19.3 Space Reservation Agreement Central Pattana Public Company Limited Space Reservation Agreement and Central Realty Service Co., Ltd. Number of agreement 1 agreement Objective To construct shopping center for lease Contractual party Central Department Stores Co., Ltd. Period of the agreement 30 years Expiry date October 2024 Advance rental per agreement Baht 155 million Actual paid up to December 31, 1998 Baht 147 million Present under Assets for lease Renewal the agreement Can be renewed for further period - 19 - 19.4 Land Lease Agreement Land Lease Agreement Central Pattana Nine Square Co., Ltd. Number of agreement 1 agreement Objective To construct shopping center for lease Contractual party Praram 9 Square Ltd. Period of the agreement 30 years Expiry date June 2030 Advance rental per agreement Baht 850 million Actual paid up to December 31, 1998 Baht 377 million Present under Cost of Project Development Total monthly rental per year Baht 6.0 million to Baht 21.1 million Renewal the agreement The lessor agrees to offer the first option to the Company to renewal of the lease agreement. 19.5 Reciprocal Agreement Under the terms of the agreement between the Company and a related company, the Company has been granted the right to construct the building on the leased property of the related company and to operate the building for the Companys benefits up to December 18, 2008. The agreement is renewable for a period of ten (10) years each. The Company shall deliver the rights of the building and improvements thereon to the landlord on expiry date. The Company is committed to pay compensation totalling Baht 96,272,000 which is payable in various installments up to 2008. It is the Companys policy to record the compensation amount to expenses over the period of the agreement. 19.6 Guarantee for leasehold right agreements The Company and subsidiaries had entered into various guarantee for leasehold right agreements to reserve shops in shopping center of Pinklao, Ram-indra, Pattaya, Rama III and Chonburi projects. As at December 31, 1998 and 1997, the Company and subsidiaries received guarantee for leasehold rights amounting to approximately Baht 128.7 million and Baht 220.0 million, respectively and is presented in the consolidated balance sheets under Guarantee for leasehold rights. - 20 - 20. SEGMENT FINANCIAL INFORMATION Segment financial information for 1998 is as follows: In Thousand Baht Construction Lease and Condominium Utilities and Shophouse Food and Services for rent Beverage Segment Segment Segment Total Main income 1,961,341 - 295,472 2,256,813 Costs ( 977,857) - (223,420) ( 1,201,277) Operating income 983,484 - 72,052 1,055,536 Other income 293,574 Operating and administrative expenses ( 327,360) Interest expenses ( 592,170) Directors remuneration ( 9,669) Other expenses ( 378,127) Income from operations 41,784 Loss on declining in value of cost of project development ( 258,077) Gain on redemption of convertible bonds 264,604 Income before tax 48,311 Income tax ( 151,507) Loss before minority interest ( 103,196) Minority interest in subsidiaries 42,558 Income before gain on exchange rate and cumulative effect of accounting change ( 60,638) - 21 - In Thousand Baht Construction Lease and Condominium Utilities and Shophouse Food and Services for rent Beverage Segment Segment Segment Total Gain on exchange rate (Note 1) 418,753 Net income 358,115 Fixed assets - net at December 31, 1998 7,461,477 187,521 67,128 7,716,126 Other assets 4,179,366 Total Assets 11,895,492 Segment financial information for 1997 is as follows: In Thousand Baht Construction Lease and Condominium Utilities and Shophouse Food and Services for rent Beverage Segment Segment Segment Total Main income 1,748,879 1,299 253,876 2,004,054 Costs ( 796,954) ( 1,239) ( 188,220) ( 986,413) Operating income 951,925 60 65,656 1,017,641 Other income 526,911 Operating and administrative expenses ( 289,123) Interest expenses ( 524,681) Directors remuneration ( 10,530) Other expenses ( 15,009) Income from operations 705,209 Gain on redemption of convertible bonds 5,013 Income before tax 710,222 Income tax ( 245,632) Net income before minority interest 464,590 - 22 - In Thousand Baht Construction Lease and Condominium Utilities and Shophouse Food and Services for rent Beverage Segment Segment Segment Total Minority interest in loss of subsidiaries 23,930 Income before loss on exchange rate and cumulative effect of accounting change 488,520 Loss on exchange rate (Note 1) ( 886,550) Cumulative effect of accounting change (Note 5) 5,503 Net loss ( 392,527) Fixed assets - net at December 31, 1997 7,673,428 73,560 45,249 7,792,237 Other assets 5,138,956 Total Assets 12,931,193 The Company and subsidiaries operated three principal segments involving construction shopping centers for lease and providing utilities services, 9 the construction of condominium and shophouse for rent and food and beverage business in the shopping center. Fixed assets of each segment represented in the segment operating assets, while other assets were cash on hand and in banks, investments in promissory notes, investments in related companies, cost of project development and guarantee for leasehold rights. 21. COMMITMENTS AND CONTINGENT LIABILITIES As at December 31, 1998, 21.1 The subsidiary had entered into a long-term loan agreement with the line of Baht 1,000 million and a loan agreement by issuing promissory note with the line of Baht 300 million with the local bank. The above loans are guaranteed by the Company and a related company and secured by transferring one land leasehold right and mortgage of the Companys existing construction and/or the future construction thereon. However, as at December 31, 1998, the subsidiary has not yet withdrawn these loans. - 23 - 21.2 The subsidiaries had commitments to pay for consultant fee for building design and management fee for various projects amounting to approximately Baht 140.5 million. 21.3 In 1998, the subsidiary filed a case with the court against a local company for breach of land lease agreement amounting to approximately Baht 444 million. The defendant filed a counter-claim with the court against the subsidiary for the payment of land rental and damage amounting to approximately Baht 1,249 million (consist of rental fee of approximately Baht 349 million and claim loss for breach the agreement of approximately Baht 900 million). These cases are pending. The ultimate outcome of these cannot presently be determined. 21.4 The Company and subsidiaries had contingent liabilities for letter of guarantee issues by banks in favour of a state enterprise totalling approximately Baht 60 million. 22. INCOME TAX 1998/In Thousand Baht Income Equity in (Loss) net loss of Dividend Taxable Income tax before tax subsidiaries and others income 30% Central Pattana Public Co., Ltd. 78,936 368,851 17,457 465,244 139,573 Central Realty service Co., Ltd. 33,052 - 5,958 39,010 11,703 Numsup Pattana Realty Services Co., Ltd. 2,212 - ( 2,212)* - - Central Pattana Chonburi Co., Ltd. 770 - - 770 231 Other subsidiaries (66,658) - - - - Total 48,312 151,507 * Loss carry forward from 1997 23. ACCOUNTS RECLASSIFICATION Certain accounts in 1997 financial statements are reclassified to conform with the 1998 presentation. - 24 - 24. THE COMPUTER REMEDIATION PLAN FOR THE YEAR 2000 (UNAUDITED) The Company has adjusted the computer system to solve the year 2000 problems beginning in February 1998. As at December 31, 1998, approximately 80% of the remediation project has been completed. The Company expects to complete the project in May 1999 with the total cost of Baht 7 million, which mainly is providing the new personal computer and equipment totalling to approximately Baht 6 million. The cost of the computer system examination and remediation is totalling to approximately Baht 1 million, which is recorded as expense in the period as incurred. The Companys computer remediation plan will be completed and can be implemented before the year 2000. But the Company still faces risks that other companies with whom the Company does business may be unsuccessful in their computer remediation plans within the time limit. As a result, there are uncertainties that might affect the Companys operations. The ultimate outcome of this matter cannot presently be determined.