NTERIM F/S AND CONSOLIDATED OF Q3/1997

Unaudited Reviewed Siam Makro Public Company Limited Page 5 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued Basis of preparation of the interim financial statements 1. These interim financial statements should be read in conjunction with the financial statements and the consolidated financial statements for the year ended December 31, 1996. Basis for consolidation 2. The consolidated financial statements include the financial statements of Siam Makro Public Company Limited and its subsidiaries as follows: % of interest Makro Properties Limited 99.99 Makro Auto Care Company Limited 99.99 Makro Office Centre Company Limited 99.99 Significant intercompany transactions have been eliminated in the consolidated financial statements. The minority interest is immaterial and, therefore, not separately shown in the consolidated financial statements. Principal accounting policies 3. A summary of the significant accounting policies of the company, which have been applied consistently, is set out below. (a) Depreciation and amortisation Depreciation is calculated so as to write off the cost of the assets on a straight-line basis over the expected useful economic lives of the assets which range from 5 - 20 years. Leasehold rights are deferred and amortised by the straight-line method over the period of agreement which range from 6 - 20 years. Unaudited Reviewed Siam Makro Public Company Limited Page 6 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued Pre-opening and start-up expenses are deferred and amortised by the straight-line method over a period of 5 years. (b) Inventories Inventories are stated at the lower of cost or market. Cost is determined on the latest purchase price which is approximate to cost determined on a first-in first-out basis. (c) Foreign currencies Trading transactions denominated in foreign currencies are translated into Thai Baht at the exchange rates ruling when the transactions are entered into. Monetary assets and liabilities denominated in foreign currencies are translated into Thai Baht at the exchange rates ruling at the balance sheet date and the forward contracted rate. Exchange gains or losses arising from the application of forward contracted rate are deferred and amortised by the straight-line method over the period of forward contracted rate agreements. Exchange gains or losses arising from the application of exchange rates at the balance sheet date are included in the statement of income. (d) Investment Investment in companies in which Siam Makro Public Company Limited holds more than 20% of the share capital and over which the company exercises significant influence, are accounted for under the equity method. The investment is initially recorded at cost. The carrying amount of the investment is increased or decreased to recognise the company's share of the profits or losses of the investee after the date of acquisition and to take account of any dividends received. Unaudited Reviewed Siam Makro Public Company Limited Page 7 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued (e) Deferred development rights Deferred development rights represent certain costs of development that the subsidiary companies acquired from Siam Makro Public Company Limited. These costs are capitalised and are being amortised over 5 years from the date of acquisition by the subsidiary companies. (f) Provision for retirement benefits Provision for retirement benefits is for employees whose working period are over 3 years and is normally payable on termination of service. The calculation is based on the latest basic salary multiplied by the years of each employee's service, as set out in the company's retirement benefits plan. Cash in hand and at banks 4. Cash in hand and at banks include deposits amounting to Baht 958 and 477 million in respect of which the company has agreed to maintain minimum balances of Baht 65 and 70 million respectively in order to earn favorable interest rates. However, there are no restrictions for the company to withdraw these funds should the special rate be lower than the interest rates offered by other banks. Short-term investments 5. Short-term investments comprise fixed deposits bearing interest at rates between 11% - 12.25% per annum and bills of exchange which bear interest at rates between 11.50% - 13.75% per annum. Unaudited Reviewed Siam Makro Public Company Limited Page 8 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued Related company transactions 6. A portion of the company's transactions have been made with subsidiary, associated and affiliated companies. A summary of significant transactions is set out below : The company only For the third quarter For the period of 9 months 1997 1996 1997 1996 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Transactions during the periods : With subsidiary companies Revenues: - Sales of inventory - - 241.6 - - Disposal of fixed assets - - 294.8 - - Disposal of deferred development rights - - 55.7 - - Interest income 24.0 18.5 66.4 54.8 - Rental income 18.1 - 43.4 - - Management fee 0.5 0.5 1.4 1.4 Expenses: - Land rental 60.9 54.9 176.7 164.7 - Royalty and service fee 3.1 3.2 9.0 8.8 - Sales discounts 10.6 - 10.6 - With an associated company Interest income 0.9 - 2.4 - With an affiliated company Royalty fee 34.2 34.7 97.0 98.9 The transactions in respect of sales of inventory, disposal of fixed assets and deferred development rights to the subsidiary companies which are Makro Auto Care Company Limited and Makro Office Centre Company Limited resulted from a business reorganisation in the first quarter of this year. The selling prices of the above transactions represent net book value, as specified in the agreements between the company and the subsidiary companies. Unaudited Reviewed Siam Makro Public Company Limited Page 9 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued The consolidation For the third quarter For the period 9 of months 1997 1996 1997 1996 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Transaction during the periods With an affiliated company Royalty fee 35.9 34.7 101.1 98.9 The company only 1997 1996 (Million Baht) (Million Baht) Balance as at September 30, 1997 and 1996 Amount due from subsidiary companies 721.8 - Amount due from an associated company 4.3 23.8 Amount due from affiliated companies 0.6 29.5 726.7 53.3 Short-term loans to a subsidiary company 312.3 - (interest at 9% per annum) Short-term loan to an associated company 22.5 - (interest at Minimum Overdraft Rate) 1,061.5 53.3 Amount due to a subsidiary company 9.2 13.2 Amount due to affiliated companies 40.9 37.3 50.1 50.5 Long-term loans to a subsidiary company 1,178.4 1,214.4 (interest at 6% per annum) Deposits for landlease paid to a subsidiary company 243.6 219.6 Short - term loans to a subsidiary company, being in the form of promissory notes, are due at call. Loan to an associated company, being in the form of a promissory note, is due for repayment in December 1997. Unaudited Reviewed Siam Makro Public Company Limited Page 10 Notes to the financial statements and consolidated financial statements - September 30, 1997 continued Long - term loans to a subsidiary company are due for repayment within 10 years commencing from January 1, 1993. The consolidation 1997 1996 (Million Baht) (Million Baht) Balance as at September 30, 1997 and 1996 Amount due from an associated company 4.3 23.8 Amount due from affiliated companies 1.0 29.5 5.3 53.3 Short-term loan to an associated company (interest at Minimum Overdraft Rate) 22.5 - 27.8 53.3 Amount due to affiliated companies 43.0 37.3 Investments 7. Investments in subsidiary and associated companies are accounted for under the equity method. Investments comprise : % 1997 1996 Holding (Baht'000) (Baht'000) Makro Properties Limited 99.99 1,056,834 946,092 Peoples Health Care Company Limited 45.00 2,902 24,167 Makro Auto Care Company Limited 99.99 4,445 - Makro Office Centre Company Limited 99.99 1,331 - 1,065,512 970,259 Unaudited Reviewed Siam Makro Public Company Limited Page 11 Notes to the financial statements and consolidated financial statements - September 30, 1997 (continued) Loans from bank 8. These represent loans from a foreign bank, equivalent to USD 15 million. The loans bear interest at the Singapore Inter Bank Offer rate plus 0.425% and will be due for repayment in August 1998. The company is required to comply with the terms and conditions as specified in the loan agreement. There is a forward exchange contract to cover this loan. Dividends 9. At the annual shareholders' meeting dated April 23,1997, it was unanimously resolved that dividends for the year ended December 31, 1996 be paid at Baht 1.30 per share totalling Baht 312 million. These dividends were paid in the second quarter of this year. Earnings per share 10. Earnings per share is calculated based on the weighted average number of shares in issue during the period. Contingent liabilities and commitment (More)