ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR'S REPORT To the shareholders of Siam Makro Public Company Limited I have audited the accompanying balance sheets of Siam Makro Public Company Limited as at 31 December 1998 and 1997 and the related statements of income and retained earnings, changes in shareholders equity and cash flows for the years then ended and the consolidated balance sheets of Siam Makro Public Company Limited and its subsidiaries as at 31 December 1998 and 1997 and the related consolidated statements of income and retained earnings, changes in shareholders equity and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards in Thailand. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Siam Makro Public Company Limited as at 31 December 1998 and 1997 and the results of its operations and its cash flows for the years then ended and the consolidated financial position of Siam Makro Public Company Limited and its subsidiaries as at 31 December 1998 and 1997 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles in Thailand. I draw attention to Note 19 which is marked "unaudited". Information regarding the Year 2000 issue as presented in this note has not been subjected to auditing procedures, and accordingly, I express no opinion on it. PRASAN CHUAPHANICH Certified Public Accountant (Thailand) No.3051 PricewaterhouseCoopers Audit and Business Advisory Services Ltd. Bangkok 29 January 1999 Siam Makro Public Company Limited Balance sheets and consolidated balance sheets as at 31 December 1998 and 1997 The company only The consolidation Notes 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) ASSETS Current assets Cash in hand and at banks 3,328,055,361 2,245,176,415 3,444,026,299 2,305,684,001 Short-term investments 2 180,000,000 124,339,818 180,000,000 124,339,818 Accounts receivable - trade 3 - - 4,712,445 - Amounts due from subsidiary and affiliated companies 4 167,113,138 521,358,816 817,269 5,533,077 Short-term loans to affiliated companies 4 163,100,000 464,800,000 - - Inventories, net 5 2,094,630,878 2,398,930,299 2,272,169,709 2,632,747,668 Other current assets VAT receivable - - 32,046,520 23,593,055 Purchase discount receivable 90,126,433 47,355,000 104,166,964 49,139,850 Prepayment 5,052,985 7,163,030 7,275,199 9,955,363 Other 33,084,801 63,868,208 35,566,798 83,843,595 Total current assets 6,061,163,596 5,872,991,586 6,080,781,203 5,234,836,427 Loans to a subsidiary company 4 1,178,400,000 1,178,400,000 - - Investments in subsidiary and associated companies 6 1,600,281,155 1,061,704,506 - - Property, plant and equipment, net 7 5,604,432,900 5,314,571,223 8,900,858,160 8,654,374,351 Other assets Deferred development rights, net 8 - - 35,161,765 46,272,471 Pre-opening and start-up 189,729,268 expenses, net 9 139,969,477 174,650,293 154,590,906 52,694,196 Deposits 4 288,235,271 309,382,346 32,339,916 TOTAL ASSETS 14,872,482,399 13,911,699,954 15,203,731,950 14,177,906,713 The notes to the financial statements on pages 8 to 20 form an integral part of these financial statements. Auditor's report page 1. Siam Makro Public Company Limited Page 2 Balance sheets and consolidated balance sheets as at 31 December 1998 and 1997 The company only The consolidation Notes 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Loans from bank - 506,700,000 - 506,700,000 Accounts payable - trade 5,516,654,550 5,230,077,486 5,749,637,963 5,417,367,638 Amounts due to subsidiary and affiliated companies 4 55,897,152 72,005,904 59,804,661 67,137,211 Other current liabilities Accounts payable - other 343,026,063 261,943,178 361,284,120 326,910,199 Accrued income tax 194,127,139 82,243,769 235,368,471 100,477,411 Accrued expenses 160,376,501 151,467,485 178,421,842 171,354,266 VAT payable 78,633,397 27,059,217 78,633,397 - Forward exchange contract payable 72,978,000 - 72,978,000 - Other 76,361,535 82,831,063 83,191,848 85,877,417 Total current liabilities 6,498,054,337 6,414,328,102 6,819,320,302 6,675,824,142 Long term loan from bank 10 553,350,000 - 553,350,000 - Other liabilities Provision for retirement benefits 141,402,433 114,442,288 151,046,926 118,640,225 Other liability - - 339,093 512,782 TOTAL LIABILITIES 7,192,806,770 6,528,770,390 7,524,056,321 6,794,977,149 Shareholders' equity Share capital 11 2,400,000,000 2,400,000,000 2,400,000,000 2,400,000,000 Share premium 3,290,152,068 3,290,152,068 3,290,152,068 3,290,152,068 Legal reserve 163,947,221 138,909,918 163,947,221 138,909,918 Retained earnings 1,825,576,340 1,553,867,578 1,825,576,340 1,553,867,578 TOTAL SHAREHOLDERS' EQUITY 7,679,675,629 7,382,929,564 7,679,675,629 7,382,929,564 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 14,872,482,399 13,911,699,954 15,203,731,950 14,177,906,713 Director Director . Date 29 January 1999 . Siam Makro Public Company Limited Page 3 Statements of income and consolidated statements of income for the years ended 31 December 1998 and 1997 The company only The consolidation Notes 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) REVENUES Sales 29,223,955,761 31,109,169,868 30,775,732,363 32,094,207,581 Other income Interest income 302,127,093 258,771,961 210,150,701 178,884,962 Service income 444,015,163 393,984,961 456,167,676 402,572,985 Other 174,476,519 112,662,819 130,286,264 62,196,969 TOTAL REVENUES 30,144,574,536 31,874,589,609 31,572,337,004 32,737,862,497 EXPENSES Cost of sales 26,898,183,340 28,602,917,374 28,162,889,448 29,376,077,332 Selling and administrative expenses 2,559,556,875 2,528,046,309 2,608,624,422 2,502,983,377 Interest expenses 38,135,905 30,536,875 38,136,240 30,703,406 Directors' remuneration 1,440,000 1,440,000 1,440,000 1,440,000 TOTAL EXPENSES 29,497,316,120 31,162,940,558 30,811,090,110 31,911,204,115 Net income before tax 647,258,416 711,649,051 761,246,894 826,658,382 Income tax (205,089,000) (255,051,000) (260,500,829) (303,129,568) Net income before share of profit (loss) from subsidiary and associated companies 442,169,416 456,598,051 500,746,065 523,528,814 Share of profit (loss) from subsidiary and associated companies 58,576,649 49,063,763 - (17,867,000) NET INCOME FOR THE YEAR 500,746,065 505,661,814 500,746,065 505,661,814 STATEMENTS OF RETAINED EARNINGS Retained earnings brought forward 1,553,867,578 1,385,488,850 1,553,867,578 1,385,488,850 Net income for the year 500,746,065 505,661,814 500,746,065 505,661,814 Transfer to legal reserve 12 (25,037,303) (25,283,086) (25,037,303) (25,283,086) Dividends 13 (204,000,000) (312,000,000) (204,000,000) (312,000,000) Retained earnings carried forward 1,825,576,340 1,553,867,578 1,825,576,340 1,553,867,578 EARNINGS PER SHARE 14 Net income 2.09 2.11 2.09 2.11 The notes to the financial statements on pages 8 to 20 form an integral part of these financial statements. 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Siam Makro Public Company Limited Page 4 Statements of changes in shareholders' equity and consolidated statements of changes in shareholders' equity for the years ended 31 December 1998 and 1997 The company only The consolidation 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) SHARE CAPITAL Common share Brought forward 2,400,000,000 2,400,000,000 2,400,000,000 2,400,000,000 Increase during the period - - - - Carried forward 2,400,000,000 2,400,000,000 2,400,000,000 2,400,000,000 SHARE PREMIUM Brought forward 3,290,152,068 3,290,152,068 3,290,152,068 3,290,152,068 Increase during the period - - - - Carried forward 3,290,152,068 3,290,152,068 3,290,152,068 3,290,152,068 RETAINED EARNINGS Appropriated Legal reserve Brought forward 138,909,918 113,626,832 138,909,918 113,626,832 Increase during the period 25,037,303 25,283,086 25,037,303 25,283,086 Carried forward 163,947,221 138,909,918 163,947,221 138,909,918 UNAPPROPRIATED Brought forward 1,553,867,578 1,385,488,850 1,553,867,578 1,385,488,850 Increase during the period 500,746,065 505,661,814 500,746,065 505,661,814 Decrease during the period (229,037,303) (337,283,086) (229,037,303) (337,283,086) Carried forward 1,825,576,340 1,553,867,578 1,825,576,340 1,553,867,578 Shareholders' equity 7,679,675,629 7,382,929,564 7,679,675,629 7,382,929,564 The notes to the financial statements on pages 8 to 20 form an integral part of these financial statements. Auditor's report page 1. Siam Makro Public Company Limited Page 5 Statements of cash flows and consolidated statements of cash flows for the years ended 31 December 1998 and 1997 The company only The consolidation 1998 1997 1998 1997 (Baht) (Baht) (Baht) (Baht) Cash flows from operating activities : Net income 500,746,065 505,661,814 500,746,065 505,661,814 Adjustments to reconcile net income to net cash : Depreciation and amortisation 654,660,064 570,265,655 731,009,129 616,642,835 Allowance for doubtful accounts 5,000,000 49,031,443 5,500,000 52,031,443 Provision for retirement benefits 26,960,145 17,971,896 32,406,701 22,169,833 Provision for warranty claim - - (173,689) 512,782 Gain on disposal of equipment (13,484,523) (5,607,269) (20,080,243) (5,761,219) Share of loss (profit) from subsidiary and associated companies (58,576,649) (49,063,763) - 17,867,000 Provision for loss on disposal of equipment 6,703,512 20,599,000 10,454,739 20,599,000 Amortisation of deferred hedging cost 17,680,863 15,920,666 17,680,863 15,920,666 Changes in current assets and liabilities : Inventories 304,299,421 474,863,844 360,577,959 241,046,476 Amounts due from subsidiary and affiliated companies 354,245,678 (495,811,270) 4,715,808 (3,032,390) Accounts receivable - trade - - (4,712,445) - VAT receivable - 62,050,692 (8,453,464) 38,457,637 Purchase discount receivable (42,771,433) (47,334,200) (55,027,114) (49,119,050) Other current assets 27,893,452 11,865,023 45,456,961 (13,620,385) Accounts payable - trade 286,577,064 (320,882,985) 332,270,325 (133,592,833) Amounts due to subsidiary and affiliated companies (16,108,753) (1,600,629) (7,332,984) (6,469,322) Accounts payable - other 81,082,886 (55,043,552) 34,373,921 9,923,469 Accrued income tax 111,883,370 (45,533,951) 134,891,060 (35,681,367) Accrued expenses 8,909,015 28,027,840 7,067,576 45,275,807 VAT Payable 51,574,179 - 78,633,397 - Other current liabilities (13,173,040) 22,562,402 (13,140,308) (1,990,900) Net cash flows provided by operating activities 2,294,101,316 757,942,656 2,186,864,257 1,336,841,296 The notes to the financial statements on pages 8 to 20 form an integral part of these financial statements. 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