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Dsr Agreement - PRICESMART INC - 11-29-2001

VIEWS: 28 PAGES: 82

									Exhibit 10.47 DSR AGREEMENT among PRICESMART, INC., THE BANK OF NEW YORK, and OVERSEAS PRIVATE INVESTMENT CORPORATION Dated as of August xx, 2001

ARTICLE I

DEFINITIONS AND INTERPRETATION...............................................1 DEFINITIONS AND INTERPRETATION.........................................1

SECTION 1.01 ARTICLE II SECTION SECTION SECTION SECTION

THE COLLATERAL ACCOUNT......................................................2 2.01 2.02 2.03 2.04 STATUS OF ACCOUNT AND RELATIONSHIP OF PARTIES..........................2 TREATMENT OF PROPERTY AS FINANCIAL ASSETS..............................2 COMPLIANCE WITH ENTITLEMENT ORDERS OF OPIC.............................2 FORM OF PERMITTED INVESTMENTS..........................................3

ARTICLE III SECTION SECTION SECTION SECTION SECTION ARTICLE IV

ASSIGNMENT AND GRANT OF SECURITY INTEREST..................................4 ASSIGNMENT AND GRANT OF SECURITY INTEREST..............................4 SECURITY FOR OBLIGATIONS...............................................4 COMPANY REMAINS LIABLE.................................................4 DELIVERY OF COLLATERAL.................................................4 SECURITY INTEREST ABSOLUTE.............................................5

3.01 3.02 3.03 3.04 3.05

INVESTMENT OF COLLATERAL ACCOUNT............................................6 INVESTMENTS............................................................6 LIQUIDATION OF INVESTMENTS.............................................6

SECTION 4.01 SECTION 4.02 ARTICLE V

PAYMENTS FROM THE COLLATERAL ACCOUNT.........................................7 DISBURSEMENTS AND LIMITATIONS ON DISBURSEMENTS TO THE COMPANY..........7 DISBURSEMENTS TO OPIC..................................................8

SECTION 5.01 SECTION 5.02 ARTICLE VI SECTION SECTION SECTION SECTION SECTION

CONCERNING THE INTERMEDIARY.................................................8 6.01 6.02 6.03 6.04 6.05 POWERS, RIGHTS AND RESPONSIBILITIES OF INTERMEDIARY....................8 COMPENSATION AND REIMBURSEMENT OF INTERMEDIARY........................10 INTERMEDIARY'S WAIVER OF LIEN ON COLLATERAL AND SETOFF RIGHTS.........11 ACCESS TO BOOKS; INSPECTION; STATEMENTS OF ACCOUNT....................11 CLOSING OF COLLATERAL ACCOUNT.........................................12

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INTERMEDIARY.............13 REPRESENTATIONS AND WARRANTIES OF INTERMEDIARY........................13 COVENANTS OF INTERMEDIARY.............................................14

SECTION 7.01 SECTION 7.02 ARTICLE VIII

COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS........................16 REPRESENTATIONS AND WARRANTIES MADE UPON EXECUTION OF THIS AGREEMENT..16 REPRESENTATIONS AND WARRANTIES MADE UPON DELIVERY OF ANY COLLATERAL...17 COMPANY COVENANTS.....................................................18

SECTION 8.01 SECTION 8.02 SECTION 8.03 ARTICLE IX

EVENT OF DEFAULT...........................................................19

ARTICLE I

DEFINITIONS AND INTERPRETATION...............................................1 DEFINITIONS AND INTERPRETATION.........................................1

SECTION 1.01 ARTICLE II SECTION SECTION SECTION SECTION

THE COLLATERAL ACCOUNT......................................................2 2.01 2.02 2.03 2.04 STATUS OF ACCOUNT AND RELATIONSHIP OF PARTIES..........................2 TREATMENT OF PROPERTY AS FINANCIAL ASSETS..............................2 COMPLIANCE WITH ENTITLEMENT ORDERS OF OPIC.............................2 FORM OF PERMITTED INVESTMENTS..........................................3

ARTICLE III SECTION SECTION SECTION SECTION SECTION ARTICLE IV

ASSIGNMENT AND GRANT OF SECURITY INTEREST..................................4 ASSIGNMENT AND GRANT OF SECURITY INTEREST..............................4 SECURITY FOR OBLIGATIONS...............................................4 COMPANY REMAINS LIABLE.................................................4 DELIVERY OF COLLATERAL.................................................4 SECURITY INTEREST ABSOLUTE.............................................5

3.01 3.02 3.03 3.04 3.05

INVESTMENT OF COLLATERAL ACCOUNT............................................6 INVESTMENTS............................................................6 LIQUIDATION OF INVESTMENTS.............................................6

SECTION 4.01 SECTION 4.02 ARTICLE V

PAYMENTS FROM THE COLLATERAL ACCOUNT.........................................7 DISBURSEMENTS AND LIMITATIONS ON DISBURSEMENTS TO THE COMPANY..........7 DISBURSEMENTS TO OPIC..................................................8

SECTION 5.01 SECTION 5.02 ARTICLE VI SECTION SECTION SECTION SECTION SECTION

CONCERNING THE INTERMEDIARY.................................................8 6.01 6.02 6.03 6.04 6.05 POWERS, RIGHTS AND RESPONSIBILITIES OF INTERMEDIARY....................8 COMPENSATION AND REIMBURSEMENT OF INTERMEDIARY........................10 INTERMEDIARY'S WAIVER OF LIEN ON COLLATERAL AND SETOFF RIGHTS.........11 ACCESS TO BOOKS; INSPECTION; STATEMENTS OF ACCOUNT....................11 CLOSING OF COLLATERAL ACCOUNT.........................................12

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INTERMEDIARY.............13 REPRESENTATIONS AND WARRANTIES OF INTERMEDIARY........................13 COVENANTS OF INTERMEDIARY.............................................14

SECTION 7.01 SECTION 7.02 ARTICLE VIII

COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS........................16 REPRESENTATIONS AND WARRANTIES MADE UPON EXECUTION OF THIS AGREEMENT..16 REPRESENTATIONS AND WARRANTIES MADE UPON DELIVERY OF ANY COLLATERAL...17 COMPANY COVENANTS.....................................................18

SECTION 8.01 SECTION 8.02 SECTION 8.03 ARTICLE IX

EVENT OF DEFAULT...........................................................19 NOTICE OF EVENT OF DEFAULT............................................19 REMEDIES UPON EVENT OF DEFAULT........................................19

SECTION 9.01 SECTION 9.02 ARTICLE X SECTION SECTION SECTION SECTION SECTION ARTICLE XI

CERTAIN RIGHTS, POWERS AND REMEDIES; NO WAIVER..............................21 10.01 10.02 10.03 10.04 10.05 OPIC APPOINTED ATTORNEY-IN-FACT......................................21 OPIC MAY PERFORM.....................................................21 CUMULATIVE RIGHTS....................................................21 NO DUTIES............................................................22 WAIVERS..............................................................22

CONTINUING OBLIGATION; TERMINATION.........................................22 CONTINUING OBLIGATION................................................22

SECTION 11.01

i

SECTION 11.02 ARTICLE XII

TERMINATION..........................................................23

MISCELLANEOUS.............................................................23 JURISDICTION AND CONSENT TO SUIT; WAIVER OF OBJECTION TO FORUM.......23

SECTION 12.01

SECTION 11.02 ARTICLE XII SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION

TERMINATION..........................................................23

MISCELLANEOUS.............................................................23 JURISDICTION AND CONSENT TO SUIT; WAIVER OF OBJECTION TO FORUM.......23 IMMUNITY.............................................................24 NOTICES..............................................................24 ENGLISH LANGUAGE.....................................................25 GOVERNING LAW........................................................26 SUCCESSION; ASSIGNMENT...............................................26 SURVIVAL OF AGREEMENTS...............................................26 INTEGRATION; AMENDMENTS..............................................26 SEVERABILITY.........................................................26 WAIVER OF JURY TRIAL.................................................27 RIGHT OF SET-OFF.....................................................27 INDEMNITY............................................................27 LIMITATION ON DAMAGES................................................28 FEES AND EXPENSES OF OPIC............................................28 WAIVER OF LITIGATION PAYMENTS........................................29 BENEFITS OF AGREEMENT................................................29 ARM'S-LENGTH NEGOTIATIONS............................................29 FURTHER ASSURANCES...................................................29 FINANCING STATEMENTS.................................................30 COUNTERPARTS.........................................................30

12.01 12.02 12.03 12.04 12.05 12.06 12.07 12.08 12.09 12.10 12.11 12.12 12.13 12.14 12.15 12.16 12.17 12.18 12.19 12.20

SCHEDULES AND EXHIBITS
SCHEDULE X SCHEDULE Y SCHEDULE Z-1 SCHEDULE Z-2 SCHEDULE Z-3 EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT EXHIBIT A B C D E F G DEFINITIONS AND RULES OF INTERPRETATION FEES PAYABLE TO INTERMEDIARY CERTIFICATE OF NAME, TITLE AND SPECIMEN SIGNATURES PRICESMART, INC. (THE "COMPANY") CERTIFICATE OF NAME, TITLE AND SPECIMEN SIGNATURES OVERSEAS PRIVATE INVESTMENT CORPORATION ("OPIC") CERTIFICATE OF NAME, TITLE AND SPECIMEN SIGNATURES THE BANK OF NEW YORK (THE "INTERMEDIARY") FORM OF EXCESS AMOUNT CERTIFICATE FORM OF NOTICE OF OBJECTION FORM OF NOTICE OF AUTHORIZATION FORM OF NOTICE OF EVENT OF DEFAULT FORM OF NOTICE OF CANCELLATION FORM OF OPIC DISBURSEMENT REQUEST FORM OF PERMITTED INVESTMENTS NOTICE

ii

DSR AGREEMENT DSR AGREEMENT, dated as of August 17, 2001 (this "Agreement"), by and among (i) PriceSmart, Inc, a corporation organized and existing under the laws of the State of Delaware (the "COMPANY"), (ii) The Bank of New York, a banking corporation organized and existing under the laws of the State of New York, (the "INTERMEDIARY"), and (iii) OVERSEAS PRIVATE INVESTMENT CORPORATION, an agency of the United States of America ("OPIC" and, together with the Company and the Intermediary, the "PARTIES"). R E C I T A L S: WHEREAS, under two loan agreements (OPIC/517-2001-181-DI and OPIC/515-2001181-DI) dated as of August17, 2001 (the "LOAN AGREEMENTS"), by and between OPIC and the Company, OPIC has agreed to lend up to U.S. $10,000,000 (the "LOANS") to the Company; WHEREAS, it is a condition precedent to the first disbursement under the Loan Agreements, that the Parties shall have entered into this Agreement and that the Company shall have opened a Collateral Account (as hereinafter defined), and that such Collateral Account shall be pledged to OPIC as security for the Loan and associated obligations;

DSR AGREEMENT DSR AGREEMENT, dated as of August 17, 2001 (this "Agreement"), by and among (i) PriceSmart, Inc, a corporation organized and existing under the laws of the State of Delaware (the "COMPANY"), (ii) The Bank of New York, a banking corporation organized and existing under the laws of the State of New York, (the "INTERMEDIARY"), and (iii) OVERSEAS PRIVATE INVESTMENT CORPORATION, an agency of the United States of America ("OPIC" and, together with the Company and the Intermediary, the "PARTIES"). R E C I T A L S: WHEREAS, under two loan agreements (OPIC/517-2001-181-DI and OPIC/515-2001181-DI) dated as of August17, 2001 (the "LOAN AGREEMENTS"), by and between OPIC and the Company, OPIC has agreed to lend up to U.S. $10,000,000 (the "LOANS") to the Company; WHEREAS, it is a condition precedent to the first disbursement under the Loan Agreements, that the Parties shall have entered into this Agreement and that the Company shall have opened a Collateral Account (as hereinafter defined), and that such Collateral Account shall be pledged to OPIC as security for the Loan and associated obligations; WHEREAS, the Company is entering into this Agreement to satisfy such condition to the first disbursement under the Loan Agreements; and WHEREAS, the Parties are entering into this Agreement to perfect OPIC's security interest in the Collateral Account and to provide for the management of the Account Assets (as hereinafter defined) held therein; NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, it is hereby agreed as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01 DEFINITIONS AND INTERPRETATION In this Agreement, (a) unless otherwise provided herein, all capitalized terms have the respective meanings specified in the Loan Agreements as of the date hereof; (b) capitalized terms used but

not otherwise defined in the Loan Agreements have the meanings set forth in the attached Schedule X, and (c) the rules of interpretation set forth in Schedule X apply. ARTICLE II THE COLLATERAL ACCOUNT SECTION 2.01 STATUS OF ACCOUNT AND RELATIONSHIP OF PARTIES The Intermediary acknowledges and agrees that: (a) it has established and is maintaining on its books and records a segregated, non-interest bearing account with the account number A/C # 293644, designated the "Collateral Account, subject to the security interest of the Overseas Private Investment Corporation pursuant to the DSR Agreement among Overseas Private Investment Corporation, PriceSmart, Inc. and Bank of New York, dated as of August 17, 20001"; (b) the Collateral Account is a "securities account" within the meaning of Section 8-501(a) of the UCC, in respect of which the Intermediary is a "securities intermediary" within the meaning of Section 8-102(a)(14) of the UCC; and (c) the Company is the "entitlement holder" within the meaning of

not otherwise defined in the Loan Agreements have the meanings set forth in the attached Schedule X, and (c) the rules of interpretation set forth in Schedule X apply. ARTICLE II THE COLLATERAL ACCOUNT SECTION 2.01 STATUS OF ACCOUNT AND RELATIONSHIP OF PARTIES The Intermediary acknowledges and agrees that: (a) it has established and is maintaining on its books and records a segregated, non-interest bearing account with the account number A/C # 293644, designated the "Collateral Account, subject to the security interest of the Overseas Private Investment Corporation pursuant to the DSR Agreement among Overseas Private Investment Corporation, PriceSmart, Inc. and Bank of New York, dated as of August 17, 20001"; (b) the Collateral Account is a "securities account" within the meaning of Section 8-501(a) of the UCC, in respect of which the Intermediary is a "securities intermediary" within the meaning of Section 8-102(a)(14) of the UCC; and (c) the Company is the "entitlement holder" within the meaning of Section 8-102(a)(7) of the UCC, and the Intermediary has identified OPIC on its records as the party with "control" (within the meaning of Section 8-106(d) of the UCC) of the Company's security entitlements, with respect to the Collateral, in accordance with Sections 8-501(b) and 8-106(d)(2) of the UCC, and the Intermediary shall make all notations in its records pertaining to the Collateral that are necessary to reflect the security interest granted hereunder to OPIC. SECTION 2.02 TREATMENT OF PROPERTY AS FINANCIAL ASSETS The Intermediary agrees that each item of property (whether cash, a security, an instrument or any other property whatsoever, including any Permitted Investments) credited to the Collateral Account shall be treated as a "financial asset" under Article 8 of the UCC. SECTION 2.03 COMPLIANCE WITH ENTITLEMENT ORDERS OF OPIC The Intermediary agrees that it will comply with "entitlement orders" (within the meaning of Section 8-102(a)(8) of the UCC) originated by OPIC, as the secured party with respect to the Collateral, without further consent by the Company.

Unless the Intermediary has received a Notice of Event of Default, OPIC hereby directs the Intermediary to permit the Company to direct the investment and reinvestment of any amounts in the Collateral Account in Permitted Investments in accordance with Section 4.01(a) and to liquidate Permitted Investments in accordance with Section 4.02(a). After receipt of a Notice of Event of Default, the Intermediary shall no longer comply with orders originated by, or other directions or instructions received from, or on behalf of, the Company with respect to the Collateral. SECTION 2.04 FORM OF PERMITTED INVESTMENTS To the extent applicable to the relevant Permitted Investments, the Intermediary shall treat Account Assets in the following manner: (a) CERTIFICATED SECURITIES. All certificated securities and other Account Assets in physical form shall be delivered to and thereafter held by the Intermediary as follows: (i) (x) in its custody or subject to its control, which shall include the holding of such assets on behalf of the Intermediary by a clearing corporation, its custodian, or a nominee of either of them, (and, if held on behalf of the Intermediary by another intermediary, credited to a securities account maintained in the name of the

Unless the Intermediary has received a Notice of Event of Default, OPIC hereby directs the Intermediary to permit the Company to direct the investment and reinvestment of any amounts in the Collateral Account in Permitted Investments in accordance with Section 4.01(a) and to liquidate Permitted Investments in accordance with Section 4.02(a). After receipt of a Notice of Event of Default, the Intermediary shall no longer comply with orders originated by, or other directions or instructions received from, or on behalf of, the Company with respect to the Collateral. SECTION 2.04 FORM OF PERMITTED INVESTMENTS To the extent applicable to the relevant Permitted Investments, the Intermediary shall treat Account Assets in the following manner: (a) CERTIFICATED SECURITIES. All certificated securities and other Account Assets in physical form shall be delivered to and thereafter held by the Intermediary as follows: (i) (x) in its custody or subject to its control, which shall include the holding of such assets on behalf of the Intermediary by a clearing corporation, its custodian, or a nominee of either of them, (and, if held on behalf of the Intermediary by another intermediary, credited to a securities account maintained in the name of the Intermediary); (y) in bearer form or indorsed in blank by an appropriate Person or registered by the Company in the name of, or payable to the order of, the Intermediary, its clearing corporation, its custodian bank, or a nominee of either of them on the books of the issuer; and (z) credited to the Collateral Account, for the benefit of OPIC as secured party; or (b) UNCERTIFICATED SECURITIES. All uncertificated securities and other Account Assets (other than cash balances) held in uncertificated form shall be registered by the Company on the books of the issuer thereof in the name of the Intermediary or, subject to the Intermediary's control, in the name of the Intermediary's clearing corporation, its custodian bank, or a nominee of either of them. In no case shall any Account Asset be registered in the name of, or payable to or to the order of, the Company or indorsed to or to the order of the Company, except to the extent the foregoing have been specially indorsed to or to the order of the Intermediary (or its clearing corporation, its custodian bank, or a nominee of either of them) or in blank. 3

ARTICLE III ASSIGNMENT AND GRANT OF SECURITY INTEREST SECTION 3.01 ASSIGNMENT AND GRANT OF SECURITY INTEREST The Company hereby pledges, assigns and grants to OPIC a first priority security interest and Lien upon all of its rights, title and interest in and to, the Collateral and all other rights of the Company in and arising out of the Collateral. SECTION 3.02 SECURITY FOR OBLIGATIONS The pledge, assignment, and grant in this Agreement is made by the Company to OPIC to secure the full payment and performance of the Obligations. All Collateral shall constitute security for the Obligations and shall not constitute payment of any Obligation until applied as set forth in this Agreement. SECTION 3.03 COMPANY REMAINS LIABLE Anything herein to the contrary notwithstanding, (i) the Company shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder, to the same extent as if this Agreement had not been executed, (ii) the exercise by OPIC and/or the Intermediary of any of the rights hereunder shall not release the Company from any of its duties or obligations under such contracts and agreements, and (iii) OPIC and/or the Intermediary

ARTICLE III ASSIGNMENT AND GRANT OF SECURITY INTEREST SECTION 3.01 ASSIGNMENT AND GRANT OF SECURITY INTEREST The Company hereby pledges, assigns and grants to OPIC a first priority security interest and Lien upon all of its rights, title and interest in and to, the Collateral and all other rights of the Company in and arising out of the Collateral. SECTION 3.02 SECURITY FOR OBLIGATIONS The pledge, assignment, and grant in this Agreement is made by the Company to OPIC to secure the full payment and performance of the Obligations. All Collateral shall constitute security for the Obligations and shall not constitute payment of any Obligation until applied as set forth in this Agreement. SECTION 3.03 COMPANY REMAINS LIABLE Anything herein to the contrary notwithstanding, (i) the Company shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder, to the same extent as if this Agreement had not been executed, (ii) the exercise by OPIC and/or the Intermediary of any of the rights hereunder shall not release the Company from any of its duties or obligations under such contracts and agreements, and (iii) OPIC and/or the Intermediary shall not have any obligation or liability under such contracts and agreements or otherwise by reason of this Agreement, nor shall OPIC be obligated to perform any of the obligations or duties of the Company thereunder or to take any action to collect or enforce any claim assigned hereunder. SECTION 3.04 DELIVERY OF COLLATERAL (a) Unless otherwise specified herein, any and all funds, securities, certificates, instruments, investment property, and other property and assets from time to time that shall constitute or are intended to constitute or are obligated to become Account Assets shall be delivered by the Company to the Intermediary (i) by wire transfer as follows: The Bank of New York, ABA#: 021 000 018, A/C#: GLA 111-565, For further credit to A/C#: 293644 ______, Ref: Price/Smart/OPIC Collateral Account,or (ii) by physical delivery to The Bank of New York, 101 Barclay Street, 21W, New York, NY 10286, Attn: Vanessa Mack, Ref: PriceSmart/OPIC, within one (1) Business Day of the date on which they are required to be delivered, and shall be held in the Collateral Account in accordance herewith. 4

(b) All certificates or instruments or other physical evidence, if any, representing or evidencing the Collateral shall be held in the Collateral Account by the Intermediary, and, when delivered, shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to OPIC. OPIC shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. SECTION 3.05 SECURITY INTEREST ABSOLUTE The obligations of the Company under this Agreement are independent of the other obligations included in the definition of "Obligations" and a separate action or actions may be brought and prosecuted against the Company to enforce this Agreement, irrespective of whether any action is brought against any Sponsor or other collateral securing the obligations under the Loan Agreements, and irrespective of whether any Sponsor is joined in any such action or actions. Notwithstanding anything to the contrary contained herein and without limiting the generality of any other provision hereof, OPIC may, at any time and from time to time, either before or after the maturity of the Loan, make any agreement with a Party, for the extension, renewal, payment, compromise, discharge, release, or settlement of any of the terms hereof, without notice to or further consent by any other Party, and without in any way impairing or affecting the obligations and liabilities of any other Party. All rights of

(b) All certificates or instruments or other physical evidence, if any, representing or evidencing the Collateral shall be held in the Collateral Account by the Intermediary, and, when delivered, shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to OPIC. OPIC shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. SECTION 3.05 SECURITY INTEREST ABSOLUTE The obligations of the Company under this Agreement are independent of the other obligations included in the definition of "Obligations" and a separate action or actions may be brought and prosecuted against the Company to enforce this Agreement, irrespective of whether any action is brought against any Sponsor or other collateral securing the obligations under the Loan Agreements, and irrespective of whether any Sponsor is joined in any such action or actions. Notwithstanding anything to the contrary contained herein and without limiting the generality of any other provision hereof, OPIC may, at any time and from time to time, either before or after the maturity of the Loan, make any agreement with a Party, for the extension, renewal, payment, compromise, discharge, release, or settlement of any of the terms hereof, without notice to or further consent by any other Party, and without in any way impairing or affecting the obligations and liabilities of any other Party. All rights of OPIC and the pledge, assignment and security interest hereunder, and all obligations of the Company hereunder, shall be absolute and unconditional (except as the same may be extinguished by payment and/or performance in full of the Obligations) irrespective of: (a) any lack of validity or enforceability of any Financing Document; (b) any change in the time, manner, or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any Financing Document, including any increase in the Obligations resulting from the extension of additional credit to the Company or otherwise; (c) any taking, exchange, release, or non-perfection of any other collateral or any taking, release, or amendment or waiver of, or consent to departure from any guaranty, for all or any of the Obligations; (d) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of the Company or any Sponsor; (e) whether or not there are, at any given time, sufficient funds in the Collateral Account to meet the Company's Obligations; 5

(f) any change, restructuring, or termination of the corporate structure or existence of the Company; or (g) any other circumstances that might otherwise constitute a defense available to, or a discharge of, the Company or a third party grantor of a security interest. ARTICLE IV INVESTMENT OF COLLATERAL ACCOUNT SECTION 4.01 INVESTMENTS (a) Subject to Section 4.02(a), if no Notice of Event of Default is in effect, the Intermediary shall invest and reinvest all, or any portion of, amounts at any time credited to the Collateral Account in such Permitted Investments as shall be designated by the Company in a Permitted Investments Notice. In the absence of such designation, by no later than 1:00 p.m. New York City time on the Business Day following receipt of amounts in the form of same day funds, the Intermediary shall, to the extent possible, invest such amounts in (VALIANT TRSRY MMKT FD CL B (VN) (CUSIP NO.S99998860). OPIC may withdraw its authorization allowing the Company to designate investments hereunder, at any time, by notice to the Intermediary and the Company, in which case the Intermediary shall invest at the direction of OPIC.

(f) any change, restructuring, or termination of the corporate structure or existence of the Company; or (g) any other circumstances that might otherwise constitute a defense available to, or a discharge of, the Company or a third party grantor of a security interest. ARTICLE IV INVESTMENT OF COLLATERAL ACCOUNT SECTION 4.01 INVESTMENTS (a) Subject to Section 4.02(a), if no Notice of Event of Default is in effect, the Intermediary shall invest and reinvest all, or any portion of, amounts at any time credited to the Collateral Account in such Permitted Investments as shall be designated by the Company in a Permitted Investments Notice. In the absence of such designation, by no later than 1:00 p.m. New York City time on the Business Day following receipt of amounts in the form of same day funds, the Intermediary shall, to the extent possible, invest such amounts in (VALIANT TRSRY MMKT FD CL B (VN) (CUSIP NO.S99998860). OPIC may withdraw its authorization allowing the Company to designate investments hereunder, at any time, by notice to the Intermediary and the Company, in which case the Intermediary shall invest at the direction of OPIC. (b) Subject to Section 4.02(b), if a Notice of Event of Default is in effect, or if OPIC has provided notice to the Intermediary pursuant to the last sentence of Section 4.01(a), the Intermediary shall invest and reinvest all, or any portion of, amounts at any time credited to the Collateral Account in such Permitted Investments as shall be designated by OPIC in a Permitted Investments Notice. In the absence of such OPIC designation, by no later than 1:00 p.m. New York City time on the Business Day following receipt of such amounts in the form of same day funds, the Intermediary shall, to the extent possible, invest such amounts in direct obligations of, or obligations guaranteed by, the United States government or any agency or instrumentality thereof, maturing not later than seven (7) days after the date of such investment, and the Intermediary shall continue to re-invest any proceeds of such investments in like manner, until further direction from OPIC. SECTION 4.02 LIQUIDATION OF INVESTMENTS (a) If the Intermediary is required to disburse funds to the Company pursuant to Section 5.01(b) hereof, then on the Requested Payment Date, the Intermediary shall liquidate only those Account Assets specified in the related Excess Amount Certificate (as may be superseded pursuant to Section 5.01(c)) hereof, which are necessary to enable the Intermediary to disburse the Authorized Amount, in the order that has been specified by the Company; PROVIDED, THAT, if the cash that will be realized upon the liquidation of 6

the designated Account Assets is not sufficient to enable the Intermediary to make such disbursement, subject to the conditions set forth in Section 5.01(b), the Intermediary shall liquidate such Account Assets as instructed by OPIC in writing, so long as the Intermediary has first provided to OPIC a complete list of the Account Assets, as shall enable it to make such disbursement. Any amounts not required for disbursement received from such liquidation shall be invested in Permitted Investments indicated in the Excess Amount Certificate, or otherwise in accordance with Section 4.01(a). (b) If a Notice of Event of Default is in effect, not less than two (2) Business Days before a disbursement to OPIC from the Collateral Account is required pursuant to Section 5.02, OPIC shall deliver to the Intermediary an OPIC Disbursement Request designating the Account Assets to be liquidated. On the OPIC Disbursement Date, the Intermediary shall liquidate only those designated Account Accounts necessary to enable the Intermediary to disburse the amount indicated in the OPIC Disbursement Request, in the order specified therein; PROVIDED, THAT, if the cash that will be realized upon the liquidation of the designated Account Assets is not sufficient to enable the Intermediary to make such disbursement, the Intermediary shall liquidate such Account Assets selected by OPIC in writing, so long as the Intermediary has first provided to OPIC a complete list of the Account Assets, as shall enable it to make such disbursement within the time required for payment under Section 5.02. Any amounts not required for disbursement, received from such liquidation shall be invested in Permitted Investments indicated in the OPIC Disbursement Request, or otherwise in accordance with Section 4.01(b).

the designated Account Assets is not sufficient to enable the Intermediary to make such disbursement, subject to the conditions set forth in Section 5.01(b), the Intermediary shall liquidate such Account Assets as instructed by OPIC in writing, so long as the Intermediary has first provided to OPIC a complete list of the Account Assets, as shall enable it to make such disbursement. Any amounts not required for disbursement received from such liquidation shall be invested in Permitted Investments indicated in the Excess Amount Certificate, or otherwise in accordance with Section 4.01(a). (b) If a Notice of Event of Default is in effect, not less than two (2) Business Days before a disbursement to OPIC from the Collateral Account is required pursuant to Section 5.02, OPIC shall deliver to the Intermediary an OPIC Disbursement Request designating the Account Assets to be liquidated. On the OPIC Disbursement Date, the Intermediary shall liquidate only those designated Account Accounts necessary to enable the Intermediary to disburse the amount indicated in the OPIC Disbursement Request, in the order specified therein; PROVIDED, THAT, if the cash that will be realized upon the liquidation of the designated Account Assets is not sufficient to enable the Intermediary to make such disbursement, the Intermediary shall liquidate such Account Assets selected by OPIC in writing, so long as the Intermediary has first provided to OPIC a complete list of the Account Assets, as shall enable it to make such disbursement within the time required for payment under Section 5.02. Any amounts not required for disbursement, received from such liquidation shall be invested in Permitted Investments indicated in the OPIC Disbursement Request, or otherwise in accordance with Section 4.01(b). ARTICLE V PAYMENTS FROM THE COLLATERAL ACCOUNT SECTION 5.01 DISBURSEMENTS AND LIMITATIONS ON DISBURSEMENTS TO THE COMPANY (a) Not less than fifteen (15) Business Days prior to a Requested Payment Date, the Company shall send an Excess Amount Certificate to to OPIC, setting forth the Requested Payment and designate the specific investments to be sold as necessary. At least two (2) Business Days prior to the Requested Payment Date, OPIC shall deliver either (i) to the Intermediary (with a copy to the Company), a Notice of Authorization in respect of and with a copy of the Excess Amount Certificate, or (ii) a Notice of Objection to the Company. (b) If OPIC has delivered a Notice of Authorization to the Intermediary, then the Intermediary shall make disbursements from the Collateral Account to the Company on the Requested Payment Date in the amount designated in the Notice of Authorization as the Authorized Amount; PROVIDED, HOWEVER, that the Intermediary shall make no such disbursement to the Company pursuant to this Section 5.01 if: 7

(i) the Intermediary receives a Notice of Event of Default from OPIC at any time prior to 11:00 a.m. New York City time on a Requested Payment Date, or (ii) the Intermediary has received a Notice of Objection before 11:00 a.m. New York City time on the Requested Payment Date. (c) If the Company elects to designate Account Assets for liquidation on the Requested Payment Date, other than those previously specified in an Excess Amount Certificate, the Company shall notify the Intermediary of such designation in writing, at least two (2) Business Days prior to a Requested Payment Date. (d) Unless otherwise instructed by the Company in writing, the Intermediary shall make all disbursements to the Company pursuant to this Agreement in accordance with the following wire transfer instructions: [Mellon Bank, 3 Mellon Bank Center, Pittsburgh, PA 15259. USA. ] ABA # 043 000 261. Account: Merrill Lynch, A/C No. 101-1730 "For further credit to the account of PriceSmart, Inc. Account No. 72B-07435" SECTION 5.02 DISBURSEMENTS TO OPIC If a Notice of Event of Default is in effect, the Intermediary shall make disbursements from the Collateral Account

(i) the Intermediary receives a Notice of Event of Default from OPIC at any time prior to 11:00 a.m. New York City time on a Requested Payment Date, or (ii) the Intermediary has received a Notice of Objection before 11:00 a.m. New York City time on the Requested Payment Date. (c) If the Company elects to designate Account Assets for liquidation on the Requested Payment Date, other than those previously specified in an Excess Amount Certificate, the Company shall notify the Intermediary of such designation in writing, at least two (2) Business Days prior to a Requested Payment Date. (d) Unless otherwise instructed by the Company in writing, the Intermediary shall make all disbursements to the Company pursuant to this Agreement in accordance with the following wire transfer instructions: [Mellon Bank, 3 Mellon Bank Center, Pittsburgh, PA 15259. USA. ] ABA # 043 000 261. Account: Merrill Lynch, A/C No. 101-1730 "For further credit to the account of PriceSmart, Inc. Account No. 72B-07435" SECTION 5.02 DISBURSEMENTS TO OPIC If a Notice of Event of Default is in effect, the Intermediary shall make disbursements from the Collateral Account on the date and in the amount designated by OPIC in an OPIC Disbursement Request substantially in the form annexed hereto as Exhibit F on at least two (2) Business Days' prior written notice. The Intermediary shall conclusively rely upon and act in accordance with such OPIC Disbursement Request without notice to or consent of the Company. ARTICLE VI CONCERNING THE INTERMEDIARY SECTION 6.01 POWERS, RIGHTS AND RESPONSIBILITIES OF INTERMEDIARY (a) The Intermediary shall exercise its duties upon the express terms and conditions contained in this Agreement and in fulfillment of the duties and obligations of a securities intermediary, as set forth in Article 8. (b) The Intermediary shall be obligated to perform only such duties as are expressly set forth in this Agreement, including such duties as are incorporated herein by reference to the UCC. No covenants or obligations shall be implied or inferred from this 8

Agreement against the Intermediary, nor shall the Intermediary be bound by the provisions of any other agreement. (c) The Intermediary shall not be liable for any action taken or omitted or for any loss or injury resulting from its actions or its performance or lack of performance of its duties hereunder in the absence of gross negligence or willful misconduct on its part. In no event shall the intermediary be liable (i) for acting in accordance with or relying upon any instruction, notice, demand, certificate or document from any other Party hereto, but only to the extent that such Party may permissively give instructions, notices demands and the like pursuant to the provisions hereof, or any entity acting on behalf of any such Party, (ii) for any consequential, punitive or special damages, (iii) for the acts or omissions of its nominees, correspondents, designees, subagents or subcustodians chosen with due care, or (iv) for an amount in excess of the value of the securities or other property or assets deposited in or credited to the Collateral Account, valued as of the date of deposit. (d) The Intermediary shall be entitled to conclusively rely upon any order, judgment, certification, instruction, notice, direction, request, opinion, instrument or other ]writing delivered to it in compliance with the provisions of this Agreement, reasonably believed by the Intermediary to be authentic, and to be signed or sent by the proper Person without being required to determine the authenticity or the correctness of any fact stated therein. The Intermediary shall not be required to ascertain the propriety or validity of service with respect to the foregoing.

Agreement against the Intermediary, nor shall the Intermediary be bound by the provisions of any other agreement. (c) The Intermediary shall not be liable for any action taken or omitted or for any loss or injury resulting from its actions or its performance or lack of performance of its duties hereunder in the absence of gross negligence or willful misconduct on its part. In no event shall the intermediary be liable (i) for acting in accordance with or relying upon any instruction, notice, demand, certificate or document from any other Party hereto, but only to the extent that such Party may permissively give instructions, notices demands and the like pursuant to the provisions hereof, or any entity acting on behalf of any such Party, (ii) for any consequential, punitive or special damages, (iii) for the acts or omissions of its nominees, correspondents, designees, subagents or subcustodians chosen with due care, or (iv) for an amount in excess of the value of the securities or other property or assets deposited in or credited to the Collateral Account, valued as of the date of deposit. (d) The Intermediary shall be entitled to conclusively rely upon any order, judgment, certification, instruction, notice, direction, request, opinion, instrument or other ]writing delivered to it in compliance with the provisions of this Agreement, reasonably believed by the Intermediary to be authentic, and to be signed or sent by the proper Person without being required to determine the authenticity or the correctness of any fact stated therein. The Intermediary shall not be required to ascertain the propriety or validity of service with respect to the foregoing. (e) The Intermediary shall not be called upon to advise any Party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property and assets deposited in or credited to the Collateral Account pursuant hereto. (f) No provision of this Agreement shall require the Intermediary to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers hereunder. (g) In the event of any ambiguity or uncertainty hereunder or in any notice, instruction or other communication received by the Intermediary hereunder, the Intermediary may, in its sole discretion, refrain from taking any action other than retain possession of the Account Assets, unless the Intermediary receives written instructions, signed by all other Parties, which eliminates such ambiguity or uncertainty. (h) The Intermediary may consult with legal counsel of its selection at the expense of the Company as to any matter relating to this Agreement, and 9

the Intermediary shall not incur any liability in acting in good faith in accordance with any advice from such counsel. (i) The Intermediary shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Intermediary (including butnot limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility. (j) The Intermediary shall not be responsible in any respect for the form, execution, validity, value or genuineness of documents or securities deposited hereunder, or for any description therein, or for the identity, authority or rights of persons executing or delivering or purporting to execute or deliver any such document, security or endorsement. The Intermediary shall not be required, or have any duty, to notify anyone of any payment or maturity under the terms of any instrument deposited hereunder, nor to take any legal action to enforce payment of any check, note or security deposited hereunder or to exercise any right or privilege which may be afforded to the holder of such security. (k) If at any time the Intermediary is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Collateral (including but not limited to orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of

the Intermediary shall not incur any liability in acting in good faith in accordance with any advice from such counsel. (i) The Intermediary shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Intermediary (including butnot limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility. (j) The Intermediary shall not be responsible in any respect for the form, execution, validity, value or genuineness of documents or securities deposited hereunder, or for any description therein, or for the identity, authority or rights of persons executing or delivering or purporting to execute or deliver any such document, security or endorsement. The Intermediary shall not be required, or have any duty, to notify anyone of any payment or maturity under the terms of any instrument deposited hereunder, nor to take any legal action to enforce payment of any check, note or security deposited hereunder or to exercise any right or privilege which may be afforded to the holder of such security. (k) If at any time the Intermediary is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Collateral (including but not limited to orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of Account Assets), the Intermediary shall immediately notify OPIC, provide copies of all documents served on it to enable OPIC to take appropriate action to protect its interests and confer with OPIC before complying. Thereafter, the Intermediary is authorized tom comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate; and if the Intermediary complies with any such judicial or administrative order, judgment, decree writor other form of judicial or administrative process, the Intermediary shall not be liable to any of the other parties hereto or to any other person or entity even though such order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect. (m) The provisions of this Article shall survive termination of this Agreement, the resignation or removal of the Intermediary and the closing of the Collateral Account. SECTION 6.02 COMPENSATION AND REIMBURSEMENT OF INTERMEDIARY 10

(a) On or prior to the initial Closing Date, the Company shall pay the Intermediary the fees payable for the first year, and, not later than the annual anniversary thereof, the Company shall pay the Intermediary the fees then payable, in advance, for the upcoming year, pursuant to Schedule Y, as such schedule may be amended from time to time to reflect changes in the Intermediary's standard rates for such services, by the Intermediary's delivery of a new Schedule Y to the other Parties. (b) The Company shall reimburse the Intermediary, upon demand, for all expenses, disbursements, and advances incurred or made by the Intermediary in implementing any of the provisions of this Agreement, including any costs or expenses incurred by the Intermediary as a result of conflicting claims or notices involving the Parties, compensation and the expenses and disbursements of its counsel and agents, and all other costs and expenses incurred in connection with the execution, administration or enforcement of this Agreement, except any such expense, disbursement, or advance as may arise from the Intermediary's gross negligence or willful misconduct. (c) The Intermediary shall promptly notify OPIC of any failure by the Company to pay the Intermediary any fees and expenses or other amounts due and payable to the Intermediary pursuant to this Section 6.02 and Section 12.12. The Intermediary shall take no action against the Company with respect to any nonpayment, prior to thirty (30) Business Days from the date of notice to OPIC thereof, during which time OPIC may elect to pay the Intermediary the amounts due by the Company, as provided in Section 6.02(d). (d) OPIC shall have no liability to the Intermediary for any amounts payable pursuant to this Section 6.02 and Section 12.12; however, OPIC may, in its sole discretion, agree to pay amounts owed by the Company to the

(a) On or prior to the initial Closing Date, the Company shall pay the Intermediary the fees payable for the first year, and, not later than the annual anniversary thereof, the Company shall pay the Intermediary the fees then payable, in advance, for the upcoming year, pursuant to Schedule Y, as such schedule may be amended from time to time to reflect changes in the Intermediary's standard rates for such services, by the Intermediary's delivery of a new Schedule Y to the other Parties. (b) The Company shall reimburse the Intermediary, upon demand, for all expenses, disbursements, and advances incurred or made by the Intermediary in implementing any of the provisions of this Agreement, including any costs or expenses incurred by the Intermediary as a result of conflicting claims or notices involving the Parties, compensation and the expenses and disbursements of its counsel and agents, and all other costs and expenses incurred in connection with the execution, administration or enforcement of this Agreement, except any such expense, disbursement, or advance as may arise from the Intermediary's gross negligence or willful misconduct. (c) The Intermediary shall promptly notify OPIC of any failure by the Company to pay the Intermediary any fees and expenses or other amounts due and payable to the Intermediary pursuant to this Section 6.02 and Section 12.12. The Intermediary shall take no action against the Company with respect to any nonpayment, prior to thirty (30) Business Days from the date of notice to OPIC thereof, during which time OPIC may elect to pay the Intermediary the amounts due by the Company, as provided in Section 6.02(d). (d) OPIC shall have no liability to the Intermediary for any amounts payable pursuant to this Section 6.02 and Section 12.12; however, OPIC may, in its sole discretion, agree to pay amounts owed by the Company to the Intermediary, in which case such amount shall be deemed to be an Obligation secured by the Collateral. The foregoing is without prejudice to any right which OPIC may have under applicable law, upon OPIC's payment to the Intermediary, to be subrogated to the rights of the Intermediary against the Company. SECTION 6.03 INTERMEDIARY'S WAIVER OF LIEN ON COLLATERAL AND SETOFF RIGHTS The Intermediary acknowledges that it shall hold the Collateral solely in its capacity as securities intermediary hereunder, and the Intermediary irrevocably waives and agrees not to exercise any banker's lien, right of setoff, right of recoupment, right to combine accounts or any similar lien, claim or right, it may have against or on the Collateral, express or implied, statutory or otherwise, to satisfy any obligation which the Company may owe to the Intermediary, in any capacity. SECTION 6.04 ACCESS TO BOOKS; INSPECTION; STATEMENTS OF ACCOUNT 11

(a) Until one (1) year after the Intermediary has received notice from OPIC pursuant to Section 11.02 that all Obligations have been paid in full, the Intermediary shall, upon request of OPIC, give or cause to be given to an Authorized Officer of OPIC, access, during normal business hours, to examine, copy and make extracts from, in a manner that does not disrupt the Intermediary's normal business operations, any and all records and documents which are then in the possession or subject to the control of the Intermediary, relating to the Collateral. The Company shall pay the costs and expenses of OPIC and the Intermediary in connection with the exercise of OPIC's rights under this Section. If the Company fails to pay the Intermediary's costs and expenses, OPIC may do so in accordance with Section 10.02, and OPIC may then seek reimbursement from the Company under Section 12.14. (b) The Intermediary shall furnish to the Company and to an Authorized Officer of OPIC monthly transaction statements showing all credits and deposits to, and disbursements from, the Collateral Account during such month, and showing the Account Assets held by the Intermediary (identified by title or series, unpaid principal amount, maturity date and other relevant identifying features) as of the last Business Day of such period and the value thereof (valued in accordance with the Intermediary's customary methods for the valuation of such assets). The Company and OPIC shall each be entitled to communicate directly with the Intermediary and the Intermediary shall, upon the reasonable request of the Company or OPIC, from time to time, confirm the value of Account Assets. SECTION 6.05 CLOSING OF COLLATERAL ACCOUNT

(a) Until one (1) year after the Intermediary has received notice from OPIC pursuant to Section 11.02 that all Obligations have been paid in full, the Intermediary shall, upon request of OPIC, give or cause to be given to an Authorized Officer of OPIC, access, during normal business hours, to examine, copy and make extracts from, in a manner that does not disrupt the Intermediary's normal business operations, any and all records and documents which are then in the possession or subject to the control of the Intermediary, relating to the Collateral. The Company shall pay the costs and expenses of OPIC and the Intermediary in connection with the exercise of OPIC's rights under this Section. If the Company fails to pay the Intermediary's costs and expenses, OPIC may do so in accordance with Section 10.02, and OPIC may then seek reimbursement from the Company under Section 12.14. (b) The Intermediary shall furnish to the Company and to an Authorized Officer of OPIC monthly transaction statements showing all credits and deposits to, and disbursements from, the Collateral Account during such month, and showing the Account Assets held by the Intermediary (identified by title or series, unpaid principal amount, maturity date and other relevant identifying features) as of the last Business Day of such period and the value thereof (valued in accordance with the Intermediary's customary methods for the valuation of such assets). The Company and OPIC shall each be entitled to communicate directly with the Intermediary and the Intermediary shall, upon the reasonable request of the Company or OPIC, from time to time, confirm the value of Account Assets. SECTION 6.05 CLOSING OF COLLATERAL ACCOUNT (a) The Intermediary may close the Collateral Account by giving at least ninety (90) days' prior written notice to the Company and OPIC. OPIC may enter into an agreement with a successor securities intermediary during such notice period. The Intermediary shall keep the Collateral Account open and hold all Account Assets in accordance with the terms of this Agreement, pending distribution to such successor securities intermediary, and shall promptly deliver all Account Assets to such successor upon notice from OPIC of OPIC's designation thereof. (b) OPIC may cause the Collateral Account to be closed upon written notice to the Intermediary. The Intermediary shall promptly deliver the Account Assets to OPIC or any successor securities intermediary designated by OPIC, in accordance with OPIC's instructions. The account closing shall take effect upon delivery of all Account Assets to OPIC as specified in clause (c) below or the designated successor securities intermediary, and the Intermediary shall thereupon be discharged from all further obligations under this Agreement and shall have no further duties or responsibilities in connection herewith. (c) If during the ninety (90) day notice period specified in clause (a) above or after forty-five (45) days following the date of delivery of OPIC's notice of closing pursuant to clause (b) above, the Intermediary has not received a written designation of a 12

successor securities intermediary then, after such period in each case, the Intermediary's sole responsibility shall be to promptly deliver all Account Assets to OPIC. (d) Pursuant to clauses (a) through (c) of this Section 6.05, and in accordance with the time periods specified in each such clause, as applicable, the Intermediary shall, upon instruction from OPIC and without notice to the Company: (i) transfer or cause its nominee to transfer to OPIC or its designee any and all Collateral in the Intermediary's possession or control, or maintained in the Intermediary's name, or on its behalf; and (ii) provide such documents to OPIC as may be reasonably required to register OPIC, a successor securities intermediary or another designee of OPIC, as the case may be, as the owner or registered pledgee (as directed by OPIC) of any uncertificated security or certificated security in registered form, then included in the Collateral. (e) The Intermediary shall close the Collateral Account upon termination of this Agreement and delivery of Account Assets to the Company pursuant to Section 11.02.

successor securities intermediary then, after such period in each case, the Intermediary's sole responsibility shall be to promptly deliver all Account Assets to OPIC. (d) Pursuant to clauses (a) through (c) of this Section 6.05, and in accordance with the time periods specified in each such clause, as applicable, the Intermediary shall, upon instruction from OPIC and without notice to the Company: (i) transfer or cause its nominee to transfer to OPIC or its designee any and all Collateral in the Intermediary's possession or control, or maintained in the Intermediary's name, or on its behalf; and (ii) provide such documents to OPIC as may be reasonably required to register OPIC, a successor securities intermediary or another designee of OPIC, as the case may be, as the owner or registered pledgee (as directed by OPIC) of any uncertificated security or certificated security in registered form, then included in the Collateral. (e) The Intermediary shall close the Collateral Account upon termination of this Agreement and delivery of Account Assets to the Company pursuant to Section 11.02. ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INTERMEDIARY SECTION 7.01 REPRESENTATIONS AND WARRANTIES OF INTERMEDIARY The Intermediary represents and warrants as follows: (a) it is duly organized and validly existing the laws of the jurisdiction of its organization and incorporation and, if relevant under such laws, is in good standing; (b) it has the power to execute and deliver this Agreement and any other documentation relating to this Agreement to which it is a party or that it is required by this Agreement to deliver, and to perform its obligations under this Agreement, and it has taken all necessary action to authorize such execution, delivery and performance, and this Agreement has been, and each other such document shall be, duly executed, delivered and performed by it; (c) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constituent documents, any order or 13

judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (d) all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and it has complied with all conditions of any such consents; (e) its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms; (f) there is not pending or, to its knowledge, threatened against it or any of its affiliates any action, suit or proceeding at law or in equity before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or its ability to perform its obligations under this Agreement; (g) it is not a clearing corporation, as defined in Article 8; (h) its jurisdiction is New York for purposes of Section 8-110(e) of the UCC;

judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (d) all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and it has complied with all conditions of any such consents; (e) its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms; (f) there is not pending or, to its knowledge, threatened against it or any of its affiliates any action, suit or proceeding at law or in equity before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or its ability to perform its obligations under this Agreement; (g) it is not a clearing corporation, as defined in Article 8; (h) its jurisdiction is New York for purposes of Section 8-110(e) of the UCC; (i) it has established the Collateral Account in the manner described in Section 2.01 and such Collateral Account is subject to this Agreement; and (j) it is not aware of any claim to or interest in the Collateral Account or any of the Collateral, including any other Person having "control" (as defined in Article 8) of such account or assets, other than those claims and interests of the Company and OPIC hereunder, and it has not entered into any other agreement with any Person relating to the Collateral pursuant to which it has agreed to comply with entitlement orders or other instructions with respect to the Collateral made by any Person or to limit or condition the obligation of the Intermediary to comply with entitlement orders or other instructions by OPIC. The Intermediary makes no representation as to the validity, value, genuineness or collectability of any security or other document or instrument held by or delivered to it. SECTION 7.02 COVENANTS OF INTERMEDIARY The Intermediary covenants as follows: (a) it shall not change its jurisdiction, as specified in Section 7.01(h), or the governing law provisions contained in the account agreement pursuant to which the Company opened the Collateral Account; (b) if any account agreement establishing the Collateral Account exists that does not specify New York as its governing law, this Agreement shall be attached 14

thereto, and shall be provided to any third parties making inquiries about the Collateral Account; (c) without the prior written consent of OPIC and notice to the Company, it shall not change the name or account number of the Collateral Account, or enter into any agreement under which the Intermediary agrees to comply with entitlement orders originated by any Person other than OPIC with respect to the Collateral; (d) subject to the terms of this Agreement, it shall comply with all entitlement orders and other orders of OPIC directing transfer, investment, redemption or withdrawal of any Collateral or other instructions originated by OPIC with respect to the Collateral, without further consent by the Company or any other Person, and notwithstanding any contrary instructions to the Intermediary from the Company or any other Person, and the Company shall have only such rights to transfer, invest, redeem or withdraw the Collateral as are specifically provided herein or in a written instruction by OPIC to the Intermediary;

thereto, and shall be provided to any third parties making inquiries about the Collateral Account; (c) without the prior written consent of OPIC and notice to the Company, it shall not change the name or account number of the Collateral Account, or enter into any agreement under which the Intermediary agrees to comply with entitlement orders originated by any Person other than OPIC with respect to the Collateral; (d) subject to the terms of this Agreement, it shall comply with all entitlement orders and other orders of OPIC directing transfer, investment, redemption or withdrawal of any Collateral or other instructions originated by OPIC with respect to the Collateral, without further consent by the Company or any other Person, and notwithstanding any contrary instructions to the Intermediary from the Company or any other Person, and the Company shall have only such rights to transfer, invest, redeem or withdraw the Collateral as are specifically provided herein or in a written instruction by OPIC to the Intermediary; (e) it shall maintain all Account Assets in its exclusive control, subject to the terms of this Agreement; (f) it shall report all items of income (including dividends, interest and other distributions on Account Assets), gain, expense, and loss recognized in the Collateral Account in the name and under the tax identification number of the Company as shown on the Form W-9 to be delivered upon the execution hereof; (g) it shall accept and promptly credit all property delivered to it by or on behalf of the Company for credit to the Collateral Account, and all Permitted Investments, by an appropriate entry in its records; (h) it does not have any interest in the Collateral but is serving only as securities intermediary, and this is, and shall remain until termination of this Agreement pursuant to Section 11.02, the only agreement between the Intermediary and the Company relating to the Collateral (other than an agreement establishing the Collateral Account, a copy of which has been delivered to OPIC); (i) it shall not grant any Lien on the Collateral and it shall promptly notify OPIC and the Company if any Person requests the Intermediary to enter into an agreement with respect to the Collateral, or otherwise asserts or seeks to assert a lien, encumbrance or adverse claim against all or any portion of the Collateral; (j) it shall provide to OPIC and the Company, simultaneously, copies of all account statements, confirmations, and other correspondence relating to the Collateral Account, and a monthly transaction and valuation statement in accordance with Section 6.04(b), and it shall provide OPIC with any other reports, valuations or other correspondence that OPIC may reasonably request; 15

(k) it shall only accept Account Assets in the form specified in Section 2.04; (l) it shall maintain the Collateral Account and shall not terminate or close the Collateral Account without the prior written consent of OPIC and notice to the Company, except as provided in Section 6.05; and (m) it has not extended, and shall not extend, any credit to the Company. ARTICLE VIII COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 8.01 REPRESENTATIONS AND WARRANTIES MADE UPON EXECUTION OF THIS AGREEMENT Upon execution of this Agreement, the Company represents and warrants as follows: (a) it has established the Collateral Account with the Intermediary subject to this Agreement and the Company is not a party to any agreement with respect to the establishment, management, or operation of the Collateral Account or investment of amounts credited thereto or held therein, except for this Agreement (other than an

(k) it shall only accept Account Assets in the form specified in Section 2.04; (l) it shall maintain the Collateral Account and shall not terminate or close the Collateral Account without the prior written consent of OPIC and notice to the Company, except as provided in Section 6.05; and (m) it has not extended, and shall not extend, any credit to the Company. ARTICLE VIII COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 8.01 REPRESENTATIONS AND WARRANTIES MADE UPON EXECUTION OF THIS AGREEMENT Upon execution of this Agreement, the Company represents and warrants as follows: (a) it has established the Collateral Account with the Intermediary subject to this Agreement and the Company is not a party to any agreement with respect to the establishment, management, or operation of the Collateral Account or investment of amounts credited thereto or held therein, except for this Agreement (other than an agreement establishing the Collateral Account, a copy of which has been delivered to OPIC); (b) this Agreement creates a legal, valid and enforceable Lien in favor of OPIC in the Collateral, securing the payment of the Obligations, enforceable against the Company and third parties; (c) the security interest created by this Agreement in the Collateral Account is perfected under the UCC, and such security interest, as so perfected, is first priority; (d) there are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived; (e) no consent of any other Person and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (x) for the execution, delivery, or performance of this Agreement by the Company, (y) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest), or (z) for the exercise by OPIC of the rights provided for in this Agreement; (f) the Company has no trade name; 16

(g) the Company has not (x) borrowed any money from, (y) been extended any credit by, or (z) become otherwise obligated to pay any money to, the Intermediary, other than the fees and expenses payable to the Intermediary pursuant to Section 6.02; and (h) the Company has, independently and without reliance upon the representations of OPIC or any other Person and based on such documents and information as it has deemed appropriate, made its own decision to enter into this Agreement. SECTION 8.02 REPRESENTATIONS AND WARRANTIES MADE UPON DELIVERY OF ANY COLLATERAL The Company represents and warrants as follows, upon delivery of any Collateral: (a) any Account Assets that are transferred to the Intermediary have been fully paid and are nonassessable, and all documentary, stamp, or other taxes or fees that may be owing in connection with the issuance, transfer, and pledge thereof have been paid by it or on its behalf;

(g) the Company has not (x) borrowed any money from, (y) been extended any credit by, or (z) become otherwise obligated to pay any money to, the Intermediary, other than the fees and expenses payable to the Intermediary pursuant to Section 6.02; and (h) the Company has, independently and without reliance upon the representations of OPIC or any other Person and based on such documents and information as it has deemed appropriate, made its own decision to enter into this Agreement. SECTION 8.02 REPRESENTATIONS AND WARRANTIES MADE UPON DELIVERY OF ANY COLLATERAL The Company represents and warrants as follows, upon delivery of any Collateral: (a) any Account Assets that are transferred to the Intermediary have been fully paid and are nonassessable, and all documentary, stamp, or other taxes or fees that may be owing in connection with the issuance, transfer, and pledge thereof have been paid by it or on its behalf; (b) the Company is the legal and beneficial owner of and has good title to the Collateral, free and clear of any Lien thereon, other than the Liens created hereby, and the Collateral is not subject to any agreement purporting to grant to any third party a Lien on the property or assets of the Company which would include the Collateral. No effective financing statement or other instrument similar in effect covering all or any part of such Collateral is on file in any recording office, except such as may have been filed in favor of OPIC relating to this Agreement; and (c) no consent of any other Person and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the pledge and assignment of, and grant of a security interest in, the Collateral or for the exercise by OPIC of the rights provided for in this Agreement or the remedies in respect of such Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Collateral by laws affecting the offering and sale of securities generally). 17

SECTION 8.03 COMPANY COVENANTS So long as any of the Obligations shall remain unpaid and until termination of this Agreement, unless OPIC shall otherwise consent in writing, the Company agrees as follows: (a) it shall not move its chief executive office without at least sixty (60) days prior written notice to OPIC; (b) it shall not make any withdrawal from or direct that any payment be debited from the Collateral Account other than as expressly permitted by this Agreement; (c) it shall not permit any Person other than OPIC to have control of the Collateral Account or any of the Account Assets, including as a result of the grant of a security interest to any Person acting as securities intermediary with respect to such Collateral; (d) it shall not (x) borrow any money from, (y) allow any credit to be extended to it by, or (z) become otherwise obligated to pay any money to, the Intermediary, other than the fees or expenses payable to the Intermediary pursuant to Section 6.02; (e) it shall pay all documentary, stamp, registration, or other duties, taxes or fees, if any, to which this Agreement may be subject or give rise, and shall indemnify OPIC and the Intermediary against any and all liabilities with respect to or resulting from any delay or omission on the part of the Company to pay any such duties, taxes, or fees; (f) it shall not knowingly take any action in connection with the Collateral that would materially impair the value of

SECTION 8.03 COMPANY COVENANTS So long as any of the Obligations shall remain unpaid and until termination of this Agreement, unless OPIC shall otherwise consent in writing, the Company agrees as follows: (a) it shall not move its chief executive office without at least sixty (60) days prior written notice to OPIC; (b) it shall not make any withdrawal from or direct that any payment be debited from the Collateral Account other than as expressly permitted by this Agreement; (c) it shall not permit any Person other than OPIC to have control of the Collateral Account or any of the Account Assets, including as a result of the grant of a security interest to any Person acting as securities intermediary with respect to such Collateral; (d) it shall not (x) borrow any money from, (y) allow any credit to be extended to it by, or (z) become otherwise obligated to pay any money to, the Intermediary, other than the fees or expenses payable to the Intermediary pursuant to Section 6.02; (e) it shall pay all documentary, stamp, registration, or other duties, taxes or fees, if any, to which this Agreement may be subject or give rise, and shall indemnify OPIC and the Intermediary against any and all liabilities with respect to or resulting from any delay or omission on the part of the Company to pay any such duties, taxes, or fees; (f) it shall not knowingly take any action in connection with the Collateral that would materially impair the value of the Collateral or that would impair the interest or rights of OPIC therein; (g) it shall not sell, assign, transfer, charge, pledge, or encumber in any manner, or otherwise dispose of, or grant any option with respect to, any of the Collateral or the Company's interest therein, or allow to exist any Lien (other than a Lien created hereby) on such Collateral or any of the Company's interest therein; nor file, nor permit to be at any time on file in any recording office, any effective financing statement or other instrument similar in effect covering all or any part of such Collateral (except for filings permitted or required hereunder); (h) it shall at all times maintain or cause to be maintained in the Collateral Account, Account Assets at least equal in aggregate fair market value to the Collateral Maintenance Requirement, and it shall monitor the value of Account Assets on a daily basis to assure that the Collateral Maintenance Requirement is at all times maintained; and 18

(i) it shall furnish to OPIC, within forty-five (45) days after the end o each fiscal quarter (including the fourth fiscal quarter) of each Fiscal Year, statements and schedules further identifying and describing the Collateral and setting forth its fair market value, and, from time to time, it shall furnish such other reports in connection with the Collateral as OPIC may reasonably request, all in reasonable detail. ARTICLE IX EVENT OF DEFAULT SECTION 9.01 NOTICE OF EVENT OF DEFAULT Upon the occurrence of an Event of Default, under either of the Loan Agreements, OPIC may, in its sole discretion, deliver a Notice of Event of Default to the Intermediary, with a copy thereof delivered to the Company. A Notice of Event of Default delivered by OPIC shall become effective upon receipt thereof by the Intermediary. A Notice of Event of Default, once effective, shall remain in effect unless and until it is canceled by OPIC by delivery of a Notice of Cancellation to the Intermediary (with a copy thereof to the Company). The Company shall not be entitled to cancel any Notice of Event of Default. For the avoidance of doubt, the Intermediary is required to comply with OPIC's entitlement orders whether or not a Notice of Event of Default

(i) it shall furnish to OPIC, within forty-five (45) days after the end o each fiscal quarter (including the fourth fiscal quarter) of each Fiscal Year, statements and schedules further identifying and describing the Collateral and setting forth its fair market value, and, from time to time, it shall furnish such other reports in connection with the Collateral as OPIC may reasonably request, all in reasonable detail. ARTICLE IX EVENT OF DEFAULT SECTION 9.01 NOTICE OF EVENT OF DEFAULT Upon the occurrence of an Event of Default, under either of the Loan Agreements, OPIC may, in its sole discretion, deliver a Notice of Event of Default to the Intermediary, with a copy thereof delivered to the Company. A Notice of Event of Default delivered by OPIC shall become effective upon receipt thereof by the Intermediary. A Notice of Event of Default, once effective, shall remain in effect unless and until it is canceled by OPIC by delivery of a Notice of Cancellation to the Intermediary (with a copy thereof to the Company). The Company shall not be entitled to cancel any Notice of Event of Default. For the avoidance of doubt, the Intermediary is required to comply with OPIC's entitlement orders whether or not a Notice of Event of Default shall have been given; the mechanism of providing a Notice of Event of Default is used purely for ease of administering this Agreement and to reflect understandings with respect to directing investments, as set forth herein. SECTION 9.02 REMEDIES UPON EVENT OF DEFAULT (a) Upon the occurrence of an Event of Default, under either of the Loan Agreements, OPIC shall have the right, in its discretion and without notice to or consent of the Company, and whether or not it has delivered a Notice of Event of Default, to direct the Intermediary to transfer to OPIC or any of its nominees, all or any part of the Collateral. OPIC shall be entitled to exercise all of the rights, powers and remedies set forth in Article X and all rights and remedies it may have as a secured creditor under the UCC and other applicable law, in protecting and enforcing its rights hereunder, including, if an Event of Default, under either of the Loan Agreements, shall have occurred and be continuing, without notice, to sell, lease, assign, and deliver, or grant options to purchase, or otherwise dispose of, all or any part of the Collateral, at such place or places as OPIC may determine, at public or private sale, for cash or on credit and for present or future delivery (without thereby assuming any credit risk), and at such price or prices and upon such other terms as OPIC may deem commercially reasonable, it being agreed that the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public or private sale shall thereafter hold the same absolutely free from any claim or right of the Company of whatsoever kind, including any right of redemption, and any 19

obligation to see to the application of any part of the purchase money paid therefor or any liability for the misapplication or non-application thereof, and OPIC may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale or other disposition, and such sale or other disposition may be made at any time or place to which the same may be so adjourned. As provided in Sections 1-102 and 9-501(3)(c) of the UCC, the duties of OPIC pursuant to Sections 9-504(3) and 9-505(1) of the UCC shall be deemed to be satisfied so long as the requirements of this Section are satisfied in connection with any disposition of Collateral pursuant to this Agreement. To the extent notice of sale or other disposition shall be required by law, at least ten (10) days notice to the Company of the time and place of any sale or other disposition shall constitute reasonable notice. (b) All cash proceeds received by OPIC in respect of any sale of, collection from, or other realization on or upon all or any part of the Collateral pursuant to Section 10.01, or any other payments made in respect of the Collateral and received by OPIC pursuant to Section 9.01(a), may, in the discretion of OPIC, be redelivered to the Intermediary as Collateral for, and then or as soon thereafter as is reasonably practicable applied in whole or in part by OPIC in accordance with Section 5.02 hereof, against, all or any of the Obligations in any manner elected by OPIC that is permitted by applicable law. Any surplus of such cash proceeds or other payments and interest accrued thereon, held by the Intermediary or OPIC and remaining after payment in full of all of the Obligations shall be promptly paid over (upon joint written instruction of the Company and OPIC) to the

obligation to see to the application of any part of the purchase money paid therefor or any liability for the misapplication or non-application thereof, and OPIC may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale or other disposition, and such sale or other disposition may be made at any time or place to which the same may be so adjourned. As provided in Sections 1-102 and 9-501(3)(c) of the UCC, the duties of OPIC pursuant to Sections 9-504(3) and 9-505(1) of the UCC shall be deemed to be satisfied so long as the requirements of this Section are satisfied in connection with any disposition of Collateral pursuant to this Agreement. To the extent notice of sale or other disposition shall be required by law, at least ten (10) days notice to the Company of the time and place of any sale or other disposition shall constitute reasonable notice. (b) All cash proceeds received by OPIC in respect of any sale of, collection from, or other realization on or upon all or any part of the Collateral pursuant to Section 10.01, or any other payments made in respect of the Collateral and received by OPIC pursuant to Section 9.01(a), may, in the discretion of OPIC, be redelivered to the Intermediary as Collateral for, and then or as soon thereafter as is reasonably practicable applied in whole or in part by OPIC in accordance with Section 5.02 hereof, against, all or any of the Obligations in any manner elected by OPIC that is permitted by applicable law. Any surplus of such cash proceeds or other payments and interest accrued thereon, held by the Intermediary or OPIC and remaining after payment in full of all of the Obligations shall be promptly paid over (upon joint written instruction of the Company and OPIC) to the Company or to whomsoever else may be lawfully entitled to receive such surplus as directed by a court of competent jurisdiction; PROVIDED, HOWEVER, that neither the Intermediary nor OPIC shall have any obligation to invest or otherwise pay interest on any amounts held by it in connection with or pursuant to this Agreement. (c) If the proceeds of sale, collection or other realization of or upon the Collateral pursuant to clause (a) are insufficient to cover the costs and expenses of such sale, collection, or other realization and the payment in full of the Obligations, the Company shall remain liable for any deficiency. (d) To the extent permitted by law, OPIC may be a purchaser of the Collateral, or any part thereof, at any sale or other disposition carried out pursuant to the provisions of this Agreement, and may bid for and acquire all or any part of the Collateral and, in lieu of paying cash, may make settlement for the purchase price by crediting against the Obligations the net sales or realization price, after deducting the costs and expenses of such sale or other disposition. (e) Subject to compliance with any applicable law, OPIC may, at its option, enforce its rights hereunder without prior judicial or arbitral process or hearing, and, to the extent permitted by applicable law, the Company expressly waives any and all legal and equitable rights which might otherwise require OPIC to enforce its rights by judicial or arbitral process. 20

ARTICLE X CERTAIN RIGHTS, POWERS AND REMEDIES; NO WAIVER SECTION 10.01 OPIC APPOINTED ATTORNEY-IN-FACT The Company irrevocably appoints OPIC its agent and attorney-in-fact, coupled with an interest, with full authority in the Company's place and stead and in its name or otherwise, from time to time upon the occurrence and during the continuance of an Event of Default under either Loan Agreement or otherwise, to the extent that OPIC shall reasonably deem any action to be necessary in order to maintain the perfection and assure first priority of, and the ability to enforce, its security interest in the Collateral, in OPIC's discretion, to take any action and to execute any instrument which OPIC may deem necessary or advisable to accomplish the purposes of this Agreement, including, to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in connection with the Collateral, to receive, indorse, and collect any drafts or other instruments, documents, and chattel paper in connection therewith, to sign the Company's name on, and file financing statements as described in Section 12.19, and to file any claims or take any action or institute any proceedings which OPIC may deem necessary or desirable for the collection thereof.

ARTICLE X CERTAIN RIGHTS, POWERS AND REMEDIES; NO WAIVER SECTION 10.01 OPIC APPOINTED ATTORNEY-IN-FACT The Company irrevocably appoints OPIC its agent and attorney-in-fact, coupled with an interest, with full authority in the Company's place and stead and in its name or otherwise, from time to time upon the occurrence and during the continuance of an Event of Default under either Loan Agreement or otherwise, to the extent that OPIC shall reasonably deem any action to be necessary in order to maintain the perfection and assure first priority of, and the ability to enforce, its security interest in the Collateral, in OPIC's discretion, to take any action and to execute any instrument which OPIC may deem necessary or advisable to accomplish the purposes of this Agreement, including, to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in connection with the Collateral, to receive, indorse, and collect any drafts or other instruments, documents, and chattel paper in connection therewith, to sign the Company's name on, and file financing statements as described in Section 12.19, and to file any claims or take any action or institute any proceedings which OPIC may deem necessary or desirable for the collection thereof. SECTION 10.02 OPIC MAY PERFORM If the Company fails to perform any agreement contained herein, including payment of fees and expenses of the Intermediary, OPIC may itself perform, or cause performance of, such agreement, and the payments made by OPIC and expenses incurred in connection therewith (including attorneys' fees and expenses) shall be payable by the Company to OPIC on demand, and shall be secured by the Collateral. In no event shall OPIC be responsible for any obligation of the Company pursuant to Section 12.12. SECTION 10.03 CUMULATIVE RIGHTS (a) OPIC shall be entitled to exercise all of the rights, powers, and remedies (whether vested in it by this Agreement, by law, in equity, by statute, or otherwise), to the maximum extent permitted by applicable law, for the protection and enforcement of OPIC's rights hereunder, including any proceeding in any court or other tribunal by an action at law, suit in equity, or other appropriate proceeding, whether for damages, for the specific performance of any term hereof, or otherwise in aid of the exercise of any power granted hereby or by law. (b) The rights, powers and remedies provided herein and in the other Financing Documents are cumulative and are in addition to any other rights, powers or remedies provided in any Financing Document or now or hereafter existing at law or in 21

equity or by statute. The assertion or employment of any right, power or remedy hereunder or otherwise, including any rights of setoff or rights under other Financing Documents or under applicable law shall not prevent the concurrent assertion of any other appropriate right, power or remedy and shall not diminish or otherwise affect the rights, powers and remedies conferred hereunder. No single or partial exercise of any right, power or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. SECTION 10.04 NO DUTIES Rights, powers and remedies conferred upon OPIC by this Agreement are to protect the interests of OPIC in the Collateral and shall not impose any duty upon OPIC to exercise any such rights, powers or remedies. Except as specifically provided herein, OPIC shall have no duty as to the collection or protection of Collateral, nor as to the preservation of any rights pertaining thereto, beyond the safe custody thereof (if Collateral is in OPIC's custody), and OPIC shall not be responsible for any loss attributable to the manner of realization of the value of any Collateral. Except for notices of sale or other notices required to be given by OPIC hereunder, OPIC shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or take notice or demand in connection with any Collateral or the Obligations, or take any steps necessary to preserve any rights against the Company or any other Person.

equity or by statute. The assertion or employment of any right, power or remedy hereunder or otherwise, including any rights of setoff or rights under other Financing Documents or under applicable law shall not prevent the concurrent assertion of any other appropriate right, power or remedy and shall not diminish or otherwise affect the rights, powers and remedies conferred hereunder. No single or partial exercise of any right, power or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. SECTION 10.04 NO DUTIES Rights, powers and remedies conferred upon OPIC by this Agreement are to protect the interests of OPIC in the Collateral and shall not impose any duty upon OPIC to exercise any such rights, powers or remedies. Except as specifically provided herein, OPIC shall have no duty as to the collection or protection of Collateral, nor as to the preservation of any rights pertaining thereto, beyond the safe custody thereof (if Collateral is in OPIC's custody), and OPIC shall not be responsible for any loss attributable to the manner of realization of the value of any Collateral. Except for notices of sale or other notices required to be given by OPIC hereunder, OPIC shall be under no duty whatsoever to make or give any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or take notice or demand in connection with any Collateral or the Obligations, or take any steps necessary to preserve any rights against the Company or any other Person. SECTION 10.05 WAIVERS No waiver of any right, power or remedy of any Party hereunder shall be effective unless given in writing. No delay of any Party hereunder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise impair any of such Party's rights, powers or remedies. ARTICLE XI CONTINUING OBLIGATION; TERMINATION SECTION 11.01 CONTINUING OBLIGATION (a) This Agreement and the security interest created hereby is a continuing obligation and whether or not there are, at any time, sufficient assets in the Collateral Account to meet the Company's obligations to OPIC as they fall due, nothing in this Agreement shall be deemed in any way to lessen or absolve the Company from its obligations to OPIC to satisfy the Obligations in full as they fall due. This Agreement shall create a continuing pledge and assignment of, and security interest in, the Collateral 22

and shall be binding on the Company and shall remain in full force and effect until this Agreement is terminated in accordance with Section 11.02. For the avoidance of doubt, the security interest created hereby shall continue, notwithstanding closure of the Collateral Account pursuant to Section 6.05(a), (b) or (c) and transfer of Account Assets to a successor securities intermediary. (b) To the extent that any payments on the Obligations or proceeds of the Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, other law or equitable cause, then to such extent the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received by OPIC, and OPIC's security interests, rights, powers and remedies hereunder shall continue in full force and effect. In such event, this Agreement shall be automatically reinstated if it shall theretofore have been terminated. The provisions of this Section shall survive termination of this Agreement. SECTION 11.02 TERMINATION Except as otherwise stated herein, this Agreement shall remain in full force and effect until the date that the Obligations shall have been indefeasibly paid in full in Dollars and the Intermediary receives notice from OPIC thereof. Upon the indefeasible payment in full in Dollars of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Company. Upon any such termination, OPIC

and shall be binding on the Company and shall remain in full force and effect until this Agreement is terminated in accordance with Section 11.02. For the avoidance of doubt, the security interest created hereby shall continue, notwithstanding closure of the Collateral Account pursuant to Section 6.05(a), (b) or (c) and transfer of Account Assets to a successor securities intermediary. (b) To the extent that any payments on the Obligations or proceeds of the Collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, other law or equitable cause, then to such extent the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received by OPIC, and OPIC's security interests, rights, powers and remedies hereunder shall continue in full force and effect. In such event, this Agreement shall be automatically reinstated if it shall theretofore have been terminated. The provisions of this Section shall survive termination of this Agreement. SECTION 11.02 TERMINATION Except as otherwise stated herein, this Agreement shall remain in full force and effect until the date that the Obligations shall have been indefeasibly paid in full in Dollars and the Intermediary receives notice from OPIC thereof. Upon the indefeasible payment in full in Dollars of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Company. Upon any such termination, OPIC shall, at the Company's expense, execute and deliver to the Company such documents as the Company shall reasonably request to evidence such termination and promptly return any Collateral then in the possession or under the control of OPIC, and the Intermediary shall deliver any remaining Account Assets to the Company at the Company's direction, after deduction of any payments due from the Company to the Intermediary. ARTICLE XII MISCELLANEOUS SECTION 12.01 JURISDICTION AND CONSENT TO SUIT; WAIVER OF OBJECTION TO FORUM Each of the Company and the Intermediary hereby irrevocably and unconditionally: (a) submits itself and its property in any legal action or proceeding relating to this Agreement, or for recognition, protection, or enforcement of any judgment in respect hereof (any of the foregoing, an "ACTION") to the nonexclusive personal jurisdiction of the courts within the City and State of New York, 23

(b) consents that any such Action may be brought in such courts, and waives its right to request transfer of such Action and any objection that it may now or hereafter have to the venue of any such Action in any such court or that such Action was brought in an inconvenient court or one that lacked or had improper jurisdiction and agrees not to plead or claim the same; (c) agrees that service of process in any such Action may be effected by mailing a copy thereof by registered or certified mail (or overnight courier or any substantially similar form of mail), postage prepaid, to the Company at its address set forth in Section 12.03 or at such other address of which OPIC shall have been designated by notice pursuant thereto; (d) agrees that nothing herein shall affect OPIC's right to serve process or notice in any other manner permitted by law or shall limit OPIC's right to sue in any other jurisdiction; and (e) agrees that judgment against it in any such Action shall be final and may be enforced in any other jurisdiction within or without the U.S. by action to enforce the judgment or otherwise as provided by law, a certified or exemplified copy of which judgment shall be conclusive evidence of the fact and amount of the obligation of the Company or the Intermediary, as applicable. SECTION 12.02 IMMUNITY

(b) consents that any such Action may be brought in such courts, and waives its right to request transfer of such Action and any objection that it may now or hereafter have to the venue of any such Action in any such court or that such Action was brought in an inconvenient court or one that lacked or had improper jurisdiction and agrees not to plead or claim the same; (c) agrees that service of process in any such Action may be effected by mailing a copy thereof by registered or certified mail (or overnight courier or any substantially similar form of mail), postage prepaid, to the Company at its address set forth in Section 12.03 or at such other address of which OPIC shall have been designated by notice pursuant thereto; (d) agrees that nothing herein shall affect OPIC's right to serve process or notice in any other manner permitted by law or shall limit OPIC's right to sue in any other jurisdiction; and (e) agrees that judgment against it in any such Action shall be final and may be enforced in any other jurisdiction within or without the U.S. by action to enforce the judgment or otherwise as provided by law, a certified or exemplified copy of which judgment shall be conclusive evidence of the fact and amount of the obligation of the Company or the Intermediary, as applicable. SECTION 12.02 IMMUNITY The Company represents and warrants that it is subject to civil and commercial law with respect to its obligations under this Agreement, that the making and performance of this Agreement constitute private and commercial acts rather than governmental or public acts and that neither the Company nor any of its properties or revenues has any right of immunity from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, set-off, execution of a judgment, or from any other legal process with respect to its obligations under this Agreement. To the extent that the Agreement may hereafter be entitled, in any jurisdiction in which judicial or arbitral proceedings may at any time be commenced with respect to any Financing Document, to claim for itself or its revenues or assets any such immunity, and to the extent that in any such jurisdiction there may be attributed to the Company such an immunity (whether or not claimed), the Company hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity. The foregoing waiver of immunity shall have effect under the United States Foreign Sovereign Immunities Act of 1976. SECTION 12.03 NOTICES Each notice, demand, or other communication relating to this Agreement shall be in writing, shall be handdelivered or sent prepaid by mail or overnight delivery service or electronically confirmed facsimile transmission (with a copy by mail to follow, receipt 24

of which copy shall not be required to effect notice), and shall be deemed duly given when actually delivered to the following addresses: TO THE COMPANY: PriceSmart, Inc. 4649 Morena Blvd. San Diego, CA 92117-3650 Attn.: General Counsel Facsimile: (858) 581-4707 Phone: (858) 581-7728 TO OPIC: Overseas Private Investment Corporation

of which copy shall not be required to effect notice), and shall be deemed duly given when actually delivered to the following addresses: TO THE COMPANY: PriceSmart, Inc. 4649 Morena Blvd. San Diego, CA 92117-3650 Attn.: General Counsel Facsimile: (858) 581-4707 Phone: (858) 581-7728 TO OPIC: Overseas Private Investment Corporation 1100 New York Avenue, N.W. Washington, D.C. 20527 United States of America Attn.: Vice President, Finance Re: PriceSmart, Inc. corporate expansion Facsimile: 1-202-408-9866 Phone: (202) 336-8480 TO THE INTERMEDIARY: The Bank of New York 101 Barclay Street 21W New York, NY 10286 Attn.: Vanessa Mack Ref: PriceSmart/OPIC Facsimile: (212) 815-4803 Phone: (212) 815-5346 Any Party may, by written notice to the other Parties, change the address to which such notices, demands, or other communications should be sent to it. Whenever hereunder the time for giving a notice or performing an act falls on a Saturday, Sunday or banking holiday, such time shall be extended to the next day on which the Intermediary is open for business. SECTION 12.04 ENGLISH LANGUAGE 25

All documents to be furnished or communications made under this Agreement shall be in English or, if in another language, shall be accompanied by a certified translation into English, which translation shall govern among the Parties hereto. SECTION 12.05 GOVERNING LAW THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES AGREE THAT THE "SECURITIES INTERMEDIARY'S JURISDICTION" (WITHIN THE MEANING OF SECTION 8-110(e)(1) OF THE UCC) IS THE STATE OF NEW YORK.

All documents to be furnished or communications made under this Agreement shall be in English or, if in another language, shall be accompanied by a certified translation into English, which translation shall govern among the Parties hereto. SECTION 12.05 GOVERNING LAW THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES AGREE THAT THE "SECURITIES INTERMEDIARY'S JURISDICTION" (WITHIN THE MEANING OF SECTION 8-110(e)(1) OF THE UCC) IS THE STATE OF NEW YORK. SECTION 12.06 SUCCESSION; ASSIGNMENT This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties; provided, however, that neither the Company nor the Intermediary shall, without the prior consent of OPIC, assign or delegate all or any part of its interest herein or obligations hereunder. SECTION 12.07 SURVIVAL OF AGREEMENTS Each agreement, representation, warranty, and covenant contained or referred to in this Agreement shall survive any investigation at any time made by OPIC and shall survive disbursement of the Loan, except for changes permitted hereby, and, except as otherwise provided in this Section, shall terminate only in accordance with Section 11.02. Without prejudice to the survival of any other agreement of the Parties, the agreements and obligations contained in Sections 6.01(c) 6.02, 8.03(e), 12.12, 12.13, 12.14, 12.15 and 12.21 shall survive the payment in full of all of the other Obligations. SECTION 12.08 INTEGRATION; AMENDMENTS This Agreement embodies the entire understanding of the Parties and supersedes all prior negotiations, understandings, and agreements between or among them with respect to the subject matter hereof. The provisions of this Agreement may be waived, supplemented, or amended only by an instrument in writing signed by the Parties. The Parties agree to amend this Agreement to reflect commercial code changes or otherwise, in a manner consistent with the intent of this Agreement, if requested by OPIC. SECTION 12.09 SEVERABILITY 26

If any provision of this Agreement is prohibited or held to be invalid, illegal, or unenforceable in any jurisdiction, the Parties agree to the fullest extent permitted by law that such invalidity, illegality or enforceability shall not affect the validity, legality, and enforceability of the other provisions of this Agreement and shall not render such provision prohibited, invalid, illegal, or unenforceable in any other jurisdiction. If, and to the extent that, any obligation of the Company (including that under Article XI) is unenforceable for any reason, the Company agrees, independently of any other obligation hereunder, to make the maximum contribution to the payment and satisfaction thereof as is permissible under applicable law. SECTION 12.10 WAIVER OF JURY TRIAL THE COMPANY, OPIC AND THE INTERMEDIARY EACH IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN AND AMONG THEM ESTABLISHED BY THIS AGREEMENT. SECTION 12.11 RIGHT OF SET-OFF Upon the occurrence of any failure by the Company to perform any obligation under this Agreement, OPIC is

If any provision of this Agreement is prohibited or held to be invalid, illegal, or unenforceable in any jurisdiction, the Parties agree to the fullest extent permitted by law that such invalidity, illegality or enforceability shall not affect the validity, legality, and enforceability of the other provisions of this Agreement and shall not render such provision prohibited, invalid, illegal, or unenforceable in any other jurisdiction. If, and to the extent that, any obligation of the Company (including that under Article XI) is unenforceable for any reason, the Company agrees, independently of any other obligation hereunder, to make the maximum contribution to the payment and satisfaction thereof as is permissible under applicable law. SECTION 12.10 WAIVER OF JURY TRIAL THE COMPANY, OPIC AND THE INTERMEDIARY EACH IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN AND AMONG THEM ESTABLISHED BY THIS AGREEMENT. SECTION 12.11 RIGHT OF SET-OFF Upon the occurrence of any failure by the Company to perform any obligation under this Agreement, OPIC is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by OPIC to or for the credit or the account of the Company against any and all of the obligations of the Company now or hereafter existing under this Agreement, whether or not OPIC shall have made any demand under this Agreement and although such obligations may be contingent and unmatured. OPIC agrees to promptly notify the Company after any such set-off and application, PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of OPIC under this Section are in addition to other rights and remedies (including other rights of setoff) which OPIC may have. SECTION 12.12 INDEMNITY The Company shall, at all times, indemnify and hold harmless each of OPIC and the Intermediary and its directors, officers, agents and employees (each, an "INDEMNIFIED PERSON") in connection with any Loss (as defined below) and any Costs of Defense (as defined below) (the "INDEMNITY"). The term "LOSS" shall mean any losses, claims, damages, taxes, penalties, or other costs relating to this Agreement to which an Indemnified Person may become subject. The term "COSTS OF DEFENSE" shall mean costs, fees, and expenses incurred by or imposed on any Indemnified Person in defending, 27

analyzing, settling, or resolving a Loss or Potential Loss (as defined below), and the expenses associated with the making of any affirmative claim in connection therewith (PROVIDED, THAT, costs, fees, and expenses in connection with a proceeding by any Indemnified Person to enforce his, her, or its rights under this Indemnity shall not be considered to be "COSTS OF DEFENSE"). The term "POTENTIAL LOSS" shall mean any event, fact, condition, or circumstance that is reasonably likely to give rise to a Loss. This Indemnity shall not apply to the extent that a court or arbitral tribunal with jurisdiction over the Loss and each Indemnified Person who has a Loss or Costs of Defense in connection therewith renders a final determination that the Loss or Costs of Defense resulted from (i) the gross negligence or willful misconduct of the Indemnified Person, or (ii) OPIC's failure to perform any act required of it under this Agreement. The Indemnity is independent of and in addition to (i) any rights of any party hereto in connection with any Loss or Costs of Defense and (ii) any other agreement, and shall survive the execution, modification, and amendment of this Agreement and the other Financing Documents, the expiration, cancellation, or termination of the Commitment, the disbursement and repayment of the Loan, and the provisions of any other indemnity. Any exclusion of an obligation to pay any amount under this Section shall not affect the requirement to pay such amount under any other Section hereof or under any other agreement. OPIC and each other Indemnified Person shall have the right to control its, his, or her defense, PROVIDED, HOWEVER, that each Indemnified Person shall: (a) notify the Company in writing as soon as practicable of any Loss, Potential Loss, or Cost of Defense, and (b) keep the Company reasonably informed of material

analyzing, settling, or resolving a Loss or Potential Loss (as defined below), and the expenses associated with the making of any affirmative claim in connection therewith (PROVIDED, THAT, costs, fees, and expenses in connection with a proceeding by any Indemnified Person to enforce his, her, or its rights under this Indemnity shall not be considered to be "COSTS OF DEFENSE"). The term "POTENTIAL LOSS" shall mean any event, fact, condition, or circumstance that is reasonably likely to give rise to a Loss. This Indemnity shall not apply to the extent that a court or arbitral tribunal with jurisdiction over the Loss and each Indemnified Person who has a Loss or Costs of Defense in connection therewith renders a final determination that the Loss or Costs of Defense resulted from (i) the gross negligence or willful misconduct of the Indemnified Person, or (ii) OPIC's failure to perform any act required of it under this Agreement. The Indemnity is independent of and in addition to (i) any rights of any party hereto in connection with any Loss or Costs of Defense and (ii) any other agreement, and shall survive the execution, modification, and amendment of this Agreement and the other Financing Documents, the expiration, cancellation, or termination of the Commitment, the disbursement and repayment of the Loan, and the provisions of any other indemnity. Any exclusion of an obligation to pay any amount under this Section shall not affect the requirement to pay such amount under any other Section hereof or under any other agreement. OPIC and each other Indemnified Person shall have the right to control its, his, or her defense, PROVIDED, HOWEVER, that each Indemnified Person shall: (a) notify the Company in writing as soon as practicable of any Loss, Potential Loss, or Cost of Defense, and (b) keep the Company reasonably informed of material developments with respect thereto. In exercising the right and power to control his, her, or its actions in connection with a Loss or Potential Loss, including a decision to settle any such Loss, each Indemnified Person shall, taking into account the nature and policies of such Indemnified Person (i) consult with the Company, and (ii) act as such Indemnified Person would act if the Costs of Defense or settlement were to be paid by such Indemnified Person. The Company acknowledges and agrees that each Indemnified Person is an express, thirdparty beneficiary of the Company's obligations under this Section. SECTION 12.13 LIMITATION ON DAMAGES No claim may be made by the Company against the Intermediary or OPIC or any officer, agent, stockholder, partner, member, director or employee of either of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out or relating to this Agreement or the transactions contemplated hereby or any act, omission or event occurring in connection therewith, and the Company hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. SECTION 12.14 FEES AND EXPENSES OF OPIC 28

The Company hereby agrees to pay OPIC on demand any and all costs and expenses (including attorneys' fees and expenses) incurred by OPIC in connection with this Agreement, including, without limitation, all costs and expenses incurred by OPIC in connection with collecting any amount due by the Company hereunder, defending against any claims or counterclaims by the Company, or enforcing or preserving any of OPIC's rights, powers, or remedies contained herein. SECTION 12.15 WAIVER OF LITIGATION PAYMENTS In the event that any action or lawsuit is initiated by or on behalf of OPIC against the Company or any other party to any Financing Document, the Company, to the fullest extent permissible under applicable law, irrevocably waives its right to, and agrees not to request, plead, or claim that OPIC and its successors, transfers, and assigns (any such Person, an "OPIC PLAINTIFF") post, pay, or offer, any CAUTIO JUDICATUM SOLVI bond, litigation bond, or any other bond, fee, payment, or security measure provided for by any provision of law applicable to such action or lawsuit (any such bond, fee, payment, or measure, a "LITIGATION PAYMENT"), and the Company further waives any objection that it may now or hereafter have to an OPIC Plaintiff's claim that such OPIC Plaintiff should be exempt or immune from posting, paying, making, or offering any such Litigation Payment. SECTION 12.16 BENEFITS OF AGREEMENT

The Company hereby agrees to pay OPIC on demand any and all costs and expenses (including attorneys' fees and expenses) incurred by OPIC in connection with this Agreement, including, without limitation, all costs and expenses incurred by OPIC in connection with collecting any amount due by the Company hereunder, defending against any claims or counterclaims by the Company, or enforcing or preserving any of OPIC's rights, powers, or remedies contained herein. SECTION 12.15 WAIVER OF LITIGATION PAYMENTS In the event that any action or lawsuit is initiated by or on behalf of OPIC against the Company or any other party to any Financing Document, the Company, to the fullest extent permissible under applicable law, irrevocably waives its right to, and agrees not to request, plead, or claim that OPIC and its successors, transfers, and assigns (any such Person, an "OPIC PLAINTIFF") post, pay, or offer, any CAUTIO JUDICATUM SOLVI bond, litigation bond, or any other bond, fee, payment, or security measure provided for by any provision of law applicable to such action or lawsuit (any such bond, fee, payment, or measure, a "LITIGATION PAYMENT"), and the Company further waives any objection that it may now or hereafter have to an OPIC Plaintiff's claim that such OPIC Plaintiff should be exempt or immune from posting, paying, making, or offering any such Litigation Payment. SECTION 12.16 BENEFITS OF AGREEMENT Nothing in this Agreement, express or implied, shall give to any Person, other than the Parties and the other Indemnified Persons and their respective successors and assigns, any benefit or any legal or equitable right or remedy under this Agreement. SECTION 12.17 ARM'S-LENGTH NEGOTIATIONS This Agreement is the product of arm's-length negotiations between and among the Parties. The Parties have entered into this Agreement freely, voluntarily and with the advice of legal counsel. No Party shall be deemed to have drafted this Agreement unilaterally. In the event a dispute arises regarding the meaning or application of any provision of this Agreement, such provision shall not be construed by reference to any doctrine calling for ambiguities to be construed against the drafter of a document. SECTION 12.18 FURTHER ASSURANCES The Company shall execute and deliver to OPIC such additional documents and take such additional action as OPIC may require, at the Company's expense, to carry out the purposes of this Agreement, to cause this Agreement to be duly registered, notarized, 29

and stamped in any applicable jurisdiction, and to perfect, preserve and protect OPIC's rights as contemplated herein. SECTION 12.19 FINANCING STATEMENTS The Company hereby further authorizes OPIC to file one or more financing or continuation statements, and amendments thereto (any such financing or continuation statements or amendments to be delivered by the Company to OPIC in form sufficient for filing), relating to all or any part of the Collateral without the signature of the Company, where permitted by law. A photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. SECTION 12.20 COUNTERPARTS This Agreement may be executed in counterparts, each of which when so executed and delivered shall be deemed an original and all of which together shall constitute one and the same instrument.

and stamped in any applicable jurisdiction, and to perfect, preserve and protect OPIC's rights as contemplated herein. SECTION 12.19 FINANCING STATEMENTS The Company hereby further authorizes OPIC to file one or more financing or continuation statements, and amendments thereto (any such financing or continuation statements or amendments to be delivered by the Company to OPIC in form sufficient for filing), relating to all or any part of the Collateral without the signature of the Company, where permitted by law. A photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. SECTION 12.20 COUNTERPARTS This Agreement may be executed in counterparts, each of which when so executed and delivered shall be deemed an original and all of which together shall constitute one and the same instrument. SECTION 12.21 NO PROMOTIONAL MATERIALS No printed or other material in any language, including prospectuses, notices, reports, and promotional material which mentions "the Bank of New York" by name or the rights, powers, or duties of the Intermediaries under this Agreement shall be issued by any other parties hereto, or on such party's behalf, without the prior written consent of the Intermediary. 30

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative as of the day and year first above written. PRICESMART, INC. By: ______________________________ Name: ____________________________ Title: ___________________________ THE BANK OF NEW YORK By: ______________________________ Name: ____________________________ Title: ___________________________ OVERSEAS PRIVATE INVESTMENT CORPORATION By: ______________________________ Name: ____________________________ Title: ___________________________ 31

EXHIBIT 11.1

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed and delivered on its behalf by its duly authorized representative as of the day and year first above written. PRICESMART, INC. By: ______________________________ Name: ____________________________ Title: ___________________________ THE BANK OF NEW YORK By: ______________________________ Name: ____________________________ Title: ___________________________ OVERSEAS PRIVATE INVESTMENT CORPORATION By: ______________________________ Name: ____________________________ Title: ___________________________ 31

EXHIBIT 11.1 PRICESMART, INC. COMPUTATION OF NET INCOME OR LOSS PER COMMON SHARE (BASIC AND DILUTED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED AUGUST 31, -------------------------------------------2001 2000 1999 ------------------------- ------------$ 3,733 $(5,444) $(3,892) (349) ------------------------- ------------$ 3,384 $(5,444) $(3,892) ============= ============= =============

Income (loss) before extraordinary loss Extraordinary items, net of tax Net income (loss)

Determination of shares: Common shares outstanding Assumed conversion of stock options Diluted average common shares outstanding Basic earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss)

6,254 404 ------------6,658

5,386 ------------5,386

5,120 ------------5,120

$ 0.60 $ (0.06) ------------$ 0.54 =============

$ (1.01) $ ------------$ (1.01) =============

$ (0.76) $ ------------$ (0.76) =============

Diluted earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items

$ 0.56 $ (0.05) -------------

$ (1.01) $ -------------

$ (0.76) $ -------------

EXHIBIT 11.1 PRICESMART, INC. COMPUTATION OF NET INCOME OR LOSS PER COMMON SHARE (BASIC AND DILUTED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED AUGUST 31, -------------------------------------------2001 2000 1999 ------------------------- ------------$ 3,733 $(5,444) $(3,892) (349) ------------------------- ------------$ 3,384 $(5,444) $(3,892) ============= ============= =============

Income (loss) before extraordinary loss Extraordinary items, net of tax Net income (loss)

Determination of shares: Common shares outstanding Assumed conversion of stock options Diluted average common shares outstanding Basic earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss)

6,254 404 ------------6,658

5,386 ------------5,386

5,120 ------------5,120

$ 0.60 $ (0.06) ------------$ 0.54 =============

$ (1.01) $ ------------$ (1.01) =============

$ (0.76) $ ------------$ (0.76) =============

Diluted earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss)

$ 0.56 $ (0.05) ------------$ 0.51 =============

$ (1.01) $ ------------$ (1.01) =============

$ (0.76) $ ------------$ (0.76) =============

EXHIBIT 13.1 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following table sets forth selected consolidated financial data of the Company for the five fiscal years ended August 31, 2001.

SELECTED CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE) FISCAL YEARS ENDED AUGUST 31 (1) 2001 --------INCOME STATEMENT DATA: Net warehouse sales Export sales Membership fees and other Travel and auto programs Total revenues Cost of goods sold Selling, general and administrative (3) Goodwill amortization Preopening expenses Operating income (loss) Net interest and other income (expense)(4) Income (loss) before provision (benefit) $473,127 500 15,323 --------488,950 405,721 70,776 998 4,866 --------6,589 (3,442) --------2000 --------$292,013 421 8,216 3,965 --------304,615 256,652 53,549 223 7,681 --------(13,490) 7,927 --------1999 ---------$89,184 6,773 2,008 10,907 ---------108,872 84,638 32,021 4,949 ---------(12,736) 9,034 ---------1998 --------$ 48,287 32,813 2,720 13,368 --------97,188 74,684 26,421 433 --------(4,350) 7,492 --------1997 -----$ 21, 37, 3, 12, -----74, 55, 25,

-----(8, 1, ------

EXHIBIT 13.1 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following table sets forth selected consolidated financial data of the Company for the five fiscal years ended August 31, 2001.

SELECTED CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE) FISCAL YEARS ENDED AUGUST 31 (1) 2001 --------INCOME STATEMENT DATA: Net warehouse sales Export sales Membership fees and other Travel and auto programs Total revenues Cost of goods sold Selling, general and administrative (3) Goodwill amortization Preopening expenses Operating income (loss) Net interest and other income (expense)(4) Income (loss) before provision (benefit) for income taxes and extraordinary items Net income (loss) EARNINGS (LOSS) PER SHARE: Basic (5) Diluted (5) BALANCE SHEET DATA: Cash and cash equivalents Marketable securities Total assets Long-term debt Stockholders' equity(6) $473,127 500 15,323 --------488,950 405,721 70,776 998 4,866 --------6,589 (3,442) --------2000 --------$292,013 421 8,216 3,965 --------304,615 256,652 53,549 223 7,681 --------(13,490) 7,927 --------1999 ---------$89,184 6,773 2,008 10,907 ---------108,872 84,638 32,021 4,949 ---------(12,736) 9,034 ---------1998 --------$ 48,287 32,813 2,720 13,368 --------97,188 74,684 26,421 433 --------(4,350) 7,492 --------1997 -----$ 21, 37, 3, 12, -----74, 55, 25,

-----(8, 1, ------

$

3,147 3,384

(5,563) $ (5,444)

(3,702) $ (3,892)

$

3,142 3,028

(6, $(24,

$

0.54 0.51

$(1.01) (1.01)

$

(0.76) (0.76)

$

0.51 0.50

$

(4 (4

$ 26,280 324,080 79,303 130,110

$ 24,503 5,482 261,400 50,532 131,683

$ 14,957 17,627 152,074 7,787 93,861

$ 5,639 56,133 124,576 103,081

$ 58, 125, 107,

(1) Effective September 1, 1997, the Company changed its 52/53 week fiscal year which ends on the Sunday nearest August 31 to a fiscal year end of August 31. For ease of presentation, all fiscal years in this report are referred to as having ended on August 31. (2) Prior to fiscal year 1998, the Company operated as certain subsidiaries of Price Enterprises, Inc. ("PEI"). Accordingly, the financial data of the Company prior to fiscal year 1998 has been prepared as though the Company had been a stand-alone business. (3) Prior to fiscal year 1998, PEI provided administrative services to the Company. The amount allocated to the Company for corporate administrative expenses for fiscal year 1997 was $1,065. (4) Net interest and other income (expense) includes interest income, gains and losses on sale of assets, interest on bank borrowings and minority interest of shareholders in joint venture businesses. (5) For fiscal year 1997, loss per share is based on the 5,908,235 shares issued in connection with the distribution (see Note 2). (6) Prior to fiscal year 1998, stockholders' equity represents the net assets transferred and the earnings of the businesses and assets comprising PriceSmart, Inc. on a historical basis.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Annual Report contains forward-looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow and related matters. These forward-looking statements include, but are not limited to, statements containing the words "expect", "believe", "will", "may", "should", "project", "estimate", "scheduled", and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements, including foreign exchange risks, political or economic instability of host countries, and competition, as well as those risks described in the Company's reports filed with the Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K filed pursuant to the Securities and Exchange Act of 1934. The following discussion and analysis compares the results of operations for each of the three fiscal years ended August 31, 2001 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. In fiscal 2001, the Company opened six new US-style membership shopping warehouses operating in Central America, the Caribbean and Asia, with one each in the Dominican Republic (October 2000), Aruba (March 2001), the US Virgin Islands (May 2001), the Philippines (May 2001), Guatemala (May 2001), and Barbados (August 2001) bringing the total number of warehouses in operation to twenty-two operating in eleven countries as of August 31, 2001. This compares to sixteen warehouses operating in seven countries at the end of fiscal 2000 and five warehouses operating in four countries at the end of fiscal 1999. Subsequent to fiscal 2001, the Company opened one additional location in the Philippines in November 2001. Also, there were nine warehouse stores in operation licensed to and operated by local business people at the end of fiscal 2001, versus six licensed warehouse stores at the end of fiscal 2000 and four licensed warehouse stores at the end of fiscal 1999. The Company seeks to establish significant market share in the metropolitan areas of emerging market countries by rapidly saturating these areas with second and third stores. Same-store-sales (where at least one-third of the Company's stores have comparative prior period sales in metropolitan markets that have not had additional store openings), representing thirteen of the twenty-two warehouse stores in operation, increased 4.8% in fiscal 2001. Same store sales, including stores in metropolitan markets with additional store openings, representing fourteen warehouses, in the past year decreased 5.9%. As of August 31, 2001, the average life of the twenty-two warehouses in operation was eighteen months. Net warehouse sales increased 62% to $473.1 million in fiscal 2001 from $292.0 million in fiscal 2000. The increase was primarily a result of the six new warehouses opened throughout fiscal 2001 and a full year of operations from eleven new warehouses opened in the prior fiscal year. Net warehouse sales increased 227% to $292.0 million in fiscal 2000 from $89.2 million in fiscal 1999. The increase was primarily a result of eleven new warehouses opened during fiscal 2000 and a full year of operations related to three new warehouses opened in fiscal 1999. The Company's warehouse gross profit margins (defined as net warehouse sales less associated cost of goods sold) for fiscal 2001 were 14.4% compared to 12.3% for fiscal 2000. The increase in gross profit margins is a result of the Company's increased purchasing power resulting in lower costs of purchased goods, an increase in sales penetration of higher margin non-food items, lower shrink costs in fiscal 2001 and the planned lower margins associated with the rapid expansion in fiscal 2000. The Company's warehouse gross profit margins for fiscal 2000 were 12.3% compared to 12.4% for fiscal 1999. The change between fiscal 2000 and fiscal 1999 is primarily a result of anticipated lower margins during the initial entry into a market, which resulted from the Company opening eleven new warehouses in fiscal 2000, compared to three in fiscal year 1999. Export sales to the Company's licensee warehouses in Asia in fiscal 2001 were $500,000 compared to $421,000 and $6.8 million for fiscal years 2000 and 1999, respectively. The change between years is a factor of the number of licensees in operation and associated export sales. The Company anticipates export sales to its licensees to be $1.5 million in fiscal 2002.

The Company's export sales gross margin for fiscal 2001 was 3.6% compared to 3.8% and 3.2% for fiscal years

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Annual Report contains forward-looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow and related matters. These forward-looking statements include, but are not limited to, statements containing the words "expect", "believe", "will", "may", "should", "project", "estimate", "scheduled", and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements, including foreign exchange risks, political or economic instability of host countries, and competition, as well as those risks described in the Company's reports filed with the Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K filed pursuant to the Securities and Exchange Act of 1934. The following discussion and analysis compares the results of operations for each of the three fiscal years ended August 31, 2001 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. In fiscal 2001, the Company opened six new US-style membership shopping warehouses operating in Central America, the Caribbean and Asia, with one each in the Dominican Republic (October 2000), Aruba (March 2001), the US Virgin Islands (May 2001), the Philippines (May 2001), Guatemala (May 2001), and Barbados (August 2001) bringing the total number of warehouses in operation to twenty-two operating in eleven countries as of August 31, 2001. This compares to sixteen warehouses operating in seven countries at the end of fiscal 2000 and five warehouses operating in four countries at the end of fiscal 1999. Subsequent to fiscal 2001, the Company opened one additional location in the Philippines in November 2001. Also, there were nine warehouse stores in operation licensed to and operated by local business people at the end of fiscal 2001, versus six licensed warehouse stores at the end of fiscal 2000 and four licensed warehouse stores at the end of fiscal 1999. The Company seeks to establish significant market share in the metropolitan areas of emerging market countries by rapidly saturating these areas with second and third stores. Same-store-sales (where at least one-third of the Company's stores have comparative prior period sales in metropolitan markets that have not had additional store openings), representing thirteen of the twenty-two warehouse stores in operation, increased 4.8% in fiscal 2001. Same store sales, including stores in metropolitan markets with additional store openings, representing fourteen warehouses, in the past year decreased 5.9%. As of August 31, 2001, the average life of the twenty-two warehouses in operation was eighteen months. Net warehouse sales increased 62% to $473.1 million in fiscal 2001 from $292.0 million in fiscal 2000. The increase was primarily a result of the six new warehouses opened throughout fiscal 2001 and a full year of operations from eleven new warehouses opened in the prior fiscal year. Net warehouse sales increased 227% to $292.0 million in fiscal 2000 from $89.2 million in fiscal 1999. The increase was primarily a result of eleven new warehouses opened during fiscal 2000 and a full year of operations related to three new warehouses opened in fiscal 1999. The Company's warehouse gross profit margins (defined as net warehouse sales less associated cost of goods sold) for fiscal 2001 were 14.4% compared to 12.3% for fiscal 2000. The increase in gross profit margins is a result of the Company's increased purchasing power resulting in lower costs of purchased goods, an increase in sales penetration of higher margin non-food items, lower shrink costs in fiscal 2001 and the planned lower margins associated with the rapid expansion in fiscal 2000. The Company's warehouse gross profit margins for fiscal 2000 were 12.3% compared to 12.4% for fiscal 1999. The change between fiscal 2000 and fiscal 1999 is primarily a result of anticipated lower margins during the initial entry into a market, which resulted from the Company opening eleven new warehouses in fiscal 2000, compared to three in fiscal year 1999. Export sales to the Company's licensee warehouses in Asia in fiscal 2001 were $500,000 compared to $421,000 and $6.8 million for fiscal years 2000 and 1999, respectively. The change between years is a factor of the number of licensees in operation and associated export sales. The Company anticipates export sales to its licensees to be $1.5 million in fiscal 2002.

The Company's export sales gross margin for fiscal 2001 was 3.6% compared to 3.8% and 3.2% for fiscal years

The Company's export sales gross margin for fiscal 2001 was 3.6% compared to 3.8% and 3.2% for fiscal years 2000 and 1999, respectively. The gross margin percentages on export sales are based on the varying agreements the Company has with its licensees and the gross margin amount that the Company can earn under these agreements. Membership fees and other, including royalties earned from licensees, increased 87% to $15.3 million in fiscal 2001 from $8.2 million in fiscal 2000. Membership fees (which include rental income, advertising revenues and vendor promotions) increased to $14.3 million, or 3.0% of net warehouse sales, from $7.4 million, or 2.5% of net warehouse sales, in fiscal year 2000. The increase was a result of the six new warehouses opened in fiscal 2001, which resulted in an increase in the total memberships to 524,000 at the end of fiscal 2001 from 414,000 at the end of fiscal 2000, and increases in rental and advertising revenues between the periods presented. Royalties increased to $1.0 million in fiscal 2001 from $840,000 in fiscal 2000. The increase in royalties was primarily due to the increase in number of licensees in fiscal 2001 compared with fiscal 2000. Membership fees and other, including royalties earned from licensees, increased 309% to $8.2 million in fiscal 2000 from $2.0 million in fiscal 1999. Membership fees (which include rental income, advertising revenues and vendor promotions) increased to $7.4 million, or 2.5% of net warehouse sales, from $1.3 million, or 1.5% of net warehouse sales, in fiscal year 1999. The increase was a result of the eleven new warehouses opened in fiscal 2000, which resulted in an increase in the total memberships to 414,000 at the end of fiscal 2000 from 148,000 at the end of fiscal 1999. Royalties increased to $840,000 in fiscal 2000 from $674,000 in fiscal 1999. The increase in royalties was primarily due to the increase in number of licensees in fiscal 2000 compared with fiscal 1999. The Company sold its travel program in March 2000 (fiscal 2000) and its auto referral program in March 1999 (fiscal 1999), accounting for the change in revenue for the periods presented. Warehouse operating expenses increased to $53.2 million, or 11.2% of net warehouse sales, for fiscal 2001 from $34.1 million, or 11.7% of net warehouse sales, for fiscal 2000. The increase in warehouse operating expenses is attributable to the six additional warehouses opened in fiscal 2001. The decrease in warehouse operating expenses as a percentage of net warehouse sales in fiscal 2001 is attributable to the leveraging of centralized warehouse costs over additional warehouses. Warehouse operating expenses increased to $34.1 million, or 11.7% of net warehouse sales, for fiscal 2000 from $9.6 million, or 10.8% of net warehouse sales, for fiscal 1999. The increase in warehouse operating expenses is attributable to the eleven additional warehouses opened in fiscal 2000. The increase in warehouse operating expenses as a percentage of net warehouse sales is primarily attributable to higher costs realized in the first year of operations of the eleven warehouses opened in fiscal 2000, and from cannibalization of sales from additional locations operating in the same metropolitan markets. General and administrative expenses decreased to $17.6 million, or 3.7% of net warehouse sales, for fiscal 2001 from $17.9 million, or 6.1% of net warehouse sales, for fiscal 2000, resulting primarily from operating cost reduction initiatives. As a percentage of net warehouse sales, general and administrative expenses declined in fiscal 2001 due to sales leverage from additional warehouse openings in fiscal 2001 and 2000. General and administrative expenses increased to $17.9 million, or 6.1% of net warehouse sales, for fiscal 2000 from $15.5 million, or 17.3% of net warehouse sales, for fiscal 1999. As a percentage of net warehouse sales, general and administrative expenses declined in fiscal 2000 due to sales leverage from the additional warehouse openings in fiscal 2000 and 1999. Travel and auto selling, general and administrative expenses represent the respective operating expenses incurred by both the travel and auto programs. The travel program was sold in March 2000 (fiscal 2000) and the auto referral program was sold in April 1999 (fiscal 1999), accounting for the change between the periods presented. Pre-opening expenses, which represent expenses incurred before a warehouse store is in operation, decreased to $4.9 million in fiscal 2001 from $7.7 million in fiscal 2000 and remained flat compared to fiscal 1999. The changes between the periods presented are a result of opening six, eleven and three new warehouses in fiscal 2001, 2000 and 1999, respectively.

Interest income reflects earnings on marketable securities, cash and cash equivalent balances, City Notes (see "Notes to Consolidated Financial Statements") and certain secured notes receivable from buyers of formerly

Interest income reflects earnings on marketable securities, cash and cash equivalent balances, City Notes (see "Notes to Consolidated Financial Statements") and certain secured notes receivable from buyers of formerly owned properties. Interest income decreased to $3.2 million in fiscal 2001 from $3.9 million and $5.3 million in fiscal 2000 and 1999, respectively. The change in interest income is due to the change in amounts between interest-bearing instruments held by the Company between the periods presented and the interest rate earned on those instruments. Interest expense primarily reflects borrowings by the Company's majority or wholly owned foreign subsidiaries to finance capital requirements of new warehouses, and was $7.7 million (net of capitalized interest of $730,000) for fiscal 2001 compared with $2.9 million (net of capitalized interest of $891,000) and $143,000 in fiscal 2000 and 1999, respectively. The increases in interest expense are a result of increased borrowings by the Company to finance the additional warehouses opened during each of the periods presented. In fiscal 2001, the Company sold excess real estate properties owned by its wholly owned foreign subsidiaries in the Dominican Republic, Costa Rica and Panama, and its majority owned subsidiary in Trinidad. The sale of the excess land resulted in a gain of $2.0 million, of which the Company's share was $1.5 million. During fiscal 2000, the Company sold its travel program and City Notes for $1.5 million and $22.5 million, respectively. The Company recognized gains arising from these transactions of $1.1 million and $3.9 million for the travel program and City Notes, respectively. In fiscal 1999, the Company sold its auto referral program and real estate properties resulting in gains of $798,000 and $1.8 million, respectively. During fiscal 2001, the Company recognized foreign net deferred tax assets of $2,238,000 as a result of transitioning most of the Company's foreign operations to profitability in fiscal 2001. The Company also incurred current income tax expense of $1,652,000 for a net tax benefit of $586,000. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements are the financing of land, construction and equipment costs associated with new warehouse stores, plus the cost of preopening and working capital requirements. For fiscal 2002, the Company's current intention is to spend an aggregate between $30 million to $44 million for land, construction and equipment for four to six new warehouses (one of which opened subsequent to the fiscal year-end). Actual capital expenditures for new warehouse locations and operations may vary from estimated amounts depending on the number of new warehouses actually opened, business conditions and other risks and uncertainties to which the Company and its businesses are subject. The Company, primarily through its foreign subsidiaries, intends to increase bank borrowings by $20 million to $27 million during fiscal 2002, depending on the number of stores opened, and to use these proceeds, as well as excess cash and cash generated from existing operations, to finance these expenditures. On April 5, 2001, the Company repurchased 242,144 shares of its common stock for an aggregate of approximately $11.4 million in cash. The Company repurchased these shares pursuant to its obligations under the Stock Purchase Agreement, as amended, relating to the Company's acquisition in March 2000 of the 49% minority interest in its Panamanian subsidiaries which previously had been owned by BB&M International Trading Group ("BB&M"). In exchange for BB&M's 49% interest, the Company issued to BB&M's principals 306,748 shares of the Company's common stock and agreed to redeem the shares issued to BB&M at a price of $46.86 per share following the one-year anniversary of the completion of the acquisition upon the request of BB&M's principals. The Company has agreed to redeem the remaining 64,604 shares following the second anniversary of the completion of the acquisition at the price of $46.86 per share upon the holders' request.

In April 2001, the Company sold 67,700 shares of common stock previously held as treasury stock in a private placement for $39.00 per share for total proceeds of approximately $2.6 million. The Company believes that borrowings under its current and future credit facilities, together with its other sources of liquidity, will be sufficient to meet its working capital and capital expenditure requirements for the foreseeable future. However, if such sources of liquidity are insufficient to satisfy the Company's liquidity requirements, the

In April 2001, the Company sold 67,700 shares of common stock previously held as treasury stock in a private placement for $39.00 per share for total proceeds of approximately $2.6 million. The Company believes that borrowings under its current and future credit facilities, together with its other sources of liquidity, will be sufficient to meet its working capital and capital expenditure requirements for the foreseeable future. However, if such sources of liquidity are insufficient to satisfy the Company's liquidity requirements, the Company may need to sell equity or debt securities, obtain additional credit facilities or reduce the number of anticipated warehouse openings. Furthermore, the Company has and will continue to consider sources of capital, including the sale of equity or debt securities to strengthen its financial position and liquidity. There can be no assurance that such financing alternatives will be available under favorable terms, if at all. SEASONALITY Historically, the Company's merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, the Company's operating results fluctuate quarter-to-quarter as a result of economic and political events in markets served by the Company, the timing of holidays, weather, timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more expensive in local currencies and less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that the Company's future results will be consistent with past results or the projections of securities analysts. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company, through its majority or wholly owned subsidiaries, conducts foreign operations primarily in Central America, the Caribbean, and Asia, and as such is subject to both economic and political instabilities that cause volatility in foreign currency exchange rates or weak economic conditions. At the end of fiscal 2001, the Company had a total of twenty-two warehouses operating in eleven foreign countries. Fifteen of the twenty-two warehouses operate in foreign currencies other than the U.S. dollar. For fiscal 2001, 70% of the Company's net warehouse sales were in foreign currencies. The Company plans to enter into additional foreign countries in the future, which may involve similar economic and political risks as well as challenges that are different from those currently encountered by the Company. The Company believes that because its present operations and expansion plans involve numerous countries and currencies, the effect from any one-currency devaluation may not significantly impact the overall financial or operating results of the Company. However, there can be no assurance that the Company will not experience a materially adverse effect on the Company's business, financial condition, operating results, cash flow or liquidity, as a result of the economic and political risks of conducting an international merchandising business. In fiscal 2001, the foreign currency translation adjustment for the Company's non-U.S. denominated majority or wholly owned subsidiaries operating in Central America, the Caribbean and Asia increased to $962,000 from $633,000 and $245,000 at the end of fiscal 2000 and fiscal 1999, respectively. Foreign currencies in most of the countries where the Company operates have historically devalued against the U.S. dollar and are expected to continue to devalue. Managing foreign exchange is critical for operating successfully in these markets and the Company manages its risks at times by hedging currencies through Non Deliverable Forward Exchange Contracts (NDF). As of August 31, 2001, the Company had $2.0 million in NDFs outstanding. As there is no formal contemporaneous documentation for NDFs and no physical exchange of currency occurs at maturity (only the resulting gain or loss), they are not reflected on the balance sheet. If the NDFs were recorded based on their fair values, the effect would be immaterial. The Company may continue to purchase NDFs in the future to mitigate foreign exchange losses, but due to the volatility and lack of derivative financial instruments in the countries the Company operates, significant risk from unexpected devaluation of local currencies exist. Foreign exchange transaction losses realized, which are included as a part of the costs of goods sold in the consolidated statements

of operations, for fiscal 2001, fiscal 2000 and fiscal 1999 (including the cost of the NDFs) were $718,000, $1.3 million and $538,000, respectively.

of operations, for fiscal 2001, fiscal 2000 and fiscal 1999 (including the cost of the NDFs) were $718,000, $1.3 million and $538,000, respectively. The Company is exposed to changes in interest rates on various bank loan facilities. A hypothetical 100 basis point adverse change in interest rates along the entire interest rate yield curve would adversely affect the Company's pretax net income by approximately $850,000.

FINANCIAL STATEMENTS PRICESMART, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors Consolidated Balance Sheets as of August 31, 2001 and 2000 Consolidated Statements of Operations for the three years ended August 31, 2001 Consolidated Statements of Stockholders' Equity for the three years ended August 31, 2001 Consolidated Statements of Cash Flows for the three years ended August 31, 2001 Notes to Consolidated Financial Statements

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND STOCKHOLDERS PRICESMART, INC. We have audited the accompanying consolidated balance sheets of PriceSmart, Inc. as of August 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PriceSmart, Inc. at August 31, 2001 and 2000 and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 2001 in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP

San Diego, California November 2, 2001

FINANCIAL STATEMENTS PRICESMART, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors Consolidated Balance Sheets as of August 31, 2001 and 2000 Consolidated Statements of Operations for the three years ended August 31, 2001 Consolidated Statements of Stockholders' Equity for the three years ended August 31, 2001 Consolidated Statements of Cash Flows for the three years ended August 31, 2001 Notes to Consolidated Financial Statements

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND STOCKHOLDERS PRICESMART, INC. We have audited the accompanying consolidated balance sheets of PriceSmart, Inc. as of August 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PriceSmart, Inc. at August 31, 2001 and 2000 and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 2001 in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP

San Diego, California November 2, 2001

PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
August 31, ----------------------2001 2000 ----------------ASSETS

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND STOCKHOLDERS PRICESMART, INC. We have audited the accompanying consolidated balance sheets of PriceSmart, Inc. as of August 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PriceSmart, Inc. at August 31, 2001 and 2000 and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 2001 in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP

San Diego, California November 2, 2001

PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
August 31, ----------------------2001 2000 ----------------ASSETS Current assets Cash Marketable securities Receivables, net of allowance for doubtful accounts of $58 and $41 in 2001 and 2000, respectively Merchandise inventories Prepaid expenses and other current assets Property held for sale Total current assets Restricted cash Property and equipment, net Goodwill, net

$ 26,280 6,134 71,297 6,249 726 --------110,686 24,207 163,200 20,128

$

24,503 5,482

1,732 54,949 5,286 1,652 --------93,604 12,698 128,985 19,178

PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
August 31, ----------------------2001 2000 ----------------ASSETS Current assets Cash Marketable securities Receivables, net of allowance for doubtful accounts of $58 and $41 in 2001 and 2000, respectively Merchandise inventories Prepaid expenses and other current assets Property held for sale Total current assets Restricted cash Property and equipment, net Goodwill, net Deferred tax asset Note receivable and other TOTAL ASSETS

$ 26,280 6,134 71,297 6,249 726 --------110,686 24,207 163,200 20,128 2,357 3,502 --------$324,080 =========

$

24,503 5,482

1,732 54,949 5,286 1,652 --------93,604 12,698 128,985 19,178 119 6,816 --------$261,400 =========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings Accounts payable Accrued salaries and benefits Deferred membership income Income tax payable Other accrued expenses Long-term debt, current portion Total current liabilities Long-term debt, less current portion Total liabilities Minority interest Commitments and contingencies Stockholders' equity: Preferred stock, $.0001 par value, 2,000,000 shares authorized, none issued Common stock, $.0001 par value, 15,000,000 shares authorized, 6,928,690 and 6,812,485 shares issued and outstanding in 2001 and 2000, respectively Additional paid-in capital Notes receivable from stockholders Deferred compensation Accumulated other comprehensive loss Accumulated deficit Less: Treasury stock at cost 697,167 and 555,093 shares in 2001 and 2000, respectively Total stockholders' equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 22,205 60,789 3,551 4,371 1,643 7,073 6,842 --------106,474 79,303 --------185,777 8,193 -

$9,493 43,312 3,086 3,892 5,946 8,773 --------74,502 50,532 --------125,034 4,683 -

-

-

1 150,906 (769) (307) (962) (2,924)

1 148,970 (1,000) (679) (695) (6,308)

(15,835) --------130,110 --------$324,080 =========

(8,606) --------131,683 --------$261,400 =========

See accompanying notes.

PRICESMART, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Years Ended August 31, --------------------------------------------2001 2000 1999 --------------------------------Revenues: Sales: Net warehouse Export Membership fees and other Travel and auto programs Total revenues Expenses: Cost of goods sold: Net warehouse Export Selling, general and administrative: Warehouse operations General and administrative Travel and auto expenses Goodwill Amortization Preopening expenses Total expenses Operating income (loss) Other income (expense): Interest income Interest expense Other income (expense) Gain on sale: Travel (related party) and auto City notes (related party) Real estate Minority interest Total other income (expense) Income (loss) before provision (benefit) for income taxes and extraordinary items Provision (benefit) for income taxes Income (loss) before extraordinary items Extraordinary items, net of tax: Earthquake Debt restructuring Net income (loss)

$473,127 500 15,323 ----------488,950

$ 292,013 421 8,216 3,965 ----------304,615

$ 89,184 6,773 2,008 10,907 ------------108,872

405,239 482 53,215 17,561 998 4,866 ----------482,361 ----------6,589

256,247 405 34,133 17,896 1,520 223 7,681 ----------318,105 ----------(13,490)

78,081 6,557 9,588 15,469 6,964 4,949 ------------121,608 ------------(12,736)

3,240 (7,721) (76) 1,955 (840) ----------(3,442)

3,891 (2,866) (61) 1,133 3,948 1,882 ----------7,927

5,257 (143) 452 798 1,757 913 ------------9,034

3,147 (586) ----------$ 3,733

(5,563) (119) ----------$ (5,444)

(3,702) 190 ------------$ (3,892)

(120) (229) ----------$ 3,384 ===========

----------$ (5,444) ===========

------------$ (3,892) =============

Basic earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss) Diluted earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items

$

0.60

$

(1.01)

$

(0.76)

$ (0.06) ----------$ 0.54 ===========

$ ----------$ (1.01) ===========

$ ------------$ (0.76) =============

$ $

0.56 (0.05)

$ $

(1.01) -

$ $

(0.76) -

Net income (loss) Shares used in per share computation: Basic Diluted

----------$ 0.51 ===========

----------$ (1.01) ===========

------------$ (0.76) =============

6,254 =========== 6,658 ===========

5,386 =========== 5,386 ===========

5,120 ============= 5,120 =============

See accompanying notes.

PRICESMART, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS ENDED AUGUST 31, 2001 (AMOUNTS IN THOUSANDS)
Common Stock -----------------Shares Amount ------------6,004 $ 1 Additional paid-in capital ---------$108,873 Notes receivable from stockholders ---------------$ (697)

Balance at August 31, 1998 Issuance of common stock for cash and notes receivable Exercise of stock options Purchase of treasury stock Cancellation of notes receivable from stockholders Payment on notes receivable from stockholder Deferred compensation related to grant of stock options Amortization of deferred compensation Compensation expense related to the issuance of common stock Retirement of common stock held in treasury Net loss Net unrealized loss on marketable securities Translation adjustment Comprehensive loss

Defer Compens ------$

16 51 (4) (76) ------5,991 142 680 ------6,813 96 20

------1 ------1 -

424 585 (65) 2,355 485 (1,174) ---------111,483 92 1,616 35,779 ---------148,970 922 (884) 1,103 795

(387) 126 8 ---------------(950) (150) 100 ---------------(1,000) (

------(

Balance at August 31, 1999 Issuance of common stock for cash and notes receivable Exercise of stock options Issuance of stock in exchange for minority interest Amortization of deferred compensation Payment on notes receivable from stockholders Net loss Net unrealized gain on marketable securities Translation adjustment Comprehensive loss

-------

Balance at August 31, 2000 Exercise of stock options Repurchase of common stock Panama acquisition Sale of treasury stock Issuance of stock in exchange for minority interest Payment on notes receivables

PRICESMART, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS ENDED AUGUST 31, 2001 (AMOUNTS IN THOUSANDS)
Common Stock -----------------Shares Amount ------------6,004 $ 1 Additional paid-in capital ---------$108,873 Notes receivable from stockholders ---------------$ (697)

Balance at August 31, 1998 Issuance of common stock for cash and notes receivable Exercise of stock options Purchase of treasury stock Cancellation of notes receivable from stockholders Payment on notes receivable from stockholder Deferred compensation related to grant of stock options Amortization of deferred compensation Compensation expense related to the issuance of common stock Retirement of common stock held in treasury Net loss Net unrealized loss on marketable securities Translation adjustment Comprehensive loss

Defer Compens ------$

16 51 (4) (76) ------5,991 142 680 ------6,813 96 20 ------6,929 =======

------1 ------1 ------$ 1 =======

424 585 (65) 2,355 485 (1,174) ---------111,483 92 1,616 35,779 ---------148,970 922 (884) 1,103 795 ---------$150,906 ==========

(387) 126 8 ---------------(950) (150) 100 ---------------(1,000) 231 ---------------$ (769) ================ (

------(

Balance at August 31, 1999 Issuance of common stock for cash and notes receivable Exercise of stock options Issuance of stock in exchange for minority interest Amortization of deferred compensation Payment on notes receivable from stockholders Net loss Net unrealized gain on marketable securities Translation adjustment Comprehensive loss

-------

Balance at August 31, 2000 Exercise of stock options Repurchase of common stock Panama acquisition Sale of treasury stock Issuance of stock in exchange for minority interest Payment on notes receivables from stockholders Amortization of deferred compensation Net income Net unrealized gain on marketable securities Translation adjustment Comprehensive income Balance at August 31, 2001

------$ =======

See accompanying notes.

Balance at August 31, 1998 Issuance of common stock for cash and notes receivable Exercise of stock options Purchase of treasury stock Cancellation of notes receivable from stockholders Payment on notes receivable from stockholder Deferred compensation related to grant of stock options Amortization of deferred compensation Compensation expense related to the issuance of common stock Retirement of common stock held in treasury Net loss Net unrealized loss on marketable securities Translation adjustment Comprehensive loss Balance at August 31, 1999 Issuance of common stock for cash and notes receivable Exercise of stock options Issuance of stock in exchange for minority interest Amortization of deferred compensation Payment on notes receivable from stockholders Net loss Net unrealized gain on marketable securities Translation adjustment Comprehensive loss Balance at August 31, 2000 Exercise of stock options Repurchase of common stock Panama acquisition Sale of treasury stock Issuance of stock in exchange for minority interest Payment on notes receivables from stockholders Amortization of deferred compensation Net income Net unrealized gain on marketable Securities Translation adjustment Comprehensive income Balance at August 31, 2001

Other Comprehensive income (loss) ------------$ 519

Retained earnings (deficit) ----------$ 3,028

Treasury Stock at Cost --------------------Shares Amount --------------550 $ (8,643)

sto ---

(727) (245) ------------(453) 146 (388) ------------(695) 62 (329) ------------$ (962) =============

(3,892) ----------(864) (5,444) ----------(6,308) 3,384 ----------$(2,924) ===========

434 (76) -------908 (4) (17) (332) -------555 (32) 242 (68) -------697 ========

(6,605) 1,174 ---------(14,074) 58 265 5,145 ---------(8,606) 646 (9,413) 1,538 ---------$(15,835) ======== --=== -----

See accompanying notes.

PRICESMART, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)

Balance at August 31, 1998 Issuance of common stock for cash and notes receivable Exercise of stock options Purchase of treasury stock Cancellation of notes receivable from stockholders Payment on notes receivable from stockholder Deferred compensation related to grant of stock options Amortization of deferred compensation Compensation expense related to the issuance of common stock Retirement of common stock held in treasury Net loss Net unrealized loss on marketable securities Translation adjustment Comprehensive loss Balance at August 31, 1999 Issuance of common stock for cash and notes receivable Exercise of stock options Issuance of stock in exchange for minority interest Amortization of deferred compensation Payment on notes receivable from stockholders Net loss Net unrealized gain on marketable securities Translation adjustment Comprehensive loss Balance at August 31, 2000 Exercise of stock options Repurchase of common stock Panama acquisition Sale of treasury stock Issuance of stock in exchange for minority interest Payment on notes receivables from stockholders Amortization of deferred compensation Net income Net unrealized gain on marketable Securities Translation adjustment Comprehensive income Balance at August 31, 2001

Other Comprehensive income (loss) ------------$ 519

Retained earnings (deficit) ----------$ 3,028

Treasury Stock at Cost --------------------Shares Amount --------------550 $ (8,643)

sto ---

(727) (245) ------------(453) 146 (388) ------------(695) 62 (329) ------------$ (962) =============

(3,892) ----------(864) (5,444) ----------(6,308) 3,384 ----------$(2,924) ===========

434 (76) -------908 (4) (17) (332) -------555 (32) 242 (68) -------697 ========

(6,605) 1,174 ---------(14,074) 58 265 5,145 ---------(8,606) 646 (9,413) 1,538 ---------$(15,835) ======== --=== -----

See accompanying notes.

PRICESMART, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
Years Ended August 31,

PRICESMART, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
Years Ended August 31, --------------------------------------------2001 2000 1999 ----------------------------------

OPERATING ACTIVITIES Net income (loss) $ 3,384 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation 9,414 Goodwill amortization 998 Allowance for doubtful accounts 17 Gain on sale of City Notes (related party) Gain on sale of travel program (related party) Gain on sale of real estate (1,955) Extraordinary loss 349 Income tax provision (benefit) (586) Minority interest 840 Compensation expense recognized for stock options 372 Change in operating assets and liabilities: Restricted cash (11,509) Accounts receivable and other assets (25,227) Accounts payable and other liabilities 21,173 Other 62 ----------Net cash flows used in operating activities (2,668) INVESTING ACTIVITIES Purchase of marketable securities Sale of marketable securities Additions to property and equipment Payment(disbursement)of notes receivable Proceeds from sale of real estate Proceeds from sale of City notes (related party) Proceeds from sale of travel business (related party) Proceeds from sale of property held for sale Panama acquisition - repurchase of common stock Net cash flows provided by (used in) investing activities FINANCING ACTIVITIES Proceeds from bank borrowings Repayment of bank borrowings Contributions by minority interest shareholders Distributions to minority shareholders Proceeds from exercise of stock options Issuance of common stock Payment on notes receivable from stockholders Sale (purchase) of treasury stock Other

$(5,444)

$ (3,892)

4,610 223 (443) (3,948) (1,133) (119) (1,882) 603 (2,503) (28,729) 24,883 146 -----------(13,736)

1,622 30 190 (1,096) 1,558 (7,191) (18,778) 19,721 (137) -------------(7,973)

5,482 (45,421) 3,768 4,185 926 (11,347) ----------(42,407)

12,145 (79,101) (2,597) 22,534 1,500 440 -----------(45,079)

(44,638) 82,417 (37,156) 2,027 2,760 -------------5,410

75,342 (35,789) 3,188 1,568 231 2,641 ----------47,181

62,653 (2,350) 6,465 1,881 100 -----------68,749

8,912 (4,200) 14,547 (1,029) 585 37 8 (6,605) (129) -------------12,126

Net cash flows provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

(329) ----------1,777 24,503 $ 26,280 ===========

(388) -----------9,546 14,957 $ 24,503 ============

(245) -------------9,318 5,639 $ 14,957 ==============

Supplemental disclosure of cash flow information Cash paid during the period for:

Interest, net of amounts capitalized Income taxes

$ $

6,801 1,739

$ $

2,324 677

$ $

143 129

See accompanying notes.

PRICESMART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - COMPANY OVERVIEW PriceSmart, Inc.'s ("PriceSmart" or the "Company") business consists of international membership shopping stores similar to, but smaller in size than, warehouse clubs in the United States. As of August 31, 2001, the Company had twenty-two warehouse stores in operation (four in Panama, three each in Guatemala, Costa Rica,and the Dominican Republic, two each in El Salvador and Honduras, and one each in Aruba, Barbados, the Philippines, Trinidad, and the U.S. Virgin Islands) of which the Company owns at least a majority interest. In fiscal 2001, the Company increased its ownership from 62.5% to 90% in the operations in Trinidad (see Note 13). In fiscal 2000, the Company increased its ownership from 51% to 100% in the operations in Panama and increased its ownership from 60% to 100% in the operations in Costa Rica, Dominican Republic, El Salvador and Honduras (see Note 13). In addition, there were nine warehouse stores in operation (eight in China and one in Saipan) licensed to and operated by local business people as of August 31, 2001. Additionally, until March 1, 2000, the Company operated a domestic travel program (see Note 9) and until April 1, 1999, the Company operated a domestic auto referral business (see Note 9). The Company principally operates under one segment in three geographic regions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the assets, liabilities and results of operations of the Company's majority and wholly owned subsidiaries as listed below. All significant intercompany accounts and transactions have been eliminated in consolidation.
OWNERSHIP ----------------100.0% 100.0% 100.0% 100.0% 66.0% 90.0% 60.0% 51.0% 67.5% 60.0% 100.0% 100.0% 100.0% 100.0% BASIS OF PRESENTATION -----------------------Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated

Ventures Services, Inc. PriceSmart Panama (see Note 13) PriceSmart US Virgin Islands PriceSmart Guam PriceSmart Guatemala PriceSmart Trinidad (see Note 13) PriceSmart Aruba PriceSmart Barbados PriceSmart Jamaica PriceSmart Philippines PSMT Caribe, Inc. (see Note 13): Costa Rica Dominican Republic El Salvador Honduras

USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and short-term investments with maturities of three months or less

PRICESMART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - COMPANY OVERVIEW PriceSmart, Inc.'s ("PriceSmart" or the "Company") business consists of international membership shopping stores similar to, but smaller in size than, warehouse clubs in the United States. As of August 31, 2001, the Company had twenty-two warehouse stores in operation (four in Panama, three each in Guatemala, Costa Rica,and the Dominican Republic, two each in El Salvador and Honduras, and one each in Aruba, Barbados, the Philippines, Trinidad, and the U.S. Virgin Islands) of which the Company owns at least a majority interest. In fiscal 2001, the Company increased its ownership from 62.5% to 90% in the operations in Trinidad (see Note 13). In fiscal 2000, the Company increased its ownership from 51% to 100% in the operations in Panama and increased its ownership from 60% to 100% in the operations in Costa Rica, Dominican Republic, El Salvador and Honduras (see Note 13). In addition, there were nine warehouse stores in operation (eight in China and one in Saipan) licensed to and operated by local business people as of August 31, 2001. Additionally, until March 1, 2000, the Company operated a domestic travel program (see Note 9) and until April 1, 1999, the Company operated a domestic auto referral business (see Note 9). The Company principally operates under one segment in three geographic regions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the assets, liabilities and results of operations of the Company's majority and wholly owned subsidiaries as listed below. All significant intercompany accounts and transactions have been eliminated in consolidation.
OWNERSHIP ----------------100.0% 100.0% 100.0% 100.0% 66.0% 90.0% 60.0% 51.0% 67.5% 60.0% 100.0% 100.0% 100.0% 100.0% BASIS OF PRESENTATION -----------------------Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated

Ventures Services, Inc. PriceSmart Panama (see Note 13) PriceSmart US Virgin Islands PriceSmart Guam PriceSmart Guatemala PriceSmart Trinidad (see Note 13) PriceSmart Aruba PriceSmart Barbados PriceSmart Jamaica PriceSmart Philippines PSMT Caribe, Inc. (see Note 13): Costa Rica Dominican Republic El Salvador Honduras

USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and short-term investments with maturities of three months or less when purchased. RESTRICTED CASH Restricted cash represents time deposits that are pledged as collateral for majority-owned subsidiary loans and amounts deposited in escrow for future asset acquisitions.

MARKETABLE SECURITIES In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Debt and Equity Securities", marketable securities are

classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in a separate component of the stockholders' equity. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. MERCHANDISE INVENTORIES Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:
Building and improvements Fixtures and equipment 10-25 years 3-15 years

LONG-LIVED ASSETS Long-lived assets are being amortized on a straight-line basis over the periods that expected economic benefits will be provided. Management estimates such periods of economic benefits based on undiscounted cash flows, profitability projections and the ability of the business to perform within those projections. The Company periodically reviews long-lived assets, including those assets that are anticipated of being disposed of. No such indicators of impairment were present in the fiscal years presented. REVENUE RECOGNITION The Company recognizes sales revenue when title passes to the customer. Membership fee income represents annual membership fees paid by the Company's warehouse members, which are recognized over the 12-month term of the membership. The historical membership fee refunds have been minimal and, accordingly, no reserve has been established for membership refunds for the periods presented. PRE-OPENING COSTS The Company expenses pre-opening costs (the costs of start-up activities, including organization costs) as incurrred. STOCK-BASED COMPENSATION SFAS No. 123, "Accounting for Stock-Based Compensation," establishes the use of fair value based method for stock-based compensation arrangements, under which compensation is determined using the fair value of stockbased compensation determined as of the grant date, and is recognized over the periods in which the related services are rendered. SFAS No. 123 also permits companies to elect to continue using the current intrinsic value accounting method specified in Accounting Principles Board Opinion ("APB") No. 25 to account for stockbased compensation. The Company has decided to retain the current intrinsic value based method, and has disclosed the pro forma effect of using the fair value based method for its stock-based compensation. When the exercise price of the stock option is less than the fair value price of the underlying stock on the grant date, deferred stock compensation is recognized and amortized to expense in accordance with FASB Interpretation

classified as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported in a separate component of the stockholders' equity. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. MERCHANDISE INVENTORIES Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows:
Building and improvements Fixtures and equipment 10-25 years 3-15 years

LONG-LIVED ASSETS Long-lived assets are being amortized on a straight-line basis over the periods that expected economic benefits will be provided. Management estimates such periods of economic benefits based on undiscounted cash flows, profitability projections and the ability of the business to perform within those projections. The Company periodically reviews long-lived assets, including those assets that are anticipated of being disposed of. No such indicators of impairment were present in the fiscal years presented. REVENUE RECOGNITION The Company recognizes sales revenue when title passes to the customer. Membership fee income represents annual membership fees paid by the Company's warehouse members, which are recognized over the 12-month term of the membership. The historical membership fee refunds have been minimal and, accordingly, no reserve has been established for membership refunds for the periods presented. PRE-OPENING COSTS The Company expenses pre-opening costs (the costs of start-up activities, including organization costs) as incurrred. STOCK-BASED COMPENSATION SFAS No. 123, "Accounting for Stock-Based Compensation," establishes the use of fair value based method for stock-based compensation arrangements, under which compensation is determined using the fair value of stockbased compensation determined as of the grant date, and is recognized over the periods in which the related services are rendered. SFAS No. 123 also permits companies to elect to continue using the current intrinsic value accounting method specified in Accounting Principles Board Opinion ("APB") No. 25 to account for stockbased compensation. The Company has decided to retain the current intrinsic value based method, and has disclosed the pro forma effect of using the fair value based method for its stock-based compensation. When the exercise price of the stock option is less than the fair value price of the underlying stock on the grant date, deferred stock compensation is recognized and amortized to expense in accordance with FASB Interpretation No. 28 ("FIN 28"), "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans",over the vesting period of the individual option.

The Financial Accounting Standards Board ("FASB") issued FASB Interpretation No.

The Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 44 ("FIN 44"), "Accounting of Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25" ("APB 25"). FIN 44 clarifies the application of APB 25 for (a) the definition of employee for purposes of applying APB 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 was effective July 1, 2000, and did not have a material effect on the Company's financial position or results of operations. FOREIGN CURRENCY TRANSLATION In accordance with SFAS No. 52 "Foreign Currency Translation", the assets and liabilities of the Company's foreign operations are primarily translated to U.S. dollars using the exchange rates at the balance sheet date and revenues and expenses are translated at average rates prevailing during the period. Related translation adjustments are recorded as a component of accumulated comprehensive income. BUSINESS COMBINATIONS For business combinations accounted for under the purchase method of accounting, the Company includes the results of operations of the acquired business from the date of acquisition. Net assets of the acquired business are recorded at their fair value at the date of acquisition. The excess of the purchase price over the fair value of tangible and intangible net assets acquired is included in goodwill in the accompanying consolidated balance sheets. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS In fiscal 2001, the Company adopted Financial Accounting Standards Board ("FASB") Statements No. 133 ("SFAS 133") pertaining to the accounting for derivatives and hedging activities. SFAS 133 requires all derivatives to be recorded on the balance sheet at fair value and establishes accounting treatment for three types of hedges: hedges of changes in the fair value of assets, liabilities, or firm commitments; hedges of the variable cash flows of forecasted transactions; and hedges of foreign currency exposures of net investments in foreign operations. The adoption of SFAS 133 did not have a material impact on the Company's consolidated financial statements. ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB")issued Statements of Financial Accounting Standards No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income of approximately $1.1 million per year. During fiscal 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of February 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. Accounting for the Impairment or Disposal of Long-Lived Assets - Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144) was issued in August 2001 and will become effective for the Company beginning in fiscal 2003. Prior period financial statements will not be restated upon the adoption of this Statement. This Statement establishes a number of rules for the recognition, measurement and display of long-lived assets which are

impaired and either held for sale or continuing use within the business. In addition, the Statement broadly expands the definition of a discontinued operation to individual reporting units or asset groupings for which identifiable cash flows exist. RECLASSIFICATIONS Certain amounts in the prior period consolidated financial statements have been reclassified to conform to current period presentation. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands):
AUGUST 31, -------------------------------2001 2000 -------------------------PROPERTY AND EQUIPMENT: Land Building and improvements Fixtures and equipment Construction in progress $ 30,232 87,305 56,135 7,396 ------------181,068 (17,868) ------------$ 163,200 ============= $ 29,779 61,649 40,299 5,712 -------------137,439 (8,454) -------------$ 128,985 ==============

Less: accumulated depreciation Property and equipment, net

Building includes capitalized interest of $730,000 and $891,000 as of August 31, 2001 and 2000, respectively. NOTE 4 - EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share are computed based on the weighted average shares outstanding in the period. Diluted earnings (loss) per share is computed based on the weighted average shares outstanding in the period and the effect of dilutive securities (options) except where their inclusion is antidilutive (amounts in thousands, except per share data):
YEARS ENDED AUGUST 31, -------------------------------------------2001 2000 1999 ------------------------- ------------$ 3,733 $(5,444) $(3,892) (349) ------------------------- ------------$ 3,384 $(5,444) $(3,892) ============= ============= =============

Income (loss) before extraordinary loss Extraordinary items, net of tax Net income (loss)

Determination of shares (000's): Common shares outstanding Assumed conversion of stock options Diluted average common shares outstanding Basic earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss)

6,254 404 ------------6,658

5,386 ------------5,386

5,120 ------------5,120

$ 0.60 $ (0.06) ------------$ 0.54 =============

$ (1.01) $ ------------$ (1.01) =============

$ (0.76) $ ------------$ (0.76) =============

Diluted earnings (loss) per share: Income (loss) before extraordinary items Extraordinary items Net income (loss)

$ 0.56 $ (0.05) ------------$ 0.51

$ (1.01) $ ------------$ (1.01)

$ (0.76) $ ------------$ (0.76)

Net income (loss)

$ 0.51 =============

$ (1.01) =============

$ (0.76) =============

NOTE 5 - MARKETABLE SECURITIES The following is a summary of marketable securities classified as available-for-sale as of August 31, 2000 (in thousands):
AMORTIZED COST ----------2000 Commercial company bonds $ 5,544 $ $ (62) $ 5,4 GROSS UNREALIZED GAINS -----------GROSS UNREALIZED LOSSES ------------ESTIMAT FAIR VALUES --------

The fair value of the marketable securities is based on quoted market prices for the same or similar type issues. For fiscal 2001, there were no gross realized gains or losses. Gross realized losses were $104,000 for fiscal 2000. NOTE 6 - RETIREMENT PLAN PriceSmart offers a defined contribution retirement and 401(k) plans to employees. Employees become eligible for these plans after one year of employment. Enrollment in these plans begins on the first of the month following the employee's one-year anniversary date. Prior to fiscal 2001, retirement contributions, if any, were based on a discretionary amount determined by the Board of Directors and were allocated to each participant based on the relative compensation of the participant, subject to certain limitations. During fiscal 2001, the plan was amended to eliminate discretionary contributions. Profit sharing contributions were $0, $321,000 and $361,000 for fiscal 2001, 2000 and 1999, respectively. The Company makes contributions that are nondiscretionary and equal to 100% of the participant's contribution up to an anuual maximum of 4% of base compensation that a participant contributes to the plan. Employer contributions to the 401(k) plan were $178,000, $25,000, and $27,000 during fiscal 2001, 2000 and 1999, respectively. NOTE 7 - STOCK OPTION PLAN AND EQUITY PARTICIPATION PLAN On August 6, 1997, the Company adopted the 1997 Stock Option Plan of PriceSmart, Inc. (the "1997 Plan") for the benefit of its eligible employees, consultants and independent directors. Under the 1997 Plan, 700,000 shares of the Company's common stock are authorized for issuance. The Compensation Committee of the Board of Directors administers the 1997 Plan with respect to grants to employees or consultants of the Company, and the full Company Board of Directors administers the Plan with respect to director options. Options issued under the 1997 Plan typically vest over five years and expire in six years. In January 1999, the Company adopted the 1998 Equity Participation Plan (the "Equity Plan") for the benefit of its eligible employees, consultants and independent directors. The Equity Plan authorizes 700,000 shares of the Company's common stock for issuance. Options issued under the Equity Plan typically vest over five years and expire in six years. The Equity Plan also allows the Company to make loans to participants for the purchase of shares. As of August 31, 2001, outstanding loans were $769,000. The loans are with full recourse and interest is payable semi-monthly at 5.85% with the principal due in six years. Total stock option activity relating to the 1997 Plan and Equity Plan was as follows:

Balance at August 31, 1998 Granted Exercised

SHARES -----------------633,736 729,185 (51,253)

WEIGHTED AVERAGE EXERCISE PRICE ---------------------$13.94 19.45 11.43

The fair value of the marketable securities is based on quoted market prices for the same or similar type issues. For fiscal 2001, there were no gross realized gains or losses. Gross realized losses were $104,000 for fiscal 2000. NOTE 6 - RETIREMENT PLAN PriceSmart offers a defined contribution retirement and 401(k) plans to employees. Employees become eligible for these plans after one year of employment. Enrollment in these plans begins on the first of the month following the employee's one-year anniversary date. Prior to fiscal 2001, retirement contributions, if any, were based on a discretionary amount determined by the Board of Directors and were allocated to each participant based on the relative compensation of the participant, subject to certain limitations. During fiscal 2001, the plan was amended to eliminate discretionary contributions. Profit sharing contributions were $0, $321,000 and $361,000 for fiscal 2001, 2000 and 1999, respectively. The Company makes contributions that are nondiscretionary and equal to 100% of the participant's contribution up to an anuual maximum of 4% of base compensation that a participant contributes to the plan. Employer contributions to the 401(k) plan were $178,000, $25,000, and $27,000 during fiscal 2001, 2000 and 1999, respectively. NOTE 7 - STOCK OPTION PLAN AND EQUITY PARTICIPATION PLAN On August 6, 1997, the Company adopted the 1997 Stock Option Plan of PriceSmart, Inc. (the "1997 Plan") for the benefit of its eligible employees, consultants and independent directors. Under the 1997 Plan, 700,000 shares of the Company's common stock are authorized for issuance. The Compensation Committee of the Board of Directors administers the 1997 Plan with respect to grants to employees or consultants of the Company, and the full Company Board of Directors administers the Plan with respect to director options. Options issued under the 1997 Plan typically vest over five years and expire in six years. In January 1999, the Company adopted the 1998 Equity Participation Plan (the "Equity Plan") for the benefit of its eligible employees, consultants and independent directors. The Equity Plan authorizes 700,000 shares of the Company's common stock for issuance. Options issued under the Equity Plan typically vest over five years and expire in six years. The Equity Plan also allows the Company to make loans to participants for the purchase of shares. As of August 31, 2001, outstanding loans were $769,000. The loans are with full recourse and interest is payable semi-monthly at 5.85% with the principal due in six years. Total stock option activity relating to the 1997 Plan and Equity Plan was as follows:

Balance at August 31, 1998 Granted Exercised Cancelled Balance at August 31, 1999 Granted Exercised Cancelled Balance at August 31, 2000 Granted Exercised Cancelled Balance at August 31, 2001

SHARES -----------------633,736 729,185 (51,253) (116,867) -----------------1,194,801 111,900 (158,891) (114,429) -----------------1,033,381 102,770 (138,882) (60,346) -----------------936,923

WEIGHTED AVERAGE EXERCISE PRICE ---------------------$13.94 19.45 11.43 15.17 ---------------------$17.29 38.17 12.13 20.97 ---------------------$19.94 36.68 13.68 28.78 ---------------------$22.93

As of August 31, 2001, options to purchase 413,819 shares were exercisable and there were 1,026,173 shares, of Common Stock reserved for future issuance. The following table summarizes information about stock options

outstanding at August 31, 2001:

RANGE OF EXERCISE PRICES --------------$ 8.25 - $12.38 12.38 16.50 28.88 33.00 16.50 20.63 33.00 37.13

OUTSTANDING AS OF 8/31/01 ----------4,261 393,412 247,920 49,900 27,900 213,530 ----------936,923

WEIGHTED-AVERAGE REMAINING CONTRACTUAL LIFE ---------------0.3 2.6 2.6 6.0 5.7 4.9 ---------------3.4

WEIGHTEDAVERAGE EXERCISE PRICE -------------$ 11.64 15.59 17.65 32.13 35.02 39.06 -------------$ 22.93

EXERCISABLE AS OF 8/31/01 ----------4,261 226,918 135,940 2,980 43,720 ----------413,819

WEIGHTEDAVERAGE EXERCISE PRICE ---------$ 11.64 15.62 17.57 35.00 38.33 ---------18.76

37.13 - 41.25 --------------$ 8.25 - 41.25

The weighted-average fair value of the stock options granted during 2001 and 2000 were $14.49 and $18.08, respectively. The Company recorded deferred compensation of $2.4 million in connection with the grants of certain stock options to employees during fiscal 1999. A total of 552,291 options were issued at a price lower than market on date of grant. On date of grant the market price was $20.25 while 81,250 options were issued with an exercise price of $16.25, 446,041 options were issued with an exercise price of $15.50 and 25,000 options were issued with an exercise price of $14.75. The deferred compensation is being amortized ratably over the vesting period of the respective options in accordance with FIN 28. Pro forma information regarding net income is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method prescribed by SFAS No. 123. The fair value of each option grant is estimated on the date of grant using the "Black-Scholes" option-pricing model with the following weighted average assumptions used for grants in fiscal 2001, 2000, and 1999:

Risk free interest rate Expected life Expected volatility Expected dividend yield

2001 ------6% 5 years 42.5% 0%

2000 ------6% 6 years 42.6% 0%

1999 ------6% 6 years 42.7% 0%

For the purpose of pro forma disclosures, the estimated fair value of the options granted is amortized to expense over the options' vesting period. The Company's pro forma information for the years ended August 31, 2001, 2000, and 1999 were as follows:

2001 ------Pro forma net income (loss) (in thousands) Pro forma earnings (loss) per share diluted $ 2,911 $ 0.44

2000 ------$ (6,715) $ (1.13)

1999 ------$ (5,072) $ (0.99)

RANGE OF EXERCISE PRICES --------------$ 8.25 - $12.38 12.38 16.50 28.88 33.00 16.50 20.63 33.00 37.13

OUTSTANDING AS OF 8/31/01 ----------4,261 393,412 247,920 49,900 27,900 213,530 ----------936,923

WEIGHTED-AVERAGE REMAINING CONTRACTUAL LIFE ---------------0.3 2.6 2.6 6.0 5.7 4.9 ---------------3.4

WEIGHTEDAVERAGE EXERCISE PRICE -------------$ 11.64 15.59 17.65 32.13 35.02 39.06 -------------$ 22.93

EXERCISABLE AS OF 8/31/01 ----------4,261 226,918 135,940 2,980 43,720 ----------413,819

WEIGHTEDAVERAGE EXERCISE PRICE ---------$ 11.64 15.62 17.57 35.00 38.33 ---------18.76

37.13 - 41.25 --------------$ 8.25 - 41.25

The weighted-average fair value of the stock options granted during 2001 and 2000 were $14.49 and $18.08, respectively. The Company recorded deferred compensation of $2.4 million in connection with the grants of certain stock options to employees during fiscal 1999. A total of 552,291 options were issued at a price lower than market on date of grant. On date of grant the market price was $20.25 while 81,250 options were issued with an exercise price of $16.25, 446,041 options were issued with an exercise price of $15.50 and 25,000 options were issued with an exercise price of $14.75. The deferred compensation is being amortized ratably over the vesting period of the respective options in accordance with FIN 28. Pro forma information regarding net income is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method prescribed by SFAS No. 123. The fair value of each option grant is estimated on the date of grant using the "Black-Scholes" option-pricing model with the following weighted average assumptions used for grants in fiscal 2001, 2000, and 1999:

Risk free interest rate Expected life Expected volatility Expected dividend yield

2001 ------6% 5 years 42.5% 0%

2000 ------6% 6 years 42.6% 0%

1999 ------6% 6 years 42.7% 0%

For the purpose of pro forma disclosures, the estimated fair value of the options granted is amortized to expense over the options' vesting period. The Company's pro forma information for the years ended August 31, 2001, 2000, and 1999 were as follows:

2001 ------Pro forma net income (loss) (in thousands) Pro forma earnings (loss) per share diluted $ 2,911 $ 0.44

2000 ------$ (6,715) $ (1.13)

1999 ------$ (5,072) $ (0.99)

The pro forma effect on net income for 2001 and net losses for 2000 and 1999 is not likely to be representative

of the pro forma effect on reported earnings in future years. NOTE 8 - CITY NOTES RECEIVABLE The City Notes, with interest rates ranging from 8% to 10%, which were sold in April 2000 (see Note 9), represent amounts loaned to U.S. municipalities and agencies to facilitate real property acquisition and improvements. Repayment of the majority of these notes were generally based on that municipality's allocation of sales tax revenues generated by retail businesses located on the particular property associated with such City Note. City Note repayments were calculated in accordance with specific revenue sharing agreements, and, under the terms of most City Notes, the unpaid balance of the note was to be forgiven on its maturity date. Interest income was recognized based upon the stated interest rates and amounted to $948,000 and $1.7 million for the years ended August 31, 2000 and 1999, respectively.

NOTE 9 - SALE OF ASSETS During fiscal 2001, the Company, through its majority and wholly owned subsidiaries, sold $2.2 million in land. The properties were mainly excess land surrounding its warehouses. These sales resulted in a gain of approximately $2.0 million. On April 5, 2000, the Company sold its City Notes for $22.5 million to the Price Family Charitable Trust ("Trust"), a California trust (see Note 16). The Company recognized a gain of approximately $3.9 million arising from this transaction. On March 1, 2000, the Company sold its travel program for $1.5 million to Club-4U, Inc. (see Note 16) under an asset purchase agreement ("purchase agreement"). Under the purchase agreement, Club-4U, Inc. acquired the assets primarily used in connection with the travel program, subject to liabilities under the travel program existing contracts, resulting in a gain of approximately $1.1 million. In August 1998, the Company entered into an agreement to sell its auto referral business effective November 1, 1999. On March 29, 1999, the Company entered into an amendment to the purchase agreement to change the closing date of the sale to April 1, 1999. The Company operated the auto referral business through March 31, 1999. The sale resulted in a net gain of approximately $798,000. NOTE 10 - PROPERTY HELD FOR SALE Property held for sale includes improved land which the Company expects to dispose of in the next twelve months. Property held for sale was $726,000 and $1.7 million as of August 31, 2001 and 2000, respectively. As the property is held for sale, the net results of the real estate operations are included in other income (expense) on the consolidated statements of operations. The net results for fiscal 2001 and 2000 were not material, and for fiscal 1999 were $1.3 million. NOTE 11 - FOREIGN CURRENCY INSTRUMENTS PriceSmart transacts business primarily in various Central American and Caribbean foreign currencies. The Company, at times, enters into non deliverable forward currency exchange contracts that are generally for short durations of six months or less. The resulting gains or losses from the non deliverable forward currency exchange contracts entered into for the periods presented have not been material. As of August 31, 2001, the Company had $2.0 million in non deliverable forward currency exchange contracts outstanding. As there is no formal contemporaneous documentation for non deliverable forward currency exchange contracts and provided no physical exchange of currency occurs at maturity (only the resulting gain or loss), they are not reflected on the balance sheet. If the non deliverable forward exchange contracts were recorded based on their fair values, the effect would be immaterial. As of August 2000, the Company had no non deliverable forward exchange contracts outstanding. NOTE 12 - COMMITMENTS AND CONTINGENCIES

NOTE 9 - SALE OF ASSETS During fiscal 2001, the Company, through its majority and wholly owned subsidiaries, sold $2.2 million in land. The properties were mainly excess land surrounding its warehouses. These sales resulted in a gain of approximately $2.0 million. On April 5, 2000, the Company sold its City Notes for $22.5 million to the Price Family Charitable Trust ("Trust"), a California trust (see Note 16). The Company recognized a gain of approximately $3.9 million arising from this transaction. On March 1, 2000, the Company sold its travel program for $1.5 million to Club-4U, Inc. (see Note 16) under an asset purchase agreement ("purchase agreement"). Under the purchase agreement, Club-4U, Inc. acquired the assets primarily used in connection with the travel program, subject to liabilities under the travel program existing contracts, resulting in a gain of approximately $1.1 million. In August 1998, the Company entered into an agreement to sell its auto referral business effective November 1, 1999. On March 29, 1999, the Company entered into an amendment to the purchase agreement to change the closing date of the sale to April 1, 1999. The Company operated the auto referral business through March 31, 1999. The sale resulted in a net gain of approximately $798,000. NOTE 10 - PROPERTY HELD FOR SALE Property held for sale includes improved land which the Company expects to dispose of in the next twelve months. Property held for sale was $726,000 and $1.7 million as of August 31, 2001 and 2000, respectively. As the property is held for sale, the net results of the real estate operations are included in other income (expense) on the consolidated statements of operations. The net results for fiscal 2001 and 2000 were not material, and for fiscal 1999 were $1.3 million. NOTE 11 - FOREIGN CURRENCY INSTRUMENTS PriceSmart transacts business primarily in various Central American and Caribbean foreign currencies. The Company, at times, enters into non deliverable forward currency exchange contracts that are generally for short durations of six months or less. The resulting gains or losses from the non deliverable forward currency exchange contracts entered into for the periods presented have not been material. As of August 31, 2001, the Company had $2.0 million in non deliverable forward currency exchange contracts outstanding. As there is no formal contemporaneous documentation for non deliverable forward currency exchange contracts and provided no physical exchange of currency occurs at maturity (only the resulting gain or loss), they are not reflected on the balance sheet. If the non deliverable forward exchange contracts were recorded based on their fair values, the effect would be immaterial. As of August 2000, the Company had no non deliverable forward exchange contracts outstanding. NOTE 12 - COMMITMENTS AND CONTINGENCIES The Company is committed under 17 non-cancelable operating leases for rental of facilities and land. These leases expire or become subject to renewal between 2003 and 2032. Rental expense charged to operations under operating leases totaled approximately $4.6 million, $2.2 million, and $1.4 million, for fiscal years 2001, 2000, and 1999, respectively. Future minimum lease commitments for facilities under these leases with an initial term in excess of one year are as follows (in thousands):
YEARS ENDED AUGUST 31, ---------------------2002 2003 2004 2005 2006 Thereafter Total AMOUNT --------------$ 6,373 7,343 7,335 7,402 7,419 106,760 --------------$ 142,632

===============

From time to time the Company and its subsidiaries are subject to legal proceedings and claims in the ordinary course of business. The Company currently is not aware of any such legal proceedings or claims (other than disclosed below) that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, cash flow or liquidity. On May 18, 2001, the Company opened its first warehouse in Manila, Philippines. The warehouse is operated (through a joint venture of which the Company is the majority owner) under the name of "S&R Price Membership Shopping Warehouse". On June 15, 2001 the joint venture was served with a Complaint filed by a former Company licensee whose license was terminated by the Company in 1998. The Complaint alleges that the license was inappropriately terminated and that the former licensee therefore maintains the exclusive right for 20 years to own and operate warehouses licensed by the Company in the Philippines. On June 15 the joint venture was also served with a temporary restraining order issued in that action, requiring that the Company cease its operations in the Philippines. The Company closed the warehouse in accordance with the temporary restraining order, but reopened on June 19, 2001 after the Philippine Court of Appeals issued its own temporary restraining order staying enforcement of the restraining order that had closed the warehouse. The trial court judge subsequently issued an order lifting the restraining order. The parties currently are awaiting a decision from the Court of Appeals on the application, by the Company's joint venture, to dismiss or abate the lawsuit pending arbitration in Sydney, Australia, pursuant to a contractual arbitration clause previously agreed to by the parties. The Company maintains that the factual allegations and legal claims asserted in the Complaint are without merit and intends to defend them vigorously. Nevertheless, adverse rulings by the Philippine courts or in the arbitration proceedings, may suspend or shut-down current operations, delay or prevent future openings in the Philippines. NOTE 13 - ACQUISITION OF MINORITY INTERESTS On July 24, 2001, the Company entered into agreements to acquire an additional 27.5% interest in the PriceSmart Trinidad majority owned subsidiary, which previously had been 62.5% owned by the Company (see Note 16). The purchase price of the 27.5% interest consisted of: (a) 20,115 shares of PriceSmart common stock; (b) a 9% interest in the PriceSmart Barbados subsidiary; (c) a 17.5% interest in the PriceSmart Jamaica subsidiary; (d) a promissory note of $314,000; (e) forgiveness of a note receivable due to the Company of $317,000 and (f) assumption of remaining contributions of $340,000 shown net of minority interest acquired. As a result of this additional interest acquired, the Company increased its guarantee proportionately for the outstanding long term debt related to the Trinidad operations. On March 27, 2000, the Company entered into an agreement to acquire the remaining interest in the PriceSmart Panama majority owned subsidiary, which previously had been 51% owned by the Company and 49% owned by BB&M International Trading Group ("BB&M"), whose principals are several Panamanian businessmen, including Rafael Barcenas, a director of PriceSmart (see Note 16). In exchange for BB&M's 49% interest, the Company issued to BB&M's principals 306,748 shares of PriceSmart common stock. As a result of this acquisition, the Company increased its guarantee for the outstanding long term debt related to the Panama operations to 100%. Under the Stock Purchase Agreement, as amended, related to the Panama Acquisition, the Company agreed to redeem the shares of the Company's common stock issued to BB&M at a price of $46.86 per share following the one-year anniversary of the completion of the acquisition upon the request of BB&M's principals. On April 5, 2001, the Company repurchased 242,144 shares of its common stock, par value $.0001 par value per share, for an aggregate of approximately $11.4 million in cash, resulting in an incremental goodwill adjustment of approximately $1.1 million. The Company has agreed to redeem, at its option for cash or additional stock, the remaining 64,604 shares following the second anniversary of the completion of the acquisition at the price of $46.86 per share upon the holders' request. On July 7, 2000, the Company agreed to acquire the 40% interest in PSMT Caribe, Inc. not held by the Company. PSMT Caribe is the holding company formed by PriceSmart and PSC, S.A. (a Panamanian company with shareholders representing five Central American and Caribbean countries) to hold their respective interests

From time to time the Company and its subsidiaries are subject to legal proceedings and claims in the ordinary course of business. The Company currently is not aware of any such legal proceedings or claims (other than disclosed below) that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition, operating results, cash flow or liquidity. On May 18, 2001, the Company opened its first warehouse in Manila, Philippines. The warehouse is operated (through a joint venture of which the Company is the majority owner) under the name of "S&R Price Membership Shopping Warehouse". On June 15, 2001 the joint venture was served with a Complaint filed by a former Company licensee whose license was terminated by the Company in 1998. The Complaint alleges that the license was inappropriately terminated and that the former licensee therefore maintains the exclusive right for 20 years to own and operate warehouses licensed by the Company in the Philippines. On June 15 the joint venture was also served with a temporary restraining order issued in that action, requiring that the Company cease its operations in the Philippines. The Company closed the warehouse in accordance with the temporary restraining order, but reopened on June 19, 2001 after the Philippine Court of Appeals issued its own temporary restraining order staying enforcement of the restraining order that had closed the warehouse. The trial court judge subsequently issued an order lifting the restraining order. The parties currently are awaiting a decision from the Court of Appeals on the application, by the Company's joint venture, to dismiss or abate the lawsuit pending arbitration in Sydney, Australia, pursuant to a contractual arbitration clause previously agreed to by the parties. The Company maintains that the factual allegations and legal claims asserted in the Complaint are without merit and intends to defend them vigorously. Nevertheless, adverse rulings by the Philippine courts or in the arbitration proceedings, may suspend or shut-down current operations, delay or prevent future openings in the Philippines. NOTE 13 - ACQUISITION OF MINORITY INTERESTS On July 24, 2001, the Company entered into agreements to acquire an additional 27.5% interest in the PriceSmart Trinidad majority owned subsidiary, which previously had been 62.5% owned by the Company (see Note 16). The purchase price of the 27.5% interest consisted of: (a) 20,115 shares of PriceSmart common stock; (b) a 9% interest in the PriceSmart Barbados subsidiary; (c) a 17.5% interest in the PriceSmart Jamaica subsidiary; (d) a promissory note of $314,000; (e) forgiveness of a note receivable due to the Company of $317,000 and (f) assumption of remaining contributions of $340,000 shown net of minority interest acquired. As a result of this additional interest acquired, the Company increased its guarantee proportionately for the outstanding long term debt related to the Trinidad operations. On March 27, 2000, the Company entered into an agreement to acquire the remaining interest in the PriceSmart Panama majority owned subsidiary, which previously had been 51% owned by the Company and 49% owned by BB&M International Trading Group ("BB&M"), whose principals are several Panamanian businessmen, including Rafael Barcenas, a director of PriceSmart (see Note 16). In exchange for BB&M's 49% interest, the Company issued to BB&M's principals 306,748 shares of PriceSmart common stock. As a result of this acquisition, the Company increased its guarantee for the outstanding long term debt related to the Panama operations to 100%. Under the Stock Purchase Agreement, as amended, related to the Panama Acquisition, the Company agreed to redeem the shares of the Company's common stock issued to BB&M at a price of $46.86 per share following the one-year anniversary of the completion of the acquisition upon the request of BB&M's principals. On April 5, 2001, the Company repurchased 242,144 shares of its common stock, par value $.0001 par value per share, for an aggregate of approximately $11.4 million in cash, resulting in an incremental goodwill adjustment of approximately $1.1 million. The Company has agreed to redeem, at its option for cash or additional stock, the remaining 64,604 shares following the second anniversary of the completion of the acquisition at the price of $46.86 per share upon the holders' request. On July 7, 2000, the Company agreed to acquire the 40% interest in PSMT Caribe, Inc. not held by the Company. PSMT Caribe is the holding company formed by PriceSmart and PSC, S.A. (a Panamanian company with shareholders representing five Central American and Caribbean countries) to hold their respective interests in the PriceSmart membership warehouse clubs operating in Costa Rica, El Salvador, Honduras and the

Dominican Republic. As consideration for the acquisition of the 40% interest, PriceSmart issued to PSC, S.A. 679,500 shares of PriceSmart common stock, half of which were restricted from sale for one year. As a result of this acquisition, PriceSmart, Inc. has increased its guarantee for the outstanding long term debt related to the warehouses operating in Costa Rica, El Salvador, Honduras and the Dominican Republic to 100%. Results from operations of the acquired minority interests have been included, based on sole ownership, in the financial results of the Company from the date of the transactions, which occurred on July 24, 2001, March 27, 2000 and July 7, 2000 for Trinidad, Panama and PSMT Caribe, Inc., respectively. The acquisitions were accounted for as purchases under Accounting Principles Board Opinion No. 16 (APB No. 16) and SFAS 141. In accordance with APB No. 16 and SFAS 141, the Company allocated the purchase prices of the acquisitions based on the fair value of the assets acquired. The excess of the purchase price over the fair value of assets acquired was $21.3 million and is reflected in goodwill, net of accumulated amortization of $1.2 million, in the accompanying consolidated balance sheets. The components of the purchase prices and allocations, as adjusted, for the acquisitions are as follows (in thousands):
PSMT CARIBE, INC. ------------27,010 341 ------------$ 27,351 ============= $

TRINIDAD ---------Consideration and acquisition costs: Issuance of common stock Cash Forgiveness of note receivable Interest in PriceSmart ventures Acquisition costs Total 795 314 317 1,651 225 ---------$ 3,302 ========== $

PANAMA -----------2,617 11,347 35 -----------$ 13,999 ============ $

TOTAL ----------$30,422 11,661 317 1,651 601 ----------$44,652 ===========

Allocation of purchase price: Land Minority interest Goodwill Total

423 2,167 712 ---------$ 3,302 ==========

$

806 6,234 6,959 -----------$ 13,999 ============

$

3,093 10,580 13,678 ------------$ 27,351 =============

$

$ 4,322 18,981 21,349 ----------$44,652 ===========

In connection with the acquisition of the Trinidad operations, the allocation of the purchase price is based on preliminary data and may change when final valuation information is obtained. The following unaudited pro forma data summarizes the results of operations for the periods presented as if the acquisitions of minority interests had been completed as of September 1, 1998. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred as of the beginning of the periods presented or that may be obtained in the future (in thousands, except per share data).
YEARS ENDED AUGUST 31, ----------------------------------------------2001 2000 1999 ------------------------------------$488,950 $304,615 $108,872 6,589 (13,490) (12,736) $ 4,070 $ (7,515) $ (4,341) $ 0.65 $ (1.40) $ (0.85) $ 0.61 $ (1.40) $ (0.85)

Total revenue Operating income (loss) Net income (loss) Basic earnings (loss) per share Diluted earnings (loss) per share

NOTE 14 - INCOME TAXES Significant components of the income tax provision (benefit) are as follows (in thousands):
YEARS ENDED AUGUST 31,

YEARS ENDED AUGUST 31, ----------------------------------------2001 2000 1999 -----------------------------Current: Domestic Foreign 1,652 ----------1,652 ----------190 ---------190

Deferred: Domestic Foreign Valuation Allowance

(1,448) (679) (111) ----------(2,238) ----------$ (586) ===========

(2,484) (3,145) 5,510 ----------(119) ----------$ (119) ===========

(1,136) 15 1,121 ------------------$ 190 ==========

Total provision (benefit)

The reconciliation of income tax computed at the Federal statutory tax rate to the provision (benefit) for income taxes is as follows (in thousands):
YEARS ENDED AUGUST 31, ----------------------------------------2001 2000 1999 -----------------------------$ 951 $ (1,891) $ (1,259) 163 (334) (222) (627) (1,364) 650 (1,098) 25 ----------$ (586) =========== 4,055 (585) ----------$ (119) =========== 1,121 (100) ---------$ 190 ==========

Federal taxes at statutory rates State taxes, net of Federal benefit Difference in foreign tax rates and permanent items Increase (decrease) in valuation allowance for deferred tax assets and other All other, net Total provision (benefit)

The change in the valuation allowance for 2001 and 2000 includes the future tax benefit of stock option deductions of approximately $987,000 and $1.5 million, respectively, which when recognized will be allocated to additional paid in capital. Significant components of the Company's deferred tax assets as of August 31, 2001, and 2000 are shown below. A valuation allowance of $30.3 million at August 31, 2001, has been recognized to offset the deferred tax assets as realization of such assets, is uncertain (in thousands).
AUGUST 31, -------------------------2001 2000 --------------------Deferred tax assets: Net operating loss carryforward Capital loss carryforward International Deferred compensation All other, net Total deferred tax assets Deferred tax liabilities: Unrealized gains on marketable securities Total deferred tax liabilities Valuation allowance Net deferred tax assets 17,267 10,137 3,936 816 518 ----------32,674 $ $ 16,185 10,137 3,257 668 507 ----------30,754

----------(30,317) ----------$ 2,357 ===========

(207) ----------(207) (30,428) ----------$ 119 ===========

The reconciliation of income tax computed at the Federal statutory tax rate to the provision (benefit) for income taxes is as follows (in thousands):
YEARS ENDED AUGUST 31, ----------------------------------------2001 2000 1999 -----------------------------$ 951 $ (1,891) $ (1,259) 163 (334) (222) (627) (1,364) 650 (1,098) 25 ----------$ (586) =========== 4,055 (585) ----------$ (119) =========== 1,121 (100) ---------$ 190 ==========

Federal taxes at statutory rates State taxes, net of Federal benefit Difference in foreign tax rates and permanent items Increase (decrease) in valuation allowance for deferred tax assets and other All other, net Total provision (benefit)

The change in the valuation allowance for 2001 and 2000 includes the future tax benefit of stock option deductions of approximately $987,000 and $1.5 million, respectively, which when recognized will be allocated to additional paid in capital. Significant components of the Company's deferred tax assets as of August 31, 2001, and 2000 are shown below. A valuation allowance of $30.3 million at August 31, 2001, has been recognized to offset the deferred tax assets as realization of such assets, is uncertain (in thousands).
AUGUST 31, -------------------------2001 2000 --------------------Deferred tax assets: Net operating loss carryforward Capital loss carryforward International Deferred compensation All other, net Total deferred tax assets Deferred tax liabilities: Unrealized gains on marketable securities Total deferred tax liabilities Valuation allowance Net deferred tax assets 17,267 10,137 3,936 816 518 ----------32,674 $ $ 16,185 10,137 3,257 668 507 ----------30,754

----------(30,317) ----------$ 2,357 ===========

(207) ----------(207) (30,428) ----------$ 119 ===========

During fiscal 2001, management reassessed the valuation allowance recorded against net deferred tax assets generated in certain foreign jurisdictions. Based on the operating results of certain foreign entities, management believes it is more likely than not that the Company will realize deferred tax assets. Accordingly, the Company has recognized foreign net deferred tax assets of $2,238,000. As of August 31, 2001, the Company has Federal and state net operating loss carry-forwards of approximately $46.5 million and $16.6 million, respectively. The Federal and state tax loss carry forwards will begin expiring in 2001 and 2010, respectively, unless previously utilized. In addition, the Company incurred a Federal and state capital loss on the sale of the City Notes in fiscal 2000 totaling $25.4 million. The associated tax loss carryforward will expire in 2006. Pursuant to Section 382 of the Internal Revenue Code, annual use of $11.8 million of the Company's net operating loss carry forwards will be limited because of cumulative changes in ownership of more than 50% which occurred during 1995. However, the Company does not believe such change will have a material impact upon utilization of these carryforwards. NOTE 15 - DEBT

As of August 31, 2001, the Company had $22.2 million outstanding in short-term bank borrowings as follows:

In April 2000, the Company, through its Dominican Republic subsidiary, entered into a line of credit for $2.0 million, which was due in six months and subsequently renewed for another six months. Interest is payable monthly at 9% per annum. In June and July 2001, the Company, through its Dominican Republic subsidiary, entered into two separate line of credit facilities of $2.0 million each, both of which are due in six months. Interest on both facilities is payable monthly at 10.5% and 9% per annum, respectively. In June 2001, the Company, through its joint venture arrangement in Guatemala entered into a line of credit for approximately $1.9 million, which is due in twelve months. Interest is payable monthly at 15% per annum. In July 2001, the Company, through its joint venture arrangement in Guatemala, entered into a line of credit for approximately $2.6 million, which is due in twelve months. Interest is payable monthly at 13% per annum. In July 2001, the Company, through its Honduras subsidiary, entered into a line of credit for $2.0 million, which is due in six months. Interest is payable monthly at 11% per annum. In March 2001, the Company, through its El Salvador subsidiary, entered into a line of credit for $1.0 million, which was due in six months and subsequently renewed for another six months. Interest is payable monthly at 9% per annum. In March 2001, the Company, through its El Salvador subsidiary, entered into a line of credit for approximately $1.9 million, which is due in twelve months. Interest is payable monthly at 10% per annum. In July 2001, the Company, through its Costa Rica subsidiary, entered into a line of credit for $2.0 million, which is due in six months. Interest is payable monthly at 7.75% per annum. In August 2001, the Company through its Costa Rica subsidiary, entered into a line of credit for $3.0 million, which is due in six months. Interest is payable monthly and based on the prime rate plus 2% (8.5% at August 31, 2001). In May 2001, the Company, through its joint venture arrangement in the Philippines, entered into a line of credit for approximately $1.5 million, which is due in twelve months. Interest is payable monthly at 12.5% per annum. As of August 31, 2001, the full amounts were drawn for each of the facilities listed above. Each of the facilities is secured by certain assets of the respective subsidiary and $19.8 million of the total are guaranteed by the Company as of August 31, 2001. In October 2000, the Company entered into a new line of credit for $10 million, which expires in July 2002. As of August 31, 2001, $314,000 is outstanding and $9.7 million is available under the revolving line of credit. Interest is based on the 30-day dealer commercial paper rate plus 1.65% (5.15% at August 31, 2001) and is payable monthly. Long-term debt consist of the following (amounts in thousands):
AUGUST 31, -----------------------------2001 2000 ------------------------$ 4,126 $ 5,255 3,900 5,900 3,750 3,750 3,750 3,750 3,750 22,000 5,000 3,750 3,750 3,688 4,560 10,000 2,800 3,360 7,000 2,907 3,780 5,357 3,000 9,417 11,300 5,850 -------------------------

7.45% 8.50% 8.85% 14.00% 11.25% 11.25% 7.45% 7.45% 11.50% 7.46% 5.45% 8.59% 7.96% 9.11% 7.46% 5.21% 7.46%

Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

due due due due due due due due due due due due due due due due due

October 2004 (six-month LIBOR + 4.0%) June 2005 (prime + 2.0%) May 2005 (six-month LIBOR + 5.4%) May 2003 August 2003 May 2004 September 2010 (six-month LIBOR + 4%) September 2010 (six-month LIBOR + 4%) upon demand December 2004 (three-month LIBOR + 4% March 2011 (six-month LIBOR + 2%) February 2005 (three-month LIBOR + 5.125%) November 2005 (three-month LIBOR + 4.5%) February 2005 (three-month LIBOR + 5.645%) June 2007 (six-month LIBOR + 4.0%) October 2005 (three-month LIBOR + 1.75%) March 2011 (three-month LIBOR + 4.0%)

In April 2000, the Company, through its Dominican Republic subsidiary, entered into a line of credit for $2.0 million, which was due in six months and subsequently renewed for another six months. Interest is payable monthly at 9% per annum. In June and July 2001, the Company, through its Dominican Republic subsidiary, entered into two separate line of credit facilities of $2.0 million each, both of which are due in six months. Interest on both facilities is payable monthly at 10.5% and 9% per annum, respectively. In June 2001, the Company, through its joint venture arrangement in Guatemala entered into a line of credit for approximately $1.9 million, which is due in twelve months. Interest is payable monthly at 15% per annum. In July 2001, the Company, through its joint venture arrangement in Guatemala, entered into a line of credit for approximately $2.6 million, which is due in twelve months. Interest is payable monthly at 13% per annum. In July 2001, the Company, through its Honduras subsidiary, entered into a line of credit for $2.0 million, which is due in six months. Interest is payable monthly at 11% per annum. In March 2001, the Company, through its El Salvador subsidiary, entered into a line of credit for $1.0 million, which was due in six months and subsequently renewed for another six months. Interest is payable monthly at 9% per annum. In March 2001, the Company, through its El Salvador subsidiary, entered into a line of credit for approximately $1.9 million, which is due in twelve months. Interest is payable monthly at 10% per annum. In July 2001, the Company, through its Costa Rica subsidiary, entered into a line of credit for $2.0 million, which is due in six months. Interest is payable monthly at 7.75% per annum. In August 2001, the Company through its Costa Rica subsidiary, entered into a line of credit for $3.0 million, which is due in six months. Interest is payable monthly and based on the prime rate plus 2% (8.5% at August 31, 2001). In May 2001, the Company, through its joint venture arrangement in the Philippines, entered into a line of credit for approximately $1.5 million, which is due in twelve months. Interest is payable monthly at 12.5% per annum. As of August 31, 2001, the full amounts were drawn for each of the facilities listed above. Each of the facilities is secured by certain assets of the respective subsidiary and $19.8 million of the total are guaranteed by the Company as of August 31, 2001. In October 2000, the Company entered into a new line of credit for $10 million, which expires in July 2002. As of August 31, 2001, $314,000 is outstanding and $9.7 million is available under the revolving line of credit. Interest is based on the 30-day dealer commercial paper rate plus 1.65% (5.15% at August 31, 2001) and is payable monthly. Long-term debt consist of the following (amounts in thousands):
AUGUST 31, -----------------------------2001 2000 ------------------------$ 4,126 $ 5,255 3,900 5,900 3,750 3,750 3,750 3,750 3,750 22,000 5,000 3,750 3,750 3,688 4,560 10,000 2,800 3,360 7,000 2,907 3,780 5,357 3,000 9,417 11,300 5,850 ------------------------86,145 59,305 6,842 8,773 -------------------------

7.45% 8.50% 8.85% 14.00% 11.25% 11.25% 7.45% 7.45% 11.50% 7.46% 5.45% 8.59% 7.96% 9.11% 7.46% 5.21% 7.46%

Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

due due due due due due due due due due due due due due due due due

October 2004 (six-month LIBOR + 4.0%) June 2005 (prime + 2.0%) May 2005 (six-month LIBOR + 5.4%) May 2003 August 2003 May 2004 September 2010 (six-month LIBOR + 4%) September 2010 (six-month LIBOR + 4%) upon demand December 2004 (three-month LIBOR + 4% March 2011 (six-month LIBOR + 2%) February 2005 (three-month LIBOR + 5.125%) November 2005 (three-month LIBOR + 4.5%) February 2005 (three-month LIBOR + 5.645%) June 2007 (six-month LIBOR + 4.0%) October 2005 (three-month LIBOR + 1.75%) March 2011 (three-month LIBOR + 4.0%)

Total Less: current portion

Long-term debt

$ 79,303 ==============

$ 50,532 ============

All of the notes are collateralized by certain land, building, fixtures and equipment of each respective subsidiary and guaranteed by the Company, except for approximately $24.0 million and $11.3 million at August 31, 2001 and 2000, respectively, which are secured by a collateral deposit for the same amount and is included in restricted cash on the consolidated balance sheets. In addition, the Company drew on the $3.0 million that was available on one note at August 31, 2000. Annual maturities of long-term debt during the next five years are as follows (amounts in thousands):
YEARS ENDED AUGUST 31, ------------------------2002 2003 2004 2005 2006 Thereafter Total ANNUAL MATURITY --------------$ 6,842 16,030 10,218 14,987 5,209 32,859 --------------$86,145 ===============

Under the terms of each of its note agreements, the Company must comply with certain covenants which include, among others, current ratio, debt service ratio, interest coverage ratio and leverage ratio. The Company is in compliance with most of these covenants and has obtained the necessary waivers from the lenders for the covenants for which the Company is out of compliance. NOTE 16 - RELATED PARTY TRANSACTIONS Mr. Edgar Zurcher is a director of the Company and has also been a director and officer of PSMT Caribe, Inc., a subsidiary of the Company. Mr. Zurcher is also the managing partner of the law firm Zurcher, Montoya and Zurcher, in Costa Rica, which the Company has utilized in legal matters and incurred legal expenses of $20,000 during fiscal 2001. Mr. Zurcher is also a director of a vendor from which the Company purchased approximately $258,200 and $227,000 of product during fiscal 2001 and fiscal 2000 respectively. In November 2000, the Company's subsidiary in the Dominican Republic sold to PSC, S.A., of which Mr. Zurcher is a director and minority shareholder, excess land at its Santo Domingo warehouse for approximately $249,000. In July 2001, the Company agreed to purchase a 5.0% interest in the PriceSmart Trinidad operations from PSC, S.A., in exchange for 7.5% of the Company's interest in the PriceSmart Jamaica operations and the assumption of $100,000 in remaining equity contributions due to the Trinidad operations. Mr. Zurcher is also Chairman of the Board of Banca Promerica (Costa Rica), which lent $900,000 as part of a $5.9 million syndicated loan to the Company in fiscal 2000, of which $700,000 is outstanding as of August 31, 2001. Additionally, Mr. Zurcher is a director of Banco Promerica (El Salvador), which entered into a $1 million short-term credit facility with the Company during fiscal 2000 and was repaid in January 2001. During fiscal 2001, the Company entered into a $1.9 million short-term credit facility with Banco Promerica (El Salvador), that is due in March 2002. Mr. Rafael Barcenas is a director of the Company and is also Vice President of Boyd, Barcenas, S.A., an advertising firm in Panama, to which the Company paid approximately $95,000 and $187,000 for services rendered during fiscal 2001 and fiscal 2000, respectively. In July 2001, the Company agreed to purchase a 2.5% interest in the PriceSmart Trinidad operations from an affiliate of Mr. Barcenas in exchange for 6,490 shares of the Company's common stock and assume $40,000 in remaining equity contributions due to the Trinidad operations. In November 2000, the Company sold excess land in Panama through its Panamanian subsidiary in David, Panama for approximately $471,000 to an affiliate of Mr. Barcenas. In March 2000, the Company acquired sole ownership of the PriceSmart Panama business, which previously had been 51% owned by the Company and 49% owned by BB&M International Trading Group ("BB&M"), whose principals are several Panamanian businessmen, including Mr. Barcenas. In return for BB&M's 49% interest, PriceSmart conveyed to BB&M's principals 306,748 shares of

All of the notes are collateralized by certain land, building, fixtures and equipment of each respective subsidiary and guaranteed by the Company, except for approximately $24.0 million and $11.3 million at August 31, 2001 and 2000, respectively, which are secured by a collateral deposit for the same amount and is included in restricted cash on the consolidated balance sheets. In addition, the Company drew on the $3.0 million that was available on one note at August 31, 2000. Annual maturities of long-term debt during the next five years are as follows (amounts in thousands):
YEARS ENDED AUGUST 31, ------------------------2002 2003 2004 2005 2006 Thereafter Total ANNUAL MATURITY --------------$ 6,842 16,030 10,218 14,987 5,209 32,859 --------------$86,145 ===============

Under the terms of each of its note agreements, the Company must comply with certain covenants which include, among others, current ratio, debt service ratio, interest coverage ratio and leverage ratio. The Company is in compliance with most of these covenants and has obtained the necessary waivers from the lenders for the covenants for which the Company is out of compliance. NOTE 16 - RELATED PARTY TRANSACTIONS Mr. Edgar Zurcher is a director of the Company and has also been a director and officer of PSMT Caribe, Inc., a subsidiary of the Company. Mr. Zurcher is also the managing partner of the law firm Zurcher, Montoya and Zurcher, in Costa Rica, which the Company has utilized in legal matters and incurred legal expenses of $20,000 during fiscal 2001. Mr. Zurcher is also a director of a vendor from which the Company purchased approximately $258,200 and $227,000 of product during fiscal 2001 and fiscal 2000 respectively. In November 2000, the Company's subsidiary in the Dominican Republic sold to PSC, S.A., of which Mr. Zurcher is a director and minority shareholder, excess land at its Santo Domingo warehouse for approximately $249,000. In July 2001, the Company agreed to purchase a 5.0% interest in the PriceSmart Trinidad operations from PSC, S.A., in exchange for 7.5% of the Company's interest in the PriceSmart Jamaica operations and the assumption of $100,000 in remaining equity contributions due to the Trinidad operations. Mr. Zurcher is also Chairman of the Board of Banca Promerica (Costa Rica), which lent $900,000 as part of a $5.9 million syndicated loan to the Company in fiscal 2000, of which $700,000 is outstanding as of August 31, 2001. Additionally, Mr. Zurcher is a director of Banco Promerica (El Salvador), which entered into a $1 million short-term credit facility with the Company during fiscal 2000 and was repaid in January 2001. During fiscal 2001, the Company entered into a $1.9 million short-term credit facility with Banco Promerica (El Salvador), that is due in March 2002. Mr. Rafael Barcenas is a director of the Company and is also Vice President of Boyd, Barcenas, S.A., an advertising firm in Panama, to which the Company paid approximately $95,000 and $187,000 for services rendered during fiscal 2001 and fiscal 2000, respectively. In July 2001, the Company agreed to purchase a 2.5% interest in the PriceSmart Trinidad operations from an affiliate of Mr. Barcenas in exchange for 6,490 shares of the Company's common stock and assume $40,000 in remaining equity contributions due to the Trinidad operations. In November 2000, the Company sold excess land in Panama through its Panamanian subsidiary in David, Panama for approximately $471,000 to an affiliate of Mr. Barcenas. In March 2000, the Company acquired sole ownership of the PriceSmart Panama business, which previously had been 51% owned by the Company and 49% owned by BB&M International Trading Group ("BB&M"), whose principals are several Panamanian businessmen, including Mr. Barcenas. In return for BB&M's 49% interest, PriceSmart conveyed to BB&M's principals 306,748 shares of

common stock. In January 2000, the Company sold a five percent interest in PSMT Trinidad/Tobago Limited

common stock. In January 2000, the Company sold a five percent interest in PSMT Trinidad/Tobago Limited ("PSMT Trinidad"), which operates the Company's Trinidad and Tobago business, to an affiliate of Mr. Barcenas for $400,000. In April 2000 the Company sold its City Notes to the Price Family Charitable Trust ("Trust"), a California trust (see Note 9). Mr. Sol Price (a principal stockholder of PriceSmart, Inc.) and Mr. Robert Price (a principal stockholder and Chairman of the Board of PriceSmart, Inc.) are trustee and successor trustee, respectively, of the Trust. The Company secured an independent appraisal and marketed the City Notes through a third-party brokerage firm before selling the City Notes to the Trust. In March 2000 the Company sold its travel program to Club-4U, Inc. (see Note 9). Club-4U, Inc. is owned by Mr. Sol Price (a principal stockholder of the Company) and its directors include Mr. James Cahill and Mr. Murray Galinson, who are also directors of the Company. NOTE 17 - SEGMENTS The Company, through sole or majority ownership, is principally engaged in international membership shopping stores operating primarily in Central America, Caribbean and Asia (see Note 1) at the end of fiscal 2001. The Company has identified segments based on geographic area. All intercompany transactions between segments have been eliminated. Certain operating costs are incurred at the Company's corporate headquarters and are not allocated to the segment operating income (loss) presented below (in thousands).
YEARS ENDED AUGUST 31, -----------------------------------------------2001 2000 1999 ------------------------------------Revenues: United States Central America/Caribbean Asia $ 1,840 476,425 10,685 -----------$488,950 5,169 299,446 ------------$ 304,615 $ 18,933 89,939 -------------$ 108,872 $

Operating income (loss): United States Central America/Caribbean Asia

$ (7,594) 14,428 (245) -----------$ 6,589

$ (14,874) 1,384 ------------$ (13,490)

(9,684) (3,052) -------------$ (12,736)

$

Identifiable Assets: United States Central America/Caribbean Asia

$ 53,395 251,083 19,602 -----------$324,080 ============

54,608 206,792 ------------$ 261,400 =============

$

52,787 99,287 -------------$ 152,074 ==============

$

NOTE 18 - EXTRAORDINARY ITEMS Earthquake - On January 13, 2001 an earthquake, and subsequent aftershocks, occurred in Central America that impacted most particularly El Salvador. The Company has two warehouses operating in El Salvador, in the cities of San Salvador and Santa Elena. These two facilities had no structural damage and each was reopened shortly after the initial earthquake. The total losses sustained, net of reimbursable insurance amounts totaled approximately $120,000. Net warehouse sales for the operations in El Salvador were not impacted and did not have a materially adverse impact on the overall financial operating results of the Company. Debt restructuring - In fiscal 2001, the Company retired $15.9 million of high interest long-term debt with proceeds from three loans totaling $37 million ($22 million, $10 million and $5 million). The interest on these loans ranged between six-month LIBOR plus 2.0% and 4.0%. These debt retirements resulted in a loss of $229,000, net of tax.

NOTE 19 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FISCAL 2001 THREE MONTHS THREE MONTHS THREE MONTHS THREE MONTHS ENDED ENDED ENDED ENDED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) NOV. 30, 2000 FEB. 28, 2001 MAY 31, 2001 AUG. 31, 2001 --------------------------------------------------------------------------------------------------------Total net sales $ 108,163 $ 124,953 $ 119,660 $ 136,174 Gross profit 17,691 21,118 20,439 23,981 Income (loss) before extraordinary items 846 2,634 (431) 684 Net income (loss) 846 2,514 (431) 455 Basic earnings (loss) per share before extraordinary items 0.14 0.42 (0.07) 0.11 Basic earnings (loss) per share 0.14 0.40 (0.07) 0.07 Diluted earnings (loss) per share before extraordinary items 0.13 0.39 (0.07) 0.10 Diluted earnings (loss) per share 0.13 0.38 (0.07) 0.07

FISCAL 2000 THREE MONTHS THREE MONTHS THREE MONTHS THREE MONTHS ENDED ENDED ENDED ENDED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) NOV. 30, 1999 FEB. 29, 2000 MAY 31, 2000 AUG. 31, 2000 --------------------------------------------------------------------------------------------------------Total net sales $ 53,715 $ 79,951 $ 74,348 $ 96,601 Gross profit 9,410 13,681 10,864 14,008 Income (loss) before extraordinary items (2,768) 207 1,703 (4,586) Net income (loss) (2,768) 207 1,703 (4,586) Basic earnings (loss) per share before extraordinary items (0.54) 0.04 0.32 (0.77) Basic earnings (loss) per share (0.54) 0.04 0.32 (0.77) Diluted earnings (loss) per share before extraordinary items (0.54) 0.04 0.28 (0.77) Diluted earnings (loss) per share (0.54) 0.04 0.28 (0.77)

PRICESMART, INC. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock has been quoted and traded on the NASDAQ National market under the symbol "PSMT" since September 2, 1997. As of November 9, 2001, there were approximately 430 holders of record of the common stock.
------------------------------------------------------------------------------DATES STOCK PRICE -----------------------------------------------FROM TO HIGH LOW -------------------------------------2000 CALENDAR QUARTERS First Quarter 9/1/99 11/30/99 $42.750 $34.500 Second Quarter 12/1/99 2/29/00 48.125 37.375 Third Quarter 3/1/00 5/31/00 49.250 32.688 Fourth Quarter 6/1/00 8/31/00 44.000 35.250 2001 CALENDAR QUARTERS First Quarter Second Quarter Third Quarter Fourth Quarter 2002 CALENDAR QUARTERS First Quarter

9/1/00 12/1/00 3/1/01 6/1/01

11/30/00 2/28/01 5/31/01 8/31/01

38.938 36.000 43.350 44.500

26.750 27.000 30.500 35.080

9/1/01

11/9/01

43.930

28.750

The Company has never declared a cash dividend on its Common Stock and does not anticipate doing so in the foreseeable future.

NOTE 19 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FISCAL 2001 THREE MONTHS THREE MONTHS THREE MONTHS THREE MONTHS ENDED ENDED ENDED ENDED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) NOV. 30, 2000 FEB. 28, 2001 MAY 31, 2001 AUG. 31, 2001 --------------------------------------------------------------------------------------------------------Total net sales $ 108,163 $ 124,953 $ 119,660 $ 136,174 Gross profit 17,691 21,118 20,439 23,981 Income (loss) before extraordinary items 846 2,634 (431) 684 Net income (loss) 846 2,514 (431) 455 Basic earnings (loss) per share before extraordinary items 0.14 0.42 (0.07) 0.11 Basic earnings (loss) per share 0.14 0.40 (0.07) 0.07 Diluted earnings (loss) per share before extraordinary items 0.13 0.39 (0.07) 0.10 Diluted earnings (loss) per share 0.13 0.38 (0.07) 0.07

FISCAL 2000 THREE MONTHS THREE MONTHS THREE MONTHS THREE MONTHS ENDED ENDED ENDED ENDED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) NOV. 30, 1999 FEB. 29, 2000 MAY 31, 2000 AUG. 31, 2000 --------------------------------------------------------------------------------------------------------Total net sales $ 53,715 $ 79,951 $ 74,348 $ 96,601 Gross profit 9,410 13,681 10,864 14,008 Income (loss) before extraordinary items (2,768) 207 1,703 (4,586) Net income (loss) (2,768) 207 1,703 (4,586) Basic earnings (loss) per share before extraordinary items (0.54) 0.04 0.32 (0.77) Basic earnings (loss) per share (0.54) 0.04 0.32 (0.77) Diluted earnings (loss) per share before extraordinary items (0.54) 0.04 0.28 (0.77) Diluted earnings (loss) per share (0.54) 0.04 0.28 (0.77)

PRICESMART, INC. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock has been quoted and traded on the NASDAQ National market under the symbol "PSMT" since September 2, 1997. As of November 9, 2001, there were approximately 430 holders of record of the common stock.
------------------------------------------------------------------------------DATES STOCK PRICE -----------------------------------------------FROM TO HIGH LOW -------------------------------------2000 CALENDAR QUARTERS First Quarter 9/1/99 11/30/99 $42.750 $34.500 Second Quarter 12/1/99 2/29/00 48.125 37.375 Third Quarter 3/1/00 5/31/00 49.250 32.688 Fourth Quarter 6/1/00 8/31/00 44.000 35.250 2001 CALENDAR QUARTERS First Quarter Second Quarter Third Quarter Fourth Quarter 2002 CALENDAR QUARTERS First Quarter

9/1/00 12/1/00 3/1/01 6/1/01

11/30/00 2/28/01 5/31/01 8/31/01

38.938 36.000 43.350 44.500

26.750 27.000 30.500 35.080

9/1/01

11/9/01

43.930

28.750

The Company has never declared a cash dividend on its Common Stock and does not anticipate doing so in the foreseeable future.

DIRECTORS The table below indicates the name, position with the Company and age of each director:
NAME ---Robert E. Price Gilbert A. Partida Rafael E. Barcenas James F. Cahill Murray L. Galinson Katherine L. Hensley Leon C. Janks Lawrence B. Krause Jack McGrory Edgar A. Zurcher POSITION WITH THE COMPANY ----------------------------------------------------Chairman of the Board President, Chief Executive Officer and Director Director Director Director Director Director Director Director Director AGE --59 39 57 46 64 64 52 71 52 51

ROBERT E. PRICE has been Chairman of the Board of the Company since July 1994 and served as President and Chief Executive Officer of the Company from July 1994 until January 1998. Mr. Price also served as Chairman of the Board of Price Enterprises, Inc. ("PEI") from July 1994 until November 1999 and was President and Chief Executive Officer of PEI from July 1994 until September 1997. Mr. Price was Chairman of the Board of Price/Costco, Inc. ("Costco") from October 1993 to December 1994. From 1976 to October 1993, he was Chief Executive Officer and a director of The Price Company ("TPC"). Mr. Price served as Chairman of the Board of TPC from January 1989 to October 1993, and as its President from 1976 until December 1990. GILBERT A. PARTIDA has been a director of the Company since July 1997 and has been President and Chief Executive Officer of the Company since January 1998. Mr. Partida was President and Chief Executive Officer of the Greater San Diego Chamber of Commerce from January 1993 until December 1997. Prior to joining the Chamber of Commerce, Mr. Partida was an attorney with the law firm of Gray, Cary, Ames & Frye in San Diego, California from 1987 to 1992. RAFAEL E. BARCENAS has been a director of the Company since April 1998. Mr. Barcenas has also been a director and officer of PriceSmart Panama, S.A.(formerly known as PriceCostco de Panama, S.A.) and PriceSmart Real Estate, S.A. (formerly known as PB Real Estate, S.A.), which are subsidiaries of the Company, since their formation in September 1995 and July 1997, respectively. Additionally, Mr. Barcenas has been a principal of BB&M International Trading Group, a Panamanian company (which previously owned 49% of both PriceCostco de Panama, S.A. and PB Real Estate, S.A.) from March 1995 until March 2000. Mr. Barcenas has been General Director of Boyd, Barcenas, S.A., the largest advertising agency in Panama, since April 1971. JAMES F. CAHILL has been a director of the Company since November 1999 and has served as a director of PEI since August 1997. In September 2001, PEI completed a merger transaction with its former parent, Excel Legacy Corporation, a Delaware corporation ("Legacy"), pursuant to which a subsidiary of PEI was merged with and into Legacy. Upon completion of the merger, Legacy became a wholly owned subsidiary of PEI, which changed its name to Price Legacy Corporation ("Price Legacy"), and Mr. Cahill continues to serve as a director. Additionally, Mr. Cahill has been Executive Vice President of Price Entities since January 1987. In this position he has been responsible for the oversight and investment activities of the financial portfolio of Sol Price, founder of TPC and related entities. Prior to 1987, Mr. Cahill was employed by TPC for ten years, with his last position being Vice President of Operations. MURRAY L. GALINSON has been a director of the Company since November 2000. Mr. Galinson served as a director of PEI from August 1994 until November 1999 and currently serves as director of Price Legacy. Additionally, Mr. Galinson has been Chairman of the Board of San Diego National Bank since May 1996 and has served as a director of San Diego National Bank since its inception in 1981. Mr. Galinson also served as President and Chief Executive Officer of San Diego National Bank from September 1984 to September 1997 and was Chairman of the Board and Chief Executive Officer of SDNB Financial Corporation from 1985 to 1997. KATHERINE L. HENSLEY has been a director of the Company since July 1997 and served as a director of

ROBERT E. PRICE has been Chairman of the Board of the Company since July 1994 and served as President and Chief Executive Officer of the Company from July 1994 until January 1998. Mr. Price also served as Chairman of the Board of Price Enterprises, Inc. ("PEI") from July 1994 until November 1999 and was President and Chief Executive Officer of PEI from July 1994 until September 1997. Mr. Price was Chairman of the Board of Price/Costco, Inc. ("Costco") from October 1993 to December 1994. From 1976 to October 1993, he was Chief Executive Officer and a director of The Price Company ("TPC"). Mr. Price served as Chairman of the Board of TPC from January 1989 to October 1993, and as its President from 1976 until December 1990. GILBERT A. PARTIDA has been a director of the Company since July 1997 and has been President and Chief Executive Officer of the Company since January 1998. Mr. Partida was President and Chief Executive Officer of the Greater San Diego Chamber of Commerce from January 1993 until December 1997. Prior to joining the Chamber of Commerce, Mr. Partida was an attorney with the law firm of Gray, Cary, Ames & Frye in San Diego, California from 1987 to 1992. RAFAEL E. BARCENAS has been a director of the Company since April 1998. Mr. Barcenas has also been a director and officer of PriceSmart Panama, S.A.(formerly known as PriceCostco de Panama, S.A.) and PriceSmart Real Estate, S.A. (formerly known as PB Real Estate, S.A.), which are subsidiaries of the Company, since their formation in September 1995 and July 1997, respectively. Additionally, Mr. Barcenas has been a principal of BB&M International Trading Group, a Panamanian company (which previously owned 49% of both PriceCostco de Panama, S.A. and PB Real Estate, S.A.) from March 1995 until March 2000. Mr. Barcenas has been General Director of Boyd, Barcenas, S.A., the largest advertising agency in Panama, since April 1971. JAMES F. CAHILL has been a director of the Company since November 1999 and has served as a director of PEI since August 1997. In September 2001, PEI completed a merger transaction with its former parent, Excel Legacy Corporation, a Delaware corporation ("Legacy"), pursuant to which a subsidiary of PEI was merged with and into Legacy. Upon completion of the merger, Legacy became a wholly owned subsidiary of PEI, which changed its name to Price Legacy Corporation ("Price Legacy"), and Mr. Cahill continues to serve as a director. Additionally, Mr. Cahill has been Executive Vice President of Price Entities since January 1987. In this position he has been responsible for the oversight and investment activities of the financial portfolio of Sol Price, founder of TPC and related entities. Prior to 1987, Mr. Cahill was employed by TPC for ten years, with his last position being Vice President of Operations. MURRAY L. GALINSON has been a director of the Company since November 2000. Mr. Galinson served as a director of PEI from August 1994 until November 1999 and currently serves as director of Price Legacy. Additionally, Mr. Galinson has been Chairman of the Board of San Diego National Bank since May 1996 and has served as a director of San Diego National Bank since its inception in 1981. Mr. Galinson also served as President and Chief Executive Officer of San Diego National Bank from September 1984 to September 1997 and was Chairman of the Board and Chief Executive Officer of SDNB Financial Corporation from 1985 to 1997. KATHERINE L. HENSLEY has been a director of the Company since July 1997 and served as a director of PEI from December 1994 until July 1997. She is a lawyer and a retired partner of the law firm of O'Melveny & Myers in Los Angeles, California. Ms. Hensley joined O'Melveny & Myers in 1978 and was a partner from 1986 to February 1992. From 1994 to 2000, Ms. Hensley served as a trustee of Security First Trust, an openend investment management company registered under the Investment Company Act of 1940. LEON C. JANKS has been a director of the Company since July 1997 and served as a director of PEI from March 1995 until July 1997. He has been a partner in the accounting firm of Green, Hasson & Janks LLP in Los Angeles, California since 1980. Mr. Janks also serves on the board of directors of Expert Ease Software, Inc., a privately held corporation. Mr. Janks has extensive experience in domestic and international business serving a wide variety of clients in diverse businesses and is a Certified Public Accountant. LAWRENCE B. KRAUSE has been a director of the Company since July 1997. Mr. Krause has been a Professor and the Director of the Korea-Pacific Program at the Graduate School of International Relations and Pacific Studies at the University of California, San Diego since 1986. He became a Professor Emeritus in 1997. Mr. Krause also serves on

advisory boards for a number of institutions including the Institute for International Economics, the Korea Economic Institute, the Committee on Asian Economic Studies and the U.S. National Committee for Pacific Economic Cooperation. JACK MCGRORY has been a director of the Company since November 2000. Mr. McGrory serves as Chairman of the Board of Price Legacy, and was President and Chief Executive Officer of PEI from September 1997 until November 1999. Mr. McGrory also serves as a director of the San Diego Padres, L.P. and was its Executive Vice President and Chief Operating Officer from September 1999 until August 2000. He is also President of Downtown Development, Inc., which is responsible for coordinating construction of the new San Diego Padres ballpark and the San Diego Padres' commercial real estate activities. From March 1991 through August 1997, Mr. McGrory served as City Manager of San Diego. EDGAR A. ZURCHER has been a director of the Company since November 2000. Mr. Zurcher has also been a director and officer of PSMT Caribe, Inc., a subsidiary of the Company, since its inception in December 1998. Additionally, Mr. Zurcher has been a director of PSC, S.A. (which previously owned 49% of PSMT Caribe, Inc.) since its inception in September 1998. Mr. Zurcher is also the managing partner of the law firm Zurcher, Montoya and Zurcher in Costa Rica. Additionally, he is Chairman of Banca Promerica (Costa Rica) and is a director of Banco Promerica (El Salvador) and a director of Banco Promerica (Honduras). EXECUTIVE OFFICERS OF THE COMPANY The table below indicates the name, position and age of the executive officers of the Company:
NAME ---Gilbert A. Partida Kevin C. Breen Robert M. Gans John D. Hildebrandt Thomas D. Martin William J. Naylon Allan C. Youngberg POSITION WITH THE COMPANY ----------------------------------------------------President, Chief Executive Officer and Director Executive Vice President-Operations Executive Vice President, Secretary and General Counsel Executive Vice President-Central American & Caribbean Operations Executive Vice President-Merchandising Executive Vice President-Merchandising Executive Vice President and Chief Financial Officer

GILBERT A. PARTIDA has been a director of the Company since July 1997 and has been President and Chief Executive Officer of the Company since January 1998. Mr. Partida was President and Chief Executive Officer of the Greater San Diego Chamber of Commerce from January 1993 until December 1997. Prior to joining the Chamber of Commerce, Mr. Partida was an attorney with the law firm of Gray, Cary, Ames & Frye in San Diego, California from 1987 to 1992. KEVIN C. BREEN has been Executive Vice President of the Company since September 1999 and served as Senior Vice President of the Company from August 1997 to August 1999. Mr. Breen previously served as Executive Vice President of Price Ventures, Inc., a subsidiary of PEI, from February 1997 until August 1997, overseeing operational and construction management areas for the international merchandising business. Prior to joining PEI as Vice President in August 1994, Mr. Breen served as Vice President of Costco from October 1993 to December 1994 and previously served in various management roles for TPC. ROBERT M. GANS has been Executive Vice President, General Counsel and Secretary of the Company since August 1997 and was Executive Vice President and General Counsel of PEI from October 1994 until July 1997. Mr. Gans graduated from the UCLA School of Law in 1975 and actively practiced law in private practice from 1975 until 1994. From 1988 until October 1994, Mr. Gans was the senior member of the law firm of Gans, Blackmar & Stevens, A.P.C., of San Diego, California. JOHN D. HILDEBRANDT has been Executive Vice President-Central American and Caribbean Operations of the Company since July 2001 and served as Senior Vice President of the Company from September 2000 until July 2001. Mr. Hildebrandt previously served as Vice President of the Company from September 1998 until August 2000, overseeing oerations in Central America. Mr. Hildebrandt served as the Company's Country Manager in the Philippines and Panama from 1996 until August 1998. Prior to joining PEI as Country Manager in 1996, Mr. Hildebrandt was a Senior Operations Manager of Costco from 1994 through 1996, and had served in various management roles for TPC since 1979.

THOMAS D. MARTIN has been Executive Vice President of the Company since October 1998 and served as Senior Vice President of the Company from August 1997 to September 1998. Mr. Martin previously served as Vice President of PEI from August 1994 until July 1997, directing merchandising strategies and product sourcing for its international merchandising business, in addition to managing its trading company activities. Prior to joining PEI as Vice President in August 1994, Mr. Martin served as Vice President of Costco from October 1993 to December 1994 and had served in various management roles for TPC. WILLIAM J. NAYLON has been Executive Vice President-Merchandising of the Company since July 2001 and served as Senior Vice President of the Company from March 1998 until July 2001. From September 1995 through February 1998, Mr. Naylon was Managing Director for PriceSmart's licensee warehouse club operation in Indonesia. Prior to joining PriceSmart, Mr. Naylon was a General Manager for Costco and had served in various management roles for TPC. ALLAN C. YOUNGBERG has been Executive Vice President and Chief Financial Officer of the Company since July 1999. From January 1993 until July 1999, Mr. Youngberg had been Executive Vice President, Chief Financial Officer, Secretary and Treasurer of Cost-U-Less, Inc. Prior to joining Cost-U-Less, Mr. Youngberg was President and shareholder of Youngberg & Schumacher, P.S., a certified public accounting firm in Bellevue, Washington, which Mr. Youngberg founded in 1984 and sold in December 1992. Mr. Youngberg is a Certified Public Accountant.

EXHIBIT 21.1 LIST OF SUBSIDIARIES OF PRICESMART, INC. The following table sets forth a list of the Company's subsidiaries as of August 31, 2001:
JURISDICTION OF INCORPORATION OR ORGANIZATION --------------------------Delaware Panama Panama Guatemala British Virgin Islands El Salvador El Salvador Costa Rica Costa Rica Costa Rica Honduras Dominican Republic Dominican Republic Barbados Trinidad/St. Lucia Trinidad Trinidad U.S. Virgin Islands Philippines St. Lucia Barbados Aruba Guam

NAME -----------------------------------------------Ventures Services, Inc. PriceSmart Real Estate, S.A. PriceSmart Panama, S.A. PriceSmart (Guatemala), S.A. PSMT Caribe, Inc. PriceSmart El Salvador, S.A. de C.V. Inmobiliaria PriceSmart El Salvador, S.A. de C.V. Prismar de Costa Rica, S.A. Pricsmarlandco, S.A. Promotora PS Escazu, S.A. PriceSmart Honduras, S.A. PriceSmart Dominicana, S.A Inmobiliaria PriceSmart, S.A. PriceSmart Exempt SRL PSMT Trinidad/Tobago LTD PriceSmart (Trinidad) LTD PS Operations, LTD PSMT, LLC PSMT Philippines, Inc. PriceSmart Holdings, Inc. PSMT (Barbados), Inc. Island Foods and Distributors, N.V. PSMT Guam, Inc.

OWNERSHIP ----------100.0% 100.0% 100.0% 66.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90.0% 90.0% 90.0% 100.0% 60.0% 51.0% 51.0% 60.0% 100.0%

--Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri

EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

THOMAS D. MARTIN has been Executive Vice President of the Company since October 1998 and served as Senior Vice President of the Company from August 1997 to September 1998. Mr. Martin previously served as Vice President of PEI from August 1994 until July 1997, directing merchandising strategies and product sourcing for its international merchandising business, in addition to managing its trading company activities. Prior to joining PEI as Vice President in August 1994, Mr. Martin served as Vice President of Costco from October 1993 to December 1994 and had served in various management roles for TPC. WILLIAM J. NAYLON has been Executive Vice President-Merchandising of the Company since July 2001 and served as Senior Vice President of the Company from March 1998 until July 2001. From September 1995 through February 1998, Mr. Naylon was Managing Director for PriceSmart's licensee warehouse club operation in Indonesia. Prior to joining PriceSmart, Mr. Naylon was a General Manager for Costco and had served in various management roles for TPC. ALLAN C. YOUNGBERG has been Executive Vice President and Chief Financial Officer of the Company since July 1999. From January 1993 until July 1999, Mr. Youngberg had been Executive Vice President, Chief Financial Officer, Secretary and Treasurer of Cost-U-Less, Inc. Prior to joining Cost-U-Less, Mr. Youngberg was President and shareholder of Youngberg & Schumacher, P.S., a certified public accounting firm in Bellevue, Washington, which Mr. Youngberg founded in 1984 and sold in December 1992. Mr. Youngberg is a Certified Public Accountant.

EXHIBIT 21.1 LIST OF SUBSIDIARIES OF PRICESMART, INC. The following table sets forth a list of the Company's subsidiaries as of August 31, 2001:
JURISDICTION OF INCORPORATION OR ORGANIZATION --------------------------Delaware Panama Panama Guatemala British Virgin Islands El Salvador El Salvador Costa Rica Costa Rica Costa Rica Honduras Dominican Republic Dominican Republic Barbados Trinidad/St. Lucia Trinidad Trinidad U.S. Virgin Islands Philippines St. Lucia Barbados Aruba Guam

NAME -----------------------------------------------Ventures Services, Inc. PriceSmart Real Estate, S.A. PriceSmart Panama, S.A. PriceSmart (Guatemala), S.A. PSMT Caribe, Inc. PriceSmart El Salvador, S.A. de C.V. Inmobiliaria PriceSmart El Salvador, S.A. de C.V. Prismar de Costa Rica, S.A. Pricsmarlandco, S.A. Promotora PS Escazu, S.A. PriceSmart Honduras, S.A. PriceSmart Dominicana, S.A Inmobiliaria PriceSmart, S.A. PriceSmart Exempt SRL PSMT Trinidad/Tobago LTD PriceSmart (Trinidad) LTD PS Operations, LTD PSMT, LLC PSMT Philippines, Inc. PriceSmart Holdings, Inc. PSMT (Barbados), Inc. Island Foods and Distributors, N.V. PSMT Guam, Inc.

OWNERSHIP ----------100.0% 100.0% 100.0% 66.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90.0% 90.0% 90.0% 100.0% 60.0% 51.0% 51.0% 60.0% 100.0%

--Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri

EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K)of PriceSmart, Inc. of our

EXHIBIT 21.1 LIST OF SUBSIDIARIES OF PRICESMART, INC. The following table sets forth a list of the Company's subsidiaries as of August 31, 2001:
JURISDICTION OF INCORPORATION OR ORGANIZATION --------------------------Delaware Panama Panama Guatemala British Virgin Islands El Salvador El Salvador Costa Rica Costa Rica Costa Rica Honduras Dominican Republic Dominican Republic Barbados Trinidad/St. Lucia Trinidad Trinidad U.S. Virgin Islands Philippines St. Lucia Barbados Aruba Guam

NAME -----------------------------------------------Ventures Services, Inc. PriceSmart Real Estate, S.A. PriceSmart Panama, S.A. PriceSmart (Guatemala), S.A. PSMT Caribe, Inc. PriceSmart El Salvador, S.A. de C.V. Inmobiliaria PriceSmart El Salvador, S.A. de C.V. Prismar de Costa Rica, S.A. Pricsmarlandco, S.A. Promotora PS Escazu, S.A. PriceSmart Honduras, S.A. PriceSmart Dominicana, S.A Inmobiliaria PriceSmart, S.A. PriceSmart Exempt SRL PSMT Trinidad/Tobago LTD PriceSmart (Trinidad) LTD PS Operations, LTD PSMT, LLC PSMT Philippines, Inc. PriceSmart Holdings, Inc. PSMT (Barbados), Inc. Island Foods and Distributors, N.V. PSMT Guam, Inc.

OWNERSHIP ----------100.0% 100.0% 100.0% 66.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90.0% 90.0% 90.0% 100.0% 60.0% 51.0% 51.0% 60.0% 100.0%

--Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri Pri

EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K)of PriceSmart, Inc. of our report dated November 2, 2001, included in the 2001 Annual Report to Stockholders of PriceSmart, Inc. Our audits also included the financial statement schedule of PriceSmart, Inc. listed in Item 14(d). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-38345 and No. 333-61067) pertaining to the 1997 Stock Option Plan and the 1998 Equity Participation Plan and (Form S3 No. 333-36546, No. 333-42374, No. 333-60812 and No. 333-67106) of PriceSmart, Inc. and in the related prospectus of our report dated November 2, 2001, with respect to the consolidated financial statements of PriceSmart, Inc. incorporated by reference in its Annual Report on Form 10-K for the year ended August 31, 2001 and the related financial statement schedule included therein, filed with the Securities and Exchange Commission.
/S/ ERNST & YOUNG LLP

San Diego, California November 27, 2001

EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K)of PriceSmart, Inc. of our report dated November 2, 2001, included in the 2001 Annual Report to Stockholders of PriceSmart, Inc. Our audits also included the financial statement schedule of PriceSmart, Inc. listed in Item 14(d). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-38345 and No. 333-61067) pertaining to the 1997 Stock Option Plan and the 1998 Equity Participation Plan and (Form S3 No. 333-36546, No. 333-42374, No. 333-60812 and No. 333-67106) of PriceSmart, Inc. and in the related prospectus of our report dated November 2, 2001, with respect to the consolidated financial statements of PriceSmart, Inc. incorporated by reference in its Annual Report on Form 10-K for the year ended August 31, 2001 and the related financial statement schedule included therein, filed with the Securities and Exchange Commission.
/S/ ERNST & YOUNG LLP

San Diego, California November 27, 2001


								
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