Loans From Foreign Company Loans from a foreign company as at March 31, 1997 represent loans obtained by the Company from a company under four loan agreements. Loans under the first, second and third agreement are repayable in ten equal semi-annual installments commencing December 30, 1992, June 30, 1993 and January 31, 1994, respectively, while interest payments under the said three loan agreements are payable semi-annually at the rates ranging from 5.875% - 6.750% per annum. Loan under the fourth agreement is repayable in ten equal semi-annual installments commencing April 29, 1994, while interest rate and interest payments under the said loan are at the 6 month LIBOR plus the rate as prescribed in the said agreement. Loans obtained by the Company from a foreign company as at March 31, 1998 represent loans under the same four loan agreements as at March 31, 1997. Repayments of the first and second loan agreement were fully made during the three month period ended March 31, 1998. As at March 31, 1998 and 1997, outstanding balances under the aforesaid four loan agreements amount to approximately Baht 45.03 million and Baht 96.69 million, respectively. According to the aforesaid loan agreements made with foreign banks, finance and foreign companies, there are certain terms and conditions for the Company and its subsidiary to comply. At March 31, 1998, Advanced Info Service Public Company Limited has outstanding loan balances obtained from a foreign financial institution under two agreements amounting to US$ 14.55 million and their repayments are scheduled within January 2001. Debt/Equity Ratio and Current Ratio requirements stipulated under the first loan agreement are 1.75:1 and 0.75:1, respectively. Debt/Equity Ratio requirement stipulated under the second loan agreement is 1.75:1. As at December 31, 1997, the Debt/Equity Ratio of the Company was higher than the point stipulated in the both loan agreements while Current Ratio was lower than the point stipulated in one loan agreement, caused by the large unrealized exchange loss which derived from the change in exchange rate system. The Company's management has been re- negotiating with the aforesaid financial institution to make allowances for the Company relating to conditions prescribed in the aforesaid loan agreements, although the Company's Debt/Equity Ratio and Current Ratio were improved as at March 31, 1998. Liabilities Under Financial Leases The Company has entered into six financial lease agreements with a related company to obtain vehicles for its business operations. The financial leases are irrevocable and payable monthly in 60 installments with interest at the rates ranging from 19.81 - 23.648% per annum. The said lease agreements stipulate that the Company has the right to buy those vehicles, after fully paid up those leases, at the price of 10% of the vehicles' costs or of the prices purchased by the lessor from car agency. At March 31, 1998, the Company has annual payment commitments under financial leases shown in present value, using the discount rates ranging from 19.81 - 23.648% per annum, as follows: Date Amount (Baht) March 31, 1999 747,590.93 March 31, 2000 923,632.56 March 31, 2001 1,141,460.66 December 31, 2001 611,937.63 Total 3,424,621.78 Payment commitments within March 31, 1999 are included in current portion of long-term liabilities as described above. NOTE 16 - OTHER INCOME Other income for the three month periods ended March 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Interest income 143.51 58.02 125.53 41.21 Others 27.75 4.27 26.75 2.91 Total 171.26 62.29 152.28 44.12 NOTE 17 - DIRECTORS' REMUNERATION Directors' remuneration represents meeting fees and gratuities as approved by the shareholders of the Company and its subsidiary in their Annual General Meetings. NOTE 18 - OTHER EXPENSES Other expenses for the three month periods ended March 31, comprise: Million Baht Consolidated Company's Separate Statements of Income Statements of Income 1998 1997 1998 1997 Amortization of goodwill 9.15 9.15 - - Losses from written off assets 1.96 5.09 1.96 5.09 Total 11.11 14.24 1.96 5.09 NOTE 19 - FOREIGN CURRENCY RISK MANAGEMENT The Company and its subsidiary, in terms of the Shinawatra Computer and Communications Group policy, enter into various types of foreign exchange contracts to hedge their transaction risk both in short-term and long-term foreign currency exposures. Short-term foreign currency exposures are related to trade import, short-term foreign borrowings and interest flows on long-term foreign borrowings. Long-term foreign currency exposure is related to long-term foreign borrowings. The currency risks of the Company and its subsidiary occur in various currency combinations, but mostly in the United States Dollars, due to the fact that the Company and its subsidiary involves in transactions with different countries. The Company and its subsidiary hedging policy are to hedge currency risk mostly based on their net exposure and the structure of their revenues. The Company and its subsidiary focus more on hedging when their revenue are on local currency base whereas it will do less when their revenues are on foreign currency base due to the natural hedge phenomenon. The senior executives in Group Finance meet on a monthly basis to analyze currency exposures and re-evaluate forex management strategies against revised currency forecasts. NOTE 20 - CHANGE IN EXCHANGE RATE SYSTEM On July 2, 1997, the Ministry of Finance issued its notification, dated July 2, 1997, to change the exchange rate system to the managed float system. The Shinawatra Computer and Communications group has its policy to recognize all exchange gains or losses derived from the change in exchange rate system incurred during the reporting period as income or expense in the statements of income. As at March 31, 1998, the Company and its subsidiary have significant outstanding liabilities in foreign currencies as follows: Million Consolidated Company's Separate Balance Sheets Balance Sheets US Dollar 330.93 304.79 Deutschmark 28.26 28.26 Hong Kong Dollar 9.72 9.72 Norway Krone 6.18 6.18 Singapore Dollar 1.57 1.36 Australian Dollar 0.60 0.60 UK Pound Sterling 0.54 0.54 The above foreign currency liabilities represent long-term loans and related accrued interest expense and foreign accounts payable. Future payments of foreign currency liabilities at March 31, 1998 are detailed as follows: Million Consolidated Company's Separate Financial Statements Financial Statements Liabilities and payment periods Within March 31, 1999 US Dollar 153.90 127.77 Deutschmark 28.26 28.26 Liabilities and payment periods Within March 31, 1999 Hong Kong Dollar 9.72 9.72 Norway Krone 6.18 6.18 Singapore Dollar 1.57 1.36 Australian Dollar 0.60 0.60 UK Pound Sterling 0.54 0.54 After March 31, 1999 US Dollar 177.02 177.02 Long-term loans and accrued interest in US Dollars are repayable and payable in accordance with the conditions in loan agreements as described in Note 15, while foreign currency accounts payable are payable within March 31, 1999. From the above outstanding foreign currency liabilities, a total amount of US$ 84.20 million in the book of Advanced Info Service Public Company Limited and a total amount of US$ 26.11 million in the book of Shinawatra Paging Company Limited have been hedged against the risk of currency losses on future repayments and payments. Effects derived from the change in exchange rate, incurred between April 1, 1998 and April 29, 1998, to the financial position and results of operations of the Company and its subsidiary based on their outstanding unhedged liabilities as at March 31, 1998 are as follows: Million Baht Consolidated Company's Separate Financial Statements Financial Statements Decrease in liabilities 60.81 60.82 Gain on exchange 60.81 60.82 NOTE 21 - LEGAL RESERVE Legal reserve of Advanced Info Service Public Company Limited was established in accordance with the provision of the Public Limited Company Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income each year until the reserve reaches 10% of the authorized share capital. This reserve is not available for dividend distribution. NOTE 22 - PROVIDENT FUND The provident fund of the Company and its subsidiary complies with the Provident Fund Act B.E. 2530. The fund is independently maintained and therefore does not appear in the consolidated balance sheets and the Company's separate balance sheets. NOTE 23 - COMMITMENTS Lease Agreements Other than those commitments under lease agreements as described in Note 3 to the financial statements, the Company and its subsidiary have entered into lease agreements covering spaces for branch offices, base stations and others for periods ranging from 3 months to 20 years with options to renew. The Company and its subsidiary are committed to pay monthly rental in respect of the said agreements as follows: Million Baht Per Month Advanced Info Service Public Company Limited 12.91 Advanced Info Service Public Company Limited and subsidiary 15.34 Bank Guarantees At March 31, 1998, the Company and its subsidiary had commitments with banks whereby the latter issued letters for guaranteeing the Company and its subsidiary in respect of business contracts, electricity use, customs duties and others in the following amounts: Million Baht For Advanced Info Service Public Company Limited 3,588.82 For Advanced Info Service Public Company Limited and subsidiary 3,759.97 Contracts for Construction and Equipment Installation of Mobile Phone Network At March 31, 1998, the Company had outstanding commitments under contracts relating to the construction and installation of equipment for the operations of mobile phone network amounting to approximately Baht 2,950.33 million. Data Broadcast Via Satellite Agreement The Company's subsidiary has entered into a Data Broadcast via Satellite agreement with the Telephone Organization of Thailand for a period of 5 years with option to renew. The subsidiary is committed to pay rental in respect of the said agreement in the amount of Baht 35,000 per site per month for master network and Baht 6,000 per site per month for remote network. Interest Rate and Currency Exchange Agreements In order to hedge against the risk of losses from future repayments of loans and payments of their related interest, which may derive from the fluctuation of exchange rates and interest rates under loans in foreign currencies, the Company and its subsidiary have entered into nine interest rate and currency exchange agreements to exchange the total loan principal from US$ 120,106,558.58 to Baht 3,076,293,049.15, and to exchange the related loan interest rates on US Dollar principals (comprise a fixed rate of 5.90 - 6.88% per annum, 6 month LIBOR and 6 month SIBOR plus the rate per annum as prescribed in each agreement) to the fixed rates on Thai Baht principals ranging from 9.35 - 10.935% per annum. Value dates of those nine agreements are covering from January 15, 1997 to January 15, 2001. As of March 31, 1998, outstanding balances under those interest rate and currency exchange agreements amount to US$ 102,536,944.64, and their value dates are covering from April 9, 1998 to January 15, 2001. Forward Exchange Contracts In order to hedge against the risk of exchange losses from future repayments of loans and payments of interest and foreign payables, the Company and its subsidiary have entered into five currency exchange agreements to exchange the total loan principal, interest and accounts payable from US$ 7,662,629.04 to Baht 362,042,819.99. Value dates of these five agreements are covering from April 9, 1998 to April 30, 1998. Interest Rate Exchange Agreement In order to hedge against the risk of losses from interest payments, which may derive from the fluctuation of interest rates under foreign loans, the Company and its subsidiary have entered into six interest rate exchange agreements, to exchange the related loan interest rates on US Dollar principals of US$ 112,000,000 (comprise 6 month LIBOR and 6 month SIBOR plus the rate per annum as prescribed in each agreement) to the fixed rates on US Dollar principals ranging from 5.90 - 6.34% per annum. Periods of those two agreements are covering from March 15, 1996 to October 2, 2000. NOTE 24 - SUBSEQUENT EVENT The shareholders of Advanced Info Service Public Company Limited at the Annual General Meeting held on April 29, 1998 approved additional dividend and legal reserve for 1997 of Baht 257.40 million and Baht 15.30 million, respectively. NOTE 25 - RECLASSIFICATION OF ACCOUNTS Certain accounts in the financial statements for the three month period ended March 31, 1997 have been reclassified to conform with the presentation in the financial statements for the three month period ended March 31, 1998.