commitments and contingent liabilities as follows: (MILLION BAHT) PARTICULAR CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Letter of guarantee issued by commercial banks 19.71 37.13 - - Copyright charges of pictures under forward exchange contract - Current portion 68.16 - 30.57 - - Portion due after one year 87.04 - 52.52 - 17. GENERAL DATA 17.1 A subsidiary has made an agreement for joint operation of color TV transmission with the Mass Communication Organization of Thailand dated April 28, 1978 as amended the first time on September 13, 1982, the second time on July 16, 1987 and the third time on May 2, 1989. The subsidiary is granted the right for joint operation of Channel 3 color Thai TV station's transmission until March 25, 2020. All property created or procured for the operation under this agreement shall be transferred to the Mass Communication Organization of Thailand on the date the subsidiary creates or procures. The subsidiary has the right to use such property. Under the above agreement, the subsidiary shall pay annual compensation to the Mass Communication Organization of Thailand as specified in the agreement. -15- 17.2 A subsidiary has made an agreement to lease air time for program and advertisement with the Mass Communication Organization of Thailand dated January 25, 1990 as amended on September 22, 1994. The subsidiary is granted the right to operate program and advertise through an MCOT FM radio station, at 105.5 MH frequency in Bangkok until January 31, 2020. To be consistent with the term of the agreement for joint operation of color TV transmission as amended, it is agreed that if the agreement for joint operation of color TV transmission is terminated before its term for whatever reason, this agreement shall be deemed terminated. Under the above agreement, the subsidiary shall pay the monthly air time and other expenses to the Mass Communication Organization of Thailand as specified in the agreement. 18. THE PREPARATION TO SOLVE THE PROBLEM OF YEAR 2000 The Company and its subsidiaries have analysed and evaluated the effect of problem of year 2000 which may arise to the Company and its subsidiaries for both transmission system, operation system and management information system by hiring external expert for surveying computer systems and preparing computer transactions, connected equipments and total network system applied in the organization. Such expert co-operated with the vendor of main equipment examine, analyze and evaluate the effect of problem of year 2000 of total computer systems, both HARDWARE and SOFTWARE under the supervision of one administrative director. Such surveying and evaluation are completed. From the aforementioned surveying and evaluation, the Company found that the problem is at the operating system of the main CPU (Mini-computer of IBM AS/400) which is year 2000 non-compliant. The applied work system fixed six digits for date in the form of YYMMDD -16- which have to be adjusted. Besides, some personal computers (PC) acquired before 1996 must be replaced. In order to solve the problem of year 2000, the Company and its subsidiaries start to upgrade the computer systems or programmes by planning to purchase mainframe computer and operating system in new version of Y2K compliance and hiring external expert to upgrade the operating system of BACK OFFICE included replacing the obsolete PC. The estimated expenses will be about Baht 10 million. The Company expects no significant effects to its operation or even financial status. Although the Company and its subsidiaries expect that the computer systems or programmes can be upgraded in time before the year 2000, they may have some risk due to other enterprises which they deals with are unable to upgrade their computer systems in time. However, the Company expects that such affection is immaterial to the operation of the Company and its subsidiaries. 19. RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1997 financial statements have been reclassified to conform with the presentation of 1998 financial statements. (More)