NUAL CONSOLIDATED FINANCIAL STATEMENTS 1999

15 Long-Term Borrowing (Con't) Long-term borrowings due within 1 year amounting to Baht 145,800,000 classified in accordance with repayment terms in the related loan agreements are presented as long-term borrowings due more than 1 year because they will be refinanced by the new long-term borrowings as refer to Note 30 to the consolidated and company financial statements, "Event subsequent to the balance sheet date". Loans denominated in Thai Baht as at 31 December 1999 are from financial institutions in Thailand amounting to Baht 480 million (1998: Baht 380 million). The loans bear interest at the rates ranging from 8% to 11% per annum (1998: 11% to 12.75% per annum). The loans will be due within 1 to 3 years. Long-term loans denominated in foreign currency as at 31 December 1999 include the followings: - Syndicated loan from overseas financial institutions for which Schroder International Merchant Bankers Limited acted as the facility agent for the Company amounts to US$ 10 million (1998: US$ 40 million) or Baht 254 million (1998 : Baht 1,016 million) of which is due for repayment in June 2002. Loan interest is at LIBOR per annum. - Loan from a branch of a foreign financial institution amounted to US$ 3.3 million (1998 : US$ 5 million). Loan interest is at SIBOR per annum. The loan will be repaid in US$ by three consecutive semi-annual equal installments within one year. The repayments will be due within 2001. Hedging In order to manage the risks arising from fluctuations in currency exchange rates and interest rates, the Company makes use of the following derivative financial instruments: Interest rate and currency swap In December 1996, the Company has entered into interest rate and currency swap contracts to swap both interest rate and principal of a three-year offshore loan totalling US$ 40 million, bearing interest rate at LIBOR, in exchange with the principal of Baht 1,016 million, bearing interest rate at 10.35% for the principal amount of Baht 254 million and 10.57% per annum for the principal amount of Baht 762 million. Forward foreign exchange contracts As at 31 December 1999 the Company has forward contracts to hedge long-term loans of US$ 3.33 million (1998 : US$ 4 million) at an average forward rate of US$ 1 per Baht 38.65 (1998 : Baht 38.85). 16 Unsecured Debentures On 8 May 1998, the Company issued three-year unsecured debentures totalling Baht 500,000,000 comprising 500,000 shares of Baht 1,000 each bearing interest rate of 12.35% per annum. The debentures were approved by the Securities and Exchange Commission in May 1998 and are due for redemption on 8 May 2000. The unsecured debentures are not classified to current liabilities in the consolidated and company balance sheets as at 31 December 1999 because the debentures will be refinanced by the new long-term borrowings as refer to Note 30 to the consolidated and company financial statements, "Event subsequent to the balance sheet date". 17 Accrued Liabilities Accrued liabilities comprise accrued expenses and provision for expenses relating to sales. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 18 Other Current Liabilities Consolidated Company 1999 1998 1999 1998 Baht Baht Baht Baht Advance from customers 2,463,134 9,811,510 2,463,134 9,811,510 Value Added Tax payable 6,301,481 74,956,762 6,301,481 74,956,762 Others 13,596,557 7,477,116 13,509,624 6,988,298 22,361,172 92,245,388 22,274,239 91,756,570 19 Provision for Retirement Cost The Company has set up provision for retirement cost for staff who work with the company more than 10 years. The retirement cost is calculated based on the rate not less than the rate determined in the Labor Law. 20 Provident Funds There are two provident funds currently operated by the company: i) A fund, managed by an approved fund manager was set up in accordance with the Superannuation Fund Act 1987 with effect from June 1990. The fund's assets are separated from the company's assets and operated by registered fund manager. This fund operates for the benefit of salary employees. The Company's and employees' contributions outstanding under the former provident fund scheme are being transferred to the new provident fund within 10 years. ii) An unfunded provident fund for the benefit of employees whose income is substantially in the form of commissions. 21 Land Revaluation Reserve The surplus on revaluation of land represents the difference between the appraised value and the historical cost of the land at the valuation date on 15 March 1992 and 23 September 1998 and is not available for dividend distribution. 22 Other Income Consolidated Company 1998 1998 1999 (Unaudited) 1999 (Unaudited) Baht Baht Baht Baht Income from cancelled dividends 24,317,729 - 24,317,729 - Income from waiver of offshore service fee - 50,960,770 - 50,960,770 Interest income 1,951,294 21,332,408 1,713,710 21,317,956 Others 3,549,436 18,392 1,827,354 992,272 29,818,459 72,311,570 27,858,793 73,270,998 The Company has been informed by the Stock Exchange of Thailand that certain shareholders do not qualify for entitling to dividends because of the non-compliance with the regulation in respect of nationality of the shareholders. The Company therefore has reversed the dividends payable declared before December 1996 amounting to Baht 24 million for the year ended 31 December 1999 which the Company has recognised as income from cancelled dividends. Income from waiver of offshore service fee for the year ended 31 December 1998 represented income from waiver of prior year accrued offshore service fee by a related company in that year amounting to Baht 51 million because the company had net loss in the preceding year. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 23 Extraordinary Item Gain from the change in exchange rate system On 2 July 1997, the Ministry of Finance announced a change in the exchange rate system for Thai Baht from the basket of currencies system to the managed float system which resulted in a significant decline in Thai Baht value. This caused the Group to incur a gain on exchange for the year ended 31 December 1998 of Baht 48 million which the Group had fully recognised as gain on exchange rate. This exchange gain was reported as extraordinary item in accordance with the announcement of the Institute of Certified Accountants and Auditors of Thailand No. 002/2540-2542 dated 19 September 1997. 24 Dividends On 6 August 1999, the Board of Director approved an interim dividend of Bht 1 per share, totalling Bht 27,000,000 to be paid on 6 September 1999 to the shareholders whose name were registered on 20 August 1999. 25 Cash Flows from Operating Activities Reconciliation of net profit (loss) to cash flows from operating activities: Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Note Baht Baht Baht Baht Profit (loss) from ordinary activities 51,504,526 (27,134,243) 51,504,526 (24,469,879) Adjusted by: (Gain) on exchange rate (3,480,431) (22,425,956) (3,480,431) (22,425,956) Depreciation 44,800,790 44,561,966 41,854,036 42,017,256 Amortisation of prepaid rent 22,846,697 24,286,035 22,846,697 24,286,035 Increase in allowance for doubtful accounts 53,947,800 183,192,200 52,199,000 183,071,000 (Decrease) increase in allowance for inventory obsolescence (12,996,606) 50,576 (12,300,000) 2,600,000 Provision for diminution in value of other investment - 1,170,000 - 1,170,000 (Decrease) in dividends payable 22 (24,317,729) - (24,317,729) - (Gain) loss on disposal of fixed assets (859,705) 2,445,682 (941,215) 1,729,372 Share of loss from subsidiaries - - 9,703,472 5,760,967 Decrease in inventories 105,577,832 495,728,510 102,264,755 477,600,730 Decrease in debtors and other current assets 398,461,920 1,372,911,455 396,895,656 1,396,701,921 Increase (decrease) in creditors and other current liabilities 48,267,527 (533,943,513) 44,289,475 (541,505,529) Increase (decrease) in current tax liabilities 1,559,711 (410,959) - - Cash flows from operating activities before extraordinary item 685,312,332 1,540,431,753 680,518,242 1,546,535,917 Realised gain from the change in exchange rate system - 22,894,374 - 20,230,010 Cash generated from operations 685,312,332 1,563,326,127 680,518,242 1,566,765,927 Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 26 Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, at banks and in transit and loans to financial institutions for periods not exceeding three-months as follows: Consolidated Company 1999 1998 1999 1998 Baht Baht Baht Baht Cash on hand, at banks and in transit 175,489,413 100,192,133 170,200,041 98,811,934 Short-term investments - 30,000,000 - 30,000,000 175,489,413 130,192,133 170,200,041 128,811,934 27 Segment Information The company trades in a single business segment and in a single geographical area i.e., Thailand. Accordingly no segment information has been presented. 28 Related Party Transactions The following transactions were carried out with related parties: i) Sales of goods and other incomes Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Baht Baht Baht Baht Sales of goods Subsidiary - S.T.L. Electronics Limited - - 10,579,594 871,904 Other incomes Interest income: Subsidiaries - Singer Industries (Thailand) Limited - - 7,348,082 11,873,391 - S.T.L. Electronics Limited - - 3,549,288 3,830,249 Management fee income: Subsidiary - Singer (Broker) Limited - - 830,646 927,536 - - 11,728,016 16,631,176 Sales to subsidiaries are based on the transfer price which is determined at cost plus gross margin. Management fee income is calculated at 5.5% of total brokerage income of Singer (Broker) Limited. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 28 Related Party Transactions (Con't) ii) Purchases of goods and other expenses Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Baht Baht Baht Baht Purchases of goods Subsidiary - Singer Industries (Thailand) Limited - - 174,395,598 93,159,720 Related parties - Singer Sansui International Limited - 14,256,000 - 14,256,000 - Akai Electric Company Limited 5,773,038 38,120,631 191,861 12,455,335 - Singer Brazil Limited 3,935,848 5,120,949 3,935,848 5,120,949 - Singer (Hong Kong) Limited 3,230,959 - 3,230,959 - - Singer Nikko Company Limited 31,504,183 2,487,761 1,292,228 1,814,628 - Singer (Shanghai) Sewing Machine Company Limited 18,413,405 1,371,666 746,741 - - P.T. Singer Industries Indonesia Limited 11,688,712 1,569,320 - - - Singer Export Limited 6,135,934 2,484,939 - - - others 10,876,613 4,169,611 2,485,568 3,472,874 91,558,692 69,580,877 186,278,803 130,279,506 Other expenses Interest expense: Subsidiary - Singer (Broker) Limited - - 2,809,512 3,200,006 Trademark license fee: Related party - The Singer Company B.V. 3,917,096 3,982,421 3,917,096 3,982,421 Royalty fee Related party - The Singer Company B.V. 2,389,265 1,224,640 - - 6,306,361 5,207,061 6,726,608 7,182,427 Purchase from subsidiaries is based on the transfer price which is determined at cost plus gross margin. Purchase from related companies is based on the fair price which would be charged to an independent third party. Interest expense on outstanding balance each month due to Singer (Broker) Limited bear interest at the rate of 9.5% per annum (1998 : 11% per annum). Trademark license fee is payable to the Singer Company B.V. abroad, which is calculated at 0.1% of total net sales in accordance with signed agreement. Royalty fee is payable to the Singer Company B.V. abroad, which is calculated at 5% of total net sales of sewing machines in accordance with signed agreement. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 28 Related Party Transactions (Con't) iii) Outstanding balances arising from sales/purchases of goods and other incomes/expenses Consolidated Company 1999 1998 1999 1998 Baht Baht Baht Baht Amounts due from Subsidiaries - S.T.L. Electronics Limited - - 1,067,978 3,320,779 - others - - 88,025 103,708 Related parties - The Singer Company B.V. - 1,451,264 - 1,451,264 - others 203,061 363,606 - - 203,061 1,814,870 1,156,003 4,875,751 Trade account payable Subsidiaries - Singer Industries (Thailand) Limited - - 2,365,540 6,077,548 - Singer (Broker) Limited - - 38,218,759 24,842,929 Related parties 4,335,509 5,353,326 3,922,455 5,315,526 4,335,509 5,353,326 44,506,754 36,236,003 Amounts due to Related party - The Singer Company B.V. 4,098,958 4,466,066 3,246,608 3,982,421 iv) Loans to subsidiaries Company 1999 1998 Baht Baht Singer Industries (Thailand) Limited Beginning balance 70,000,000 87,292,000 Loans made during the year 1,500,000 - Loans repaid during the year - (17,292,000) Ending balance 71,500,000 70,000,000 S.T.L. Electronics Limited Beginning balance 36,000,000 - Loans made during the year 4,000,000 44,525,000 Loans repaid during the year (8,000,000) (8,525,000) Ending balance 32,000,000 36,000,000 The loans to subsidiaries bear interest rate at the rate of 9.5% per annum (1998: 13.5% per annum). Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 29 Year 2000 Issue (This note is unaudited.) The Year 2000 problem arises because many computerised systems use two digits rather than four to identify the year. Date-sensitive systems may recognise the Year 2000 as some other date, resulting in errors when information using Year 2000 dates is processed. Entities may recognise the effects of the Year 2000 problem before, on, or after 1 January 2000, and the effects on operations and financial reporting, if not addressed and rectified properly and on a timely basis, may range from minor errors to significant systems failure which could affect an entity's ability to conduct normal business operations. Although the modification and rectification of the Group's computer system were substantially completed in June 1999, the Group still remain exposed to the risk from the other companies that the Group deals with, which could not improve their computer system prior to the year 2000, and which might have an effect on the Group's operations. However, to date the Group has not experienced any year 2000 problems related to the Group's own systems or third parties. 30 Event subsequent to the balance sheet date On 10 February 2000 the Company issued the three-year unsecured debentures totalling Baht 900,000,000 comprising 900,000 shares of Baht 1,000 each bearing interest rate of 7.75% per annum. The debentures will be due for redemption every three-month period until the last redemption on 10 February 2003. Proceeds from the issue of these debentures will be refinanced to a part of current portions of the long-term borrowings and debentures which will be due in 2000. 31 Change of Accounting Period The company received an approval to change its accounting period from the period ended 30 June to 31 December of every year commencing from the period ended 31 December 1998 onward. For comparative purposes, the company's management prepared the consolidated and company statements of income, of changes in shareholders' equity, of retained earnings and of cash flows for the year ended 31 December 1998 based on the information from the audited financial statements for the six-month period ended 31 December 1999 and for the year ended 30 June 1999. 32 Reclassification Certain reclassifications have been made to the presentation of the financial statements for the year ended 31 December 1998 for comparative purpose. SINGER THAILAND PUBLIC COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS AND COMPANY FINANCIAL STATEMENTS 31 DECEMBER 1999