SET Announcements

- 23 - The Company Financial Statements In Million Baht Industrial and Information Consumer Technology Products Trading Others Total 1998 1997 1998 1997 1998 1997 1998 1997 Net sales 2,246 2,560 1,151 1,606 70 51 3,467 4,217 Cost of sales (1,947) (2,301) ( 952) (1,403) ( 43) ( 24) (2,942) (3,728) Gross profit 299 259 199 203 27 27 525 489 Operating profit ( 14) ( 75) 30 ( 56) 346 301 362 170 Dividend income from investments in other companies 16 41 Central expenses ( 201) ( 263) Interest expense ( 342) ( 338) Directors' remuneration ( 2) ( 7) Other expenses ( 602) ( 746) Equity in results of operations of subsidiaries and associated companies-net 255 ( 68) Gain on exchange rates 2,242 173 Corporate income tax ( 418) 305 Income (loss) before extraordinary item and cumulative effect of accounting change 1,310 ( 733) Extraordinary item - ( 3,355) Cumulative effect of accounting change - 78 Net income (loss) 1,310 ( 4,010) Fixed assets - net 30 60 11 11 627 674 668 745 Other assets 9,347 10,715 Total assets 10,015 11,460 - 24 - The Company and subsidiaries operates in two major businesses, Information Technology and Industrial and Consumer Products Trading. Operating profit of each segment was determined by deducting costs and operating expenses from the total revenues. Central expenses, interest expense, directors' remuneration, other expenses and corporate income tax were exclusive from segment operating profit calculation. Fixed assets of each segment were assets used in those segments' operations. Other assets consisted mainly of cash on hand and at banks, inventories and investment in stocks. 4.19 Agreements As at December 31, 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. As at August 27, 1998, the said join venture agreement had been cancelled. The net loss which belongs to the subsidiary of approximately Baht 37 million was recorded as expense in the consolidated financial statements. 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 at the rates as stipulated in the agreement. 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 18.2 million. - 25 - c) A subsidiary and 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. 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. d) 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 tool 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. 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 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. - 26 - 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 negotiating 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. 4.20 Commitments and Contingent Liabilities As at December 31, a) The Company and subsidiaries had unused letters of credit of approximately Baht 161.9 million ( Baht 134.9 million for the Company) in 1998 and Baht 1,545.1 million (Baht 1,376.6 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 773.5 million (Baht 415.9 million for the Company) in 1998 and Baht 2,231.5 million (Baht 1,061.7 million for the Company) in 1997. c) The Company 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 358.9 million in 1998 and Baht 1,143 million in 1997. - 27 - 4.21 Reclassification of accounts Certain accounts in the 1997 financial statements have been reclassified to conform with the 1998 financial statement presentation. 4.22 The computer remediation plan for the year 2000 ("unaudited") In the processing of the Company's data for management and commercial operations, the Company had already completed the remediation project to solve the year 2000 problems in 1998. The cost of computer remediation project was taken up in the financial statement. But the Company still faces risks that other companies with whom the Company does business may be unsuccessful in their computer remediation projects to solve the year 2000 problems within the time limit. The Company, however, expects that the impact, if any, will not be significant to the Company's operations. 4.23 Basis of Financial Statement Presentation The Company maintains its official accounting records in Thai Baht and prepares its statutory financial statements in the Thai language in conformity with financial accounting standards in Thailand. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in Thailand may not conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are not designed for those who are not informed about Thailand accounting principles and practices. For the convenience of the reader, the accompanying financial statements have been translated into English from the statutory Thai language financial statements which are issued for domestic reporting purposes.