ADVANC : Annual Report 1997 by ar.advanc

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. SUBSIDIARY & ASSOCIATED COMPANY Company

Nature of Business

Registered Capital

Par Value (Baht)

Paid Up Capital (Million Baht)

% of Investment

(Million Shares)

Advanced Info Service Plc. Head Office : 414 Phaholyothin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-5000 Fax : 299-5719 Branch : 1291/1 Phaholyothin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-6000 Fax : 299-6005 Shinawatra Paging Co., Ltd. 1291/1 Phaholyothin Rd. Samsennai Phayathai Bangkok 10400 Tel : 299-6000 Fax : 299-6446 Shinawatra Datacom Co., Ltd. 17th Floor Amarin Tower, 500 Ploenchit Rd. Patumwan, Bangkok 10330 Tel : 256-9461 Fax : 256-9922 Fonepoint (Thailand) Co., Ltd. 503 K.S.L. Tower 15th Floor, Sriayudhya Rd. Rajathevi, Bangkok Tel : 642-6555 Fax : 642-6540

Operator of mobile telephone System at 900 MHz

500

2,340

Operator of Phonelink paging service.

350

60.00

Operator of DATANET (Data Communication Service) through ordinary telephone lines

45.72

457.20

13.80

0.60

17.80

Financial Highlights Baht millions except per share data

Operating Results • Revenues from services and equipment rental • Total Revenues • Gross Margin • Net Income • Total Assets • Total Liabilities • Shareholders’ Equity Financial Position • Net Profit Margin • Return on Average Shareholder’s Equity • Return on Average Assets • Earning per Share • Dividend per Share • Book Value per Share

1997

1996

14,908.00 15,575.08 8,982.56 2,523.08 35,328.48 23,372.76 11,666.36

12,720.89 13,315.40 7,847.50 3,563.28 21,776.01 10,952.33 10,547.29

16.20% 22.72% 8.84% 10.78 4.10 49.86

26.76% 37.64% 17.02% 15.23 6 45.07

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC.

Board of Director Anuthra Asawanonda Withu Ruksvanichpongs Boonklee Plangsiri Somprasong Boonyachai Niyom Purakum Ph.D. Suwimol Kaewkoon Sanchai Thiewprasertkul Suphadej Poonpipat Arun Churdboonchart Vithit Leenutapong

Chairman of the Board Vice Chairman of the Board Director Director Director Director Director Independent Director Independent Director Independent Director

Executive Committee Boonklee Plangsiri Niyom Purakum Ph.D. Somprasong Boonyachai Siripen Sitasuwan Suwimol Kaewkoon Sanchai Thiewprasertkul Chanon Suwasin

Chairman of the Executive Committee Director Director Director Director Director Director

Management Team Boonklee Plangsiri Somprasong Boonyachai Suwimol Kaewkoon Vikrom Sriprataks Sukij Tirawatanawit Vuthiporn Chaipayom Wichian Mektrakarn Arpattra Sringkarrinkul Walan Norasetpakdi Annop Petchariya Walaiporn Khajeenikorn Jaranya Tungbhanjerdsuk Pensri Ayuttaka

Chairman of the Executive Committee - Wireless Communications Vice Chairman of the Executive Committee - Wireless Communications President - Wireless Communications Senior Executive Vice President - Service Operation Acting Senior Executive Vice President - Engineering Vice President - Network Engineering Vice President - Upcountry Operation & Maintenance 1 Vice President - Metropolitan Operation & Maintenance Assistant Vice President - Operation Support Assistant Vice President - Corporate Support Acting Assistant Vice President - Upcountry Operation Logistic & Procurement Manager Human Resource Manager Administration Manager

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC.

Message From the Chairman Dear Shareholders, Advanced Info Service Plc., is pleased to inform you of the results of the company performance up to 31 December 1997. Here are the important highlights.

Results and New Profit

Total revenue amounted to 15,575 million baht, up from 13,315 million baht in 1997. This is an increase of 2,260 million baht, or 16.97%. Net profit amounted to 2,523 million baht, down from 3,563 million baht in 1996. This is a decline of 1,040 million baht or 29.19% over the previous year.

Cellular Network Development

Throughout 1997, the company proceeded to develop its Cellular 900 and Digital GSM networks, continuing on from the year before. This involved expansion of the service area and boosting service efficiency with modern engineering technology in order to give cellular telephone subscribers the most convenience of use and the maximum satisfaction. At the end of 1997, AIS had 29 exchanges and 1,131 base stations for its Cellular 900 network and 13 exchanges and 977 base station for its Digital GSM network. This means that we have the widest coverage area of any cellular phone operator in Thailand.

Marketing and Service Success

Together with its network leadership, the company has maintained its market share at a high 51% with a total of 980,000 subscribers on both systems. Besides implementing many additional marketing promotions to increase the number of new subscribers, AIS has emphasized the great importance of developing its service quality and after sales service while maintaining its strategy of taking care of its old customers. This was reflected by the implementation of Priority Care Centers that give those who have lost their handsets the chance to buy new ones to Shinawatra standards for a special price using their old number. We also appointed cellular phone repair service representatives for the added convenience of our subscribers. The representatives will offer cellular phone maintenance and sell spare parts and accessories to subscribers nationwide. Call Centers were established to increase customer relations and software was installed to check on unusual cellular phone use to protect against fraud. At the same time, AIS continued to accelerate and expand work already planned, such as entering over 700,000 Cellular 900 handsets into its complete anti-cloning protection system, called SIS. This commenced full operation on the 31 December 1997. Besides this, we increased the number of our value-added services of which we now have 14 under the Cellular 900 system and 24 under the Digital GSM system. We also augmented Automatic International Roaming, which is now available in 38 countries. Whereas the company will have to face the consequences of the nationâ&#x20AC;&#x2122;s economic predicament for the last two quarters of 1997, we intend to develop every aspect of our business systematically, relying on the professionalism and sacrifice of our management and staff. At the same time, we are confident that every department will pool their energies to overcome any obstacles and finally change crisis to opportunity. 3

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. We are grateful for the support and trust of our dealers, subscribers, financial institution and shareholders who have made the company able to maintain its performance at a satisfactory level once again. Advacned Info Service would like to express much thanks to all of you.

Anuthar Asawanonda Chairman of the Board

Boonklee Plangsiri Chairman of the Executive Committee

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC.

Auditors' Report To the Shareholders Advanced Info Service Public Company Limited: We have examined the consolidated balance sheets of Advanced Info Service Public Company Limited and subsidiary as at December 31, 1997 and 1996, and the related consolidated statements of income, statements of changes in shareholders' equity, statements of retained earnings, and statements of cash flows for the years then ended, and the separate financial statements of Advanced Info Service Public Company Limited for the same periods. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Without qualifying our opinion, we draw attention to Note 1 to the financial statements. The operations of the Company and subsidiary as from the year ended December 31, 1997 have been affected and may continue to be influenced for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or classifications of assets and liabilities at balance sheet date can not presently be determined. In our opinion, the financial statements referred to in the first paragraph present fairly the consolidated financial position of Advanced Info Service Public Company Limited and subsidiary at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for the years then ended, and the separate financial position and results of operations and changes in shareholders' equity and cash flows of Advanced Info Service Public Company Limited for the same periods, in conformity with generally accepted accounting principles applied on a consistent basis.

Dr. Payom Singhasaneh Certified Public Accountant

Peat Marwick Suthee Limited Bangkok, February 13, 1998

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. BALANCE SHEETS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY AS AT DECEMBER 31, 1997 AND 1996

Consolidated 1997

Company's Separate

1996

1997

1996 Baht

ASSETS CURRENT ASSETS Cash in hand and at banks Short-term investments (Notes 6 & 10) Accounts and notes receivable - net (Notes 3, 4 & 7)

Short-term loans and advances to related parties - net (Note 3) Inventories - net (Notes 4 & 8) Other current assets (Note 9) Total Current Assets INVESTMENTS (Notes 4 & 11) Related Parties Others Total Investments PROPERTY AND EQUIPMENT - net (Notes 3, 4 & 12)

OTHER ASSETS Costs of mobile phone and pager networks under concession agreements - net (Notes 2, 3 & 4) Deferred charges - net (Note 4) Goodwill - net (Note 4) Others Total Other Assets

Total Assets

520,092,870

518,399,540

432,802,197

472,532,641

4,256,940,775

1,278,506,020

3,872,685,575

962,782,010

3,152,250,693

2,199,326,309

3,011,142,393

2,034,305,573

256,305,080

490,371,799

200,844,354

223,581,190

66,000,485

907,272,730

463,981,186

887,122,850

394,422,049

9,158,862,633

4,950,584,854

8,404,597,369

4,087,623,463

62,366,067

63,866,067

825,787,781

844,454,036

62,366,067

63,866,067

825,787,781

844,454,036

1,629,929,418

665,545,632

1,477,475,657

568,411,314

23,796,698,977

15,592,411,000

22,936,853,692

14,765,129,886

199,068,213

69,010,066

198,877,995

66,957,835

329,389,334

365,988,148

152,162,963

68,606,961

132,511,836

47,582,522

24,477,319,487

16,096,016,175

23,268,243,523

14,879,670,243

35,328,477,605

21,776,012,728

33,976,104,330

20,380,159,056

See notes to financial statements

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. BALANCE SHEETS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY AS AT DECEMBER 31, 1997 AND 1996

Consolidated 1997

Company's Separate

1996

1997

1996 Baht

LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Loans from banks Accounts payable and accrued expenses (Notes 3 & 13) Current portion of long-term liabilities (Notes 14 & 16) Advances from related parties (Note 3) Short-term bonds (Note 3) Other current liabilities (Note 15) Total Current Liabilities

51,320,000

7,674,164,786

4,790,814,130

7,534,993,629

4,608,675,962

2,025,936,387

462,067,301

1,362,936,387

462,067,301

88,034,170

68,756,939

9,374,229

1,431,992

2,130,000,000

599,987,157

921,375,905

516,986,442

860,021,117

12,518,122,500

6,294,334,275

11,554,290,687

5,983,516,372

LONG-TERM BONDS (Note 3)

1,000,000,000

LONG-TERM LIABILITIES - net (Notes 14 & 16)

6,584,347,577

1,818,281,886

6,584,347,577

1,158,401,886

DEPOSITS RECEIVED FROM CUSTOMERS Total Liabilities MINORITY INTERESTS IN SUBSIDIARY SHAREHOLDERS' EQUITY Share capital Authorized 500,000,000 shares, Baht 10 par value

3,270,288,243

2,839,710,639

3,171,102,000

2,690,955,000

23,372,758,320

10,952,326,800

2,309,740,264

9,832,873,258

89,355,219

76,400,130

5,000,000,000

2,340,000,000

2,295,000,000

Issued 234,000,000 shares, fully paid Premium on share capital Retained earnings Appropriated to legal reserve (Note 24) Unappropriated Total Shareholders' Equity

500,000,000

484,700,000

500,000,000

484,700,000

6,531,364,066

5,427,585,798

6,531,364,066

5,427,585,798

11,666,364,066

10,547,285,798

11,666,364,066

10,547,285,798

Total Liabilities and Shareholders' Equity

35,328,477,605

21,776,012,728

33,976,104,330

20,380,159,056

See notes to financial statements

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. CONSOLIDATED STATEMENTS OF INCOME ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

1997

1996 Baht

REVENUES Revenues from services and equipment rental (Note 4) Sales (Note 4) Other income (Note 18) Total Revenues

14,908,003,495

12,720,893,130

258,026,630

409,047,105

594,510,987

15,575,077,230

13,315,404,117

5,945,144,900

4,873,387,043

EXPENSES Cost of services and equipment rental (Note 4) Cost of sales (Note 4) Selling and administrative expenses Interest expense (Note 17) Directors' remuneration (Note 19) Other expenses (Note 20) Total Expenses Net income before income tax and adjustment of net effect derived from the change in exchange rate system Income tax Net income before adjustment of net effect derived from the change in exchange rate system Adjustment of net effect derived from the change in exchange rate system (net of income tax effect of Baht 531,337,770) (Note 22) Net income before considering minority interests in subsidiary Less Share of net income of subsidiary to minority interests Net income

238,333,583

3,097,120,903

2,823,566,048

572,165,240

253,079,070

2,480,000

2,020,000

76,186,103

77,648,849

9,931,430,729

8,029,701,010

5,643,646,501

5,285,703,107

(1,797,825,013)

(1,664,592,938)

3,845,821,488

3,621,110,169

(1,239,788,131)

2,606,033,357

3,621,110,169

82,955,089

57,826,259

2,523,078,268

3,563,283,910

16.43

15.47

Earnings per share (Note 4) Earnings per share before adjustment of net effect derived from the change in exchange rate system Adjustment of net effect derived from the change in exchange rate system Earnings per share before considering minority interests in subsidiary Less Share of net income of subsidiary to minority interests Earnings per share See notes to financial statements

(5.30)

11.13

15.47

0.35

0.24

10.78

15.23

245,514

22,474

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. STATEMENTS OF INCOME ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

1997

1996 Baht

REVENUES Service income (Note 4) Net result of investment in subsidiary company (Note 4) Other income (Note 18) Total Revenues

13,433,720,215

50,140,523

338,993,652

482,418,101

13,860,547,612

11,907,763,566

EXPENSES Cost of services (Note 4) Selling and administrative expenses Interest expense (Note 17) Directors' remuneration (Note 19) Other expenses (Note 20) Total Expenses Net income before income tax and adjustment of net effect derived from the change in exchange rate system Income tax Net income before adjustment of net effect derived from the change in exchange rate system Adjustment of net effect derived from the change in exchange rate system (net of income tax effect of baht 525,651,639) (Note 22) Net income

5,671,295,353

4,565,876,960

2,264,966,454

1,951,525,567

501,579,105

197,854,766

2,020,000

1,960,000

5,212,595

41,352,006

8,445,073,507

6,758,569,299

5,415,474,105

5,149,194,267

(1,665,875,346)

(1,585,910,357)

3,749,598,759

3,563,283,910

(1,226,520,491)

2,523,078,268

3,563,283,910

16.02

15.23

11,375,204,942

87,833,745

(5.24)

10.78

15.23

8,065

22,503

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. STATEMENTS OF CHANGES IN SHAREHOLDERSâ&#x20AC;&#x2122; EQUITY ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

1997

1996 Baht

Share capital Common shares Balance at beginning of year Increase during the year Decrease during the year Balance at end of year Premium on share capital Balance at beginning of year Increase during the year Decrease during the year Balance at end of year Retained earnings Appropriated to legal reserve Balance at beginning of year Increase during the year Decrease during the year Balance at end of year Unappropriated Balance at beginning of year Increase during the year Decrease during the year Balance at end of year

Total Shareholders' Equity See notes to financial statements

2,340,000,000

2,295,000,000

484,700,000

306,500,000

15,300,000

178,200,000

500,000,000

484,700,000

5,427,585,798

3,446,501,888

2,523,078,268

3,563,283,910

1,419,300,000

1,582,200,000

6,531,364,066

5,427,585,798

11,666,364,066

10,547,285,798

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. STATEMENTS OF RETAINED EARNINGS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

1997

1996 Baht

Unappropriated retained earnings Balance at beginning of year Less Appropriation of retained earnings in prior year Dividend (Note 23) Net income for the year Less Interim dividend (Note 23) Legal reserve Balance at end of year

(15,300,000)

(178,200,000)

6,531,364,066

5,427,585,798

Appropriated retained earnings Legal reserve (Note 23) Total Retained Earnings

500,000,000

484,700,000

7,031,364,066

5,912,285,798

See notes to financial statements

5,427,585,798

3,446,501,888

(702,000,000)

2,523,078,268

3,563,283,910

(702,000,000)

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. STATEMENTS OF CASH FLOWS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Consolidated 1997

Company's Separate 1996

1997

1996 Baht

CASH FLOWS FROM OPERATING ACTIVITIES Net income 2,523,078,268 Reconcile to net cash provided by operating activities Depreciation and amortization of property and equipment 279,239,394 Amortization of costs of mobile phone and pager networks under concession agreements 1,020,435,413 Amortization of deferred charges 33,401,329 Amortization of goodwill 36,598,814 Increase in bad debt and allowance for doubtful accounts 341,648,612 Unrealized net loss on exchange 1,321,771,670 Additions to allowance for obsolete inventories 25,800,565 Additions to allowance for losses on the decline in values of investments 1,500,000 Additions to allowance for obsolete equipment 7,192,000 Net result of investment in subsidiary company Net income of minority interests in the subsidiary 82,955,089 Increase in accounts and notes receivable (1,294,572,996) Decrease (increase) in advances to related parties 113,066,719 Increase in inventories (91,801,050) Increase in other current assets (443,291,544) Increase in other assets (83,556,002) Increase in accounts payable and accrued expenses 2,496,262,015 Increase (decrease) in advances from related parties 19,277,231 Increase (decrease) in other current liabilities (321,388,748) Increase in deposits received from customers 430,577,604 Losses(gain)on sales of equipment (946,999) Net Cash Provided by Operating Activities 6,497,247,384 CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in short-term investments (2,765,040,755) Net increase in loans to related parties 121,000,000 Additions to investments in property and equipment (1,254,724,644) Proceeds from sales of equipment 4,856,463 Additions to investments in mobile phone and pager networks under concession agreements (9,224,723,390) Dividend received from the subsidiary company Payment of dividend to minority interest in subsidiary (70,000,000) Additions to investments in deferred charges (163,459,476) Net Cash Used for Investing Activities (13,352,091,802)

3,563,283,910

2,523,078,268

3,563,283,910

166,701,105

236,282,966

131,780,988

827,085,546

912,581,994

741,021,581

32,104,751

33,351,646

32,104,544

36,598,814

195,668,678

271,092,216

155,967,723

18,099,478

1,316,457,294

11,209,478

1,000,000

1,500,000

1,000,000

(87,833,745)

(50,140,523)

57,826,259

(435,592,112) (1,247,929,036)

(426,083,453)

163,514,127

22,736,836

(75,654,418)

(156,593,404)

(492,700,801)

(140,882,665)

(26,811,067)

(84,929,314)

(17,741,210)

711,786,073

2,539,863,403

856,072,580

(151,286,682)

7,942,237

(1,187,177)

59,335,702

(343,034,675)

53,508,326

558,885,139

480,147,000

588,675,000

592,974

(510,420)

894,945

5,622,199,291

6,088,095,869

5,423,829,629

3,056,361,364 (2,696,509,565)

3,022,796,500

(334,184,812) (1,148,828,857)

(308,151,799)

10,600,000

9,997,929

3,991,968

9,315,904

(5,098,677,851) (9,084,305,800) (4,874,172,919)

105,000,000

(21,513,103)

(165,271,806)

(21,507,268)

(2,377,416,473) (12,985,924,060) (2,171,719,582)

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. STATEMENTS OF CASH FLOWS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

Consolidated 1997

Company's Separate

1996

1997

1996 Baht

CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in loans from banks (51,320,000) Net increase in short-term bonds 2,130,000,000 Net increase in long-term bonds 1,000,000,000 Net (decrease) increase in long-term liabilities 5,181,857,748 Payments of dividend and interim dividend (1,404,000,000) Net Cash From Financing Activities 6,856,537,748 NET INCREASE (DECREASE) IN CASH

(1,079,431,750)

(51,320,000) (1,079,431,750)

2,130,000,000

1,000,000,000

5,183,417,747

(662,319,450)

(665,569,450) (1,404,000,000)

(1,404,000,000) (1,404,000,000)

(3,149,001,200)

6,858,097,747 (3,145,751,200)

1,693,330

95,781,618

(39,730,444)

106,358,847

CASH AT BEGINNING OF YEAR

518,399,540

422,617,922

472,532,641

366,173,794

CASH AT END OF YEAR

520,092,870

518,399,540

432,802,197

472,532,641

See notes to financial statements

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Definition of Cash Cash shown in the accompanying statements of cash flows represents cash in hand and at banks as defined in the Thai Accounting Standard with respect to the preparation of the statement of cash flows which is in line with the definition prescribed in the regulation relating to the financial statements issued under the Ministerial Regulation No. 7 (B.E. 2539) , under the Public Company Limited Act B.E. 2535.

Interest Expense and Income Tax Paid During the Years Statements of Cash flows (Baht) Consolidated 1997

Interest expense Income tax

Company's Separate 1996

1997

1996

355,367,859

243,897,991

291,889,079

Baht 194,484,436

1,722,998,762

1,635,854,586

1,618,313,774

1,592,366,869

Non-Cash Investing Activities in 1997 and 1996 in Consolidated Statements of Cash Flows Additions to investments in buildings and equipment for general business operations, which are included in property and equipment, additions to investments in mobile phone and pager networks under concession agreements, which are included in costs of mobile phone and pager networks under concession agreements and additions to investments in deferred charges amounted to approximately Baht 10,642.91 million in 1997 and Baht 5,454.38 million in 1996. Certain portions of debts incurred from the aforesaid investments, amounting to approximately Baht 3,317.85 million in 1997 and Baht 340.17 million in 1996 were converted to long-term liabilities, and amounting to Baht 1,338 million in 1997 were converted to short-term bonds, whilst payments of the remaining balances shall be made in cash. As at December 31, 1997 and 1996, outstanding debts in the balance sheets relating to the aforesaid investments, other than those converted to long-term liabilities and short-term bonds , amounting to approximately Baht 4,861.75 million in 1997 and Baht 671.95 million in 1996 are included in accounts payable, and amounting to approximately Baht 68.91 million in 1997 and Baht 0.21 million in 1996 are included in advances from related parties, and amounting to approximately Baht 72.16 million in 1997 and Baht 22.96 million in 1996 are included in other current liabilities. Non-Cash Investing Activities in 1997 and 1996 in Company's Separate Statements of Cash Flows Additions to investments in buildings and equipment for general business operations, which are included in property and equipment, additions to investments in mobile phone networks under concession agreements, which is included in costs of mobile phone networks under concession agreements, and additions to investments in deferred charges amounted to approximately Baht 10,398.41 million in 1997 and Baht 5,203.83 million in 1996. Certain portions of debts incurred from the aforesaid investments, amounting to approximately Baht 3,317.85 million in 1997 and Baht 340.17 million in 1996 were converted to long-term liabilities, and amounting to Baht 1,338 million in 1997 were converted to short-term bonds, whilst payments of the remaining balances shall be made in cash. As at December 31, 1997 and 1996, outstanding debts in the balance sheets relating to the aforesaid investments, other than those converted to long-term liabilities and short-term bonds, amounting to approximately Baht 4,859.12 million in 1997 and Baht 670.08 million in 1996 are included in accounts payable, and amounting to approximately Baht 0.39 million in 1997 and Baht 0.21 million in 1996 are included in advances from related parties, and amounting to approximately Baht 70.73 million in 1997 and Baht 21.66 million in 1996 are included in other current liabilities.

See note to financial statements 14

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Notes to financial STATEMENTS ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED AND SUBSIDIARY DECEMBER 31, 1997 AND 1996

NOTE 1 - ECONOMIC ENVIRONMENT AND BASIS OF PRESENTATION In 1997, certain Asia Pacific countries, including Thailand, experienced economic difficulties relating to currency devaluation and slowdown in growth. Accordingly, the Thai government sought assistance from the International Monetary Fund to alleviate the economic crisis and improve the economy over time. The financial statements for the year ended December 31, 1997 have been presented on a going concern basis and in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year and reflect the management's current assessment of the possible impact of this economic situation on the financial position of the Company and subsidiary. The operations of the Company and subsidiary as from the year ended December 31, 1997 have been affected and may continue to be influenced for the foreseeable future by the economic conditions in Thailand and the Asia Pacific Region in general. The ultimate effect that these uncertainties will have on stated values or classifications of assets and liabilities at balance sheet date can not presently be determined. The financial statements for the year ended December 31, 1997 therefore may not necessarily include all adjustments that might ultimately result from these economic conditions due to such adjustments being both uncertain and unquantifiable. The accompanying consolidated financial statements of Advanced Info Service Public Company Limited and its subsidiary and the separate financial statements of Advanced Info Service Public Company Limited have been prepared in conformity with generally accepted accounting principles and in accordance with the requirements of the Stock Exchange of Thailand. The financial statements for the years ended December 31, 1997 and 1996 have therefore been presented in line with the recommendation of the Stock Exchange of Thailand. The consolidated financial statements for the years ended December 31, 1997 and 1996 include the financial statements of the Company and Shinawatra Paging Company Limited with 59.99% shareholding in such company. All significant intercompany transactions between the Company and its subsidiary have been eliminated in the preparation of these consolidated financial statements. NOTE 2 - GENERAL INFORMATION Advanced Info Service Public Company Limited and its subsidiary are parts of the Shinawatra Computer and Communications Group. Shinawatra Computer and Communications Public Company Limited is the parent company of Advanced Info Service Public Company Limited with 54.34% and 57.69% shareholding as at December 31, 1997 and 1996, respectively. The Company and its subsidiary are principally engaged in four main business operations; the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM under a concession received from the Telephone Organization of Thailand, under an agreement dated March 27, 1990; the operations of a DIGITAL DISPLAY PAGING SYSTEM under a concession received from the Telephone Organization of Thailand, under an agreement dated December 19, 1989; pagers rental and the trading of pagers. Under the aforesaid agreements made with the Telephone Organization of Thailand, the Company and its subsidiary have to pay annual fees to the Telephone Organization of Thailand based on certain percentage of certain service income or at the minimum fees as specified in those agreements, whichever is higher. However, under the letter dated March 4, 1997 from the Telephone Organization of Thailand, no annual fee will be charged to the subsidiary company as from March 1, 1997 since the said fee has been waived by the Telephone Organization of Thailand, while the said subsidiary has to reduce fee of pager service charging to its customers. 15

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. In addition, the Company and its subsidiary, according to the aforesaid agreements, have to transfer their ownership of certain equipment and other assets procured by the Company and its subsidiary for the operations of a 900-MHZ CELLULAR TELEPHONE SYSTEM and a DIGITAL DISPLAY PAGING SYSTEM to the Telephone Organization of Thailand on the dates of their completion of installation. As at December 31, book values of the aforementioned equipment and other assets presented in the financial statements are as follows: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Book values of equipment and other assets which have been transferred to and/or ready to be transferred to the Telephone Organization of Thailand Costs of equipment and other assets under construction and installation Total

1996

1997

1996 Million Baht

22,807.40

15,381.26

21,948.18

14,556.26

989.30

211.15

988.67

208.87

23,796.70

15,592.41

22,936.85

14,765.13

The aforementioned equipment and other assets are presented as costs of mobile phone and pager networks under concession agreements in the balance sheets and amortized over the remaining period of each agreement. Periods of concessions obtained from the Telephone Organization of Thailand have been granted until September 30, 2015 for Advanced Info Service Public Company Limited, and until June 11, 2005 for Shinawatra Paging Company Limited. NOTE 3 - TRANSACTIONS WITH RELATED PARTIES The accompanying consolidated financial statements of Advanced Info Service Public Company Limited and its subsidiary and the separate financial statements of Advanced Info Service Public Company Limited include transactions with related parties. The basis of transactions occurred among the Company and related parties is similar to the basis of those transactions dealt with non-related parties. Outstanding balances with related parties as at December 31 are summarized as follows: Balances receivable from related parties which are included in accounts and notes receivable comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

The parent company A subsidiary company Other related companies Total

0.16

1996

1997

0.53

Million Baht 0.08 0.38

1996

0.03

7.69

0.80

0.54

0.71

7.85

1.33

0.65

1.09

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Balances payable to related parties which are included in accounts payable and accrued expenses comprise: Consolidated Balance Sheets 1997

The parent company A subsidiary company Other related companies Accrued interest expense on bonds payable to the parent company Accrued interest expense on bonds payable to an other shareholder Total

Company's Separate Balance Sheets

1996

60.13

215.46

1997

1996

Million Baht 60.13 215.46

0.20

0.17

111.82

104.37

104.85

91.24

4.11

121.77

297.83

319.83

291.06

306.87

Short-term loans and advances to related parties comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Short-term loans to other related companies Advances to the parent company Advances to other related companies Amounts received from customers on behalf of the Company and subsidiary such as deposits, registration fees, service fees and sales of pagers Less Provision for loss on collection of advances to related parties Total

1996

1997

1996

Million Baht -

4.50

125.50

9.22

103.55

9.22

103.55

24.10

141.90

0.60

0.61

218.85

119.79

191.39

119.79

256.67

490.74

201.21

223.95

0.37 256.30

0.37 490.37

0.37

200.84

223.58

Short-term loans to other related companies represent loans with interest at the approximate minimum rate of bank overdraft and loan from bank. Advances to parent and other related companies mainly derived from payments made by the Company and its subsidiary on behalf of those companies. Short-term loans and advances to an other related company in the consolidated balance sheets as at December 31, 1996 amounting to approximately Baht 246.81 million, had been financially supported by the shareholders of the said related company based on their proportionate shareholdings. Advances from related parties comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Advances from the parent company Advances from the related companies Total

1996

1997

Million Baht 8.92 0.35

1996

8.95

0.39

79.08

68.37

0.45

1.08

88.03

68.76

9.37

1.43

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Advances from parent and other related companies mainly derived from the Company's subsidiary purchase of fixed assets from an other related company and payments made by those companies on behalf of the Company and its subsidiary. The said balances do not represent balances with subsidiary company in the Company's separate financial statements. Short-term bonds at December 31 represent unsecured bonds totaling 2,130,000 units, Baht 1,000 per unit, and are summarized by type of bondholders as follow: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

1996

1997

1996 Million Baht

The parent company An other shareholder Total

530.00

1,600.00

2,130.00

The said short-term bonds are repayable as from February 16, 1998 through March 27, 1998 with the fixed interest rate at 13% per annum. Under the agreements between the Company and the Thai Farmers Bank Public Company Limited, whereas the latter has been appointed as bonds registrar and has been authorized to to offer and to sell the said short-term unsecured bonds, the Company agrees to pay fees and other expenses to the said bank as prescribed in those agreements. Long-term bonds at December 31, 1997 represent unsecured bonds totaling 1,000,000 units, Baht 1,000 per unit, invested by an other shareholder. The said long-term bonds are repayable on December 15, 2000. Interest rate of the said bonds is at the average rate of Minimum Loan Rate of the Thai Farmers Bank Public Company Limited and the Bangkok Bank Public Company Limited. Under the agreements between the Company and the Thai Farmers Bank Public Company Limited, the Company agrees to pay fees and other expenses to the said bank as prescribed in those agreements. Significant transactions with related parties for the years ended December 31, 1997 and 1996 are summarized as follows: Consolidated Company's Separate Financial Statements Financial Statements 1997

1996

1997

1996 Million Baht

The parent company Costs of rental and other services Costs of consulting and management services Purchases of equipment for general operations Purchases of equipment for the operations of mobile phone and pager networks Service Income Sales of pagers Interest income Interest expense on bonds payable Subsidiary company Costs of rental and other services Service Income

127.03

182.81

127.03

182.79

168.00

240.00

168.00

240.00

0.56

130.77

0.56

130.59

226.57

258.44

226.57

250.83

4.11

3.29

2.96

2.69

0.05

1.89

12.43

2.39

1.76

0.39

0.55

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Consolidated Company's Separate Financial Statements Financial Statements 1997

1996

1997

1996 Million Baht

Other related parties Costs of rental and other services Cost of advertisement Costs of consulting and management services Purchases of equipment for general operations Purchases of property, equipment and other assets (Note 27) Purchases of equipment for the operations of mobile phone and pager networks Service Income Sales of pagers Interest income Interest expense on bonds payable to other related companies Interest expense on bonds payable to an other shareholder

480.41

273.47

423.30

216.08

312.74

345.05

304.23

332.84

10.00

96.51

4.28

96.51

4.28

217.15

189.67

1.53

188.26

1.53

10.42

18.37

8.74

15.80

13.55

8.58

47.33

8.54

160.96

Transactions other than those mentioned previously are as follows: â&#x2021;&#x2019; The Company has issued a Letter of Comfort to a bank to support credits obtained by a subsidiary in the amount of Baht 75 million. â&#x2021;&#x2019; At December 31, 1997, the Company had hired the parent and other related companies relating to the construction and installation of equipment for the operations of mobile phone network and to receive satellite transponder services as follows: Consolidated Company's Separate Financial Statements Financial Statements Commitments with the parent company Commitments with other related companies Total

10.86

Million Baht 10.86

409.99

420.85

â&#x2021;&#x2019; The Company and its subsidiary have entered into lease and related service agreements with its parent and other related companies covering their office spaces, consulting and management services, and cars for periods ranging from 2 months to 17 years with options to renew. The Company and its subsidiary are committed to pay monthly rental and service fees in respect of the said agreements as follows: Consolidated Company's Separate Financial Statements Financial Statements Commitments with the parent company Commitments with other related companies Total

11.54

Million Baht per Month 11.54

18.20

15.14

29.74

26.68

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Revenue and Cost of Revenue Recognition ⇒ The Company and its subsidiary recognize income from mobile phone and pager services when said services are rendered to customers. All service costs incurred during the year are treated as period cost. ⇒ The subsidiary recognizes sale and cost of sale when merchandise is delivered to customer. ⇒ Revenue from equipment rental is recognized over the period of and at the rate prescribed in each agreement. Accounts and Notes Receivable The Company and its subsidiary provide allowance for doubtful accounts which is equivalent to the estimated collection losses. The estimated losses are based on collection experience and the management estimates. Inventories Inventories are valued at the lower of cost or net realizable value. Cost of inventories is determined on the moving average method. In considering the realizable value, due allowance is made for all obsolete and slow-moving items. Investments Method of recording of Investments in the Company's separate financial statements Investments in subsidiary company is recorded by using the equity method of accounting, while investments in share capital of companies, which are not subsidiaries or associates, are recorded by using the cost method and less adjustments relating to the decline in values of investments. The excess of the cost of investment in the subsidiary company over its book value at the date near the acquisition is included in investments, and is amortized by the straight-line method over a period of 15 years. The proportionate share in net income of the subsidiary company for the years ended December 31, 1997 and 1996, after eliminating all significant gains or losses deriving from intercompany transactions incurred by the Company and its subsidiary, and less amortization of the excess of the cost of investment in the subsidiary company over its book value at the date near the acquisition, are shown as net result of investment in the subsidiary company in the statements of income. The recording of investment in the subsidiary company by using the equity method has been made for the purpose of reflecting the status of and return on investment in the said company. The Company, therefore, does not take into consideration the net result of investment in the subsidiary company for the years ended December 31, 1997 and 1996 in the income tax computation for such years. Method of recording of Investments in the consolidated financial statements Investment in share capital of companies, which are not subsidiaries or associates, are recorded by using the cost method and less adjustments relating to the decline in values of investments. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed by the straight-line method based on the estimated useful lives of assets of 1- 20 years. In considering the recoverability of equipment, due allowance is made for all obsolete equipment items.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Depreciation and amortization for 1997 and 1996 are summarized as follows: 1997 Recorded in the consolidated statements of income Recorded in the Company's separate statements of income

1996

Million Baht 279.24 166.70 236.28

131.78

The Company has entered into a number of financial lease agreements to obtain vehicles for its business operations. For the financial reporting purpose, vehicle under each financial lease and its related obligation are recorded at the discounted minimum lease amount, using the discount rate as prescribed in each lease agreement, or the fair market value at the date of each agreement, whichever is lower. Depreciation of vehicles under financial leases is computed by the straight-line method based on the estimated useful lives of vehicles of 5 years. Depreciation of vehicles under financial leases for 1997 and 1996, amounting to approximately Baht 0.96 million and Baht 0.24 million, respectively, are included in the total depreciation and amortization for 1997 and 1996 as disclosed in the preceding paragraph. Goodwill Goodwill in the consolidated financial statements represents the excess of the cost of investment in shares of a subsidiary company over its book value at the date near the acquisition. Goodwill is amortized by the straight-line method over a period of 15 years. Amortization of goodwill for 1997 and 1996 amount to approximately Baht 36.60 million each year. Costs of Mobile Phone and Pager Networks Under Concession Agreements Costs of mobile phone and pager networks under concession agreements represent costs of certain equipment and other assets which have been transferred and/or have to be transferred to the Telephone Organization of Thailand. Costs of certain equipment and other assets which have been transferred and/or ready to be transferred to the Telephone Organization of Thailand are amortized over the remaining period of each agreement until September 30, 2015 for Advanced Info Service Public Company Limited, and until June 11, 2005 for Shinawatra Paging Company Limited. Amortization of costs of mobile phone and pager networks under concession agreements for 1997 and 1996 are summarized as follows: 1997

Recorded in the consolidated statements of income Recorded in the Company's separate statements of income

1996

Million Baht 1,020.43 827.09 912.58

741.02

Deferred Charges Deferred charges represent expenditure relating to the increase of share capital, commitment fees of long-term loans, costs of long-term leases for spaces for base stations, expenditure relating to the increase of power of electricity at base station, and cost of additional supplementary equipment for the operation of pager network other than those specified in the concession agreement and have been transferred to the Telephone Organization of Thailand. The following amortization methods are used: ⇒ Expenditure relating to the increase of share capital is amortized over a period of five years. ⇒ Commitment fees of long-term loans are amortized over the period of each loan agreement. ⇒ Costs of long-term leases for spaces for base stations are amortized over the period of each lease agreement. ⇒ Expenditure relating to the increase of power of electricity at base stations are amortized over the remaining period of concession agreement.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. ⇒ Cost of additional supplementary equipment for the pager network other than those specified in the concession agreement and have been transferred to the Telephone Organization of Thailand are amortized over a period of five years. Amortization of deferred charges for 1997 and 1996 are summarized as follows: 1997

Recorded in the consolidated statements of income Recorded in the Company's separate statements of income

1996

Million Baht 33.40 32.10 33.35

32.10

Foreign Currency Transactions Foreign currency transactions are recorded in baht at the rates of exchange ruling on the transaction dates. Outstanding assets and liabilities in foreign currencies at the balance sheet date are translated into baht at the exchange rates ruling on that date. Translation gain or loss is included as revenue or expense in the statements of income. Outstanding assets and liabilities in foreign currencies under forward exchange contracts at the balance sheet date are recorded in accordance with the U.S. Financial Accounting Standard No. 52. Premiums or discounts under forward exchange contracts are amortized to revenue or expense in the statements of income over the period of each forward exchange contract. Earnings Per Share Earnings per share is computed by using the following methods: ⇒ Earnings per share in the consolidated financial statements for the years ended December 31, 1997 and 1996 are computed by dividing consolidated net income for each year, after considering minority interests in subsidiary, by the number of common shares outstanding at the end of each year. ⇒ Earnings per share in the Company's separate financial statements for the years ended December 31, 1997 and 1996 are computed by dividing net income for each year by the number of common shares outstanding at the end of each year. NOTE 5 - SEGMENT INFORMATION The business operations of the Company and its subsidiary, as reflected in the consolidated financial statements, are classified into four major segments; the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM network; the operations of a DIGITAL DISPLAY PAGING SYSTEM network; pagers rental; and the trading of pagers. Financial information by business segment for the years ended December 31, 1997 and 1996 are shown as follows: 1997

1996 Million Baht

Service income and Pager Rental Income Mobile phone service Pager service Pager Rental Income Adjustments of intercompany transactions Total Revenues from Sales Sales of pagers

13,433.72

11,375.20

1,474.26

1,348.00

2.80

(2.78)

(2.31)

14,908.00

12,720.89

258.03

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. 1997

1996 Million Baht

Total Revenues from Services and Sales Mobile phone service Pager service Pager Rental Income Sales of pagers Adjustments of intercompany transactions Total

13,433.72

11,375.20

1,474.26

1,348.00

2.80

258.03

Operating Profit (Loss) Mobile phone service Pager service Pager Rental Income Sales of pagers Adjustments of intercompany transactions Total

(2.78)

(2.31)

15,166.03

12,720.89

5,499.46

4,859.02

418.71

164.92

(5.14)

5,885.43

5,023.94

(27.60)

Other income Interest expense Directors' remuneration Other expenses Net income before income tax and adjustment of net effect derived from the change in exchange rate system Income tax Net income before adjustment of net effect derived from the change in exchange rate system Adjustment of net effect derived from the change in exchange rate system Net income before considering minority interests in subsidiary Less Share of net income of subsidiary to minority interests Net income

409.05

594.51

(572.17)

(253.08)

(2.48)

(2.02)

(76.19)

(77.65)

5,643.64

5,285.70

(1,797.82)

(1,664.59)

3,845.82

3,621.11

(1,239.79)

2,606.03

3,621.11

82.95

57.83

2,523.08

3,563.28

1,477.48

568.41

82.17

97.19

21.11

Classifications of assets by business segment as at December 31, Property and Equipment - net Segment-Mobile phone service Segment-Pager service Segment-Sales of pagers Segment- Pagers rental Adjustments of intercompany transactions Total

49.22

Other Assets Net book value of equipment and other assets which have been or have to be transferred to the Telephone Organization of Thailand Mobile phone service Pager service Other assets Adjustments of intercompany transactions Total Total Assets

(0.05)

1,629.93

665.55

22,936.85

14,765.13

859.85

827.28

9,901.85

5,518.05

33,698.55

21,110.46

35,328.48

21,776.01

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Operating profit (loss) by each segment represents revenue by each segment less the related cost of revenue and selling and administrative expenses. There is no intertransaction among those segments. Property and equipment by segment are those assets used in the operations of each segment. Other assets comprise: cash in hand and at banks, short-term investments, accounts and notes receivable, shortterm loans and advances to related parties, inventories, other current assets, investments, costs of mobile phone and pager networks, deferred charges, goodwill and others. NOTE 6 - SHORT-TERM INVESTMENTS Short-term investments at December 31, represent time deposits with banks and other financial institutions and investments in bills of exchange of which their withdrawal periods are within 1 year, comprise: Consolidated Balance Sheets 1997

Time deposits with local and foreign banks Time deposits with other financial institutions Investments in bills of exchange Total

1996

Company's Separate Balance Sheets 1997

1996

Million Baht 2,082.00 57.78

2,267.00

118.51

1,160.00

905.00

1,989.94

1,790.68

4,256.94

1,278.51

3,872.68

962.78

Investments in bills of exchange as at December 31, 1997 in the consolidated balance sheets and in the Company's separate balance sheets are shown net of discount, determined from the remaining periods of those bills of exchange, amounting to approximately Baht 20.06 million and Baht 19.31 million, respectively. NOTE 7 - ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable at December 31 were shown net of allowance for doubtful accounts as follows: Consolidated Balance Sheets 1997

Accounts and notes receivable Accounts and notes receivable from related parties (Note 3) Less Allowance for doubtful accounts Accounts and Notes Receivable - net

3,401.58

1996 2,475.21

Company's Separate Balance Sheets 1997

1996

Million Baht 3,187.79 2,233.81

7.85

1.33

0.65

1.09

3,409.43 257.18

2,476.54 277.21

3,188.44 177.30

2,234.90 200.60

3,152.25

2,199.33

3,011.14

2,034.30

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 8 - INVENTORIES Inventories at December 31, comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Finished goods Spare part for repair

63.47 28.33 91.80

Less Allowance for obsolescence Inventories - net

25.80 66.00

1996

1997

1996 Million Baht

NOTE 9 - OTHER CURRENT ASSETS Other current assets at December 31, comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Other receivables Prepaid expenses Refundable value added tax Interest receivables Others Total

1996

1997

1996

309.01

203.15

Million Baht 307.76 198.26

146.71

108.12

136.28

100.24

404.35

102.22

403.19

49.85

18.81

11.35

14.72

5.23

28.39

39.14

25.17

40.84

907.27

463.98

887.12

394.42

Other receivables mainly comprise service cost to be reimbursed by International network operators and value added tax to be claimed from the Telephone Organization of Thailand. NOTE 10 - ASSETS PLEDGED AS COLLATERAL As at December 31, 1996 Time deposits with banks, of the Company and its subsidiary, amounting to approximately Baht 7.50 million and 10.71 million were pledged as collateral for credits obtained from financial institutions. NOTE 11 - INVESTMENTS Investments at December 31, 1997 comprise investments in share capital of the following companies % Holding

Paid-up Capital

Cost Method

Equity Method

Recorded Values

Dividend Income

Values (Million Baht)

Related Parties Subsidiary company Shinawatra Paging Company Limited Other related company Shinawatra Datacom Company Limited Total Related Parties

59.99

350.00

753.76

763.42

18.00

695.30

62.37

763.42

105.00

62.37

825.79

Others Fonepoint (Thailand) Company Limited

17.80

15.00

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. Investments at December 31, 1996 comprise investments in share capital of the following companies: % Holding

Paid-up Capital

Cost Method

Equity Method

Recorded Values

Dividend Income

Values (Million Baht)

Related Parties Subsidiary company Shinawatra Paging Company Limited Other related company Shinawatra Datacom Company Limited Total Related Parties

59.99

350.00

753.76

780.59

18.00

695.30

63.86

780.59

63.86

844.45

Others Fonepoint (Thailand) Company Limited

17.80

15.00

Shinawatra Paging Company Limited is principally engaged in the operations of a DIGITAL DISPLAY PAGING SYSTEM network, pagers rental and the trading of pagers. Shinawatra Datacom Company Limited is principally engaged in the operations of simultaneous voice and data transfer system known as DataNet, certain directors of Shinawatra Datacom Company Limited are having their directorship in Advanced Info Service Public Company Limited. The above investments in an other related company and an other company as at December 31, 1997 and 1996 are shown net of adjustments relating to the decline in values of investments amounting to approximately Baht 50.70 million and Baht 49.20 million, respectively. The Company does not have significant influence in the management of those companies. NOTE 12 - PROPERTY AND EQUIPMENT Property and equipment at December 31 comprise: Estimated Useful Lives (Years)

Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Land Buildings and improvements Leasehold buildings improvements Furniture, fixtures and office equipment Vehicles Vehicles under financial leases Assets under construction and installation Prepayments on purchases of assets Less Accumulated depreciation and amortization Less Allowance for obsolete equipment Property and Equipment - net

1996

1997

Million Baht 2.52 2.52

1996

10.97

5.92

5-20

62.85

32.73

24.10

7.57

5-15

101.97

81.88

61.10

40.41

1-10

2,022.84

923.50

1,759.80

743.28

33.15

29.20

28.39

23.47

4.77

3.43

4.77

3.43

84.36

11.69

84.36

11.69

2.76

2,320.91 683.79

1,091.11 425.56

1,965.04 487.57

832.37 263.96

1,637.12 7.19

665.55

1,477.47

568.41

1,629.93

665.55

1,477.47

568.41

As at December 31, 1997, land purchased by the Company's subsidiary from Pager Sales Company Limited, at the value of approximately Baht 5.05 million, was in the process of transferring the ownership to the subsidiary.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 13 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31, comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Other suppliers Related parties (Note 3)

7,379.63

Less Excess of the current value of purchased foreign currency, in relation to the above payable, over the value under contracted forward exchange rate Accounts payable and accrued expenses- net

1996 4,470.98

1997

1996

Million Baht 7,247.25 4,301.81

297.83

319.83

291.06

306.87

7,677.46

4,790.81

7,538.31

4,608.68

3.30

3.32

7,674.16

4,790.81

7,534.99

4,608.68

NOTE 14 - UNUTILIZED SHORT-TERM AND LONG-TERM LOAN FACILITIES Unutilized short-term and long-term loan facilities of the Company and its subsidiary as at December 31, 1997 are classified by type of currencies and shown as follows: Million Baht Million US$ Short-term Long-term Short-term Long-term Advanced Info Service Public Company Limited Advanced Info Service Public Company Limited and subsidiary

13.00

89.21

320.00

18.00

89.21

Terms and conditions of unutilized long-term facilities are similar to those long-term loans described in Note 16, while terms and conditions of unutilized short-term loans facilities are not currently specified and subject to mutual agreement between the Company and its subsidiary and lenders in due course. NOTE 15 - OTHER CURRENT LIABILITIES Other current liabilities at December 31, comprise: Consolidated Company's Separate Balance Sheets Balance Sheets 1997

Income tax payable Other payables Equipment payables Value added tax and withholding income tax payables Others Total

1996

1997

1996

360.80

817.31

297.76

Million Baht 775.85

122.36

50.53

118.73

42.85

68.59

22.65

67.15

21.35

13.13

13.61

10.90

9.04

35.11

17.27

22.44

10.93

599.99

921.37

516.98

860.02

Other payables mainly comprise service costs to be charged from International network operators.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 16 - LONG-TERM LIABILITIES Long-term liabilities at December 31, comprise:

Consolidated Balance Sheets 1997

Loans from foreign banks Syndicated loans from foreign banks Loans from foreign finance companies Loans from foreign company Liabilities under financial leases Less Excess of the current value of purchased foreign currency, in relation to the above loans, over the value under contracted forward exchange rate Less Current portion of long-term liabilities Long-term Liabilities - net

1996

Company's Separate Balance Sheets 1997

1996 Million Baht 333.58

618.23

333.58

618.23

8,417.41

667.16

7,180.96

1,868.25

1,189.51

1,868.25

1,189.51

79.88

108.89

79.88

108.89

3.59

2.95

3.59

2.95

10,987.36

2,302.09

9,750.91

1,634.93

2,377.07

21.74

1,803.62

14.46

8,610.29 2,025.94

2,280.35 462.07

7,947.29 1,362.94

1,620.47 462.07

6,584.35

1,818.28

6,584.35

1,158.40

Outstanding long-term loans in foreign currencies at the end of each year are translated into baht at the exchange rates ruling on that date and are shown net of excess of the current value of purchased foreign currency over the value under contracted forward exchange rate Loans From Foreign Banks Loans from foreign banks as at December 31, 1997 and 1996 comprise loans obtained from two banks under two loan agreements. Both loans are repayable in lump sum on December 26, 1999. Interest rates and interest payments are to be mutually agreed with the lenders at the 1 month LIBOR or 3 month LIBOR or 6 month LIBOR plus the rates as prescribed in each of the said agreements. As at December 31, 1997 and 1996, outstanding loan balances under the aforesaid two loan agreements amount to approximately Baht 618.23 million and Baht 333.58 million, respectively. Syndicated Loans From Foreign Banks Syndicated loans from foreign banks as at December 31, 1996 comprise loans under an agreement obtained by a subsidiary company from eight banks and are repayable in a lump sum on September 5, 1998, while interest rate and interest payments under the said loan agreement are to be mutually agreed with the lenders at the 1 month SIBOR or 3 month SIBOR or 6 month SIBOR plus the rate as prescribed in the said agreement. Syndicated loans from foreign banks as at December 31, 1997 comprise loans under four loan agreements. Loan under the first agreement obtained by a subsidiary company from the same lenders and under the same loan agreement as at December 31, 1996. Loan under the second agreement obtained by the Company from fourteen banks and are repayable in five equal semi-annual installments commencing April 9, 1998, while interest rate and interest payments under the said loan agreement are to be mutually agreed with the lenders at the 1 month LIBOR or 3 month LIBOR or 6 month LIBOR plus the rate as prescribed in the said agreement. Loans under the third agreement and fourth agreement are obtained by the Company from twelve banks and three banks, respectively. Both loan agreements are repayable in four equal semi-annual installments commencing March 30, 1999 and April 2, 1999, respectively. Interest rate and interest payments under both loan agreements are to be mutually agreed with the lenders at the 3 month LIBOR or 6 month LIBOR plus the rate as prescribed in the said agreement.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. As at December 31, 1997 and 1996 outstanding balances under the said four syndicated loan agreements in the consolidated balance sheets amounted to approximately Baht 8,417.41 million and Baht 667.16 million, respectively. As at December 31, 1997 outstanding balances under the said three syndicated loan agreements in the Company's separate balance sheets amounted to approximately Baht 7,180.96 million. Loans From Foreign Finance Companies Loans from a foreign finance company as at December 31, 1996 comprise loans under five loan agreements. Loans under the first and second agreement are repayable in fifteen equal simi-annual installments commencing March 15, 1993 and June 23, 1993, respectively. Interest payments under the said two loan agreements are payable semi-annually at the rates ranging from 6.78% - 7.40% per annum. Loan under the third agreement is repayable in four equal semi-annual installments commencing January 15, 1997. Interest rates and interest payments is at the 6 month LIBOR plus the rates as prescribed in the said agreement. Loan under the fourth agreement is repayable in ten equal semiannual installments commencing July 15,1996. Interest payment under the said loan agreement is payable semi-annually at the rate of 6.88% per annum. Loan under the fifth agreement is repayable in nine equal semi-annual installments commencing January 15, 1997. Interest payment under the said loan agreement is payable semi-annually at the rate of 6.10% per annum. Loans from foreign finance companies as at December 31, 1997 comprise loans obtained from two finance companies under six loan agreements. Loans from the first finance company under five loan agreements obtained from the same lenders and the same loan agreements as at December 31, 1996. Loan from the second finance company is repayable in six equal semi-annual installments commencing September 15, 1999. Interest rate and interest payments are at the 6 month LIBOR. As at December 31, 1997 and 1996, outstanding loan balances obtained from two finance companies under six loan agreements amount to approximately Baht 1,868.25 million and Baht 1,189.51 million, respectively. Loans From Foreign Company Loans from a foreign company as at December 31, 1997 and 1996 represent loans obtained 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 semiannually 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. As at December 31, 1997 and 1996, outstanding balances under the aforesaid four loan agreements amount to approximately Baht 79.88 million and Baht 108.89 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 December 31, 1997, Advanced Info Service Public Company Limited has outstanding loan balances obtained from a foreign financial institution under two agreements amounting to US Dollar 16.97 million and their repayments are scheduled within January 2001. Debt/Equity Ratio and Current Ratio stipulated under the first loan agreement are 1.75:1 and 0.75:1, respectively. Debt/Equity Ratio 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 has been achieving progress in re-negotiating with the aforesaid financial institution to make allowances for the Company relating to the aforesaid loan agreements and the approval is expected to be given by the said foreign financial institution.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. 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 December 31, 1997, 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: Year

Amount (Baht)

1998 1999 2000 2001

709,128.35 876,049.45 1,082,576.51 920,364.54

Total

3,588,118.85

Payment commitments for 1998 are included in current portion of long-term liabilities as described above. NOTE 17 - CAPITALIZATION OF THE BORROWING COSTS The Company and its subsidiary do not capitalize interest incurred relating to the acquisition and installation of assets to costs of tools, equipment and other assets for the operations of the 900-MHz CELLULAR TELEPHONE SYSTEM and the DIGITAL DISPLAY PAGING SYSTEM due to the installation periods of most assets are short. In addition, the relevant borrowing costs which should be capitalized to costs of those tools, equipment and other assets transferred to the Telephone Organization of Thailand are not significant. No capitalization of the borrowing costs was made to costs of those assets which need not to be transferred to the Telephone Organization of Thailand as they are mostly funded by working capital derived from operations. NOTE 18 - OTHER INCOME Other income for the years ended December 31, comprise: Consolidated Statements of Income 1997

Interest income Net gain on exchange Others Total

1996

Company's Separate Statements of Income 1997

1996 Million Baht 481.14

340.75

568.75

289.16

7.88

12.43

60.42

25.76

37.41

1.28

409.05

594.51

339.00

482.42

NOTE 19 - DIRECTORS' REMUNERATION Directors' remuneration represents meeting fees and gratuities as approved by the shareholders of Advanced Info Service Public Company Limited and a subsidiary in their Annual General Meetings.

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 20 - OTHER EXPENSES Other expenses for the years ended December 31, comprise: Consolidated Statements of Income 1997

Amortization of goodwill Estimated loss on collection of other receivable Adjustments relating to values of inventories Provision for loss on obsolete equipment Losses from written off assets Adjustments on investment and other Total

1996

Company's Separate Statements of Income 1997

1996

36.60

Million Baht -

39.46

25.80

5.09

3.71

1.50

1.59

1.50

1.89

76.18

77.65

5.21

41.35

7.19

NOTE 21 - 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 22 - ADJUSTMENT OF NET EFFECT DERIVED FROM THE 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 losses derived from the change in exchange rate system incurred during the reporting year as expenses in the statements of income. As at December 31, 1997, the Company and its subsidiary have significant outstanding assets and liabilities in foreign currencies as follows: Consolidated Company's Separate Balance Sheets Balance Sheets Million

Assets U.S. Dollar Liabilities U.S. Dollar German Mark Norway Krone Hong Kong Dollar 31

40.00

287.47

260.86

13.28

7.83

1.67

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. According to the above information, foreign currency assets shall be received within 1998 while future payments of liabilities are summarized as follows: Consolidated Financial Statements

Company's Separate Financial Statements Million

Liabilities and payment periods Within 1998 U.S. Dollar German Mark Norway Krone Hong Kong Dollar After 1998 U.S. Dollar

125.75

99.14

13.28

7.83

1.67

161.72

Assets and liabilities in foreign currencies as shown above, represent time deposits with foreign banks, long-term loans and related accrued interest expense, and foreign accounts payable. Long-term loans and accrued interest expense are payable in accordance with the conditions in loan agreements as described in Note 16, while foreign accounts payable are mostly payable within 1998. From the liabilities in foreign currencies as shown above, amounts of US$ 90.74 million in the book of Advanced Info Service Public Company Limited and US$ 26.56 million in the book of Shinawatra Paging Company Limited have been hedged against the risk of currency losses on loan repayments. Net effect derived from the change in exchange rate system as shown in the statements of income is calculated based on the guideline of the Institute of Certified Accountants and Auditors of Thailand. Further effects derived from the change in exchange rate system, incurred between January 1, 1998 and February 13, 1998, to the financial position and results of operations of the Company and its subsidiary based on their outstanding assets and liabilities as at December 31, 1997 are as follows: Net gain on Exchange Advanced Info Service Public Company Limited Advanced Info Service Public Company Limited and subsidiaries

Decrease in Decrease in Assets Liabilities

102.96

31.74

Million Baht 134.70

102.99

31.74

134.73

NOTE 23 - APPROPRIATION OF EARNINGS OF ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED The shareholders of Advanced Info Service Public Company Limited at the Annual General Meeting held on April 29, 1996 approved the interim dividend and legal reserve appropriated during 1995 of Baht 468 million and Baht 61.75 million, respectively. Additional dividend and legal reserve of Baht 702 million and Baht 88.05 million, respectively, were also approved by such meeting. The shareholders of Advanced Info Service Public Company Limited at the Annual General Meeting held on April 25, 1997 approved the interim dividend and legal reserve appropriated during 1996 of Baht 702 million and Baht 89.50 million, respectively. Additional dividend and legal reserve of Baht 702 million and Baht 88.70 million, respectively, were also approved by such meeting. On August 11, 1997, the Board of Directors of Advanced Info Service Public Company Limited approved the interim dividend for 1997 in the amount of Baht 702 million. The shareholders of Advanced Info Service Public Company Limited at the Extraordinary Meeting held on October 16, 1997 approved the interim dividend for 1997 in the amount of Baht 702 million. 32

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. NOTE 24 - 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 25 - 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 26 - 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 rentals in respect of the said agreements as follows: Million Baht Per Month

Advanced Info Service Public Company Limited Advanced Info Service Public Company Limited and subsidiary

12.74 15.93

Letters of Guarantee At December 31, 1997, 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 For Advanced Info Service Public Company Limited and subsidiary

3,530.90 3,702.24

Contracts for Construction and Equipment Installation of Mobile Phone Network At December 31, 1997, 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 3,070.90 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 rentals 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 possible losses from future repayments of loans and the related interest, deriving from 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 2,779,205,269.32, and to exchange the related loan interest rates on US Dollars 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 baht principals ranging from 9.35 - 10.935% per annum. The periods of those nine agreements are covering 33

ANNUAL REPORT 1997 ADVANCED INFO SERVICE PLC. from March 5, 1996 to January 15, 2001. As of December 31, 1997, outstanding loan principals under those agreements amounted to US$ 108,393,482.62.

Forward Exchange Contracts In order to hedge against the risk of possible losses from future repayments of loans, interest and foreign payables, deriving from exchange rates under loans, interest and accounts payable in foreign currencies, the Company and its subsidiary have entered into four currency exchange agreements to exchange the total loan principal, interest and accounts payable from US$ 7,083,523.94 to Baht 332,064,995.80. The periods of these four agreements are covering from December 18, 1997 to April 9, 1998. As of December 31, 1997, outstanding loan principal, accrued interest expense and accounts payable under those agreements amounted to US$ 7,054,452.07. The Company has also entered into three sale forward contracts on October 22, 1997 to sell US$ 2,000,000 from October 27, 1997 to January 16, 1998 for the total contracted amount of Baht 79,000,000. Interest Rate Exchange Agreement In order to hedge against the risk of possible losses from interest payments, deriving from interest rates under foreign loans, the Company and its subsidiary have entered into two interest rate exchange agreements, to exchange the related loan interest rates on US Dollars principals of US$ 28,000,000 (comprise 6 month LIBOR and 6 month SIBOR plus the rate per annum as prescribed in each agreement) to the fixed rates on US Dollars principals ranging from 5.90 - 6.34% per annum. The periods of those two agreements are covering from March 15, 1996 to April 9, 2000. Equipment Purchase Agreement The Company's subsidiary, Shinawatra Paging Company Limited, has entered into an agreement with Thaimark Solutions Technology Company Limited in order to buy the said company's equipment for a total value of approximately Baht 2.49 million. NOTE 27 - OTHER INFORMATION On May 16, 1997, the Company's subsidiary, Shinawatra Paging Company Limited, has entered into an agreement with Pager Sales Company Limited in order to buy the said Company's assets for a total value of approximately Baht 154.86 million, comprise inventories at the total value of approximately Baht 98.63 million, accounts receivable at the total value of approximately Baht 37.15 million, and property and equipment at the total value of approximately Baht 19.08 million. On October 2, 1997, the Company's subsidiary, Shinawatra Paging Company Limited, entered into additional agreement with Pager Sales Company Limited in order to buy additional equipment from the said Company at the total value of approximately Baht 62.29 million. NOTE 28 - RECLASSIFICATION OF ACCOUNTS Certain accounts in the 1996 financial statements have been reclassified to conform with the 1997 presentation.