VIEWED QUARTER-3 1997/1998

SINGER THAILAND PUBLIC COMPANY LIMITED NOTES TO INTERIM CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS (UNAUDITED) 31 MARCH 1998 AND 1997 1 Summary of significant accounting policies 1.1 Basis for preparation of financial statements The interim consolidated and company financial statements have been prepared in conformity with generally accepted accounting principles in Thailand and regulations of the Stock Exchange of Thailand. The company had previously presented the interim consolidated and company financial statements for the three-month and nine-month periods ended 31 March 1997 which did not include the consolidated and company statements of changes in shareholders' equity because the presentation of such statements was not required by the Stock Exchange of Thailand. However as such statements are now required to be presented, the company has therefore presented such statements for the three-month and nine-month periods ended 31 March 1997 for comparison with the financial statements for the three-month and nine-month period ended 31 March 1998. 1.2 Principles of consolidation The consolidated financial statements incorporate the financial statements of Singer Thailand Public Company Limited and its subsidiaries. Intercompany transactions are eliminated in the consolidation. Subsidiaries are those companies in which the company holds, directly or indirectly, more than 50% of the voting shares and dominant influence is exercised in the their management. Subsidiaries included in the consolidated financial statements are 1998 1997 % of shareholding % of shareholding Singer Industries (Thailand) Limited 99.88 99.88 Singer (Broker) Limited 99.70 99.70 Singer Trading (Thailand) Limited 99.86 99.86 Sansui (Thailand) Limited 50.86 50.86 S. T. L. Electronics Limited 99.84 - 1.3 Revenue recognition Sales comprise cash sales, credit sales and installment sales. Cash sales and credit sales are recognised when products are delivered. Installment sales represent sales under hire-purchase contracts whereby the related debts are effectively secured by the products sold. Revenue from installment sales comprises sales of product and interest. The interest on installment sales are calculated on customary financing terms. Sales of product and gross profit are recognised when contracts are signed and first payments are received. Interest is recorded in unearned carrying charges and recognised as earned by using the sum-of-the-months'digits method. Collection commissions are accrued upon collection. 1.4 Trade accounts receivable In accordance with trade practice, installment accounts receivable are classified as current asset regardless of when payments are due. This receivable is effectively secured by the products sold. The company makes an allowance for doubtful accounts to cover the estimated losses that may be incurred in the collection of the debts, and makes a provision for losses and expenses relating to future estimated sale cancellation and discounts . 1.5 Inventories Inventories are stated at the lower of cost and net realisable value, cost being determined generally on the first-in first-out basis. 1.6 Investments Investments in subsidiaries are stated at cost. The equity method of accounting has not been adopted as its use does not have a significant effect on the company's results. Other investments are stated at cost less provision for permanent diminution in value. 1.7 Property, plant and equipment Property, plant and equipment are stated at cost or revaluation less accumulated depreciation. Except for land, other property, plant and equipment are depreciated on the straight-line method over the assets' estimated useful lives as follows:- Building improvements 5 Years Buildings 20 Years Machinery and equipment 5 Years Office furniture, fixtures and equipment 5 Years Expenditures for additions, renewals and betterment are capitalised. Repair and maintenance costs are recognised as expenses when incurred. 1.8 Foreign currency translation Foreign currency transactions during the year are translated into Baht at the rates of exchange ruling on the transaction dates, except where a transaction is hedged by a forward contract, in which case the contract rate is used. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Baht at the rates ruling at that date, with the exception of liabilities covered by forward contracts which are translated at the contract rates. Gains and losses on exchange arising on settlements and translation are recognised as income or expense when incurred. 1.9 Related companies Companies are considered to be related if they have, directly or indirectly, the same group of shareholders or directors. 1.10 Earnings per ordinary share Earnings per ordinary share is computed by dividing the net income for the year by the weighted average number of paid-up ordinary shares outstanding during the year. 2 Long-term Investments Company Nature of paid-up Shareholding 1998 1997 business capital % Baht Baht Investments in subsidiaries Singer Industries (Thailand) Limited Manufacturing 5,000,000 99.88 4,994,000 4,994,000 Singer (Broker) Limited Life insurance broker 200,000 99.70 199,400 199,400 Singer Trading) (Thailand) Limited Trading 125,000 99.86 124,825 124,825 Sansui (Thailand) Limited Trading 50,000 50.86 25,430 25,430 S.T.L Electronics Limited Trading 1,250,000 99.84 1,248,000 - 6,591,655 5,343,655 Other investment Thai Swedish Furniture Manufacturing Co., Ltd. and trading furniture 60,000,000 9.95 5,970,000 5,970,000 Less: Provision for diminution in value of other investment (5,000,000) (4,000,000) 970,000 1,970,000 3 Other current liabilities Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Advance from customers 10,991,163 21,252,773 10,991,163 21,252,773 Value added tax payable 26,399,031 19,556,235 25,731,290 19,556,235 Other accounts payable 4,039,568 7,325,858 3,838,098 7,159,819 41,429,762 48,134,866 40,560,551 47,968,827 4 Extraordinary item 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 company and subsidiaries to incur a loss on exchange for nine-month period ended 31 March 1998 of Bht 71 million which the company has fully recognised as expenses amounting to Bht 55 million in the first quarter and Bht 69 million in the second quarter and gain on exchange rate of Bht 53 million in the third quarter of 1998. This exchange gain or loss 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. At 31 March 1998, the company has a three-year long term loan denominated in foreign currency amounting to US$ 5 million. The loan will be repaid in US$ by three consecutive semi-annual equal installments commencing on the date falling two years after the date of first drawing. The first repayment will be due in July 1999. The liability was not hedged by forward contracts or other financial instruments, and was translated into Baht at the rates of exchange as at 31 March 1998. The unrealised loss on exchange relating to these liabilities for nine-month period ended 31 March 1998 amounted to Bht 64 million which is a part of the Bht 71 million loss on exchange rate referred to in the previous paragraph. 5 Economic crisis and effects on company's operates The company operates in Thailand, which, together with a number of other countries in the Asia Pacific Region is currently experiencing an economic crisis. The crisis in Thailand has involved a slowdown in economic growth, a shortage of liquidity within the country and volatility in both the securities market and the value of the Thai Baht. The company's operations have been affected by the economic crisis in the current year and are expected to continue to be effected for the foreseeable future. The ultimate outcome of the economic crisis cannot be determined at present. The interim inancial statements for the three-month and nine-month periods ended 31 March 1998 do not include any adjustments which cannot be determined as a result of the effects of this crisis. 6 Related party transactions The company enters into a number of transactions with subsidiaries and related companies as follows: Subsidiaries a) Purchases of goods from Singer Industries (Thailand) Limited totalling Bht 20,538,050 (1997 : Bht 104,352,529). The transfer price is determined at cost plus gross margin of approximately 2% - 3%. b) Interest income on loan to the following subsididaries: - Singer Industries (Thailand) Limited of Bht 2,899,552 (1997 : nil). The loan balance at 31 March 1998 amounted to Bht 87,292,000 million bearing interest at the rate of 15% per annum. - S.T.L. Electronic Company Limited of Bht 646,619. The loan balance at 31 March 1998 amounted to Bht 19,100,000 bearing interest at the rate of 16% per annum. c) Interest expense on outstanding balance each month due to Singer (Broker) Limited totalling Bht 1,913,431 (1997 : Bht 1,575,243). The outstanding balance at 31 March 1998 amounted to Bht 36,709,397 million (1997 : Bht 30,328,575) bearing interest at the rate of 11% per annum. Related companies a) Purchases of goods from related companies abroad totalling Bht 30,704,164 (1997 : Bht 29,558,183) The purchase price has been negotiated between the company and its related companies. b) Trademark license fee and offshore service fee totalling Bht 13,530,293 (1997 : Bht 24,330,531) payable to a related company abroad, calculated at 1.1% of total net sales in accordance with signed agreement. 7 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. 8 Reclassifications Certain reclassifications have been made to the presentation of the interim financial statements for the three months and nine months ended 31 March 1997 for comparative purpose. 9 Approval of financial statements The interim consolidated and company financial statements for the three months and nine months ended 31 March 1998 were approved by the directors on 22 April 1998. SINGER THAILAND PUBLIC COMPANY LIMITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND COMPANY FINANCIAL STATEMENTS (UNAUDITED) 31 MARCH 1998 21