NOTE 15 - OTHER INCOME Other income for the three-month periods ended September 30, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Interest income 107.35 115.23 87.69 107.29 Others 22.18 4.73 20.45 2.95 Total 129.53 119.96 108.14 110.24 Other income for the nine-month periods ended September 30, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Interest income 351.18 227.52 286.72 187.04 Others 75.28 9.29 71.18 4.00 Total 426.46 236.81 357.90 191.04 NOTE 16 - DIRECTORS' REMUNERATION Directors' remuneration represents meeting fees and gratuities as approved by the shareholders of the Company and its subsidiary in their Annual General Meetings. NOTE 17 - OTHER EXPENSES Other expenses for the three-month periods ended September 30, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Amortization of goodwill 9.15 9.15 - - Adjustments relating to values of inventories - 3.25 - - Losses from written off assets 0.84 - - - Total 9.99 12.40 - - Other expenses for the nine-month periods ended September 30, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Amortization of goodwill 27.45 27.45 - - Adjustments relating to values of inventories - 6.55 - - Losses from written off assets 11.68 5.09 - 5.09 Others 1.96 1.50 1.96 1.50 Total 41.09 40.59 1.96 6.59 NOTE 18 - FOREIGN CURRENCY RISK MANAGEMENT The Company and its subsidiary, in terms of approved policy limit of Shinawatra Computer and Communications Group, enter into various types of foreign exchange contracts to hedge their transaction risk both in short-term and long-term foreign currency exposures. Short-term foreign currency exposures are related to trade import, short-term foreign borrowings and interest flows on long-term foreign borrowings. Long-term foreign currency exposure is related to long-term foreign borrowings. The currency risks of the Company and its subsidiary occur in various currency combinations, but mostly in the United States dollars, due to the fact that the Company and its subsidiary involves in transactions with different countries. The Company and its subsidiary hedging policy is to hedge currency risk mostly based on their net exposure and the structure of their revenues. The Company and its subsidiary focus more on hedging when their revenue are on local currency base whereas it will do less when their revenues are on foreign currency base due to the natural hedge phenomenon. The senior executives in Group Finance meet on a monthly basis to analyze currency exposures and re-evaluate forex management strategies against revised currency forecasts. NOTE 19 - CHANGE IN EXCHANGE RATE SYSTEM On July 2, 1997, the Ministry of Finance issued its notification, dated July 2, 1997, to change the exchange rate system to the managed float system. The Shinawatra Computer and Communications Group has its policy to recognize all exchange gains or losses derived from the change in exchange rate system incurred during the reporting period as income or expense in the statements of income. As at September 30, 1998, the Company and its subsidiary had significant outstanding foreign currency liabilities as follows: Million Consolidated Company's Separate Liabilities by type of currencies Balance Sheet Balance Sheet US dollar 339.33 339.33 Deutschmark 19.15 19.15 Japanese yen 554.06 554.06 Norway krone 1.58 1.58 From the foreign currency liabilities as shown above, periods of their settlement are categorised as follows: Million Consolidated Company's Separate Payment periods Balance Sheet Balance Sheet Within September 30, 1999 US dollar 179.88 179.88 Deutschmark 19.15 19.15 Japanese yen 554.06 554.06 Norway krone 1.58 1.58 After September 30, 1999 US dollar 159.45 159.45 Foreign currency liabilities as shown above represent short-term loan, long-term loans and related accrued interest expense and foreign trade accounts payable. Long-term loans and related accrued interest in US dollars are repayable and payable in accordance with conditions in loan agreements as described in Note 14, while short-term loan and foreign trade accounts payable are payable within September 30, 1999. From the foreign currency liabilities as shown above, a total amount of US$ 125.94 million in the book of the Company have been hedged against the risk of currency losses on future repayments and payments. Net effect derived from the change in exchange rate system as shown in the statements of income is calculated based on the guideline of the Institute of Certified Accountants and Auditors of Thailand. Effects derived from the change in exchange rates, incurred between October 1, 1998 and October 26, 1998, to the financial position and results of operations of the Company and its subsidiary based on their outstanding unhedged foreign currency liabilities as at September 30, 1998 are as follows: Million Baht Consolidated Company's Separate Financial Statements Financial Statements Decrease in liabilities 348.53 348.53 Gain on exchange 348.53 348.53 NOTE 20 - APPROPRIATION OF EARNINGS OF ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED The shareholders of the Company at the Annual General Meeting held on April 25, 1997 approved the interim dividend and legal reserve appropriated during 1996 of Baht 702 million and Baht 89.50 million, respectively. Additional dividend and legal reserve for 1996 of Baht 702 million and Baht 88.70 million, respectively, were also approved by such meeting. On August 11, 1997, the Board of Directors of the Company approved the interim dividend for 1997 in the amount of Baht 702 million. The shareholders of the Company at the Annual General Meeting held on April 29, 1998 approved the interim dividend during 1997 of Baht 702 million. Additional dividend and legal reserve for 1997 of Baht 257.40 million and Baht 15.30 million, respectively, were also approved by such meeting. NOTE 21 - LEGAL RESERVE Legal reserve of the Company was established in accordance with the provision of the Public Limited Company Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income each year until the reserve reaches 10% of the authorized share capital. This reserve is not available for dividend distribution. NOTE 22 - INCOME TAX Income tax for the three-month periods ended September 30, 1998 and 1997 are summarized as follows: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Income tax before considering adjustment of net effect derived from the change in exchange rate system 367.26 406.57 327.38 374.95 Income tax effect on adjustment derived from the effect of change in exchange rate system - (147.50) - (143.75) Income tax for the periods 367.26 259.07 327.38 231.20 Income tax for the nine-month periods ended September 30, 1998 and 1997 are summarized as follows: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Income tax before considering adjustment of net effect derived from the change in exchange rate system 1,264.59 1,284.59 1,149.84 1,200.44 Income tax effect on adjustment derived from the effect of change in exchange rate system - (147.50) - (143.75) Income tax for the periods 1,264.59 1,137.09 1,149.84 1,056.69 NOTE 23 - PROVIDENT FUND The provident fund of the Company and its subsidiary complies with the Provident Fund Act B.E. 2530. The fund is independently maintained and therefore does not appear in the balance sheets. NOTE 24 - COMMITMENTS Lease Agreements Other than those commitments under lease agreements as described in Note 3 to the financial statements, the Company and its subsidiary have entered into lease agreements covering spaces for branch offices, base stations, cars and others for periods ranging from 10 months to 20 years with options to renew. The Company and its subsidiary are committed to pay for rental in respect of the said agreements as follows: Million Baht Per Month Advanced Info Service Public Company Limited 13.22 Advanced Info Service Public Company Limited and subsidiary 14.89 Bank Guarantees At September 30, 1998, the Company and its subsidiary had commitments with banks whereby the latter issued letters for guaranteeing the Company and its subsidiary in respect of business contracts, electricity use, customs duties and others in the following amounts: Million Baht For Advanced Info Service Public Company Limited 3,537.31 For Advanced Info Service Public Company Limited and subsidiary 3,708.46 Contracts for Construction and Equipment Installation of Mobile Phone Network At September 30, 1998, the Company had outstanding commitments under contracts relating to the construction and installation of equipment for the operations of mobile phone network amounting to approximately Baht 1,184.69 million. Data Broadcast Via Satellite Agreement The Company's subsidiary has entered into a Data Broadcast via Satellite agreement with the Telephone Organization of Thailand for a period of 5 years with option to renew. The subsidiary is committed to pay for rental in respect of the said agreement in the amount of Baht 35,000 per site per month for master network and Baht 6,000 per site per month for remote network. Interest Rate and Currency Exchange Agreements In order to hedge against the risk of possible losses from future repayments of loans and the payments of related interest, deriving from exchange rates and interest rates under loans in foreign currencies, the Company has entered into six interest rate and currency exchange agreements to exchange the US dollar loan principals from US$ 76,824,731.97 to Baht 1,990,740,460.80, and to exchange the related loan interest rates on US dollar principals (comprise a fixed rate of 6.88% per annum and 6 month LIBOR plus the rate per annum as prescribed in each agreement) to the fixed rates on Baht principals ranging from 9.68 - 10.935% per annum. Value dates of those six agreements are covering from January 15, 1997 to January 15, 2001. As of September 30, 1998, outstanding loan principals under those agreements amounted to US$ 60,680,406.65, and their value dates are covering from October 9, 1998 to January 15, 2001. Forward Exchange Contracts In order to hedge against the risk of exchange losses from future repayments of foreign currency loans and the payments of related interest, and foreign trade accounts payable, the Company has entered into fifteen currency exchange agreements to exchange loans, interest and trade accounts payable from a total amount of US$ 64,791,038.93 to Baht 2,757,957,716.74. Value dates of these fifteen agreements are covering from December 29, 1998 to March 30, 1999. Interest Rate Exchange Agreements In order to hedge against the risk of losses from interest payments, which may derive from the fluctuation of interest rates under foreign loans, the Company has entered into ten interest rate exchange agreements, to exchange the related interest rates on US dollar loan principals of US$ 147,635,790 (comprise 6 month LIBOR plus the rate per annum as prescribed in each agreement) to the fixed rates on US dollar loan principals ranging from 5.43 - 6.34% per annum. Periods of those ten agreements are covering from October 9, 1997 to September 15, 2002. As of September 30, 1998, outstanding loan balances relating to those interest rate agreements amounted to US$ 144,635,790, and are covering from April 9, 1998 to September 15, 2002. Letters of Credit At September 30, 1998, the Company's subsidiary had commitments under letters of credit with overseas suppliers amounting to approximately Baht 11.65 million. Purchase Orders As at September 30, 1998, the Company had purchase commitments with respect to the construction and installation of equipment for the operations of mobile phone network amounting to approximately Baht 12.94 million. NOTE 25 - OTHER INFORMATION On May 16, 1997, the Company's subsidiary entered into an agreement with Pager Sales Company Limited in order to buy the said company's assets for a total value of approximately Baht 154.86 million, comprise inventories at the total value of approximately Baht 98.63 million, accounts receivable at the total value of approximately Baht 37.15 million, and property and equipment at the total value of approximately Baht 19.08 million. NOTE 26 - COMPUTER REMEDY PLAN FOR THE YEAR 2000 (UNREVIEWED BY THE AUDITORS) The Company and its subsidiary have instructed their Management Information System Divisions to study the existing computer systems, applications and hardware to develop a computer remediation plan for the year 2000. As of September 30, 1998, the computer remedy projects had not been completed. Estimated expenditures of the computer remedy projects for the Company and its subsidiary are approximately Baht 50 million and Baht 5 million, respectively, which a part will be recorded as assets in case the replacement of computer systems, applications and hardware are made; and another part will be recorded as period costs when incurred if the modifications for year 2000 compliance are made. Although computer remedy projects of the Company and its subsidiary are expected to be completed and can be implemented before the year 2000, the Company and its subsidiary still face risks that other parties with which the Company and its subsidiary do business may be unsuccessful in their computer remedy projects within the time limit. However, the Company and its subsidiary expect that the impact, if any, will not be significant to the operations of the Company and its subsidiary. NOTE 27 - SUBSEQUENT EVENTS In accordance with the resolution passed by the shareholders of the Company at the Extraordinary Meeting held on October 16, 1997, on October 7, 1998, the Executive Board of Directors Meeting of the Company passed a resolution to approve the issuance of additional unsecured bonds in the amount of Baht 2,000 million (2,000,000 units of Baht 1,000 per unit, with interest at the rate of 12% per annum) and are repayable in 1999. On October 9, 1998, the Company has entered into an agreement with Bangkok First Investment and Trust Public Company Limited to appoint the said company as bonds registrar and paying agent. On October 12, 1998, the Company has also entered into an agreement with Merrill Lynch Phatra Securities Company Limited to authorize the said company to offer and sell the aforesaid unsecured bonds. The Company agrees to pay fees and other expenses to both companies in accordance with terms and conditions prescribed in both agreements. The newly issued bonds were fully sold on October 12, 1998. NOTE 28 - RECLASSIFICATION OF ACCOUNTS Certain accounts in the financial statements for the three-month and nine-month periods ended September 30, 1997 have been reclassified to conform with the presentation in the financial statements for the three-month and nine-month periods ended September 30, 1998.