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SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES BETWEEN

THAI GAAP AND IAS

The following is a general summary of certain signicant dierences between Thai GAAP and IAS as

applicable to THAI.

THAI's historical nancial statements are prepared and presented in accordance with Thai GAAP,which diers in certain signicant respects from IAS. Certain signicant dierences between Thai GAAPand IAS relevant to THAI's historical nancial statements are summarized below. Such delineation shouldnot be construed to be exhaustive. Additionally, no attempt has been made to identify all disclosure,presentation and classication dierences that would aect the manner in which transactions and eventsare presented in the nancial statements or notes thereto. Further, no attempt has been made to identifyfuture dierences between Thai GAAP and IAS as the result of prescribed changes in accountingstandards. Regulatory bodies that promulgate Thai GAAP and IAS have signicant projects ongoing thatcould aect future comparisons such as this one. Finally, no attempt has been made to identify all futuredierences between Thai GAAP and IAS that may aect THAI's nancial statements as a result oftransactions or events that may occur in the future.

Thai GAAP, endorsed by the Department of Commercial Registration and the Ministry of

Commerce, is comprised of one accounting framework, 28 accounting standards and four accountinginterpretations. These standards are supplemented by the SET's requirements and the Thai SEC'srequirements and announcements of The Institute of Certied Accountants and Auditors of Thailand. IfThai GAAP does not address a particular accounting issue, IAS and US GAAP may be used forguidance. Under SET requirements, listed companies are required to issue annual audited nancialstatements and quarterly unaudited reviewed interim nancial statements.

Management has not quantied the eects of the following dierences between Thai GAAP and IAS.Accordingly, there can be no assurance that net income and shareholders' equity reported in accordancewith Thai GAAP would not be negatively impacted if determined in accordance with IAS.

Overhaul costs

Thai GAAP does not address the specic accounting treatment for costs related to signicant regularoverhauls of aircraft. THAI has adopted a policy whereby it capitalizes such costs and amortizes themover the period until the next expected overhaul.

Eective 15 July 2000, IAS requires overhaul costs to be expensed as incurred unless an amountrepresenting overhaul costs was identied as a separate component of the initial asset and alreadydepreciated to reect the consumption of benets which are replaced or restored by the subsequentoverhaul. This treatment is also recommended by IATA guidelines.

Debt acquisition costs

Thai GAAP generally permits the capitalization and amortization of expenses incurred for theacquisition of debt as an asset, which is then amortized over the life of such debt. Such amortization is

generally provided using the straight-line method. In certain cases, such costs will be charged directly toresults of operations and THAI has adopted this treatment as its policy.

IAS requires the capitalization of debt acquisition costs, presented as a reduction of debt, andsubsequent accretion of such amounts over the life of the related debt using the interest method.

Concessions for aircraft acquisition

Thai GAAP does not address the specic accounting treatment for concessions related to theacquisition of aircraft. THAI has adopted a policy whereby normal practice is to record a concession assetand concession liability for the total amount of expected concessions available and reduce the cost of

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aircraft by the amount of the concessions when taken. Marketing subsidies for the sale of old aircraft aretreated dierently however, as an increase in sales proceeds.

IAS requires that all concessions be applied as a reduction of the purchase price of the asset acquired,or otherwise deferred and amortized over the life of the related asset. This treatment is also recommendedby IATA guidelines. The concession asset and concession liability would generally be netted forpresentation purposes.

Deferred Income Taxes

Thai GAAP has no requirement for establishing deferred income tax assets or liabilities. THAI haschosen to record deferred tax assets and liabilities on some temporary dierences but not on others. THAIhas also not recorded deferred tax assets on losses that can be and have been carried forward to reducefuture taxable income.

IAS requires deferred tax assets and liabilities to be established for temporary dierences between thetax and nancial reporting bases of assets and liabilities. Deferred tax assets are also established for tax

losses that may be carried forward and used to reduce future taxable income. IAS requires a valuationallowance to be established sucient to reduce any deferred tax assets to the extent that their recovery isprobable.

Vacation accrual

Under Thai GAAP, there is no requirement to establish a liability for earned but unused vacationtime. The costs of such benets are generally not expensed until taken. Under IAS, a liability should beaccrued for vacation benets that employees have earned but not yet taken.

Pensions

Under Thai GAAP, there is no requirement to recognize the current expense associated with adened benet retirement fund. THAI has adopted a policy whereby it provides for the deemed totalliability at and as of each period.

Under IAS, costs associated with a dened benet retirement fund are recognized annually based onservice cost, interest cost, return on plan assets (if any), amortization of unrecognized prior services (ifany), and gains or losses from changed assumptions. Such calculations are generally actuariallydetermined.

Postretirement benets

Under Thai GAAP, there is no requirement to recognize the current expense associated with

providing postretirement benets to former employees in the future.

Under IAS, the costs associated with such benets are considered deferred compensationarrangements whereby an employer agrees to provide future benets in exchange for employees' currentservices. Accordingly, employers are required to recognize the costs of such benets in the periods wherethe benets are earned and such costs are generally actuarially determined.

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INDEX TO IAS CONSOLIDATED FINANCIAL STATEMENTS

Page

Auditor's Report.............................................................................................................................................. I-2

Consolidated Balance Sheets as at September 30, 2000, 2001 and 2002 ................................................. I-3

Consolidated Statements of Income for the years ended September 30, 2000, 2001 and 2002............. I-5Consolidated Statements of Changes in Equity for the years ended September 30, 2000, 2001 and

2002.............................................................................................................................................................. I-6

Consolidated Statements of Cash Flows for the years ended September 30, 2000, 2001 and 2002...... I-7

Notes to the Financial Statements for the years ended September 2000, 2001 and 2002...................... I-9

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INDEPENDENT AUDITORS' REPORT TO THE BOARD OF

DIRECTORS OF THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

We have audited the accompanying consolidated balance sheets, in Baht, of Thai AirwaysInternational Public Company Limited (""the Company'' or ""the Group'') and its subsidiaries as ofSeptember 30, 2002, 2001, and 2000, and the related consolidated statements of income, cash ows and

changes in equity for each of the years then ended (together, ""the nancial statements''). The nancialstatements in Baht, as set out on pages I-3 to I-34 attached, were prepared in compliance withInternational Financial Reporting Standards. These nancial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these nancial statements based onour audits.

We conducted our audits in accordance with International Standards on Auditing as promulgated bythe International Federation of Accountants. Those standards require that we plan and perform the auditsto obtain reasonable assurance about whether the nancial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thenancial statements. An audit also includes assessing the accounting principles used and signicantestimates made by management, as well as evaluating the overall nancial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion the nancial statements give a true and fair view of the nancial position of ThaiAirways International Public Company Limited and its subsidiaries as of September 30, 2002, 2001, and2000, and of the results of the Group's operations and cash ows for each of the years then ended inaccordance with International Financial Reporting Standards.

KPMG Audit (Thailand) LimitedBangkok, Thailand

March 15, 2003

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THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of September 30, 2002, 2001 and 2000

Unit: Baht millions

CONSOLIDATED

Notes 2002 2001 2000

ASSETS

Current Assets

Cash and cash equivalents ................................................................ 17,402 6,340 11,498Short-term investments . .................................................................... 11 150 Accounts receivable net. ............................................................... 8 13,202 11,017 11,733Inventories and supplies net . ........................................................ 9 3,531 3,610 3,490Prepaid expenses and deposits .......................................................... 4,107 4,476 4,375Refundable taxes ................................................................................ 2,907 4,779Other current assets ........................................................................... 10 1,189 2,304 1,893

Total Current Assets ............................................................................. 39,581 30,654 37,768

Non-Current AssetsInvestments in associates and other ................................................. 11 948 1,453 2,030Property, plant and equipment net .............................................. 12 120,316 127,309 109,304Investments held for employee benet obligations ......................... 2(p) 3,347 3,351 3,116Other assets

Advance payment for aircraft ....................................................... 4,577Concession for acquisitions of aircraft and engines .................... 260 583 915Loan for investment in aircraft spare parts ................................. 13 28 28 37Deferred income taxes................................................................... 14 7,037 8,404 9,100

Total Non-Current Assets .................................................................... 131,936 141,128 129,079

Total Assets............................................................................................ 171,517 171,782 166,847

The accompanying notes are an integral part of these nancial statements.

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CONSOLIDATED BALANCE SHEETS

As of September 30, 2002, 2001 and 2000

Unit: Baht millions

CONSOLIDATED

Notes 2002 2001 2000

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable ............................................................................... 3,873 3,361 3,255Short-term loans ................................................................................ 15 12,856 10,412 Current portion of interest bearing borrowings. .............................. 16 20,946 20,699 19,194Unearned transportation revenue...................................................... 12,980 12,405 11,112Accrued expenses............................................................................... 11,459 13,925 13,957Accrued income tax ........................................................................... 1,800 42 57Other current liabilities ..................................................................... 17 6,597 6,545 5,901

Total Current Liabilities ...................................................................... 70,511 67,389 53,476

Non-Current LiabilitiesInterest bearing borrowings net.................................................... 16 79,455 94,964 101,095Deferred income................................................................................. 997 1,175 1,356Employee benet obligations ............................................................ 18 5,333 4,653 4,173Deferred tax liabilities . ...................................................................... 14 41 142 332

Total Non-Current Liabilities.............................................................. 85,826 100,934 106,956

Total Liabilities ..................................................................................... 156,337 168,323 160,432

Equity...................................................................................................... 19Issued capital...................................................................................... 14,000 14,000 14,000Share premium................................................................................... 4,750 4,750 4,750Retained earnings (decit)............................................................... (3,792) (15,725) (13,165)Unrealised gain on appreciation in value of available-for-sale

investments . .................................................................................... 11 97 332 775

Total Equity........................................................................................... 15,055 3,357 6,360

Minority Interest ................................................................................... 125 102 55

Total Liabilities and Equity................................................................. 171,517 171,782 166,847


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CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended September 30, 2002, 2001 and 2000

(In millions of Baht)

Notes 2002 2001 2000

Operating Revenues ............................................................. 3Passenger and excess baggage ............................................ 103,957 101,249 86,443Freight ................................................................................... 19,982 20,464 19,593Mail ....................................................................................... 728 656 611Other services ....................................................................... 6,110 6,755 6,359

Total operating revenues ..................................................... 130,777 129,124 113,006

Operating Expenses ............................................................. 3Flight operations................................................................... 27,042 29,598 23,051Maintenance and overhaul .................................................. 14,823 15,560 9,329Ground operations ................................................................ 19,771 18,569 16,123Passenger services ................................................................ 15,082 15,029 13,314

Marketing.............................................................................. 11,315 14,418 12,595Administration and general ................................................. 1,774 1,755 1,823Lease of aircraft and spare parts ........................................ 8,143 11,574 10,085Depreciation of aircraft........................................................ 8,998 8,542 7,676Depreciation of xed assets................................................. 1,687 1,701 1,777Other activities ..................................................................... 3,176 2,434 2,637

Total operating expenses .................................................... 111,811 119,180 98,410

Operating prot.................................................................... 18,966 9,944 14,596Finance costs net ............................................................. 5 (2,781) (12,187) (10,539)Other non-operating income/expense net ..................... 6 1,400 (610)Equity in earnings of associated companies ...................... 171 152 165

Prot (loss) before tax....................................................... 16,356 (691) 3,612

Income tax ............................................................................ 7 (4,393) (1,817) (2,111)Prot (loss) after tax ......................................................... 11,963 (2,508) 1,501Minority interest................................................................... (30) (52) (48)

Net prot (loss) for the year............................................. 11,933 (2,560) 1,453

Basic earnings (loss) per share (Baht)............................ 20 8.52 (1.83) 1.04


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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended September 30, 2002, 2001 and 2000

Unit: Baht millions

CONSOLIDATED

Unrealised gainon appreciation

Issued Share Retained in value of capital premium earnings investments Total

Balance as of September 30, 1999 ........................... 14,000 4,750 (14,618) 4,132Net prot for the year ........................................... 1,453 1,453Net unrealised gain on appreciation in value of

available-for-sale investments............................ 775 775

Balance as of September 30, 2000 ........................... 14,000 4,750 (13,165) 775 6,360Net loss for the year .............................................. (2,560) (2,560)Net unrealised gain/(loss) on appreciation in

value of available-for-sale investments............. (443) (443)

Balance as of September 30, 2001 ........................... 14,000 4,750 (15,725) 332 3,357Net prot for the year ........................................... 11,933 11,933Net unrealised gain/(loss) on appreciation in

value of available-for-sale investments............. (235) (235)

Balance as of September 30, 2002 ........................... 14,000 4,750 (3,792) 97 15,055


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CONSOLIDATED STATEMENTS OF CASH FLOWS


Unit: Baht millions

CONSOLIDATED

2002 2001 2000

Cash ows from operating activities

Net prot (loss) before tax .................................................................................. 16,356 (691) 3,612Adjustments to reconcile prot (loss) to cash provided by operating

activities:Depreciation........................................................................................................ 10,685 10,243 9,453Equity in earnings of associated companies.................................................... (171) (152) (165)Loss (gain) on sales of assets........................................................................... 438 273 (766)(Gain) loss on foreign currency exchange ...................................................... (2,041) 984 8,707Loss on obsolete inventories ............................................................................. 185 396 551Bad debt, doubtful accounts and impairment in value of assets ................... 198 149 443Interest expense.................................................................................................. 5,639 7,847 7,780

Operating prot before changes in operating assets and liabilities ................... 31,289 19,048 29,615(Increase) decrease in operating assets

Accounts receivable ........................................................................................... (2,355) 526 (1,484)Inventories and supplies .................................................................................... (106) (515) (280)Prepaid expenses and deposits.......................................................................... 322 (51) (1,227)Refundable taxes................................................................................................ 2,785 1,871 (2,838)Other current assets........................................................................................... 1,085 (483) 1,653Advance payment for aircraft ........................................................................... (4,577)Concession for acquisitions of aircraft and engines........................................ (21) 537 267Deferred income taxes....................................................................................... 1,366 697 1,169

Increase (decrease) in operating liabilitiesAccounts payable............................................................................................... 472 130 775

Unearned transportation revenue...................................................................... 575 1,293 1,312Accrued expenses and other current liabilities ............................................... (2,689) (1,293) 4,534Deferred income................................................................................................. (178) (181) (196)Employee benet obligations ............................................................................ 680 480 388

Cash generated from operations ........................................................................... 33,225 22,059 29,112Interest paid............................................................................................................ (6,126) (7,779) (6,966)Income tax paid ..................................................................................................... (1,814) (5,989)

Net cash provided by operating activities ................................................... 25,285 14,280 16,157


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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended September 30, 2002, 2001 and 2000

(In millions of Baht)

2002 2001 2000

Cash ows from investing activities

Decrease in short-term investments. .............................................................. 2,828Cash paid for acquisition of xed assets........................................................ (4,694) (11,151) (4,368)Proceeds from sales of assets.......................................................................... 299 1,018 1,123Decrease in investments. ................................................................................. 189 105 87Decrease (increase) in investments held for employee benet

obligations..................................................................................................... 4 (236) (858)Proceeds from loan for investment in aircraft spare parts ........................... 10 4

Net cash used in investing activities ......................................................... (4,202) (10,254) (1,184)

Cash ows from nancing activities

Proceeds from short-term loans...................................................................... 4,430 9,917

Proceeds from long-term loans....................................................................... 8,210 Proceeds from promissory notes. .................................................................... 10,526Repayments of short-term loans..................................................................... (1,700) Repayments of long-term loans...................................................................... (20,192) (17,895) (19,082)Repayments of promissory notes .................................................................... (1,050) (1,076) Dividends paid.................................................................................................. (7) (5)

Net cash used in nancing activities ......................................................... (10,309) (9,059) (8,556)

Net cash increase (decrease) in cash and cash equivalents ........................... 10,774 (5,033) 6,417Cash and cash equivalents at beginning of year............................................... 6,340 11,498 5,071Eects of exchange rate changes on cash and bank balances......................... 288 (125) 10

Cash and cash equivalents at end of year........................................................ 17,402 6,340 11,498

Supplementary disclosure of non-cash investing activities:Acquisitions of assets under nance leases ................................................... 10,740 20,113


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(In millions of Baht, unless otherwise stated)

1 General Information

Thai Airways International Public Company Limited (""the Company'') was established in 1960 as aState Enterprise under the supervision of the Ministry of Transportation and is principally engaged in theprovision of domestic, regional and intercontinental passenger and cargo services. On July 19, 1991, theCompany listed on the Stock Exchange of Thailand. At September 30, 2002, the Ministry of Finance andGovernment Savings Bank are the Company's major shareholders of 79.46% and 13.39%, respectively. Theremaining shares are publicly held by foreign and domestic investors, including employees of the Company.

The registered oce of the Company is 89 Vibhavadi Rangsit Road, Lad Yao, Jatujak, Bangkok10900, Thailand. The Company has to comply with the Kingdom of Thailand's rules and regulationsapplicable to State Enterprises and to comply with the Stock Exchange Commission oce's ruling as apublicly listed company.

The Company has invested in two subsidiaries, Thai-Amadeus Southeast Asia Company Limited andThai Information Solution Company Limited, in which the Company holds 55% and 100% of the sharecapital, respectively.

2 Statement of Signicant Accounting Policies

The Company is domiciled in Thailand. The consolidated nancial statements for the years endedSeptember 30, 2002, 2001 and 2000 comprise the nancial statements of the Company and its subsidiaries(""the Group'').

(a) Statement of Compliance

The Company maintains its ocial accounting records in Thai Baht and prepares its statutorynancial statements in the Thai language in conformity with accounting standards in Thailand. The

accompanying consolidated nancial statements reect certain adjustments not recorded on the Company'sbooks to present these statements in accordance with International Financial Reporting Standards(""IFRS'') issued by the International Accounting Standards Board (""IASB'') and interpretations issuedby the Standing Interpretations Committee (""SIC'') of the IASB. IFRS have been applied for the rsttime in these nancial statements. The Company decided to adopt IFRS in 2002 to prepare these nancialstatements for inclusion in its oering document. IFRS and SIC interpretations have been appliedretrospectively in accordance with SIC-8, which states that, in the period when IFRS are applied in fullfor the rst time as the primary accounting basis, the nancial statements are to be prepared and presentedas if they had always been prepared in accordance with the standards and interpretations eective for theperiod of rst time application. Any signicant adjustments resulting from the transition to IFRS havebeen adjusted to the opening balance of retained earnings of 2000.

The Company implemented the following revised or new International Accounting Standards in the

year ended September 30, 2000 in accordance with their eective dates:

IAS 1 (Revised 1997) ""Presentation of Financial Statements''

IAS 14 (Revised 1997) ""Segment Reporting''

IAS 16 (Revised 1998) ""Property, Plant and Equipment''

IAS 17 (Revised 1997) ""Leases''

IAS 22 (Revised 1998) ""Business Combinations''

IAS 32 (Revised 1998) ""Financial Instruments: Disclosure and Presentation''

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



IAS 33 ""Earnings Per Share''

IAS 35 ""Discontinuing Operations''

IAS 36 ""Impairment of Assets''

IAS 37 ""Provisions, Contingent Liabilities and Contingent Assets''

IAS 38 ""Intangible Assets''

The Company has also implemented the following revised or new International Accounting Standardsin the year ended September 30, 2000, in advance of their eective dates:

IAS 12 (Revised 1998 and 2000) ""Income Taxes''

IAS 19 (Revised 1998 and 2000) ""Employee Benets''

IAS 28 (Revised 2000) ""Accounting for Investments in Associates''

IAS 31 (Revised 2000) ""Financial Reporting of Interests in Joint Ventures''

IAS 39 ""Financial Instruments: Recognition and Measurement''

The Company has implemented the following revised International Accounting Standards in the yearended September 30, 2001.

IAS 10 (Revised 1999) ""Events After the Balance Sheet Date''

(b) Basis of Preparation

(i) General

The nancial statements are presented in Thai Baht, rounded to the nearest million. They areprepared on the historical cost basis except for investments and other assets and liabilities specicallyreferred to in this Note.

(ii) Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists when the Company hasthe power, directly or indirectly, to govern the nancial and operating policies of an enterprise so as toobtain benets from its activities. The nancial statements of subsidiaries are included in the consolidatednancial statements from the date that control commences until the date that control ceases. Minorityinterests in subsidiaries are calculated on the basis of the subsidiaries' accounts and stated in theconsolidated balance sheet as a separate item from shareholders' equity and liabilities.

(iii) Associates

Associates are those enterprises where the Group has signicant inuence, but not control, over thenancial and operating policies; they are generally, but not necessarily, enterprises in which the Group hasbetween 20% and 50% of the voting rights. Investments in associates are accounted for by the equitymethod of accounting. Under this method, the consolidated nancial statements include the Group's shareof the total recognised gains and losses of associates. The Group's interest in associates is carried in thebalance sheet at an amount that reects its share of the net assets of associates, which would include anyapplicable goodwill (net of accumulated amortisation) on acquisition. This method is applied from thedate that signicant inuence commences until the date that it ceases. If the Group's share of losses wereto exceed the carrying amount of an associate, the carrying amount would be reduced to nil and

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recognition of further losses discontinued except to the extent that the Group had incurred or guaranteedobligations in respect of the associate. A list of the principal associates is set out in Note 11.

(iv) Transactions eliminated on preparation

Balances and transactions with subsidiaries, and any unrealised gains arising from transactions withsubsidiaries, are eliminated in preparing the consolidated nancial statements. Unrealised gains arisingfrom transactions with associated companies are eliminated to the extent of the Group's interest.Unrealised gains arising from transactions with associates are eliminated against the investment in theassociates. Unrealised losses would be eliminated in the same way as unrealised gains, but only to theextent that there was no evidence of impairment.

(c) Foreign Currencies

The Group's measurement and reporting currency is the Thai Baht.

Transactions in foreign currencies during the period are translated to Baht at the applicable foreignexchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet dates are translated to Baht at the foreign exchange rate ruling at that dateannounced by Bank of Thailand. Foreign exchange dierences arising on translation of monetary assets andliabilities are recognised in the income statement.

(d) Derivative Financial Instruments

From time to time, the Group uses derivative nancial instruments to hedge its exposure to foreignexchange and fuel price risk arising primarily from operational activities. The Group does not hold or issuederivative nancial instruments for trading purposes.

Derivative nancial instruments are recognised initially at cost. Subsequent to initial recognitionderivative nancial instruments are stated at fair value. The gain or loss is recognised in the incomestatement.

(e) Property, Plant and Equipment

(i) Owned assets

Items of property, plant and equipment are stated at historical cost less depreciation and provision forimpairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it iswritten down immediately to its recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount andare included in operating prot.

(ii) Leased assets Financial and Operating

The Company has entered into nancial and operating lease contracts. Leases in terms of which theGroup assumes substantially all the risks and rewards of ownership are classied as nance leases. Plantand equipment acquired by way of nance lease is stated at an amount equal to the lower of its fair valueand the present value of the minimum lease payments at inception of the lease, and amortised on astraight line basis over the life of the lease or in the case of certain aircraft, over their estimated servicelives.

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Gains on sale and leaseback transactions which result in nance leases are deferred and amortisedover the terms of the related leases. Gains on sale and leaseback transactions which result in operatingleases are recognised immediately if the transactions are established at fair value. Any excess of the salesprice over fair value is deferred and amortised over the period over which the assets are expected to beused.

Payments under operating leases are recognised in the income statement on a straight line basis overthe term of the lease.

(iii) Maintenance and overhaul costs

Cost of routine aircraft and engine maintenance as well as repair costs are expensed on an ongoingbasis as incurred. Extensive modications and improvements to xed assets and aircraft overhaul costs (D-check) are capitalised and depreciated by the straight line basis over the period to the next D-check.

(iv) Depreciation

Depreciation is charged to the income statement on a straight line basis over the estimated usefullives of items of property, plant and equipment. Land is not depreciated. The estimated useful lives are asfollows:

Buildings and leasehold improvements............................................................................. 10, 20 yearsAircraft ................................................................................................................................ 20 yearsSpare engines and spare parts ........................................................................................... 5-20 yearsWorkshop and aircraft servicing equipment..................................................................... 20 yearsEquipment ........................................................................................................................... 5 yearsFurniture and xtures......................................................................................................... 5 yearsComputer equipment.......................................................................................................... 5 yearsVehicles ............................................................................................................................... 5 years

(f) Investments

Investments held by the Group are classied as being available-for-sale and are stated at fair value,with any unrealised gain or loss of value adjusted to equity except that any other than temporaryimpairment is reported in the income statement. The fair value of investments available-for-sale isdetermined by reference to market prices at the balance sheet date. Investments in equity instruments thatdo not have a quoted market price in an active market, and for which there are no other appropriate orpractical methods of reasonably estimating fair value, are stated at cost.

(g) Trade and Other Receivables

Trade and other receivables are stated at original invoice amount or cost less an estimate for doubtfulreceivables. An estimated allowance for doubtful accounts receivable is made based on a review of alloutstanding amounts at the year-end, in accordance with the payment history and the current nancialstatus of accounts receivable.

(h) Inventories

Inventories, which consist primarily of aircraft fuel, expendable spare parts and supplies, are stated atthe lower of cost and net realisable value. Cost represents the average unit cost.

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(i) Income Taxes

Income tax on the prot or loss for the year comprises current and deferred taxes. Income tax isrecognised in the income statement except to the extent that it relates to items recognised directly toequity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted orsubstantially enacted at the balance sheet date, and any adjustment to tax payable related to previousyears.

Deferred tax is provided using the balance sheet liability method, providing for temporary dierencesbetween the carrying amounts of assets and liabilities for nancial reporting and for taxation purposes. Theamount of deferred tax provided is based on the expected manner of realisation or settlement of thecarrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance

sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable prots willbe available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it isno longer probable that the related tax benet will be realised.

(j) Cash and Cash Equivalents

Cash and cash equivalents consist of cash balances and deposits at banks with a maturity of no morethan three months.

(k) Impairment

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determinewhether there is any indication of impairment. If any such indication exists, the asset's recoverable amountis estimated. An impairment loss is recognised whenever the carrying value of an asset or its cash-generating unit exceeds its recoverable value. Impairment losses are charged to the income statement.

(l) Interest-bearing Borrowings

Interest-bearing borrowings are recognised initially at cost less attributable transaction costs.Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost.

(m) Frequent Flyer Liability

The Group maintains a frequent yer programme, Royal Orchid Plus (ROP), which oers travelrewards to members based on accumulated mileage. A portion of ticket sales eligible to frequent yermileage collection is subject to the deferred revenue approach. This revenue portion is recorded as part ofunearned transportation revenue and is reversed to revenue and/or expenses after being netted for rewardticket issuing expenses.

In calculating the revenue to be deferred, the Company estimates the number of miles that will notbe redeemed for travel, either because they will expire or the member has not accumulated sucient milesto make it likely that they will be redeemed for a free ticket. Based on the number of accounts and thenumber of miles in the accounts, the Company estimates how many miles will never be used and does notrecord a liability for those miles. The Company also estimates how many miles will be used per award.

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(n) Provisions

A provision is recognised in the balance sheet when the Group has a legal or constructive obligationas result of a past event, and it is probable that an outow of economic benets will be required to settlethe obligation. If the eect is material, provisions are determined by discounting the expected future cashows at a pre-tax rate that reects current market assessments of the time value of money and, whereappropriate, the risks specic to the liability.

(o) Dividends

Dividends are recognised as a liability in the period in which they are declared.

(p) Employee Benets

(i) Dened contribution plans

The Group operates a provident fund, a type of dened contribution plan. The Employee of ThaiAirways International Public Company Limited Registered Provident Fund (""the Provident Fund'') wasestablished in June 26, 1992, and all employees joining the Group on or after June 26, 1992 are requiredto be members of the Provident Fund. Employees joining the Group prior to June 26, 1992 may elect tobe members of the Provident Fund. Associated companies also operate provident funds.

The Company contributes to the Provident Fund monthly, at a rate of 9% of the employee's salariesfor members having not more than 20 years service, and 10% for members having more than 20 yearsservice. Contributions to provident funds are recognised as expenses in the income statement as incurred.In 2002, 2001 and 2000, the Company contributed Baht 625.53 million, Baht 599.37 million andBaht 562.44 million, respectively, to the Provident Fund.

(ii) Dened benet retirement plan

The Pension Fund of the Company was established on June 1, 1981. Only employees who joined theCompany before June 26, 1992 are eligible to be members of the Pension Fund. The number of membersin 2002 was 4,862 (2001: 5,146; 2000: 5,262). As at September 30, 2002, 2001 and 2000, the Companymaintained cash at bank for the fund in the amounts of Baht 3,347 million, Baht 3,351 million andBaht 3,116 million, respectively. The amounts are presented on the balance sheets as investments held foremployee benet obligations.

The Company's net obligation in respect of the dened benet pension plan is calculated byestimating the amount of future benet that employees have earned in return for their service in thecurrent and prior periods. The benet is discounted to determine the present value and the fair value ofany plan assets is deducted. The discount rate is determined by reference to market yields on high quality

bonds. Where there is no deep corporate bond market then the yields on Government bonds are used. Thebonds so chosen have durations consistent with the duration of the liabilities. The calculation is performedby a qualied actuary using the projected unit credit method.

When the benets of a plan change, the portion of the increased benet relating to past service byemployees is recognised as an expense in the income statement on a straight line basis over the averageperiod until the benets become vested. To the extent that the benets vest immediately, the expense isrecognised immediately in the income statement.

In calculating the Company's obligation in respect of a plan, to the extent that any unrecognisedactuarial gain or loss exceeds ten percent of the greater of the present value of the dened benet

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obligation and the fair value of plan assets, it is recognised in the income statement over the expectedaverage remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain orloss is not recognised.

Where the calculation results in a benet to the Company, the recognised asset is limited to the nettotal of any unrecognised actuarial losses and past service costs and the present value of any future refundsfrom the plan or reductions in future contributions to the plan.

(iii) Long term service benets

Under labour laws applicable to State Enterprises in Thailand, and the Company's employmentpolicy, all employees with more than 120 days of service are entitled to severance pay on termination ofservice, including death, forced termination or retrenchment, or in the event of retirement at age 60. TheGroup accounts for this severance liability on an actuarial basis using the projected unit credit method,

similar to the dened benet retirement plan. The termination benets are unfunded.

(q) Revenue

Passenger and cargo revenues are recognised when the transportation is provided. Ticket sales fortransportation not yet provided are included in current liabilities as unearned transportation revenue.Revenues from airline-related business are recognised when services are rendered.

(r) Net Financing Costs

Net nancing costs comprise interest payable on borrowings, interest receivable on funds invested,dividend income and foreign exchange gains and losses.

Interest income is recognised in the statement of income as it accrues, taking into account theeective yield on the underlying asset. Dividend income is recognised in the statement of income on thedate that the dividend is declared.

Borrowing costs used to nance the construction of property, plant and equipment are capitalised aspart of the cost of assets under construction. Once the construction is completed, the interest on loans isrecorded as operating expenses.

All other interest and other costs incurred in connection with borrowings are expensed as incurred.The interest expense component of nance lease payments is recognised in the statement of income usingthe eective interest rate method.

(s) Earnings (Loss) per Share

The calculation of basic earnings (loss) per share is determined by dividing the Group's net prot(loss) attributable to ordinary shareholders of the Company by the weighted average number of shares inissue during the year.

(t) Segment Reporting

Segment information is presented in respect of the Group's business and geographical segments. Theprimary format, business segments, is based on the Group's management and internal reporting structure.

Business segments; this comprises the three major businesses provided by the Group including airtransportation activities, support business units and other activities.

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Geographical segments; as the operation of the Company is derived from provision of transportationservices, the geographical segment information provides the analysis of revenue by thetransportation routing of the Company.

(u) Use of Estimates

The preparation of the consolidated nancial statements of the Group in accordance with IFRSrequires management to make estimates and assumptions that aect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the nancial statements, and thereported amounts of revenues and expenses during the reporting period. Actual results could dier fromthose estimates.

3 Segment Information

Revenues Expenses Prot (Loss)Business segment 2002 2001 2000 2002 2001 2000 2002 2001 2000

Air transportation

activities ...................... 124,668 122,369 106,646 (107,861) (113,730) (94,294) 16,807 8,639 12,352

Support business unit:

Technical services...... 953 1,152 1,048 1,029 (1,899) (172) 1,982 (747) 876

Customer services...... 919 1,005 896 (1,359) (967) (781) (440) 38 115

Ground support

equipment services 1,003 1,139 1,074 (982) (892) (798) 21 247 276

Cargo and mail

commercial ............. 1,099 1,131 1,137 (922) (913) (875) 177 218 262

Catering ...................... 1,644 1,746 1,677 (520) (637) (664) 1,124 1,109 1,013

Other activities............... 491 582 528 (1,196) (142) (826) (705) 440 (298)

Operating prot.............. 130,777 129,124 113,006 (111,811) (119,180) (98,410) 18,966 9,944 14,596

Finance costs net....... (2,781) (12,187) (10,539)Other non-operating

income/expense

net ............................... 1,400 (610)

Income from associates 171 152 165

Income tax expenses ..... (4,393) (1,817) (2,111)

Minority interest ............ (30) (52) (48)

Net prot (loss)........ 11,933 (2,560) 1,453

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Geographical segments

2002 2001 2000

Domestic revenuesAir transportation activities............................................................. 12,186 12,209 11,487Support business units..................................................................... 5,618 6,173 5,832Other activities . ................................................................................ 491 582 527

Total domestic revenues...................................................................... 18,295 18,964 17,846

Foreign air transportation revenuesRegional Asia................................................................................... 62,014 61,999 54,570Europe............................................................................................... 35,010 31,772 26,669North Pacic.................................................................................... 4,965 6,521 5,728Australia & New Zealand............................................................... 9,465 8,291 6,886

Total foreign air transportation revenues................................... 111,454 108,583 93,853Charter revenues and others............................................................... 1,028 1,577 1,307

Total revenues .............................................................................. 130,777 129,124 113,006

4 Sta Costs

Sta costs charged in arriving at operating prot:

2002 2001 2000

Wages and salaries..................................................................................... 16,348 15,906 14,642Per diem and allowances........................................................................... 5,721 5,465 4,854Pension and severance plan expense........................................................ 1,244 667 534Contributions to dened contribution plans ............................................ 676 651 604Other employee benet expense............................................................... 1,120 1,121 976

Total sta costs ...................................................................................... 25,109 23,810 21,610

Numbers of employees as at September 30 2002, 2001 and 2000 are as follows:

2002 2001 2000

Sta in Thailand ........................................................................................ 23,742 24,104 23,797Sta abroad (expatriate & local)............................................................. 1,774 1,859 1,835

Total number of sta............................................................................. 25,516 25,963 25,632

5 Finance Costs Net

The following items have been included in arriving at nance costs:

2002 2001 2000

Interest expense.......................................................................................... 5,639 7,847 7,780Interest income........................................................................................... (320) (446) (380)Dividend income ........................................................................................ (15) Net foreign exchange (gain)/loss ............................................................ (2,523) 4,786 3,139

Finance costs net............................................................................... 2,781 12,187 10,539

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6 Other Non-Operating Income

On Saturday March 3, 2001, Thai Airways International Boeing 737-400, ight TG 114, parked at theDomestic Terminal, Bangkok International Airport scheduled to depart from Bangkok to Chiang Mai,exploded and caught re. The incident resulted in the total loss of the aircraft. The aircraft had a bookvalue of Baht 415 million and was under an obligation of nance lease amounting to Baht 600 million. Inyear 2001, the Company received compensation from the insurance company in the amount ofBaht 2,163 million. After deducting the book value of the aircraft amounting to Baht 415 million and thetermination of lease contract of Baht 112 million, the Company recognised a gain from aircraft insuranceof Baht 1,636 million.

7 Income Tax Expenses

Income tax recognised in the income statement:

2002 2001 2000

Current tax expense

Current year ................................................................................................... 3,095 1,121 972Under/(over) provided in prior years.......................................................... 79

3,174 1,121 972Deferred tax expense

Origination and reversal of timing dierences............................................ 1,367 696 1,139Benet of tax losses recognised .................................................................... (148)

Total income tax expense in income statement.......................................... 4,393 1,817 2,111

Reconciliation of eective tax rate

Prot before tax ............................................................................................. 16,356 (691) 3,612

Income tax using the domestic corporation tax rate.................................. 4,892 (207) 1,084Non-deductible expenses............................................................................... 21 2,089 1,096Tax exempt revenue....................................................................................... (451) (65) (69)Eect of tax losses utilised ........................................................................... (148) Under/(over) provided in prior years.......................................................... 79

4,393 1,817 2,111

Deferred tax credit recognised directly in equity

Relating to unrealised gain on revaluation on investment ......................... 101 190 (332)

Total other activities revenue.................................................................... 101 190 (332)

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8 Accounts Receivable Net

2002 2001 2000

Trade receivables by due payment:less than 6 months ................................................................................. 13,086 10,981 11,992over 6 months to 1 year ........................................................................ 188 186 117over 1 2 years....................................................................................... 86 466 34over 2 years............................................................................................. 1,187 565 615

Subtotal....................................................................................................... 14,547 12,198 12,758Less: Allowance for doubtful accounts .................................................... (1,345) (1,181) (1,025)

Accounts receivable net.................................................................... 13,202 11,017 11,733

9 Inventories and Supplies Net

2002 2001 2000

Aircraft spare parts .................................................................................... 2,484 2,635 2,568Slow moving aircraft spare parts and spare parts for sale..................... 2,062 1,961 1,535Vehicle spare parts and ground support equipment ............................... 163 167 157Fuel and oil for aircraft............................................................................. 112 55 49Cabin supplies and other consumable materials ..................................... 301 316 317Stationery and oce supplies ................................................................... 75 84 84Inventory in transit .................................................................................... 246 113 98Obsolete and damaged inventories for disposal ...................................... 75 81 89

Subtotal....................................................................................................... 5,518 5,412 4,897

Less: Allowance for obsolescence............................................................. (1,987) (1,802) (1,407)Inventories and supplies net ............................................................. 3,531 3,610 3,490

10 Other Current Assets

2002 2001 2000

Accrued income ............................................................................................... 496 410 204Value added tax ............................................................................................... 346 1,631 467Sta loans......................................................................................................... 25 54 38Other receivables net .................................................................................. 322 209 1,184

Total other current assets............................................................................ 1,189 2,304 1,893

11 Investments

(i) Short-term investments

Short-term investments of Baht 150 million at September 30, 2002 consists of available-for-salesecurity of 508,937 shares in France Telecom listed on the Bourse de Paris and the New York StockExchange. The investment has a cost basis of Baht 12 million, resulting in unrealised gain on change inmarket valuation of Baht 138 million. The unrealised gain on change in market valuation is presented inequity, net of deferred tax liability of Baht 41 million.

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(ii) Non-current investments

Available-for-sale investments consist of the following:

Investments atPercentage of shares cost/fair value

2002 2001 2000 2002 2001 2000

Fuel Pipeline Transportation Ltd. .............................. 8.4 8.4 8.4 133 133 133Aeronautical Radio of Thailand Ltd. ......................... 4.0 4.5 5.5 27 30 36SITA Investment Certicate ....................................... 38 44 46TRADESIAM Co., Ltd. ............................................. 3.5 3.5 3.5 2 2 2EQUANT N.V. ........................................................... 486 1,118Other .............................................................................. 7 7 7

Subtotal...................................................................... 207 702 1,342

Less: Allowance for impairment of investments........ (133) (133) (133)Total ........................................................................... 74 569 1,209

At September 30, 2001 and 2000, EQUANT N.V. had a market price at the New York StockExchange of USD 9.75 and USD 23.57 per share. This resulted in unrealised gains on change in marketvaluation at September 30, 2001 and 2000 of Baht 474 million and Baht 1,107 million, respectively. Theunrealised gains on change in market valuation are presented in equity, net of deferred tax liability ofBaht 142 million and Baht 332 million, respectively.

(iii) Investments in associated companies

Investments in associated companies 2002 2001 2000

At the beginning of the year................................................................................. 884 821 749Share of results after tax....................................................................................... 171 152 165Dividends received ................................................................................................. (181) (89) (93)

Total .................................................................................................................... 874 884 821

Associates of the Group are:

Percentage of shares Value of investments

Type of business 2002 2001 2000 2002 2001 2000

Royal Orchid Hotel (Thailand) Pcl. ................. Hotel 24.0 24.0 24.0 291 283 278

Donmuang International Airport Hotel Co.,Ltd. ................................................................... Hotel 40.0 40.0 40.0 213 256 218

Bangkok Aviation Fuel Services Pcl. ................ Jet fuel supplier 22.6 30.7 30.7 350 327 306

Phuket Air Catering Co., Ltd. ............................ Air catering 30.0 30.0 30.0 20 18 19

Total .................................................................. 874 884 821

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12 Property, Plant and Equipment Net

RotatableOwned Leased engines & Land & Leasehold Property Other aircraft Overhaul aircraft parts buildings buildings improvements equipment Total

Cost:

At September 30, 1999.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 86,222 6,111 45,136 24,605 3,377 3,472 2,410 16,247 187,580

Additions.. .... .... .... ... .... .... .... ... .... .... .... .... ... .... .... .... . 4,244 1 ,253 25,656 3,457 21 81 213 34,925

Adjustment/transfer .. ... .... .... .... ... .... .... .... .... ... .... .. 2,572 336 (18,766) (511) 452 (36) 416 (15,537)

Disposals . ..... .... ... .... .... .... ... .... .... .... .... ... .... .... .... ... .. (1,360) (554) (744) (29) (353) (3,040)

At September 30, 2000.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 91,678 7,146 52,026 26,807 3,377 3,945 2,426 16,523 203,928

Additions................................................................ 52 756 12,971 2,733 67 1,376 17,955

Adjustment/transfer ............................................. 3,727 466 7,852 (1,320) 21 29 90 10,865

Disposals. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . (1,347) (238) (920) (1,006) (46) (382) (3,939)

At September 30, 2001.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 94,110 8,130 71,929 27,214 3,398 3,945 2,476 17,607 228,809

Additions................................................................ 348 1,282 14 1,877 19 73 887 4,500Adjustment/transfer ............................................. 5,382 (5,600) (87) (1) 1 33 139 (133)

Disposals . ..... .... ... .... .... .... ... .... .... .... .... ... .... .... .... ... .. (408) (1,321) (14) (294) (2,037)

At September 30, 2002.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 99,840 9,004 66,343 27,683 3,397 3,965 2,568 18,339 231,139

Accumulated depreciation:

At September 30, 1999.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 34,996 4,541 17,456 14,361 1,118 2,136 1,859 11,440 87,907

Depreciation for the year . .................................... 2,996 674 1,996 2,010 120 285 183 1,189 9,453

Adjustment/transfer ............................................. 2,089 (2,054) (164) 23 (70) 122 (54)

Disposals . ..... .... ... .... .... .... ... .... .... .... .... ... .... .... .... ... .. (1,225) (554) (522) (29) (352) (2,682)

At September 30, 2000.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 38,856 4,661 17,398 15,685 1,238 2,444 1,943 12,399 94,624

Depreciation for the year . .................................... 3,262 822 2,529 1,929 118 285 173 1,125 10,243

Adjustment/transfer ............................................. 2,065 (70) (1,961) (774) 1 3 6 (730)

Disposals. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . (1,107) (219) (522) (362) (46) (381) (2,637)

At September 30, 2001.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 43,076 5,194 17,444 16,478 1,357 2,729 2,073 13,149 101,500

Depreciation for the year . .................................... 3,324 950 2,915 1,809 90 287 175 1,135 10,685Adjustment/transfer ............................................. 3,514 (3,514) (62) (62)

Disposals ................................................................ (408) (585) (14) (293) (1,300)

At September 30, 2002.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 49,914 5,736 16,845 17,640 1,447 3,016 2,234 13,991 110,823

Net book value:

At September 30, 2000.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 52,822 2,485 34,628 11,122 2,139 1,501 483 4,124 109,304

At September 30, 2001.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 51,034 2,936 54,485 10,736 2,041 1,216 403 4,458 127,309

At September 30, 2002.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 49,926 3,268 49,498 10,043 1,950 949 334 4,348 120,316

Construction in progress, included in other equipment, as at September 30, 2002 amounted toBaht 1,275 million (2001: Baht 1,129 million; 2000: Baht 539 million).

As at September 30, 2002, xed assets that are fully depreciated but still in use amounted toBaht 24,001 million at cost.

13 Loan for Investment in Aircraft Spare Parts

The Company participates in the MD-11 spare engine pool operated by SR Technics (""SRT''). Itallows the Company to rent MD-11 spare engines when required. In addition to making the rentalpayments for spare engines rented, the Company is required to maintain a cash deposit equivalent of 5% oftotal pool's net book value of engines. The cash deposit with SRT amounted to Baht 28 million, Baht 28million and Baht 37 million at September 30, 2002, 2001 and 2000, respectively. The Company receivesinterest on the deposit at a rate of 6.5% per annum on a quarterly basis.

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14 Deferred Income Tax

Deferred tax assets are attributable to the following items:

2002 2001 2000

Allowance for doubtful accounts.................................................................... 485 425 381Allowance for obsolete inventories................................................................. 596 541 422Allowance for impairment of investment ...................................................... 40 40 40Unrealised gain on revaluation of available-for-sale securities.................... (41) (142) (332)Deferred loss in foreign currencies................................................................. 4,012 5,202 6,434Contribution to sta pension fund and employee benet ............................ 1,420 1,257 1,143Net operating loss carried forward................................................................. 148 Others................................................................................................................ 484 791 680

Total deferred tax ............................................................................................ 6,996 8,262 8,768

Deferred tax assets........................................................................................... 7,037 8,404 9,100

Deferred tax liabilities..................................................................................... (41) (142) (332)

Movement in temporary dierence during the year:

2002 2001 2000

At beginning of year.................................................................................... 8,262 8,768 10,239Recognised in statement of income ........................................................... (1,367) (696) (1,139)Recognised in equity.................................................................................... 101 190 (332)

At end of year.............................................................................................. 6,996 8,262 8,768

15 Short-term Loans

Interest rate Total

2002 2001 2002 2001

Ministry of Finance .................................................... 1.89-2.02% 3.58-3.62% 12,176 8,015THAI Employees' Saving & Credit Coop Ltd. ....... 5% 1,700Orcas Leasing B.V...................................................... LIBOR1% LIBOR1% 680 697

Total short-term loans ............................................ 12,856 10,412

The short-term loans from the Ministry of Finance (""MOF'') were made in 2001 to provide a

temporary nancing for the purchase of Boeing 747-400 Nos. 15 and 16 in the amount of USD180 million. In 2002, the Company received additional loans in the amount of USD 100 million. The loansfrom MOF are due in November 2002.

The short-term loans from THAI Employees' Saving and Credit Coop Limited were made in 2001 byissuing the Company's promissory note, bearing interest at 5.00%, in the amount of Baht 1,700 million.The promissory note was fully repaid in 2002.

Orcas Leasing provided short-term nancing for the purchase of Boeing 747-400 Nos. 15 and 16 inthe amount of USD 15.65 million in 2001. The loan bears interest at LIBOR1%, and is due inDecember 2002.

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16 Borrowings

2002 2001 2000

Current

Current portion of long-term loans ........................................................ 10,926 9,794 11,969Obligation under nance lease agreements ........................................... 8,970 9,855 6,149Current portion of promissory notes ...................................................... 1,050 1,050 1,076

Total current borrowings..................................................................... 20,946 20,699 19,194

Non-current

Long-term loans....................................................................................... 36,825 40,907 48,354Obligation under nance lease agreements ........................................... 35,280 45,657 43,291Promissory notes ...................................................................................... 7,350 8,400 9,450

Total non-current borrowings.............................................................. 79,455 94,964 101,095

The terms and debt repayment schedule of the Group's bank loans and promissory notes during theperiod 2000-2002 are as follows:

Description of borrowings 2002 2001 2000

Bank loans due:Within one year.................................................................................. 10,926 9,794 11,969In the second year ............................................................................. 5,718 11,380 9,357In the third to fth year, inclusive................................................... 26,145 21,696 25,245After the fth year............................................................................. 4,962 7,831 13,752

47,751 50,701 60,323

Promissory notes/Notes payable:Within one year.................................................................................. 1,050 1,050 1,076In the second year ............................................................................. 1,050 1,050 1,050In the third to fth year, inclusive................................................... 3,150 3,150 3,150After the fth year............................................................................. 3,150 4,200 5,250

8,400 9,450 10,526

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Description of borrowings 2002 2001 2000

Unsecured bank loans:Foreign borrowing ......................... USD 504 million from lenders

with interest rate 2.06% to6.02% per annum for year2002 (2001: 3.68% to 6.91%,2000: 6.02% to 6.87%) 5,178 8,609 11,149

Domestic borrowing...................... THB 8,273 million fromlenders with interest rate 8.8%per annum for year 2002,2001 and 2000. USD 1,293million with interest rate

6.59% to 8.09% per annum foryear 2002 (2001: 6.27% to8.09%, 2000: 6.59% to 8.09%).JPY 10,000 million withinterest rate 6% per annum foryear 2000 42,573 42,092 49,174

47,751 50,701 60,323

Promissory notes/Notes payable:Domestic borrowing...................... THB 10,526 million from

lenders with interest rate 4.9%to 5.0% for year 2002(2001: 5.5% to 6.0% per

annum, 2000: 6.15% to 6.50%per annum) 8,400 9,450 10,526

56,151 60,151 70,849

Debt repayment schedule by currency as at September 30, 2002 is as follows:

1 year or More thanBorrowings in Total less 1 2 years 2 5 years 5 years

US$. ............................................................. 38,166 10,626 5,418 20,383 1,739JPY .............................................................. 8,235 5,012 3,223THB ............................................................. 9,750 1,350 1,350 3,900 3,150

56,151 11,976 6,768 29,295 8,112

Obligations under nance leases:

The Company has commitments under nance lease agreements in US dollars and Japanese yen inrespect of aircraft and related equipment.

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2002 2001 2000

Principal Total Principal Total Principal Totalobligation Interest payment obligation Interest payment obligation Interest payment

Balance due:

1 year or less ................... 8,970 1,365 10,335 9,855 2,551 12,406 6,149 2,508 8,657

1 2 years ........................ 7,721 649 8,370 9,466 1,498 10,964 8,878 2,312 11,190

2 5 years ........................ 13,238 2,011 15,249 15,847 3,236 19,083 17,519 3,618 21,137

More than 5 years........... 14,321 832 15,153 20,344 2,008 22,352 16,894 2,497 19,391

44,250 4,857 49,107 55,512 9,293 64,805 49,440 10,935 60,375

17 Other Current Liabilities

2002 2001 2000

Airport fees............................................................................................................. 2,339 1,335 1,084Deferred income..................................................................................................... 357 114 512Withholding income tax payable.......................................................................... 182 179 100Fringe benets-eld oce sta ............................................................................ 411 408 415Other accounts payable ......................................................................................... 443 979 1,299Accrued dividend................................................................................................... 27 27 27Other tax liabilities ................................................................................................ 2,838 3,503 2,464

Total other current liabilities ............................................................................ 6,597 6,545 5,901

18 Provisions for Employee Benets

The amount recognised in the consolidated balance sheet is determined as follows:

2002 2001 2000

Present value of funded obligations...................................................................... 6,358 6,193 5,245Unrecognised past service cost ............................................................................. (105) (541) Unrecognised actuarial gains (losses).................................................................. (920) (999) (1,072)

5,333 4,653 4,173

The amounts recognised in the consolidated income statement are as follows:

2002 2001 2000

Current service cost............................................................................................... 371 327 246Interest cost............................................................................................................ 359 304 288

Amortisation of actuarial losses recognised during the year.............................. 26 36 Amortisation of past service cost.......................................................................... 436 Losses on curtailment............................................................................................ 52

Total, included in sta costs (Note 4)................................................................ 1,244 667 534

The principal actuarial assumptions at the balance sheet date are as follows:

2002 2001 2000

Discount rate .......................................................................................................... 6% 6% 8%Future salary increases .......................................................................................... 7.5% 7.5% 7.5%

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19 Capital and Reserves

Share capital

2002 2001 2000

Authorised 1,700 million ordinary shares at par value ofBaht 10 each .......................................................................................... 17,000 17,000 16,000

Issued and paid up 1,400 million ordinary shares, fully paid up .......... 14,000 14,000 14,000

On December 12, 2000, the Company registered the decrease of its authorized share capital fromBaht 16,000 million to Baht 14,000 million (1,400 million ordinary shares at 10 Baht par value) byreducing unissued share capital of 200 million ordinary shares at Baht 10 par value.

On December 13, 2000, the Company registered the increase of its authorized share capital fromBaht 14,000 million to Baht 17,000 million (1,700 million ordinary shares at 10 Baht par value). A special

resolution was passed by the Extraordinary General Meeting of shareholders held on August 30, 2002authorizing the allocation of 300 million ordinary shares as follows:

1) 285 million shares may be oered and sold to the public, at one time or from time to time.The Board of Directors and/or person(s) entrusted by the Board shall be authorized to determine theterms, conditions and other details necessary for and relating to such oering, such as the oeringperiod, oering price, allocation method, details of the oering and sales, etc. and to implement anyother actions necessary for or relating to the said oering.

2) 15 million ordinary shares may be allocated to employees pursuant to the EmployeeSecurities Option Plan of Thai Airways International Public Company Limited (""ESOP'') in case theemployees elect to exercise their rights to subscribe the shares under the ESOP and/or to reserve forthe exercise of the warrant holders in the case where the employees elect to receive the warrants

under the ESOP instead of subscribing shares.

In case there are shares remaining from the exercise of the employees' rights under the ESOP, theBoard of Directors shall submit the matter to the shareholders' meeting for further allocation orimplementation.

Premium on shares

In 1992, the Company issued 95 million shares to public at Baht 60 per share. The resulting premiumon shares, representing Baht 50 per share, amounts to Baht 4,750 million.

Legal reserve

Under the Public Limited Companies Act, the Company is required to set aside as legal reserve at

least 5% of its net prot calculated on Thai GAAP basis, after accumulated decit brought forward (ifany) until the reserve is not less than 10% of the authorised capital. The reserve is not available fordividend distribution.

At the end of the year 1999, the Company's legal reserve balance amounted to Baht 1,033 million,presented as part of retained earnings. In the years 2000 and 2001, the net prot is lower than theaccumulated decit brought forward. Therefore, the Company did not have to provide its legal reserve,following Section 116 of the Public Companies Act.

In the year 2002, the Company provides its legal reserve of Baht 509 million. The total legal reservebalance at September 30, 2002 was Baht 1,542 million.

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20 Earnings/(Loss) per Share

2002 2001 2000

Net prot/(loss) attributable to shareholders (in millions of Baht) ..... 11,933 (2,560) 1,453Number of shares issued (in millions of shares) ..................................... 1,400 1,400 1,400Basic earnings/(loss) (Baht per share) .................................................... 8.52 (1.83) 1.04

There are no dilutive instruments for the years presented, or issued subsequently.

21 Financial Instruments

Financial instruments on the balance sheet include cash and bank balances, investments, trade andother receivables, trade and other payables, leases and borrowings. The recognition methods adopted foreach item are disclosed in the relevant part of Note 2.

Exposure to credit, interest rate, fuel price risk and currency risk arises in the normal course of theGroup's business. Derivative nancial instruments may be used to reduce exposure to uctuations inforeign exchange rates, fuel price risk and interest rates. While these are subject to the risk of market rateschanging subsequent to acquisition, such changes are generally oset by opposite eects on the items beinghedged.

(a) Fuel price risk

The Group's earnings are aected by the changes in the price of fuel. The Group has exposure to thefuel price risk, as the Group does not have any open contracts at September 30, 2002.

(b) Self-insurance risk

The Group maintains a limited amount of property insurance in respect of certain personal and realestate property.

(c) Foreign currency exchange risk

The Group has signicant exposure to foreign currency as substantially all of the Group's leaseobligations and a signicant portion of its bank loans are denominated in foreign currencies, principally USdollars, and, to a lesser extent, Japanese yen and Euros.

Depreciation or appreciation of the Baht against foreign currencies aects the Group's resultssignicantly because the Group's foreign currency receipts generally exceed its foreign currency payments.The Company's hedging policy is to maintain foreign currency receipts in a proportion to the requiredforeign currency payments. In addition, the company retains its foreign currency denominated earnings and

receipts to reduce the risk from foreign currency uctuation.

(d) Interest rate risk

The interest rates and terms of repayment of the Group's bank and other loans, and nance leaseobligations are disclosed in Notes 15 and 16.

(e) Liquidity risk

The Group has net current liabilities in the amount of Baht 29,337 million as at September 30, 2002.The Group reported a net cash inow from operating activities of Baht 25,285 million and net cash out

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ow from investing activities

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