1ST QUARTER F/S

2.7 Property, plant and equipment Carrying value | at appraised value Part of land is presented at market value appraised by an independent appraisal specialist in March 1992 and in September 1998. A revaluation increase is recorded as a +Surplus on revaluation of land" under the shareholders+ equity. Carrying value - at cost Property, plant and equipment are recorded at cost. Cost is measured by the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. Property, plant and equipment, except land, are presented in the balance sheet at cost less accumulated depreciation. Depreciation Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives are as follows: Buildings 20 Years Building improvements 5 Years Machinery and equipment 5 Years Office furniture, fixtures and equipment 5 Years Motor vehicles 5 Years The company records depreciation as an expense in that period. When a long-term asset is retired, the company will write-off both the asset account and its related accumulated depreciation, and recognised any gain or loss from retirement of the asset. Capital expenditures Expenditures for addition, renewal and betterment, which result in a substantial increase in an asset+s current replacement value, are capitalised. Repair and maintenance costs are recognised as an expense when incurred. 2.8 Foreign currency translation Foreign currency transactions during the period 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. 2.9 Related companies Companies are considered to be related if one company has the ability to control or exercise significant influence over the other company in making financial and operating decisions or most of the shareholders or executive management of both companies are the same persons. 2.10 Earnings per ordinary share Earnings per ordinary share is computed by dividing the income (loss) before extraordinary item, extraordinary item, and the net income (loss) for the period by the weighted average number of paid-up ordinary shares outstanding during the period. 3 Cash in hand, at banks and in transit Fixed deposit with a bank amounting to Baht 30 million (1997 : nil) has been used as collateral to guarantee subsidiary's bank overdraft amounting to Baht 20 million. 4 Trade and installment accounts receivable Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Trade and installment accounts receivable 4,597,410,276 6,267,757,210 4,587,601,209 6,262,917,188 Less: Allowance for doubtful Accounts (351,621,200) (197,600,000) (351,500,000) (197,600,000) Provision for sale Cancellation and discounts (97,992,322) (155,834,599) (97,992,322) (155,834,599) 4,147,796,754 5,914,322,611 4,138,108,887 5,909,482,589 Less: Unearned carryings charges (744,444,178) (1,008,983,132) (744,444,178) (1,008,983,132) Trade and installment accounts receivable, net 3,403,352,576 4,905,339,479 3,393,664,709 4,900,499,457 The aging of overdue trade accounts receivable are set out below. Trade and installment accounts receivable Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Over 3 months to 6 months 51,658,583 46,862,754 51,658,583 46,862,754 Over 6 months to 12 months 72,219,442 48,893,778 72,219,442 48,893,778 Over 12 months 116,414,748 60,164,687 116,414,748 60,164,687 Total 240,292,773 155,921,219 240,292,773 155,921,219 Allowance for doubtful accounts 135,121,200 87,600,000 135,000,000 87,600,000 The aging of overdue accounts receivable in 1998 as presented above is the aging of overdue accounts receivable as at 31 August 1998. The company cannot prepare an aging of overdue accounts receivable as at 30 September 1998 because the company+s computer system was damaged by fire on 14 October 1998. The computer system will be restored to normal operations within November 1998. Others Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Over 3 months 384,722,546 221,233,828 384,722,546 221,233,828 Allowance for doubtful accounts 216,500,000 110,000,000 216,500,000 110,000,000 5 Short-term investments Short-term investments represent promissory notes for period not exceeding 3 months. 6 Long-term investments Long-term investments as at 30 September can be summarised as follows: Consolidated Company 1998 1997 1998 1997 Restated Baht Baht Baht Baht Promissory note 1,139,914 - - - Investment in subsidiaries - - 130,738,766 154,921,119 Investment in other company 800,000 1,970,000 800,000 1,970,000 1,939,914 1,970,000 131,538,766 156,891,119 Investment in other company represents investment in Thai Swedish Furniture Co., Ltd., which the company holds 9.95% of its share capital. 6 Long-term investments (Cont+d) Investment in subsidiaries as at 30 September in the company financial statements comprise the following companies: In Baht as at 30 September 1998 Nature of Paid up capital Investment Amount of Amount in Nature of business relationship Baht Portion % Cost method Equity method Balance sheet Singer Industries (Thailand) Limited Manufacturing Holding 5,000,000 99.88 4,994,000 114,116,432 114,116,432 Singer (Broker) Limited Life insurance Broker Holding 200,000 99.70 199,400 18,325,998 18,325,998 Singer Trading (Thailand) Limited Trading Holding 125,000 99.86 124,825 143,305 143,305 Sansui (Thailand) Limited Trading Holding 50,000 50.86 25,430 (37,031) (37,031)S.T.L. Electronics Limited Trading Holding 1,250,000 99.84 1,248,000 (1,809,938) (1,809,938) 6,591,655 130,738,766 September 1997 (Restated) Nature of Paid up capital Investment Amount of Amount in Nature of business relationship Baht Portion % Cost method Equity method Balance sheet Singer Industries (Thailand) Limited Manufacturing Holding 5,000,000 99.88 4,994,000 129,344,744 129,344,744 Singer (Broker) Limited Life insurance Broker Holding 200,000 99.70 199,400 25,394,404 25,394,404 Singer Trading (Thailand) Limited Trading Holding 125,000 99.86 124,825 196,484 196,484 Sansui (Thailand) Limited Trading Holding 50,000 50.86 25,430 (14,513) (14,513) 5,343,655 154,921,119 154,921,119 7 Other current liabilities Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Advance from customers 10,042,468 21,041,601 10,042,468 21,041,601 Value Added Tax payable 28,919,053 27,619,439 28,728,925 27,619,439 Other accounts payable 5,944,383 7,163,795 5,461,974 6,905,125 44,905,904 55,824,835 44,233,367 55,566,165 8 Other income Other income for the three-month period ended 30 September 1998 includes income from waiver of prior year accrued offshore service fee by a related company in this period amounting to Baht 50.9 million because the company had net loss in the preceding year. 9 Cash and cash equivalent Cash and cash equivalents consist of cash in hand, at banks and in transit and loans to financial institutions for periods not exceeding three months as follows: Consolidated Company 1998 1997 1998 1997 Baht Baht Baht Baht Cash in hand, at banks and in transit 57,341,964 55,410,947 54,307,423 54,735,350 Short-term investments 230,000,000 1,000,000 230,000,000 - 287,341,964 56,410,947 284,307,423 54,735,350 10 Related party transactions During the period, 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 Baht 21,119,970 (1997 : Baht 32,053,903). The transfer price is determined at cost plus gross margin. b) Interest income on loan to the following subsidiaries: - Singer Industries (Thailand) Limited of Baht 3,111,824 (1997 : Baht 1,452,134). The loan balance at 30 September 1998 amounted to Baht 80 million (1997 : Baht 64 million) bearing interest at the rate of 13.50% per annum (1997 : 12.50% per annum). - S.T.L. Electronic Company Limited of Baht 978,430 (1997: nil). The loan balance at 30 September 1998 amounted to Baht 27 million (1997 : nil) bearing interest at the rate of 13.50% per annum. c) Interest expense on outstanding balance each month due to Singer (Broker) Limited totalling Baht 710,538 (1997 : Baht 956,061). The outstanding balance at 30 September 1998 amounted to Baht 26 million (1997 : Baht 37 million) bearing interest at the rate of 11% per annum. d) Management fee income of Baht 217,728 (1997 : Baht 299,813) from Singer (Broker) Limited, calculated at 5.5% of total brokerage income of Singer(Broker) Limited. Related companies a) Purchases of goods from related companies abroad totalling Baht 2,799,139 (1997 : Baht 10,842,604). The purchase price has been negotiated between the company and its related companies. b) Trade mark license fee totalling Baht 784,755 (1997 : Baht 1,474,274) payable to a related company abroad, calculated at 0.1% of total net sales in accordance with signed agreement. c) The offshore service fee for the three months period ended 30 September 1998 (1997 : Baht 14,742,740) which calculated at 1% of total net sales has been waived from the related company as the company has losses from operations during the period. 11 Extraordinary item Loss 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 company and subsidiaries to incur a loss on exchange for the three months ended 30 September 1997 of Baht 69 million which the company had fully recognised as expenses. This exchange 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 30 September 1997, the company had a three-year long term loan denominated in foreign currency amounting to US$ 5 million. The liability was not hedged by forward contracts or other financial instruments, and was translated into Baht at the rates of exchange as at 30 September 1997. The unrealised loss on exchange relating to these liabilities for the three-months ended 30 September 1997 amounted to Baht 55 million which was a part of the Baht 69 million loss on exchange rate referred to in the previous paragraph. 12 Restatement of 1997 interim financial statements In the fourth quarter of accounting year ended 30 June 1998, the company+s management made a dicision to change the method of accounting for investments in subsidiaries from the cost method to the equity method effective from 1 July 1997. The interim financial statements for the three-month period ended 30 September 1997 have, therefore, been restated to reflect the change in the accounting policy. 13 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. 14 Subsequent event Fire damage On 14 October 1998, there was a fire at the company+s computer department resulted from a short circuit. The fire damaged part of building and computer hardware of which net assets value as at 30 September 1998 is approximately Baht 8.5 million. The damage at present is under investigation by the insurance company. However, the company+s management believes that the damage can be claimed from the insurance company. 15 Year 2000 issue The company has commenced modifying and upgrading its key financial information and operational systems to deal with the Year 2000 issue since 1995 by the company+s specialist. The company expects to complete the systems within the second quarter of 1999. As at 30 September 1998, part of systems have been completed. The company has estimated the expenditures relating to purchase new software and hardware not exceeding Baht 7 million. The expenditure relating to purchase new software will be recognised as expenses when incurred. Although the company expects to fully complete the modification on its computer system in 1999, the company remains exposed to the risk that other companies with which the company transacts might not be the Year 2000 compliant, which might have a significant effect on the company+s operations. However, the company is unable to estimate the amount of the loss that the company might incur from such a situation at the present time. 16 Approval of financial statements The interim consolidated and company financial statements for the three-month period ended 30 September 1998 were approved by the company+s directors on 30 October 1998. SINGER THAILAND PUBLIC COMPANY LIMITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND COMPANY FINANCIAL STATEMENTS (UNAUDITED) 30 SEPTEMBER 1998 19