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- 14 - 9.EURO CONVERTIBLE BONDS During the second quarter of 1995, the Company offered the Euro- Convertible Bonds in the foreign countries with a total face value of U.S. Dollars 100 million (divided into 100,000 bonds at U.S. Dollars 1,000 principal amount) (ECD 1), or equivalent to Baht 2,455 million contingent on the exchange rate fixed at the time of conversion or redemption. The bonds bear interest at the rate of 3.5% p.a. after withholding tax and will be due for redemption on April 20, 2005. However, the bondholders, pursuant to the stipulated conditions in the prospectus, may exercise their conversion rights at any time from July 20, 1995 up to March 20, 2005 at the conversion price of Baht 500 per share, or put redemption option at prior maturity on April 20, 2000 at the price with premium totalling U.S. Dollars 1,310 per share. In addition, the Company, pursuant to the stipulated conditions in the prospectus, may mandatorily redeem all or some of the bonds at any time from May, 1998 to April 20, 2000 at the price with premium totalling U.S. Dollars 1,237 per share or U.S. Dollars 1,310 per share, depend upon the period of redemption. During the second quarter of 1996, the Company offered another Euro- Convertible Bond in the foreign countries with a total face value of U.S. Dollars 105 million (divided into 105,000 bonds at U.S. Dollars 1,000 principal amount) (ECD 2), or equivalent to Baht 2,646 million contingent on the exchange rate fixed at the time of conversion. The bonds bear interest at the rate of 2.5% p.a. after withholding tax and will be due for redemption on April 4, 2001. However, the bondholders, pursuant to the stipulated conditions in the prospectus, may exercise their conversion rights at any time from July 4, 1996 up to March 4, 2001 at the conversion price of Baht 450 per share. In addition, the Company, pursuant to the stipulated conditions in the prospectus, may mandatorily redeem all or some of the bonds at any time from April 1999 to April 3, 2001 at the price with premium totalling U.S.Dollars 1,210 per share in 2000 and U.S. Dollars 1,272 per share in 2001. In respect of the issuance of the bonds referred to above, at the extraordinary shareholders meetings held on January 11, 1995 and March 18, 1996, the shareholders approved the increase in the Company's authorized share capital from Baht 400 million (divided into 40,000,000 shares at Baht 10 par value) to Baht 460 million (divided into 46,000,000 shares at the same par value) and finally to Baht 520 million (divided into 52,000,000 shares at the same par value). The increased share capital of 12,000,000 shares will be issued to the convertible bondholders who will later exercise their conversion rights. The Company registered the resolution of the increase share capital with the Ministry of Commerce on January 27, 1995 and March 20, 1996, respectively. - 15 - Since 1996, the market prices of the stock including the Company's shares, in the Stock Exchange of Thailand have declined continuously. Consequently, the bondholders may not exercise their conversion rights as much as that of the Company's estimate. Accordingly, the Company set up a policy to provide a provision for the premium to be paid to the bondholders at the time redemption be made at the rate of 80% of total premium to be paid in case of all bondholders exercise the redemption right at prior maturity date, spread over the period of the right by applying the straight-line method. As at March 31, 1999, the provision amounted to approximately Baht 1,257.5 million (including a provision for the period ended March 31, 1999 of approximately Baht 89.3 million). Because the redemption period will be effect in the near future, in consideration thereon, the Company had appointed the financial advisors to provide assistance relating to the debt restructuring on these ECD. Currently, the progress of this debt restructuring is in favor of the Company and the Management believes that the ultimate outcome of this debt restructuring plan will be beneficial to the Company, and believes that the provision of financial expense is adequate. 10.EXCHANGE GAIN (LOSS) ARISING FROM CHANGE IN FOREIGN CURRENCY EXCHANGE SYSTEM As a result of the change in the foreign currency exchange system to the managed float system effective from July 2, 1997, the Company and subsidiaries derived a net gain (loss) on repayment and collection of its foreign currency liabilities and assets for the period ended March 31, 1999 and 1998 and on the translation of the net liabilities as at March 31, 1999 and 1998 (using the exchange rates prevailing on) totalling gain (loss) approximately Baht (207.1) million and Baht 1,885.9 million for the interim consolidated financial statements and Baht (205.7) million and Baht 1,898.4 million for the Company interim financial statements. This gain (loss) was presented separately in the Statements of Income for the period ended March 31, 1999 and 1998. 11.AGREEMENTS As at March 31, 1999 and 1998: a) A subsidiary has the joint venture agreement with a party comprising IBM Thailand Corporation Co., Ltd., Loxley International Co., Ltd. and IBM Worldtrade Corporation Co., Ltd., to supply the turnkey system for the "Taxation Computerized Project" to the Revenue Department. The total contract price is Baht 1,814 million in which the subsidiary is liable in respect of a 44.738% share of the prospective profit/loss incurred. As at August 27, 1998, the said joint venture agreement had been cancelled. The net loss which belongs to the subsidiary of approximately Baht 37 million was recorded as expense in that period. - 16 - b) A subsidiary has an agreement with the Telephone Organization of Thailand (TOT) for the latter to allow the subsidiary to provide paging services within an agreed period. By virtue of this agreement, the subsidiary is committed to transfer the ownership of communications network to TOT which subsequently grant right to use the network over the term of the license to the subsidiary. In this connection, the subsidiary has to pay compensations to TOT at the rates as stipulated in the agreement. Additionally, the subsidiary was required to provide a bank guarantee of Baht 141.7 million to TOT to guarantee its performance. A portion of banks guarantees was collateralized by the pledge of fixed deposit account approximately Baht 18.3 million. c) Two subsidiaries together with the Communication Authority of Thailand (CAT) have entered into an agreement to invest in the computer database services project. By virtue of this agreement, the subsidiaries are committed to supply, install, control and maintenance all tool and equipment as agreed in the agreement. In addition, the subsidiaries must transfer the ownership of such tools and equipment to CAT at the first day on which service be rendered. This agreement shall be in effect for a period of ten (10) years commencing from the first day on which service be rendered, without cancellation right except for those specified in the agreement. During the period of agreement, the subsidiaries have the right to charge service fee and other fees from the users as stipulated in the agreement. d) A subsidiary with the Communication Authority of Thailand (CAT) have entered into an agreement to invest in the satellite transmission services project. By virtue of this agreement, the subsidiary is committed to supply, install, control and maintenance all tools and equipment as agreed in the agreement. In addition, the subsidiary must transfer the ownership of such tools and equipment to CAT at the first day on which service be rendered. The agreement shall be in effect for a period at twenty-two (22) years commencing from the first day on which service be rendered or twelve (12) months subsequently date of an agreement, which ever is occurrence, without cancellation right except for those specified in the agreement. During the period of agreement, the subsidiary has the right to charge service fee and other fees from the users as stipulated in the agreement. - 17 - e) A subsidiary had entered into a joint venture agreement with a foreign government to set up a telecommunication system and provide related services in agreed area. Under the terms of the agreement, the subsidiary is committed to supply, install, control and maintenance all communication network. In addition, the subsidiary must transfer the ownership of such communication network to that foreign government at the expiry date of the agreement. f) A subsidiary entered into a call service center agreement with certain local companies. The term of this agreement for a period of five (5) years commencing from August 19, 1997, without cancellation right except for those specified in the agreement, the subsidiary has the right to charge service fee as stipulated in the agreement. g) A subsidiary entered into a distribute on-line charitable lotteries and award prizes agreement with the Thai Government Lottery Office (GLO). Under the terms of the agreement, the subsidiary is committed to supply and install distribute on-line lottery equipment and shall have to comply with certain conditions and restrictions as specified in the agreement. The subsidiary, however, has not yet installed the equipment since this is in the process of arbitration for commencing the subsidiary's operations according to the agreement. The management of subsidiary believes that this project can be operated in the future, therefore, does not set up any contingent losses in the books of accounts. This agreement shall be in effect for a period of ten (10) years without cancellation right except for those specified in the agreement. During the period of the agreement, the subsidiary has the right to charge service fee from distribution the said lottery as stipulated in the agreement. 12.COMMITMENTS AND CONTINGENT LIABILITIES As at March 31, a) The Company and subsidiaries had unused letters of credit of approximately Baht 335 million (Baht 322 million for the Company) in 1999 and Baht 925 million (Baht 580 million for the Company) in 1998. b) The Company and subsidiaries were contingently liable to their customers for the tender guarantees. These tender guarantees were covered by the banks' letters of guarantee totalling approximately Baht 508 million (Baht 222 million for the Company) in 1999 and Baht 2,056 million (Baht 981 million for the Company) in 1998. - 18 - c) The Company and subsidiaries had commitments under the contracts with certain banks whereby the Company committed to buy certain foreign currencies at the forward rates at the amount equivalent to approximately Baht 231 million in 1999 and Baht 1,151 million in 1998. 13.RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1998 interim financial statements have been reclassified to conform with the 1999 interim financial statement presentation. 14.THE COMPUTER REMEDIATION PLAN FOR THE YEAR 2000 (UNAUDITED/UNREVIEWED) In the processing of the Company's data for management and commercial operations, the Company had already completed the remediation project to solve the year 2000 problems in 1998. The Company, however, still faces risks that other companies with whom the Company does business may be unsuccessful in their computer remediation projects to solve the year 2000 problems within the time limit. The Company, however, expects that the impact, if any, will not be significant to the Company's operations.