AUDITOR'S REPORT To the Shareholders of Advanced Info Service Public Company Limited I have audited the accompanying consolidated and company balance sheets of Advanced Info Service Public Company Limited as at 31 December 1999, and the related consolidated and company statements of income, changes in shareholders' equity, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated and company financial statements (before restatement) of Advanced Info Service Public Company Limited for the year ended 31 December 1998 presented herewith for comparative purposes, were audited by another auditor whose report dated 10 February 1999, expressed an unqualified opinion on those statements. I conducted my audit in accordance with generally accepted auditing standards in Thailand. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the consolidated and company financial statements referred to above present fairly, in all material respects, the consolidated and company financial position of Advanced Info Service Public Company Limited as at 31 December 1999 and the consolidated and company results of operations and cash flows for the year then ended in accordance with generally accepted accounting principles in Thailand. As explained in Note 3 to the consolidated and company financial statements, during the year 1999, the Company and a subsidiary have changed their accounting policies in respect of: (a) accounting for the cost of mobile phone networks under concession agreements; (b) accounting for the cost of Datanet tools and equipment under concession agreement and (c) accounting for the change in status of investment in associate to be investment in subsidiary, to reflect a change in the reporting unit: The Company and the Group have accounted for these changes retrospectively. Accordingly the consolidated and company financial statements for the year ended 31 December 1998 have been restated. I have audited the adjustments, detailed in Note 3, relating to the restatement of the consolidated and company financial statements for the year ended 31 December 1998, and found that the adjustments have been appropriately made. I draw attention to Note 40 to the consolidated and company financial statements which is marked "unaudited". Information regarding the Year 2000 issue as presented in this note has not been subjected to auditing procedures, and, accordingly, I express no opinion on it. PRASAN CHUAPHANICH Certified Public Accountant (Thailand) No. 3051 PricewaterhouseCoopers ABAS Limited Bangkok 4 February 2000 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht ASSETS Current Assets Cash on hand and at banks 4 880,981,901 2,099,223,691 525,850,888 1,690,915,056 Short-term investments 5 2,810,130,757 2,488,523,707 2,352,919,560 2,166,007,771 Trade accounts receivable, net 6 3,848,345,836 3,064,391,826 3,430,142,410 2,749,419,588 Amounts due from and loans to related companies, net 7 548,159 17,648,364 2,093,329 214,277,318 Inventories, net 8 939,472,853 683,559,225 - - Other current assets 9 1,090,625,816 558,395,217 1,028,222,526 446,565,756 Total Current Assets 9,570,105,322 8,911,742,030 7,339,228,713 7,267,185,489 Non-Current Assets Long-term forward and swap contracts receivable, net 17 - 160,544,852 - 160,544,852 Long-term investments, net 10 - - 3,825,617,841 1,607,449,056 Property and equipment, net 11 1,974,811,317 1,954,142,351 1,778,747,098 1,750,073,217 Cost of mobile phone and pager service networks and Datanet tools and equipment under concession agreements, net 12 26,812,222,245 26,096,159,306 25,720,430,223 24,984,234,332 Other assets, net 13 1,507,022,850 956,801,422 475,145,345 457,091,531 Total Non-Current Assets 30,294,056,412 29,167,647,931 31,799,940,507 28,959,392,988 Total Assets 39,864,161,734 38,079,389,961 39,139,169,220 36,226,578,477 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loans from banks 1,950,000,000 814,688,647 1,950,000,000 627,130,000 Trade accounts payable 14 2,324,113,183 6,745,856,643 1,683,336,062 5,936,803,452 Current portion of long-term liabilities 20 1,033,126,793 4,419,468,419 1,033,126,793 4,419,468,419 Amounts due to and loans from related companies 15 135,046,813 30,887,579 693,480,365 14,360,102 Short-term debentures 16 - 2,000,000,000 - 2,000,000,000 Forward and swap contracts payable, net 17 57,450,350 76,706,115 57,227,095 76,706,115 Accrued concession fee 953,231,105 655,112,199 953,231,105 655,112,199 Other current liabilities 18 4,518,768,739 2,947,128,934 3,614,101,988 2,632,774,949 Total Current Liabilities 10,971,736,983 17,689,848,536 9,984,503,408 16,362,355,236 Non-Current Liabilities Long-term forward and swap contracts payable, net 17 24,564,860 - 24,564,860 - Long-term debentures 19 1,500,000,000 2,000,000,000 1,500,000,000 2,000,000,000 Long-term liabilities 20 2,391,868,726 4,227,455,113 2,391,868,726 4,227,455,113 Deposits from customers 21 3,450,606,377 3,083,240,092 3,871,811,093 3,300,408,562 Total Non-Current Liabilities 7,367,039,963 9,310,695,205 7,788,244,679 9,527,863,675 Total Liabilities 18,338,776,946 27,000,543,741 17,772,748,087 25,890,218,911 Shareholders' Equity Share capital Authorised share capital 5,000,000,000 5,000,000,000 5,000,000,000 5,000,000,000 Issued and paid-up share capital 22 2,700,000,000 2,340,000,000 2,700,000,000 2,340,000,000 Premium on share capital 22 10,215,000,000 2,295,000,000 10,215,000,000 2,295,000,000 Retained earnings Appropriated - Legal reserve 23 500,000,000 500,000,000 500,000,000 500,000,000 Unappropriated 7,951,421,133 5,201,359,566 7,951,421,133 5,201,359,566 Minority interests 24 158,963,655 742,486,654 - - Total Shareholders' Equity 21,525,384,788 11,078,846,220 21,366,421,133 10,336,359,566 Total Liabilities and Shareholders' Equity 39,864,161,734 38,079,389,961 39,139,169,220 36,226,578,477 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht Revenues Revenues from services and equipment rentals 18,327,768,540 14,881,128,031 16,701,245,081 13,327,584,009 Sales 6,885,884,121 224,976,672 - - Net gain on exchange - 1,773,932,350 - 1,753,066,816 Other operating income 25 659,034,636 569,436,685 506,666,477 482,667,269 Total Revenues 25,872,687,297 17,449,473,738 17,207,911,558 15,563,318,094 Expenses Cost of services and equipment rentals 26 11,222,235,367 9,563,260,582 10,750,141,776 9,190,498,846 Cost of sales 4,708,594,735 253,586,510 - - Selling and administrative expenses 4,344,823,235 3,252,628,351 2,396,658,719 2,437,376,371 Net loss on exchange 108,653,881 - 118,993,916 - Interest expenses 27 718,286,932 1,216,858,571 717,647,239 1,167,328,796 Directors' remuneration 28 5,060,000 720,000 5,000,000 660,000 Total Expenses 21,107,654,150 14,287,054,014 13,988,441,650 12,795,864,013 Operating income 29 4,765,033,147 3,162,419,724 3,219,469,908 2,767,454,081 Share of net profit in subsidiaries - - 987,568,785 129,379,554 Income before tax 4,765,033,147 3,162,419,724 4,207,038,693 2,896,833,635 Income tax 30 1,995,711,939 1,591,291,692 1,456,977,126 1,450,315,292 Income before minority interests 2,769,321,208 1,571,128,032 2,750,061,567 1,446,518,343 Share of net profit in subsidiaries to minority interests 24 19,259,641 124,609,689 - - Net income for the year 2,750,061,567 1,446,518,343 2,750,061,567 1,446,518,343 Basic earnings per share 31 Income before minority interests 10.44 6.71 10.37 6.18 Share of net profit in subsidiaries to minority interests (0.07) (0.53) - - Net income for the year 10.37 6.18 10.37 6.18 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht Share Capital Beginning balance 2,340,000,000 2,340,000,000 2,340,000,000 2,340,000,000 Increase during the year 22 360,000,000 - 360,000,000 - Decrease during the year - - - - Ending balance 2,700,000,000 2,340,000,000 2,700,000,000 2,340,000,000 Premium on Share Capital Beginning balance 2,295,000,000 2,295,000,000 2,295,000,000 2,295,000,000 Increase during the year 22 7,920,000,000 - 7,920,000,000 - Decrease during the year - - - - Ending balance 10,215,000,000 2,295,000,000 10,215,000,000 2,295,000,000 Retained Earnings Appropriated retained earnings Legal reserve 23 Beginning balance 500,000,000 500,000,000 500,000,000 500,000,000 Increase during the year - - - - Decrease during the year - - - - Ending balance 500,000,000 500,000,000 500,000,000 500,000,000 Unappropriated retained earnings Beginning balance-as previously reported 9,241,773,863 6,533,401,796 9,241,773,863 6,533,401,796 Adjustments 3 Change in amortisation period for cost of mobile phone networks under concession agreements (4,035,398,425) (2,519,895,717) (4,035,398,425) (2,519,895,717) Change in status of investment in associate to be investment in subsidiary, net of change in amortisation period for cost of Datanet tools and equipment of the subsidiary under concession agreement (5,015,872) (1,264,856) (5,015,872) (1,264,856) Beginning balance-as restated 5,201,359,566 4,012,241,223 5,201,359,566 4,012,241,223 Net income for the year As previously reported - 2,965,772,067 - 2,965,772,067 Net income for the year 2,750,061,567 - 2,750,061,567 - Adjustments 3 Change in amortisation period for cost of mobile phone networks under concession agreements - (1,515,502,708) - (1,515,502,708) Change in status of investment in associate to be investment in subsidiary, net of change in amortisation period for cost of Datanet tools and equipment of the subsidiary under concession agreement - (3,751,016) - (3,751,016) 7,951,421,133 5,458,759,566 7,951,421,133 5,458,759,566 Less: Dividends 32 - (257,400,000) - (257,400,000) Ending balance 7,951,421,133 5,201,359,566 7,951,421,133 5,201,359,566 Minority interests 24 158,963,655 742,486,654 - - Total 21,525,384,788 11,078,846,220 21,366,421,133 10,336,359,566 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht Unappropriated retained earnings: Beginning balance-as previously reported 9,241,773,863 6,533,401,796 9,241,773,863 6,533,401,796 Adjustments 3 Change in amortisation period for cost of mobile phone networks under concession agreements (4,035,398,425) (2,519,895,717) (4,035,398,425) (2,519,895,717) Change in status of investment in associate to be investment in subsidiary, net of change in amortisation period for cost of Datanet tools and equipment of the subsidiary under concession agreement (5,015,872) (1,264,856) (5,015,872) (1,264,856) Beginning balance-as restated 5,201,359,566 4,012,241,223 5,201,359,566 4,012,241,223 Net income for the year As previously reported - 2,965,772,067 - 2,965,772,067 Net income for the year 2,750,061,567 - 2,750,061,567 - Adjustments 3 Change in amortisation period for cost of mobile phone networks under concession agreements - (1,515,502,708) - (1,515,502,708) Change in status of investment in associate to be investment in subsidiary, net of change in amortisation period for cost of Datanet tools and equipment of the subsidiary under concession agreement - (3,751,016) - (3,751,016) 7,951,421,133 5,458,759,566 7,951,421,133 5,458,759,566 Less: Dividends 32 - (257,400,000) - (257,400,000) Unappropriated retained earnings at end of the year 7,951,421,133 5,201,359,566 7,951,421,133 5,201,359,566 Appropriated retained earnings: Legal reserve 23 500,000,000 500,000,000 500,000,000 500,000,000 Retained earnings at end of the year 8,451,421,133 5,701,359,566 8,451,421,133 5,701,359,566 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht Cash flows from operating activities : Net income for the year 2,750,061,567 1,446,518,343 2,750,061,567 1,446,518,343 Adjusted by : Depreciation charge 11 599,236,020 484,985,439 515,801,518 418,729,060 Provision for obsolete fixed assets 11 10,446,194 - - - Amortisation of costs of mobile phone and pager service networks and Datanet tools and equipment under concession agreements 12 3,716,634,027 3,170,262,530 3,537,661,087 3,012,871,880 Amortisation of deferred charges 13 103,337,347 76,392,042 90,534,804 76,343,343 Doubtful accounts and bad debts 611,086,487 766,995,153 485,160,365 710,946,544 Loss on write-off invetories and provisions for obsolete inventories and diminution in value of finished goods 89,758,720 7,642,038 - - Amortisation forward and swap premiums 86,523,094 46,290,723 87,460,396 44,731,624 Loss (gain) on disposals of fixed assets 2,909,857 (1,601,843) 5,662,358 (58,608) Loss from write-off cost of mobile phone service networks 170,000,000 - 170,000,000 - Unrealised loss (gain) on foreign exchange rate 38,670,393 (1,937,113,058) 45,549,824 (1,936,048,683) Realised loss (gain) on foreign exchange for loans 119,471,369 (718,374,141) 119,471,369 (718,374,141) Amortisation of goodwill 13 95,371,246 36,598,815 - - Write-down of negative goodwill to be other operating income (37,110,360) - - - Share of net profit in subsidiaries - - (987,568,785) (129,379,554) Share of net profit in subsidiaries to minority interests 19,259,641 124,609,689 - - Net income before changes in operating assets and liabilities 8,375,655,602 3,503,205,730 6,819,794,503 2,926,279,808 Changes in operating assets and liabilities (Excluding the effects of acquisition and disposal) (Increase) in trade accounts receivable (1,397,702,852) (221,336,927) (1,181,183,550) (206,055,717) Decrease in amounts due from related companies 17,100,205 72,544,966 212,183,989 36,567,036 Decrease in forward and swap contracts receivable 145,460,396 1,482,403,309 146,287,928 1,482,403,309 Decrease (increase) in inventories (345,324,549) 12,467,298 - - Decrease (increase) in other current assets (698,075,011) 155,021,733 (745,212,756) 146,599,799 Increase (decrease) in trade accounts payable (1,630,262,838) 1,680,435,861 (1,468,799,524) 1,614,614,413 Increase (decrease) in amounts due to related companies 104,159,234 (57,482,621) 29,120,263 4,985,872 Increase (decrease) in forward and swap contracts payable 5,309,096 (692,913,068) 5,085,840 (692,913,068) Increase (decrease) in accrued concession fee 298,118,906 (213,484,830) 298,118,906 (213,484,830) Increase in other current liabilities 1,661,334,480 1,041,269,814 1,034,927,302 964,129,008 (Increase) in other assets (133,241,285) (199,679,021) (108,588,618) (202,045,043) Increase in deposits from customers 362,752,809 92,204,092 571,402,530 129,306,562 Cash flows from operating activities 6,765,284,193 6,654,656,336 5,613,136,813 5,990,387,149 The notes to the consolidated and company financial statements on pages 11 to 54 form an integral part of these financial statements. Auditor's report pages 1 and 2 Consolidated Company 1999 1998 1999 1998 Restated Restated Notes Baht Baht Baht Baht Cash flows from operating activities 6,765,284,193 6,654,656,336 5,613,136,813 5,990,387,149 Cash flows from investing activities (Increase) in loans to related companies - (45,500,000) - (50,000,000) Increase in loans from related companies - - 650,000,000 - Cash invested in long-term (more)