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

Siam Makro Public Company Limited Page 17 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The consolidation 1998 1997 (Baht'000) (Baht'000) Property, plant and equipment, at cost Land 3,572,980 3,575,076 Buildings 3,452,487 3,108,671 Leasehold rights and leasehold improvement 470,684 234,032 Store equipment 2,546,762 2,268,025 Office equipment and furniture and fixtures 620,600 552,275 Motor vehicles 56,351 59,732 Construction in progress 163,950 80,009 10,883,814 9,877,820 Less: Accumulated depreciation (2,227,361) (1,630,301) Property, plant and equipment, net 8,656,453 8,247,519 The consolidation 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 165,345 499,194 154,254 435,835 Depreciation and amortisation of leasehold rights are charged to the statements of income and consolidated statements of income. Unaudited Reviewed Siam Makro Public Company Limited Page 18 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Deferred development rights, net 9. The balance is shown net of accumulated amortisation as follows : The consolidation 1998 1997 (Baht'000) (Baht'000) Accumulated amortisation 17,912 6,810 Pre-opening and start-up expenses, net 10. The balance is shown net of accumulated amortisation as follows : The company only The consolidation 1998 1997 1998 1997 (Baht'000) (Baht'000) (Baht'000) (Baht'000) Accumulated amortisation 273,458 216,103 277,036 216,268 Loans from bank 11. 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 January 2001. 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. Unaudited Reviewed Siam Makro Public Company Limited Page 19 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Share capital 12. 1998 1997 (Baht'000) (Baht'000) Authorized share capital : 240,000,000 shares of Baht 10 each 2,400,000 2,400,000 Issued and paid up share capital : 240,000,000 shares of Baht 10 each 2,400,000 2,400,000 Dividends 13. At the annual shareholders' meeting dated April 24,1998, it was unanimously resolved that dividends for the year ended December 31, 1997 be paid at Baht 0.85 per share totalling to Baht 204 million. These dividends were already paid in the second quarter of this year. Earnings per share 14. Earnings per share is calculated based on the weighted average number of shares in issue during the period. Unaudited Reviewed Siam Makro Public Company Limited Page 20 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Contingent liabilities and commitment 15. (a) Bank guarantees As at September 30, 1998, the banks have given guarantees on behalf of the company and its subsidiaries as follows: The company only The consolidation (Baht'000) (Baht'000) Electricity 38,867 40,246 Sales of liquor and cigarettes 5,951 5,981 Others 480 2,680 45,298 48,907 (b) Letter of awareness As at September 30, 1998, the company has issued letters of awareness to a bank for a bank overdraft facility of subsidiary companies amounting to Baht 70 million. (c) Lease agreement The company has entered into several land lease agreements with a subsidiary company, several building area lease agreements and service agreements with external lessors. In addition, the subsidiary companies have also entered into building area lease agreements with external lessors. The future payments to which the company and its subsidiaries are committed under these agreements are as follows : Unaudited Reviewed Siam Makro Public Company Limited Page 21 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The company only The consolidation (Baht'000) (Baht'000) Due within 1 year 275,014 44,312 Due after 1 year but within 5 years 267,636 131,676 Due after 5 years 510,395 641,950 1,053,045 817,938 (d) Capital expenditure commitment As at September 30, 1998, the company and its subsidiaries have capital expenditure commitments in respect of construction contracts and the fixed assets acquisition as follows : The company only The consolidation (Baht'000) (Baht'000) Capital expenditure commitments 347,006 359,868 Financial instruments 16. The company's policy on risk management of liabilities in foreign currencies is to use financial instruments purchased in financial markets. For hedging purposes, the company has entered into forward exchange contracts to cover loan and purchase commitments in foreign currencies. As at September 30, 1998, deferred loss on exchange rate arising under these contracts amounted to Baht 9 million. Unaudited Reviewed Siam Makro Public Company Limited Page 22 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Bank facilities 17. As at September 30, 1998, the company has the following unutilised credit facilities available with local banks and foreign banks : The company only The consolidation Currencies Amount Amount (Unit : Million) (Unit : Million) Local banks - Bank overdrafts facilities Baht 95 135 - Loans facilities Baht 100 100 - Letter of credit facilities Baht 227 267 - Letter of guarantee facilities Baht 7 17 Foreign banks - Loans facilities USD 35 35 The loan facilities from foreign banks are available through January 25, 2001. Siam Makro Public Company Limited Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Segmental information by business activity 18. The consolidation for the third quarter ended September 30, 1998 Wholesale and Service Land Rental Elimination Total Retail Business Business Business (Million Baht) (Million Baht) (Million Baht) (Million Baht) (Million Baht) Sales and service income - Unaffiliated customers 7,239 199 - - 7,438 - Intercompany - - 69 (69) - 7,239 199 69 (69) 7,438 Gross profit 597 34 - - 631 Other income 187 Selling and administrative expenses (663) Interest expenses (10) Directors' remuneration - Income tax (55) Net income 90 Property, plant and equipment, net book value as at September 30, 1998 Other assets Total assets as at September 30, 1998 Unaudited Reviewed Siam Makro Public Company Limited Page 23 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Segmental information by business activity 18. The consolidation for the period of nine months ended September 30, 1998 Wholesale and Service Land Rental Elimination Total Retail Business Business Business (Million Baht) (Million Baht) (Million Baht) (Million Baht) (Million Baht) Sales and service income - Unaffiliated customers 22,467 590 - - 23,057 - Intercompany - 1 205 (206) - 22,467 591 205 (206) 23,057 Gross profit 1,847 108 - - 1,955 Other income 575 Selling and administrative expenses (1,936) Interest expenses (28) Directors' remuneration (1) Income tax (197) Net income 368 Property, plant and equipment, net book value as at September 30, 1998 5,479 387 2,790 - 8,656 Other assets 4,889 Total assets as at September 30, 1998 13,545 Siam Makro Public Company Limited Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Segmental information by business activity The consolidation for the third quarter ended September 30, 1997 Wholesale and Service Land Rental Elimination Total Retail Business Business Business (Million Baht) (Million Baht) (Million Baht) (Million Baht) (Million Baht) Sales and service income - Unaffiliated customers 8,401 157 - - 8,558 - Intercompany - - - - - 8,401 157 - - 8,558 Gross profit 678 30 - - 708 Other income 166 Selling and administrative expenses (631) Interest expenses (8) Directors' remuneration - Income tax (74) Net income before share of loss from an associated company 161 Share of loss from an associated company (7) Net income 154 Property, plant and equipment, net book value as at September 30, 1997 Other assets Total assets as at September 30, 1997 Unaudited Reviewed Siam Makro Public Company Limited Page 24 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued Segmental information by business activity The consolidation for the period of nine months ended September 30, 1997 Wholesale and Service Land Rental Elimination Total Retail Business Business Business (Million Baht) (Million Baht) (Million Baht) (Million Baht) (Million Baht) Sales and service income - Unaffiliated customers 23,497 426 - - 23,923 - Intercompany 231 - - (231) - 23,728 426 - (231) 23,923 Gross profit 2,079 87 - - 2,166 Other income 468 Selling and administrative expenses (1,805) Interest expenses (22) Directors' remuneration (1) Income tax (264) Net income before share of loss from an associated company 542 Share of loss from an associated company (15) Net income 527 Property, plant and equipment, net book value as at September 30, 1997 5,183 275 2,790 - 8,248 Other assets 5,558 Total assets as at September 30, 1997 13,806 Unaudited Reviewed Siam Makro Public Company Limited Page 25 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The company and its subsidiary companies operate 3 major businesses as follows : - Cash and carry wholesale business of merchandise and retail business of office supplies. - Automotive service centers, automated car wash and gas stations - Land investment and property leasing Sales to unaffiliated customers , subsidiaries and affiliated companies are presented at market price. However, the transfer prices for intercompany sales are established by agreements between the company and its subsidiary companies which represent net book value due to a business reorganisation in the first quarter of 1997. Property, plant and equipment of each business are for its own operations. Other assets mainly comprise cash in hand and at banks, inventories, amounts due from and loans to affiliated companies. Year 2000 issue 19. Siam Makro Public Company Limited and its subsidiaries have commenced their plan to replace and upgrade all major computer systems since the end of 1997. This aims to increase the efficiency and ability to cope with business growth. As at September 30, 1998, the upgrades for the finance and accounting systems have already been completed and will be tested for year 2000 compliance in the first quarter of 1999. The company is now in the process of upgrading the Makro business systems in respect of purchasing, selling, goods receiving and inventory management. All developments of computer systems in the company and also the subsidiaries are expected to be completed and ready for year 2000 compliance testing within 1999. The total capital expenditure budget is estimated at Baht 120 million out of which Baht 29 million has been capitalized to fixed assets. Unaudited Reviewed Siam Makro Public Company Limited Page 26 Notes to the financial statements and consolidated financial statements - September 30, 1998 continued The company and its subsidiaries expect that such upgrades should remove any year 2000 problems as the new equipment and applications are year 2000 compliance, as certified by the suppliers. In addition, the company and its subsidiaries are proactively addressing the issue in respect of other companies with whom the company and its subsidiaries are doing business with in order to ensure year 2000 compliance. The company is in the process of gathering information regarding the readiness for year 2000 of such companies. The information will be used for preparing an assessment of the impact to the company and its subsidiaries and also for developing a plan to minimize the business risks that may arise in respect of transactions with such companies. Comparative figure 20. As a result of reclassifications of certain items of the interim financial statements ended September 30, 1998, the comparative figures have been amended accordingly. Auditors' report page 1.