EVIEWED QUARTER-1 F/S AND CONSOLIDATED F/S

(b) 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. (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 - March 31, 1998 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 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. Cash in hand and at banks 3. Cash in hand and at banks include deposit amounting to Baht 701 million in respect of which the company has agreed to maintain a minimum balance of Baht 65 million in order to earn favorable interest rate. However, there are no restrictions on the company withdrawing from this fund should the special rate be lower than the interest rates offered by other banks. Short-term investments 4. Short-term investments comprise fixed deposits and bill of exchange bearing interest at rates between 12.75% - 15.00% per annum. Unaudited Reviewed Siam Makro Public Company Limited Page 8 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued Related company transactions 5. 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 The consolidation 1998 1997 1998 1997 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Transactions during the period : With subsidiary companies Revenues : - Sales of inventory - 240.6 - - - Disposal of fixed assets 0.6 222.2 - - - Disposal of deferred development rights - 84.7 - - - Interest income 28.1 20.9 - - - Rental income 18.1 8.4 - - - Management fee 0.4 0.4 - - Expenses : - Land rental 65.4 54.9 - - - Royalty fee 2.8 3.0 - - - Purchase of office supplies 0.1 - - - - Purchase of fixed assets 0.1 - - - With an associated company Interest income - 0.7 - - With an affiliated company Royalty fee 28.5 31.3 30.5 32.1 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. Unaudited Reviewed Siam Makro Public Company Limited Page 9 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued 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. The company only The consolidation Notes 1998 1997 1998 1997 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Balance as at March 31, 1998 and 1997 Amounts due from subsidiary companies 499.8 742.1 - - Amount due from an associated company 5.1 2.3 5.1 2.4 Amounts due from affiliated companies 5.2 2.2 5.2 6.2 510.1 746.6 10.3 8.6 Short-term loans to subsidiary companies (interest at 9% per annum) 5.1 Makro Properties Limited 209.8 - - - Makro Auto Care Company Limited 243.0 - - - Short-term loan to an associated company (interest at Minimum Overdraft Rate) Peoples Health Care Company Limited 22.5 22.5 22.5 22.5 985.4 769.1 32.8 31.1 Less: Allowance for doubtful account 5.2 (28.0) - (28.0) - 957.4 769.1 4.8 31.1 Unaudited Reviewed Siam Makro Public Company Limited Page 10 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued The company only The consolidation Notes 1998 1997 1998 1997 (Million Baht) (Million Baht) (Million Baht) (Million Baht) Amount due to a subsidiary company 5.7 0.1 - - Amounts due to affiliated companies 28.5 36.5 30.4 36.6 34.2 36.6 30.4 36.6 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 261.6 219.6 - - 5.1 Short-term loans to subsidiary companies, being in the form of promissory notes, are due at call. However, the company has no plans to recall the loan due from Makro Auto Care Company Limited within the forthcoming 12 months. 5.2 Allowance for doubtful account is reserved for amounts due from and loan to an associated company amounting to Baht 28 million. At the board of directors' meeting dated March 16, 1998, the company has disinvested in this associated company in this quarter 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 Unaudited Reviewd Siam Makro Public Company Limited Page 11 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued 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 2,310,201 2,266,878 2,532,626 2,509,883 Goods in transit 828 - 828 - 2,311,029 2,266,878 2,533,454 2,509,883 Less: Provision for obsolete and shrinkage inventories (122,987) (90,843) (142,386) (103,954) Inventories, net 2,188,042 2,176,035 2,391,068 2,405,929 Unaudited Reviewed Siam Makro Public Company Limited Page 12 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued Investments 7. Investments in subsidiary and associated companies are accounted for under the equity method. Investments comprise : Issued & paid up Holding Business activity Relationship share capital % (Baht'000) Subsidiary companies : Makro Properties Limited - Land investment & property leasing Being shareholder and under the 700,000 99.99 same management control Makro Auto Care Company Limited - Automotive service centers, automated car wash Being shareholder and 10,000 99.99 and gas stations. management participation Makro Office CentreCompany Limited - Retail business of office supplies,officeequipment, Being shareholder and 10,000 99.99 office furniture and business service centre. management participation Associated company : Peoples Health Care Company Limited - Retail business of health and beauty care products Being shareholder 100,000 45.00 Disposed on February 5, 1998 and pharmaceutical products. The company only The consolidation 1998 1997 1998 1997 Investment Dividend Investment Dividend Investment Dividend Investment Dividend (Baht'000) (Baht'000) (Baht'000) (Baht'000) (Baht'000) (Baht'000) (Baht'000) (Baht'000) Subsidiary companies : Makro Properties Limited 1,118,194 - 1,000,086 - - - - - Makro Auto Care Company Limited (23,116) - 9,191 - - - - - Makro Office Centre Company Limited (31,275) - 9,554 - - - - - Associated company : Peoples Health Care Company Limited - - 11,102 - - - 11,102 - 1,063,803 - 1,029,933 - - - 11,102 - Unaudited Reviewed Siam Makro Public Company Limited Page 13 Notes to the financial statements and consolidated financial statements - March 31, 1998 continued Property, plant and equipment, net (More)