SET Announcements

- 11 - The Company These consist of: In Thousand Baht Interest Rate Amount Objective 1998 1997 1998 1997 Short-Term Loans L.B.L Algamate Partnership Ltd. For operations MOR MOR 184,850 184,850 Multimedia Telephony, Inc. (Philippines) For operations 15.00% 15.00% 91,537 112,452 Others 42,901 47,342 Total Short-Term Loans 319,288 344,644 Long-Term Loans Thai Telephone and Telecommunication Public Company Limited For operations MLR+0.5% MLR+0.5% 375,000 375,000 Loxley Broadcast and Media Company Limited For operations 15.25% - 18,469 - Thai Cellulose Products Company Limited For operations MOR+ 1% MOR+ 1% 10,400 10,400 Total Long-Term Loans 403,869 385,400 Less Allowance for Doubtful Accounts (28,869) - Net 375,000 385,400 9. SHORT-TERM LOANS AND ADVANCE FROM RELATED COMPANIES Consolidated These consist of: In Thousand Baht Interest Rate Amount Objective 1998 1997 1998 1997 Short-Term Loans Asia Pacific Post Co.,Ltd. For operations 16.00% 15.50% 20,028 10,513 C.T.W. Bata Co., Ltd. For operations 15-16.75% - 5,500 - Advance Loxley Utilities Services Co., Ltd. and Siripong Construction Partnership Ltd. Joint Venture For operations - - 16,157 - Total 41,685 10,513 - 12 - 10. EURO CONVERTIBLE BONDS During the second quarter of 1995, the Company offered the Euro- Convertible Bonds in the foreign countries with a total face value of U.S.Dollars 100 million (divided into 100,000 bonds at U.S. Dollars 1,000 principal amount) (ECD 1), or equivalent to Baht 2,455 million contingent on the exchange rate fixed at the time of conversion or redemption. The bonds bear interest at the rate of 3.5% p.a. and will be due for redemption on April 20, 2005. However, the bondholders, pursuant to the stipulated conditions in the prospectus, may exercise their conversion rights at any time from July 20, 1995 up to March 20, 2005 at the conversion price of Baht 500 per share, or put redemption option at prior maturity on April 20, 2000 at the price with premium totalling U.S.Dollars 1,310 pershare. In addition,the Company, pursuant to the stipulated conditions in the prospectus, may mandatorily redeem all or some of the bonds at any time from May,1998 to April 20, 2000 at the price with premium totalling U.S. Dollars 1,237 pershare or U.S. Dollars 1,310 per share, depend upon the period of redemption. However, upto September 30, 1998, no conversions or redemptions have been made. During the second quarter of 1996, the Company offered another Euro-Convertible Bond in the foreign countries with a total face value of U.S. Dollars 105 million (divided into 105,000 bonds at U.S.Dollars 1,000 principal amount) (ECD 2), or equivalent to Baht 2,646 million contingent on the exchange rate fixed at the time of conversion. The bonds bear interest at the rate of 2.5% p.a. and will be due for redemption on April 4,2001. However, the bondholders, pursuant to the stipulated conditions in the prospectus, may exercise their conversion rights at any time from July 4, 1996 up to March 4, 2001 at the conversion price of Baht 450 pershare. In addition, the Company, pursuant to the stipulated conditions in the prospectus, may mandatorily redeem all or some of the bonds at any time from April 1999 to April 3, 2001 at the price with premium totalling U.S. Dollars 1,210 per share in 2000 and U.S. Dollars 1,272 per share in 2001. However, upto September 30, 1998, no conversions have been made. In respect of the issuance of the bonds referred to above, at the extraordinary shareholders meetings held on January 11, 1995 and March 18, 1996, the shareholders approved the increase in the Company's authorized share capital from Baht 400 million (dividedinto 40,000,000 shares at Baht10 par value) to Baht 460 million (divided into 46,000,000 shares at the same par value) and finally to Baht 520 million (divided into 52,000,000 shares at the same par value). The increased share capital of 12,000,000 shares will be issued to the convertible bondholders who will later exercise their conversion rights. The Company registered the resolution of the increase share capital with the Ministry of Commerce on January 27, 1995 and March 20, 1996, respectively. - 13 - Since 1996, the market prices of the stock including the Companys shares, in the Stock Exchange of Thailand have declined continuously. Consequently, the bondholders may not exercise their conversion rights as much as that of the Companys estimate. Accordingly, the Company set up a policy to provide a provision for the premium to be paid to the bondholders at the time redemption be made at the rate of 80% of total premium to be paid in case of all bondholders exercise the redemption right at prior maturity date, spread over the period of the right by applying the straight-line method. The Management believes that such provision is adequate since the present market price of the Companys shares represents the price during the period that the Securities Exchange of Thailand is unusually in declining circumstances and the redemption period will be in effect in next two (2) years for ECD 1 and next three (3) years for ECD 2, respectively. As at September 30, 1998, the provision amounted to approximately Baht 1,125.2 million. 11. EXCHANGE GAIN (LOSS) ARISING FROM CHANGE IN FOREIGN CURRENCY EXCHANGE SYSTEM AND EXTRAORDINARY ITEM As a result of the change in the foreign currency exchange system to the managed float system effective from July 2, 1997, the Company and subsidiaries derived a net gain on repayment and collection of its foreign currency liabilities and assets during the three-month and nine-month periods ended September 30, 1998, and on the translation of the net liabilities outstanding at September 30, 1998 (using the exchange rates prevailing on September 30, 1998) totalling approximately Baht 671.7 million and Baht 1,688.4 million for consolidated interim financial statements and Baht 669.2 million and Baht 1,683.3 million for the company interim financial statements. This gain was presented separately in the Statement of Income for the three-month and nine-month periods ended September 30, 1998, while losses for the three-month and nine-month from translation of the net liabilities outstanding at September 30,1997 (using the exchange rates prevailing on September 30, 1997) totalling approximately Baht 1,667.6 million for the consolidated interim financial statements and Baht 1,597.8 million for the company interim financial statements (net of related income tax approximately Baht 685.3 million and Baht 684.8 million, respectively) The Company and subsidiaries recognized this exchange loss and presented as Extraordinary Item in accordance with the Announcement No. 002/2540-2542 dated September 19, 1997 issued by the Institute of Certified Accountants and Auditors of Thailand. - 14 - 12. AGREEMENTS As at September 30, 1998 and 1997: a) A subsidiary has the joint venture agreement with a party comprising IBM Thailand Corporation Co., Ltd., Loxley International Co.,Ltd. and IBM Worldtrade Corporation Co.,Ltd., to supply the turnkey system for the Taxation Computerized Project to the Revenue Department. The total contract price is Baht 1,814 million in which the subsidiary is liable in respect of a 44.738% share of the prospective profit/loss incurred. b) A subsidiary has an agreement with the Telephone Organization of Thailand (TOT) for the latter to allow the subsidiary to provide paging services within an agreed period. By virtue of this agreement, the subsidiary is committed to transfer the ownership of communications network to TOT which subsequently grant right to use the network over the term of the license to the subsidiary. In this connection, the subsidiary has to pay compensations to TOT amounted to Baht 1 million per annum. Additionally, the subsidiary was required to provide a bank guarantee of Baht 141.1 million to TOT to guarantee its performance. A portion of banks guarantees was collateralized by the pledge of fixed deposit account approximately Baht 17.8 million. c) Two subsidiaries together with the Communication Authority of Thailand (CAT) have entered into an agreement to invest in the computer database services project. By virtue of this agreement, the subsidiaries are committed to supply, install, control and maintenance all tools and equipment as agreed in the agreement. In addition, the subsidiaries must transfer the ownership of such tools and equipment to CAT at the first day on which service be rendered. This agreement shall be in effect for a period of ten (10) years commencing from the first day on which service be rendered, without cancellation right except for those specified in the agreement. During the period of agreement, the subsidiaries have the right to charge service fee and other fees from the users as stipulated in the agreement. d) A subsidiary with the Communication Authority of Thailand (CAT) have entered into an agreement to invest in the satellite transmission services project. By virtue of this agreement, the subsidiary is committed to supply, install, control and maintenance all tools and equipment as agreed in the agreement. In addition, the subsidiary must transfer the ownership of such tools and equipment to CAT at the first day on which service be rendered. - 15 - The agreement shall be in effect for a period at twenty-two (22) years commencing from the first day on which service be rendered or twelve (12) months subsequently date of an agreement, which ever is occurrence, without cancellation right except for those specified in the agreement. During the period of agreement, the subsidiary has the right to charge service fee and other fees from the users as stipulated in the agreement. e) A subsidiary had entered into a joint venture agreement with a foreign government to set up a telecommunication system and provide related services in agreed area. Under the terms of the agreement, the subsidiary is committed to supply, install, control and maintenance all communication network. In addition, the subsidiary must transfer the ownership of such communication network to that foreign government at the expiry date of the agreement. f) A subsidiary entered into a call service center agreement with certain local companies. The term of this agreement is for a period of five (5) years commencing from August 19, 1997, without cancellation right except for those specified in the agreement, the subsidiary has the right to charge service fee as stipulated in the agreement. g) A subsidiary entered into a distribute on-line charitable lotteries and award prizes agreement with the Thai Government Lottery Office (GLO). Under the terms of the agreement, the subsidiary is committed to supply and install distribute on-line lottery equipment and shall have to comply with certain conditions and restrictions as specified in the agreement. The subsidiary, however, has not yet installed the equipment since the subsidiary is in the process of negotiation certain conditions with GLO. The management of subsidiary believes that this project can be operated in the future, therefore, does not set up any contingent losses in the books of accounts. This agreement shall be in effect for a period of ten (10) years without cancellation right except for those specified in the agreement. During the period of the agreement, the subsidiary has the right to charge service fee from distribution the said lottery as stipulated in the agreement. - 16 - 13. COMMITMENTS AND CONTINGENT LIABILITIES As at September 30 : a) The Company and subsidiaries had unused letters of credit of approximately Baht 406 million (Baht 192 million for the Company) in 1998 and Baht 2,098 million (Baht 1,570 million for the Company) in 1997. b) The Company and subsidiaries were contingently liable to their customers for the tender guarantees. These tender guarantees were covered by the banks letters of guarantee totalling approximately Baht 699 million (Baht 318 million for the Company) in 1998 and Baht 1,943 million (Baht 875 million for the Company) in 1997. c) The Company and subsidiaries had commitments under the contracts with certain banks whereby the Company committed to buy certain foreign currencies at the forward rates at the amount equivalent to approximately Baht 335 million (Baht 335 million for the Company) in 1998 and Baht 1,350 million (Baht 1,275 million for the Company) in 1997. 14. THE YEAR 2000 PROBLEM Many companies must undertake major project to address the Year 2000 issue. Each companys potential costs and uncertainties will depend on a number of factors,including computer software and hardware and the nature of its industry. Companies may also coordinate with other entities with which they electronically interact, if any. If companies do not successfully address the Year 2000 Problem on a timely basis, they may face material adverse consequences. The Company instructed its Information Systems Division to study the existing computer system to solve the year 2000 problems be ginning in December 1997. At September 30, 1998, the remediation of information system and computer program had already been completed. While the hardware had been approximately 70% completed. The Company expects to complete the project in the forth quarter 1998. The cost of the computer remediation project is approximately Baht 1 million, which is recorded in the period as incurred. Although the Companys computer remediation project is expected to be completed and can be implemented before the year 2000, the Company still faces risks that other companies with whom the Company does business may be unsuccessful in their computer remediation projects within the time limit. However, the Company expects that the impact, if any, will not be significant to the Companys operations. 15. RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1997 interim financial statements have been reclassified to conform with the 1998 interim financial statements presentation.