NTERIM F/S AND CONSOLIDATED F/S OF Q3/1998

(c) Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined on the latest purchase price which is approximate to cost determined on a first-in first-out basis. Net realisable value is the price at which inventories can be sold in the normal course of business after allowing for the costs of realisation. Provision is made where necessary for obsolete, slow-moving and shrinkage inventories. (d) 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. Unaudited Reviewed Siam Makro Public Company Limited Page 9 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued (e) 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. (f) 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. (g) Provision for retirement benefits Provision for retirement benefits is made for employees whose length of service exceeds 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. Unaudited Reviewed Siam Makro Public Company Limited Page 10 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Short-term investments 3. Short-term investments comprise fixed deposits and bill of exchange bearing interest at rates between 5.50% - 15.00% per annum. Accounts receivable 4. As at September 30, 1998 the outstanding accounts receivable balances aged longer than 3 months are as follows : - The company only The consolidation (Baht'000) (Baht'000) Accounts receivable aged longer than 3 months - 124 Related parties transactions 5. A portion of the company's transactions have been made with subsidiaries, associated and affiliated companies. A summary of significant transactions is set out below : The company only . 1998 1997 . Third Period of Third Period of quarter nine months quarter nine months (Million Baht) (Million Baht) (Million Baht) (Million Baht) Transactions during the period : With subsidiary companies Revenues : - Sales of inventory 0.2 0.2 - 241.6 - Disposal of fixed assets - 0.6 - 294.8 - Disposal of deferred development rights - - - 55.7 Unaudited Reviewed Siam Makro Public Company Limited Page 11 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The company only 1998 1997 Third Period of Third Period of quarter nine months quarter nine months (Million Baht) (Million Baht) (Million Baht) (Million Baht) - Interest income 22.9 78.4 24.0 66.4 - Rental income 19.8 55.9 18.1 43.4 - Management fee 0.5 1.4 0.5 1.4 Transactions during the period : With subsidiary companies Expenses : - Land rental 65.4 196.2 60.9 176.7 - Royalty fee 3.1 9.0 3.1 9.0 - Purchase of office supplies 0.3 0.6 - - - Purchase of fixed assets - 0.1 - - - Sales discounts - - 10.6 10.6 - Motor vehicle expenses 1.3 1.3 - - With an associated company Interest income - - 0.9 2.4 With an affiliated company Royalty fee 26.9 82.9 34.2 97.0 Unaudited Reviewed Siam Makro Public Company Limited Page 12 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The consolidation 1998 1997 Third Period of Third Period of quarter nine months quarter nine months (Million Baht) (Million Baht) (Million Baht) (Million Baht) With an associated company Interest income - - 0.9 2.4 With an affiliated company Royalty fee 28.8 88.7 35.9 101.1 The transactions in respect of sales of inventory, disposal of fixed assets and deferred development rights to subsidiary companies, Makro Auto Care Company Limited and Makro Office Centre Company Limited, resulted from a business reorganisation in the first quarter of 1997. The selling prices of the above transactions represent net book value, as specified in the agreements between the company and the subsidiary companies. The rental charges in respect of land and building as specified in the agreements between the company and subsidiary companies are based on the costs of land and fixed assets plus the related expenses. General services provided by the company are charged at cost to a subsidiary company on the basis of an agreed annual fee. The company has entered into the agreements with an oversea affiliated company and a subsidiary company to use their trade marks. The royalty fee for the use of the trade marks represents a percentage of the company's net sales. Unaudited Reviewed Siam Makro Public Company Limited Page 13 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The company only The consolidation Notes 1998 1997 1998 1997 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Balance as at September 30, 1998 and 1997 Amounts due from subsidiary companies 181.3 721.8 - - Amount due from an associated company 5.5 4.3 5.5 4.3 Amounts due from affiliated companies 7.5 0.6 7.7 1.0 194.3 726.7 13.2 5.3 Short-term loans to subsidiary companies (interest at 7% per annum) 5.1 Makro Properties Limited 167.8 312.3 - - Makro Auto Care Company Limited 87.5 - - - Short-term loan to an associated company (interest at Minimum Overdraft Rate) Peoples Health Care Company Limited 22.5 22.5 22.5 22.5 472.1 1,061.5 35.7 27.8 Less: Allowance for doubtful account 5.2 (28.0) - (28.0) - 444.1 1,061.5 7.7 27.8 Amount due to a subsidiary company 31.9 9.2 - - Amounts due to affiliated companies 26.9 40.9 28.8 42.7 58.8 50.1 28.8 42.7 Long-term loans to a subsidiary company (interest at 6% per annum) Makro Properties Limited 5.3 1,178.4 1,178.4 - - Deposits for landlease paid to a subsidiary company 261.6 243.6 - - Unaudited Reviewed Siam Makro Public Company Limited Page 14 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued 5.1 Short-term loans to subsidiary companies, being in the form of promissory notes, are due at call. 5.2 Allowance for doubtful account is reserved for amounts due from and loan to an associated company amounting to Baht 28 million. The company has disinvested in this associated company on February 5, 1998 due to its continued financial losses. 5.3 Long-term loans to a subsidiary company are due for repayment as follows : Date Amount Due date (Million Baht) January 1, 1993 40.5 December 31, 2002 March 1, 1993 137.0 February 28, 2003 November 1, 1995 720.9 October 31, 2005 November 23, 1995 280.0 November 22, 2005 1,178.4 Inventories, net 6. Inventories are made up as follows : The company only The consolidation 1998 1997 1998 1997 (Baht'000) (Baht'000) (Baht'000) (Baht'000) Finished goods 2,083,896 2,389,743 2,297,200 2,679,464 Goods in transit 3,711 - 3,711 - 2,087,607 2,389,743 2,300,911 2,679,464 Less: Provision for obsolete and shrinkage inventories (139,195) (79,257) (162,355) (93,365) Inventories, net 1,948,412 2,310,486 2,138,556 2,586,099 Siam Makro Public Company Limited Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Investments in subsidiary and associated companies 7. Investments in subsidiary and associated companies are accounted for under the equity method. Investments comprise : Business activity Subsidiary companies : Makro Properties Limited - Land investment & property leasing Makro Auto Care Company Limited - Automotive service centers, automated car wash and gas stations. Makro Office Centre Company Limited - Retail business of office supplies, office equipment, office furniture and business service centre. Associated company : Peoples Health Care Company Limited - Retail business of health and beauty care products Disposed on February 5, 1998 and pharmaceutical products. The company only 1998 1997 Investment Dividend Investment Dividend (Baht'000) (Baht'000) (Baht'000) (Baht'000) Subsidiary companies : Makro Properties Limited 1,182,369 - 1,056,834 - Makro Auto Care Company Limited 230,140 - 4,445 - Makro Office Centre Company Limited 159,841 - 1,331 - Associated company : Peoples Health Care Company Limited - - 2,902 - 1,572,350 - 1,065,512 - Siam Makro Public Company Limited Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Relationship Subsidiary companies : Makro Properties Limited Being shareholder and under the same management control Makro Auto Care Company Limited Being shareholder and management participation Makro Office Centre Company Limited Being shareholder and management participation Associated company : Peoples Health Care Company Limited Being shareholder Disposed on February 5, 1998 The consolidation 1998 1997 Investment Dividend Investment Dividend (Baht'000) (Baht'000) (Baht'000) (Baht'000) Subsidiary companies : Makro Properties Limited - - - - Makro Auto Care Company Limited - - - - Makro Office Centre Company Limited - - - - Associated company : Peoples Health Care Company Limited - - 2,902 - - - 2,902 - Unaudited Reviewed Siam Makro Public Company Limited Page 15 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Issued & paid up Share capital Holding 1998 1997 1998 1997 Subsidiary companies : (Baht'000) (Baht'000) (%) (%) Makro Properties Limited 700,000 700,000 99.99 99.99 Makro Auto Care Company Limited 300,000 10,000 99.99 99.99 Makro Office Centre Company Limited 200,000 10,000 99.99 99.99 Associated company : Peoples Health Care Company Limited 100,000 100,000 - 45.00 Disposed on February 5, 1998 Unaudited Reviewed Siam Makro Public Company Limited Page 16 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Property, plant and equipment, net 8. The company only 1998 1997 (Baht'000) (Baht'000) Property, plant and equipment, at cost Land 782,655 784,892 Buildings 3,294,081 3,039,316 Leasehold rights and leasehold improvement 412,665 182,286 Store equipment 2,277,707 2,072,134 Office equipment and furniture and fixtures 518,643 470,526 Motor vehicles 52,997 56,377 Construction in progress 155,232 45,636 7,493,980 6,651,167 Less: Accumulated depreciation (2,138,173) (1,605,864) Property, plant and equipment, net 5,355,807 5,045,303 The company only 1998 1997 Third Period of Third Period of quarter nine months quarter nine months (Baht'000) (Baht'000) (Baht'000) (Baht'000) Depreciation and amortisation 147,007 445,023 143,079 410,977 Unaudited Reviewed (More)