FEDERAL FURNITURE HOLDINGS (M) BHD

Explanatory notes on Quarterly Report on consolidated results for the financial quarter ended 31 December 1999.

Notes :

1.	Accounting Policies
The quarterly financial statements have been prepared based on the accounting policies and methods of computation consistent with those adopted in the 1998 Annual Report.

2.	Exceptional Items
Net effect of :					For the quarter		Year to date
Surplus arising from compulsory acquisition		    RM			    RM
under the Land Acquisition Act, 1960 of a
portion of a property held by a subsidiary :		   nil			4,300,132

Provision for non-trade debts 			   490,000		   490,000 
  (recoverability doubtful)
Provision for obsolete stock in a subsidiary		   878,073		   878,073
Provision for settlement of legal claim made
   against a subsidiary				   570,000		   570,000
Provision for deposit paid to purchase trucks
  By a subsidiary (recoverability doubtful)		   289,345		   289,345

3.	Extraordinary Items
There was no extraordinary item for the financial period under review. 

4.	Taxation
In accordance with the Income Tax (Amendment) Act, 1999 no provision is made for taxation in respect of the results for the financial period under review.

The charge for taxation in the quarter represents additional income tax payable in respect of previous year’s assessment by a subsidiary.  

5.	Pre-acquisition Profits
There were no pre-acquisition profits for the current financial year to date.

6.	Sale of Investment and/or Properties
There was no sale of investment for the current financial year to date. Part of a piece of property was acquired under the Land Acquisition Act, 1960 as disclosed in Item 2 above.

7.	Quoted Securities
There were no purchases or disposals of quoted securities for the current financial year to date.

8.	Changes in the Composition of the Group
There were no changes in the composition of the Group for the current financial year to date

9.	Status of Corporate Proposal
There was no corporate proposal announced but not completed at the date of this report. 

10.	Seasonal or Cyclical Factors
The business operations of the Group were not materially affected by any seasonal or cyclical factors during the period under review. 

11.	Changes in Share Capital
There were no issuance and repayment of debt security nor changes in the share capital for the current financial year to date.

12.	Group Borrowings as at end of Reporting Period

•	Short Term Borrowings :

Secured :			    RM

	Bank overdrafts			     995,886
	Term loans			  1,243,110

Unsecured :			

	Bank overdrafts			  6,240,942
	Short term advances		       77,074
	Bankers’ acceptances		30,209,738
Export credit refinancing	       92,210
Revolving credit		  7,299,000
Supplier credit financing	     605,704
Term loans			               0
Trust receipts			  1,408,492

Total				48,172,156

•	Long Term Borrowings :

Secured :			    RM

	Term loans			  7,042,796

13.	Contingent Liabilities
(a)	One of the subsidiaries involving in the trading of furniture had been requested by its local banker to repay the sum of RM 695,350 which was paid by the bank’s overseas correspondent bank to some suppliers against Letters of Credit issued on behalf of the subsidiary. The subsidiary is objecting to the demand for repayment as written instructions were given to the local bank to reject the Letters of Credit due to unacceptable discrepancies. The local bank and the subsidiary have mutually agreed to jointly pursue the matter with the overseas bank to ask them to recover the full amount wrongly paid to the suppliers.

(b)	The legal claim amounting to RM 1,246,000 made by third parties against a subsidiary in respect of damages allegedly suffered relating to defective trucks acquired from the subsidiary was settled by consent judgement without admission of liability by the subsidiary. The settlement requires the subsidiary to dispose off its stock and that the third parties would be paid a sum of RM 570,000 from the sales proceeds as full and final settlement of the claim.    

(c)	Corporate guarantees given to financial institutions for credit facilities granted to subsidiaries amounted to RM 71,029,820

14.	Off Balance Sheet Financial Instruments
There were no off balance sheet financial instruments at the date of this report.

15.	Material Litigation
There is no pending material litigation at the date of this report.

16.	Segmental Reporting

By activity :	Turnover 

RM ‘000	Profit /(Loss)
Before Taxation
RM ‘000	Total Assets
Employed
RM ‘000	
				
Manufacture and trading of furniture	18,565	 (3,492)	  67,244	
Renovation and interior design	21,115	     653	  45,417	
Investment holding	      65	   (898)	  28,930	
Others	   -	   2,336	    1,995	
	39,745	(1,401)	143,586	

17.	Material Changes in Quarterly Results
Not applicable as there was no previous quarterly report.

18.	Review of Performance
For the current quarter under review, the Group recorded some improvements in its operating performance despite the stiff competition faced by the industry. Overall performance is still plagued by the high borrowing cost incurred in the period under review.

Provisions were made for exceptional items to reflect the decision of the Group to terminate its motor vehicles division which ceased operations in 1998.

Operationally, the performance of the Group’s operating divisions may be regarded as satisfactory. 

19.	Current Year Prospects
With the improving economic conditions and the Group’s strategy to maximize the potential of the overseas markets, the Group is hopeful of further improvements in its operating results in the current year. Steps will also be taken to address the Group’s borrowing to ensure that positive contributions can be achieved to enhance shareholders’ value in the years ahead.
  
20.	Variance From Profit Forecast
Not applicable.

21.	Dividend
No interim dividend was declared during the period under review.