- 9 - 9. BANK OVERDRAFTS AND LOANS FROM FINANCIAL INSTITUTIONS The Company has overdraft lines with various local banks bearing interest at the minimum overdraft rate. The Company has loans from two foreign banks totalling approximately Baht 270 million (U.S. Dollars 6.33 million). The loans bear interest at the rate based on Singapore Inter Bank Offer Rate (SIBOR). Under the terms of the loan agreements, the Company shall undertake restrictions such as, maintenance of debt to equity ratio, the determination of minimum shareholders equity, must have prior written consent of the lender, if the Company will to declare or remit any dividend exceeding 50% of the net profit for each financial year, etc. 10. LONG-TERM LOANS The Company has long-term loan with a foreign bank totalling approximately Baht 170 million (U.S. Dollars 4 million). The loan bears interest at the rate based on London Inter Bank Offer Rate (LIBOR) and will be repayable in full amount in December 1998. Under the loan agreement, the Company and subsidiaries shall not create or have outstanding any security on or over their assets and the Company shall not pay dividend more than its consolidated net income, etc. The Company has a syndicated loan agreement with a group of foreign financial institutions totalling approximately Baht 773 million (U.S. Dollars 30 million). This loan bears interest at the rate based on Singapore Inter Bank Offer Rate (SIBOR) and will be repayable in full amount in September 1999. Under the agreement, the Company undertook among other things, the maintenance of debt to equity ratio, the ratio of their consolidated total borrowings to the consolidated shareholders funds and will not create more commitment on or over the Company and subsidiaries operating assets, etc. As at June 30, 1998, the Companys debt to equity ratio was 2.31:1 and the ratio of total borrowings to the shareholders funds was 1.38:1 computed based on the consolidated financial statements. The Company hedges its foreign exchange risk by entering into swap agreements with a foreign bank to fix foreign currency exchange rate of U.S. Dollars 30 million to Baht 773 million. These swap agreements had premium amounting to approximately Baht 35.3 million (approximately U.S. Dollars 0.8 million) per year up to September 1999. However, the Company will be liable to the lender if the foreign bank can not repay the loan to lender. - 10 - The subsidiary has a long-term loan with a local bank with credit line amounting to Baht 1,500 million, bearing interest at minimum loan rate per annum, with condition to repayable in twelve (12) semi-annually starting from December 1998 and secured by the mortgaged of the subsidiarys land and the existing construction and/or the future construction thereon and certain directors. 11. EURO CONVERTIBLE BONDS In April 1996, the Company issued Euro Convertible Bonds to be offered in the Luxembourg Stock Exchange amounting to U.S. Dollars 50 million (divided into 50,000 bonds at U.S. Dollars 1,000 par value). The bonds shall be effective for a period of five (5) years (up to April 2001). The bonds bear interest at the rate of 2.75% per annum payable annually through maturity on 11th April, 2001 and can be converted at the ratio of 1 bond : 245 common shares at the price Baht 103 per share (subject to adjustment in the circumstances described under terms and conditions of the Bonds - Conversion), with a fixed rate of exchange on conversion of Baht 25.235 = U.S. Dollars 1. The bondholders may exercise conversion rights from June 11, 1996 up to March 27, 2001. In addition, under certain condition, the Company may mandatorily redeem all or some of the bonds at the par value plus redemption premium at any date after 11th April, 1999. At the maturity date, all remaining bonds will be redeemed at U.S. Dollars 1,320 per share. As at June 30, 1998, the Company provided financial expense of redemption premium amounting to U.S. Dollars 320 per share by the straight-line method over a period of the bonds. In respect of the issuance of the bonds as referred to above, the Company increased its authorized share capital of 21 million shares in order to reserve the shares for the exercise of conversion rights of the bondholders. 12. AGREEMENTS 12.1 Lease agreements The Company has entered into two (2) land lease agreements with a related company to construct buildings for lease. These agreements shall be in effect for a period of thirty (30) years (up to December 2023 and December 2024 ) and can be renewed for a further period by giving written notice not less than one (1) year before the expiry dates. Under the condition in the agreements, the Company paid advance rental amounting to approximately Baht 439 million and is presented in the consolidated balance sheets under Assets for lease. The subsidiaries has entered into two (2) land lease agreements with a local company to construct building for lease. These agreements shall be in effect for a period of three (3) years and thirty (30) years (up to February 1999 and February 2029) and three (3) land lease agreements with a group of person and a person - 11 - to construct building for lease. These agreements shall be in effect for a period of thirty (30) years (up to August 2025, May 2027 and June 2030). Under the condition in the agreements, the subsidiaries shall pay advance rental and guarantee for leasehold rights amounting to approximately Baht 599.4million and Baht 298.6 million, respectively and monthly rental amounting to approximately Baht 16.9 million to Baht 122.4 million per year. As at June 30, 1998, the subsidiaries paid advance rental amounting to approximately Baht 332.6 million and is presented in the consolidated balance sheets under Assets for lease and paid guarantee for leasehold rights amounting to approximately Baht 298.6 million and is presented in the consolidated balance sheets under Other assets. The subsidiaries shall be received guarantee for leasehold rights since rental year twenty-first (21) up to thirtieth (30). These agreements can be renewed for the future period by giving written notice not less than one (1) year before the expiry dates. The Company and subsidiaries shall deliver the rights of the buildings and improvements thereon to the lessors on expiry dates. The Company has entered into an agreement for the sub-lease of land with a related company on which it will construct buildings for lease. This agreement shall be in effect for a period of twenty one (21) years and six (6) months (up to April 2015) and can be renewed for a period of ten (10) years. Under the condition in the agreement, the Company shall pay guarantee for leasehold rights amounting to approximately Baht 62 million which is presented in the consolidated balance sheets under Other assets and monthly rental under the rate specify in the agreement amounting to approximately Baht 2 million to Baht 10 million per year. The Company shall deliver the rights of the buildings and improvements thereon to the lessor on expiry date. The Company and subsidiary had entered into a space reservation agreement for sub-lease area in shopping center with a related company. This agreement shall be in effect for a period of thirty (30) years and can be renewed for further period. Under the condition in the agreement, the Company and subsidiary shall pay advance rental amounting to approximately Baht 155 million. As at June 30, 1998, the Company and subsidiary paid advance rental amounting to approximately Baht 147 million and is presented in the consolidated balance sheets under Assets for lease. - 12 - The subsidiary has entered into a land lease agreement with a local company to engage in the business of construction of shopping center. This agreement shall be in effect for a period of thirty (30) years (up to June 2030). Under the condition in the agreement, the Company shall pay advance rental amounting to approximately Baht 850 million and shall pay the monthly rental amounting to approximately Baht 6 million to Baht 21 million per year. As at June 30, 1998, the subsidiary paid for the advance rental amounting to approximately Baht 377 million and is presented in the consolidated balance sheets under Assets for lease. The subsidiary shall deliver the rights of the building and improvements the reon to the lessor on expiry date. 12.2 Reciprocal Agreement Under the terms of the agreement between the Company and a related company, the Company has been granted the right to construct the building on the leased property of the related company and to operate the building for the Companys benefits up to December 18, 2008. The agreement is renewable for a period of ten (10) years each. The Company shall deliver the rights of the building and improvements thereon to the landlord on expiry date. The Company is committed to pay compensation totalling Baht 96,272,000 which is payable in various installments up to 2008. It is the Companys policy to record the compensation amount to expenses over the period of the agreement. 12.3 Guarantee for leasehold right agreements The Company and subsidiaries had entered into various guarantee for leasehold right agreements to reserve shop in shopping center of Pinklao, Ram-indra, Pattaya, Rama III and Chonburi projects. As at June 30, 1998 and 1997, the Company and subsidiaries received guarantee for leasehold rights amounting to approximately Baht 139.8 million and Baht 222.1 million, respectively and is presented in the consolidated balance sheets under Guarantee for leasehold rights. - 13 - 13. COMMITMENTS AND CONTINGENT LIABILITIES As at June 30, 1998, 13.1 The subsidiary had entered into a long-term loan agreement with the line of Baht 1,000 million and a loan agreement by issuing promissory note with the line Baht 300 million with the local bank. The above loans are guaranteed by the Company and a related company and secured by transferring one land leasehold right and mortgaged of the Companys existing construction and/or the future construction thereon. However, as at June 30, 1998, the subsidiary has not yet withdrawn these loans. 13.2 The subsidiaries had commitments to pay for consultant fee for building design and management fee for various projects amounting to approximately Baht 208.80 million. 13.3 The Company and subsidiaries had contingent liabilities for letter of guarantee issues by banks in favour of a state enterprise totalling approximately Baht 56 million. 14. PRESENTATION OF FINANCIAL STATEMENTS AND ACCOUNTS RECLASSIFICATION The 1998 interim financial statements have been presented in accordance with the Ministerial Regulation No. 7 (B.E. 2539) issued under the Limited Public Company Act, B.E. 2535. Consequently, certain accounts in the 1997 interim financial statements have been reclassified to conform with the 1998 interim financial statements presentation.