A . Basis of preparation
The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, and in conformity with the International Accounting Standards.

B. Basis of consolidation
(i) The consolidated profit and loss account and balance sheet include the financial statements of the Company, its subsidiaries and, on the basis set out in (ii) below, its associates. The results of subsidiaries and associates are included or excluded from their effective dates of acquisition or disposal respectively, and are based on their latest audited financial statements which are made up to 31st December 1997, with the exception of Kwik Save whose results have been included based upon published annual accounts made up to 30th August 1997.

(ii) Associates are companies, not being subsidiaries, in which the Group has an attributable interest of 20% or more of the ordinary share capital held for the long term and over which it exercises significant influence. Associates are included on the equity basis of accounting.

C. Foreign currencies
Assets and liabilities of subsidiaries and associates, together with all other monetary assets and liabilities expressed in foreign currencies are translated into United States Dollars at the rates of exchange ruling at the year end. Results expressed in foreign currencies are translated into United States Dollars at the average rates of exchange ruling during the year.

Net exchange differences arising from the translation of the financial statements of subsidiaries and associates expressed in foreign currencies and exchange differences on transactions which hedge these investments are taken directly to exchange reserves. All other exchange differences are dealt with in the consolidated profit and loss account. Upon disposal of a foreign entity, the cumulative currency translation differences relating to that foreign entity are recognised as income or expenses in the same period the gain or loss on disposal is recognised.

D. Goodwill
Goodwill represents the difference between the cost of an acquisition and the fair value of the Group's share of the net assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions occurring on or after 1st January 1995 is reported in the balance sheet as an intangible asset or included within associates, as appropriate, and is amortised using the straight line method over its estimated useful life which is generally between 5 and 20 years. Goodwill on acquisitions which occurred prior to 1st January 1995 was taken directly to reserves.

The profit or loss on disposal of subsidiaries and associates is calculated by reference to the net assets at the date of disposal including the attributable amount of goodwill which remains unamortised but does not include any attributable goodwill previously eliminated against reserves.

E. Tangible fixed assets and depreciation
Land and buildings are stated at valuation. Independent valuations are performed every three years on an open market for existing use basis. In the intervening years the Directors review the carrying value of land and buildings and adjustment is made where there has been a material change. Revaluation surpluses and deficits are dealt with in capital reserves except for movements on individual properties below depreciated cost, which are dealt with in the profit and loss account. Other tangible fixed assets are stated at cost less amounts provided for depreciation.

Depreciation is calculated on the straight line basis at annual rates estimated to write off the cost or valuation of each asset over its estimated useful life.

The principal rates generally in use are as follows: