ANNUAL CONSOLIDATED FINANCIAL STATEMENTS 1999

AUDITOR'S REPORT To the Shareholders of Singer Thailand Public Company Limited I have audited the accompanying consolidated and company balance sheets of Singer Thailand Public Company Limited as at 31 December 1999 and 1998 and the related consolidated and company statements of income, of changes in shareholders' equity, of retained earnings and of cash flows for the year ended 31 December 1999. These financial statements are the responsibility of the company's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards in Thailand. Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the aforementioned consolidated and company financial statements present fairly, in all material respects, the financial position of Singer Thailand Public Company Limited as at 31 December 1999 and 1998 and the results of it operations, changes in shares' equity and its cash flows for the year ended 31 December 1999, in accordance with generally accepted accounting principles in Thailand. 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 of Singer Thailand Public Company Limited, presented for comparative purposes, were prepared by the company's management as discussed in Note 31 to the consolidated and company financial statements and are unaudited. I draw attention to Note 29 to the consolidated and company financial statements which is marked "unaudited". Information regarding the Year 2000 issue as presented in this note has not been subjected to auditing procedures, and accordingly, I express no opinion on it. SUCHART LUENGSURASWAT Certified Public Accountant (Thailand) No. 2807 PricewaterhouseCoopers ABAS Limited Bangkok 11 February 2000 Singer Thailand Public Company Limited Balance Sheets As at 31 December Consolidated Company 1999 1998 1999 1998 Notes Baht Baht Baht Baht ASSETS Current Assets Cash on hand, at banks and in transit 4 175,489,413 100,192,133 170,200,041 98,811,934 Short-term investments 5 - 30,000,000 - 30,000,000 Current portion of debt security 6 1,139,914 - - - Trade and installment accounts receivable, net 7 2,668,410,935 3,103,618,090 2,655,990,386 3,083,521,923 Loans and amounts due from related parties 28 203,061 1,814,870 104,656,003 110,875,751 Inventories 9 842,106,044 934,687,270 795,825,622 885,790,377 Other current assets 10 24,229,092 39,819,848 16,553,008 34,396,379 Total Current Assets 3,711,578,459 4,210,132,211 3,743,225,060 4,243,396,364 Non-Current Assets Receivable from and loans to employees 1,970,618 4,625,472 746,975 3,349,712 Investments in subsidiaries 11 - - 132,844,631 134,485,157 Long-term investments 6 800,000 1,939,914 800,000 800,000 Property, plant and equipment, net 12 708,972,667 718,550,255 556,945,389 563,519,677 Prepaid rent 13 78,803,060 92,015,613 78,803,060 92,015,613 Total Non-Current Assets 790,546,345 817,131,254 770,140,055 794,170,159 Total Assets 4,502,124,804 5,027,263,465 4,513,365,115 5,037,566,523 Director Director The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Balance Sheets As at 31 December Consolidated Company 1999 1998 1999 1998 Notes Baht Baht Baht Baht LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Bank overdrafts and loans from financial institutions 14 282,562,582 90,761,691 276,894,337 86,545,007 Current portion of long-term borrowings 15 313,017,020 101,483,333 313,017,020 101,483,333 Trade accounts payable - other companies 352,024,605 127,233,241 327,713,040 115,510,133 - related parties 28 4,335,509 5,353,326 44,506,754 36,236,003 Amounts due to related party 28 4,098,958 4,466,066 3,246,608 3,982,421 Dividends payable 13,625,359 35,047,805 13,625,359 35,047,805 Accrued income tax 2,458,153 898,442 - - Accrued liabilities 17 123,067,260 223,831,313 120,716,856 221,910,214 Other current liabilities 18 22,361,172 92,245,388 22,274,239 91,756,570 Total Current Liabilities 1,117,550,618 681,320,605 1,121,994,213 692,471,486 Non-Current Liabilities Liabilities arising from investments in subsidiaries 11 - - 9,091,575 1,042,732 Unsecured debentures 16 500,000,000 500,000,000 500,000,000 500,000,000 Long-term borrowings 15 550,000,000 1,487,601,666 550,000,000 1,487,601,666 Provision for retirement cost 19 48,182,152 54,214,217 46,500,000 52,800,000 Employee security deposits 133,003,969 150,655,614 132,391,262 150,179,276 Provident funds 20 174,102,870 198,070,694 174,102,870 198,070,694 Total Non-Current Liabilities 1,405,288,991 2,390,542,191 1,412,085,707 2,389,694,368 Total Liabilities 2,522,839,609 3,071,862,796 2,534,079,920 3,082,165,854 Shareholders' Equity Share capital Registered, issued and fully paid 27,000,000 ordinary shares of Baht 10 each 270,000,000 270,000,000 270,000,000 270,000,000 Premium on share capital 225,000,000 225,000,000 225,000,000 225,000,000 Land revaluation reserve 21 240,926,403 241,546,403 240,926,403 241,546,403 Retained earnings: Appropriated - legal reserve 27,000,000 27,000,000 27,000,000 27,000,000 Unappropriated 1,216,358,792 1,191,854,266 1,216,358,792 1,191,854,266 Total Shareholders' Equity 1,979,285,195 1,955,400,669 1,979,285,195 1,955,400,669 Total Liabilities and Shareholders' Equity 4,502,124,804 5,027,263,465 4,513,365,115 5,037,566,523 The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Statements of Income For the years ended 31 December Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Notes Baht Baht Baht Baht Revenues Sales 3,434,335,896 3,288,039,780 3,403,334,464 3,239,060,220 Interest from installment sales 513,761,986 743,361,647 513,761,986 743,361,646 Gain on exchange rate - 14,482,846 - 14,513,500 Other income 22 29,818,459 72,311,570 27,858,793 73,270,998 Total Revenues 3,977,916,341 4,118,195,843 3,944,955,243 4,070,206,364 Expenses Cost of sales 2,188,665,512 2,093,671,152 2,180,230,978 2,071,854,202 Selling and administrative expenses 1,514,246,602 1,670,158,907 1,491,775,881 1,651,225,806 Directors' remuneration 400,000 400,000 400,000 400,000 Interest and other financial costs 220,037,367 377,317,255 211,340,386 365,435,268 Total Expenses 3,923,349,481 4,141,547,314 3,883,747,245 4,088,915,276 Operating profit (loss) 54,566,860 (23,351,471) 61,207,998 (18,708,912) Share of (loss) from subsidiaries - - (9,703,472) (5,760,967) Profit (loss) before tax and extraordinary item 54,566,860 (23,351,471) 51,504,526 (24,469,879) Income tax 3,062,334 3,782,772 - - Profit (loss) from ordinary activities 51,504,526 (27,134,243) 51,504,526 (24,469,879) Extraordinary item: 23 Gain from the change in exchange rate system - 47,708,284 - 45,043,920 Net profit for the year 51,504,526 20,574,041 51,504,526 20,574,041 Basic earnings per share Profit (loss) from ordinary activities 1.91 (1.00) 1.91 (0.91) Extraordinary item - 1.76 - 1.67 Net profit for the year 1.91 0.76 1.91 0.76 The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Statements of Changes in Shareholders' Equity For the years ended 31 December Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Notes Baht Baht Baht Baht Share Capital Beginning balance 270,000,000 270,000,000 270,000,000 270,000,000 Increase during the year - - - - Ending balance 270,000,000 270,000,000 270,000,000 270,000,000 Premium on Share Capital Beginning balance 225,000,000 225,000,000 225,000,000 225,000,000 Increase during the year - - - - Ending balance 225,000,000 225,000,000 225,000,000 225,000,000 Land Revaluation Reserve 21 Beginning balance 241,546,403 235,866,403 241,546,403 235,866,403 Increase during the year - 6,600,000 - 6,600,000 Decrease during the year (620,000) (920,000) (620,000) (920,000) Ending balance 240,926,403 241,546,403 240,926,403 241,546,403 Retained Earnings Appropriated retained earnings Legal reserve Beginning balance 27,000,000 27,000,000 27,000,000 27,000,000 Increase during the year - - - - Ending balance 27,000,000 27,000,000 27,000,000 27,000,000 Unappropriated retained earnings Beginning balance 1,191,854,266 1,171,280,225 1,191,854,266 1,171,280,225 Increase during the year 51,504,526 20,574,041 51,504,526 20,574,041 Decrease during the year 24 (27,000,000) - (27,000,000) - Ending balance 1,216,358,792 1,191,854,266 1,216,358,792 1,191,854,266 Total 1,979,285,195 1,955,400,669 1,979,285,195 1,955,400,669 The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Statements of Retained Earnings For the years ended 31 December Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Note Baht Baht Baht Baht Unappropriated retained earnings: Beginning balance 1,191,854,266 1,171,280,225 1,191,854,266 1,171,280,225 Net profit for the year 51,504,526 20,574,041 51,504,526 20,574,041 Less: Dividend 24 (27,000,000) - (27,000,000) - Unappropriated retained earnings at end of the year 1,216,358,792 1,191,854,266 1,216,358,792 1,191,854,266 Appropriated retained earnings: Legal reserve 27,000,000 27,000,000 27,000,000 27,000,000 Appropriated retained earnings at end of the year 27,000,000 27,000,000 27,000,000 27,000,000 Retained earnings at end of the year 1,243,358,792 1,218,854,266 1,243,358,792 1,218,854,266 The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Statements of Cash Flows For the years ended 31 December Consolidated Company 1999 1998 1999 1998 Unaudited Unaudited Notes Baht Baht Baht Baht Cash flows from operating activities 25 685,312,332 1,563,326,127 680,518,242 1,566,765,927 Cash flows from investing activities Purchases of property, plant and equipment (36,570,672) (25,656,172) (36,545,708) (25,078,048) Payment of prepaid rent (9,634,144) (8,981,202) (9,634,144) (8,981,202) Purchase of investment in subsidiary - - - (3,744,000) Purchase of long-term investment - (1,139,914) - - Loans made to subsidiaries - - (5,500,000) (44,525,000) Proceeds from disposals of property, plant and equipment 1,587,175 2,784,846 1,587,175 2,784,846 Loan payments received from subsidiaries - - 8,000,000 25,817,000 Decrease in receivable from and loans to employees 2,654,854 2,453,625 2,602,737 2,724,271 Proceeds from sales of a subsidiary's share capital - 6,000 - - Dividend received - - - 13,958,000 Net cash payments in investing Activities (41,962,787) (30,532,817) (39,489,940) (37,044,133) Cash flows from financing activities Increase (decrease) in bank overdrafts and loans from financial institutions 191,800,891 (1,449,701,528) 190,349,330 (1,446,073,779) Proceeds from long-term borrowings 590,000,000 - 590,000,000 - Payments of long-term borrowings (1,314,128,970) (40,000,000) (1,314,128,970) (40,000,000) (Decrease) in employee security deposits and provident funds (41,619,469) (56,368,899) (41,755,838) (56,731,745) Dividends paid (24,104,717) (397,840) (24,104,717) (397,840) Net cash payments in financing activities (598,052,265) (1,546,468,267) (599,640,195) (1,543,203,364) Net increase (decrease) in cash and cash equivalents 45,297,280 (13,674,957) 41,388,107 (13,481,570) Cash and cash equivalents at beginning of the year 130,192,133 143,867,090 128,811,934 142,293,504 Cash and cash equivalents at end of the year 26 175,489,413 130,192,133 170,200,041 128,811,934 Supplementary information for cash flows: Interest paid 232,364,308 437,181,240 220,817,815 420,331,518 Tax paid 884,399 3,683,765 253,472 355,196 The notes to these consolidated and company financial statements on pages 8 to 29 form an integral part of these financial statements. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 1 General Information Singer Thailand Public Company Limited is a public limited company and is incorporated and domiciled in Thailand. The address of its registered office is 321 Siphaya Road Siphaya Bangrak Bangkok 10500. The Company is listing on the Stock Exchange of Thailand. The Company operates trading of sewing machines and electrical appliances. A listing and operation of the Company's subsidiaries is set out in Note 11. As at 31 December 1999 the Company and its subsidiaries employ approximately 8,196 people and 124 people, respectively. 2 Economic Crisis and Effects on Company's Operations The economic and liquidity crisis which began in mid 1997 in Thailand and other countries in the Asia Pacific Region brought about such adverse effects as significant depreciation in the value of the Thai Baht, reduced opportunity for refinancing or refunding of maturing debts, and a general reduction in spending throughout the region. These conditions have had a material adverse effect on the operation of the Company. Recently, however, many of these economic difficulties have begun to moderate as evidenced by, for example, an increase in foreign exchange reserves, renewed interest by foreign investors, economic growth, lower interest rates and a stabilized foreign exchange rate. Nevertheless, it would be premature to be certain about the economic recovery given, among other factors, the remaining residual effects of the economic crisis which could have a continuing impact on the economy. 3 Significant Accounting Policies The principal accounting policies adopted in the preparation of these consolidated and company financial statements are set out below: 3.1 Basis for Preparation The consolidated and company financial statements are prepared in accordance with and comply with generally accepted accounting principles in Thailand. The consolidated and company financial statements are prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment. 3.2 Consolidation Subsidiary undertakings, which are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over the financial and operating policies, have been consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date of disposal. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 3.3 Investments in Subsidiaries Investments in subsidiaries undertakings are accounted for in the non-consolidated financial statements by the equity method of accounting. These are undertakings over which the Company has over 50% of the voting rights, and over which the Company exercises control. Provisions are recorded for impairment in value. Equity accounting involves recognising in the income statement the Company's share of the subsidiaries' profit or loss for the year. In case where a subsidiary incurs a loss in excess of investment, the Company will reduce the investment cost until it reaches zero. In case the Company is held responsible for subsidiary's obligations, the negative investment in the subsidiary is recorded as liability. 3.4 Foreign Currency Translation Foreign currency transactions in Group companies are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year-end exchange rates unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used. 3.5 Installment 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. Bad debts are written off during the year in which they are identified. 3.6 Troubled Debt Restructuring Where the group company is the creditor. In case that the debt restructuring involves modification of terms of receivables, the fair value of investment in receivables after restructuring is based on the net present value of the expected future cash flows, discounted by the Minimum Lending Rates (MLR) prevailing at the restructuring date. Losses arising from restructuring, less recorded allowance for doubtful accounts, are recognised in the statement of income when incurred. Legal fees and other direct costs incurred to effect the debt restructuring is included in expense when incurred. Singer Thailand Public Company Limited Notes to the Consolidated and Company Financial Statements 31 December 1999 and 1998 3.7 Investments Since 1 January 1999 Investment in debt securities which are classified as held-to-maturity securities are carried at amortised cost. Investment in non-marketable equity securities which are classified as general investments are carried at cost. A test for impairment is carried out when there is a factor indicating that such investment might be impaired. If the carrying value of the investment is less than its recoverable amount, impairment loss is charged to the income statement. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement. When disposing of part of the Group's holding of a particular investment in debt or equity securities, the carrying amount of the disposed part is determined from the weighted average carrying amount of the total holding of the investments. Prior to 1 January 1999 General investments are stated at cost less provision for permanent diminution in value. 3.8 Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the first-in, first-out method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventory, such as import duties and transportation charge, less all attributable discounts, allowances or rebates. Net realisable value is the estimate of the selling price in the ordinary course of business, less selling expenses. Provision is made, where necessary, for obsolete, slow-moving and defective inventories. 3.9 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 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. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Estimated recoverable amount is the higher of the anticipated discounted cash flows from the continuing use of the asset and the amount obtainable from the sale of the (more)