Artwright Holdings Berhad (274909-A)
And its Subsidiary Companies

The figures have not been audited.

Explanatory Notes To the Accounts For Financial Quarter Ended 30 September 2001

1. Accounting Policies
The current quarter financial statements have been prepared using the same accounting policies, method of computation and basis of consolidation as used in the preparation of the most recent annual financial statements.

2. Exceptional items
There were no exceptional items for the current quarter and financial period under review.

3. Extraordinary items
There were no extraordinary items for the current quarter and financial period under review.

4. Taxation
There were no under or over-provisions of tax in respect of prior year and no deferred taxation for the current quarter and financial period under review.
		
5.  Unquoted investments and/or properties
There were no purchase or sale of unquoted investments and/or properties for the current quarter and financial period under review.

6. Quoted Securities
There were no purchases or sales of quoted securities for the current quarter and financial period under review.

Investments in quoted shares as at 30 September 2001 is as follows:
	
		Total investments at cost			RM3,000
		Total investments at carrying value/book value	RM3,000
		Total investment at market value		RM1,580

7.  Changes in Composition of the Group
There were no changes in the composition of the company during the current quarter and financial period under review, including business combination, acquisition or disposal of subsidiaries and long-term investments, restructuring and discontinuing operations.

8.  Status of Corporate Proposals
Please refer to Appendix 1.

9. Debts and Equity Securities
There were no issuance or repayment of debts and equity securities, shares buy-backs, share cancellations, shares held as treasury shares and resale of treasury shares for the current financial period.

10. Group borrowings and Debt Securities
The Group’s borrowings are as follows:
  								   RM
Secured loan							36,158,987
Unsecured loan							30,738,860
								---------------
								66,897,847
								=========

								    RM	
Bank overdraft	12,810,661
Bankers' Acceptances	12,667,504
Trust receipts	425,954
Short term loan	2,969,000
Revolving credit	20,400,000
Bank Guarantee	320,000
Long term loan - current portion	10,263,082
								----------------
	59,856,201
								 
Long term loan - non-current portion	7,041,646
								-----------------
								66,897,847
								==========

11. Contingent Liabilities
The Company has given corporate guarantees amounting to RM105,722,000 to certain financial institutions for leasing and hire-purchase and other credit facilities granted to three (3) of its subsidiary companies. The amount of facilities utilised by the said subsidiary companies amounted to approximately RM68,710,000. Accordingly, the Company is contingently liable to the extent of the facilities utilised by the said subsidiary companies.

In addition, the Company has also given a corporate guarantee of up to RM1,000,000.00 to an unrelated third party supplier for supply of raw materials.

12. Off Balance Sheet Financial Instruments
There were no material financial instruments with off balance sheet risk during the current financial year under review.

13. Material Litigation
There were no material litigations faced by the Group.

14. Segmental Reporting
There is no segmental reporting as the Group's activities are confined to the manufacture and trading of office furniture.

15.  Results of the current quarter as compared with immediate preceding quarter - The Group
The Group’s loss before taxation (LBT) for the current quarter has improved to RM2.735 million as compared with the immediate preceding quarter of LBT of RM4.043 million, mainly due to lower finance cost.

16. Review of Performance of the Company and its Principal Subsidiaries (the Group)
The Group recorded an EBITDA* for the current quarter of RM91,000 which is slightly higher than preceding year corresponding quarter of RM55,000. The Group’s LBT for the current quarter increased to RM2.735 million as compared with the preceding year corresponding quarter of RM2.563 million. 

The Group’s revenue for the current quarter is RM7.639 million. This is lower than preceding year corresponding quarter of RM9.957 million. The decrease is mainly due to the general slowdown in the overall economy both locally and internationally.

On a positive note, despite the Group’s revenue declining from preceding year corresponding quarter of RM9.957 million to current quarter of RM7.629 million, the Group suffered merely an additional loss of RM146,000 as evidenced by the current quarter loss of RM2.735 million as compared to the preceding year corresponding quarter loss of RM2.563 million. This is mainly due to improvement in operational efficiencies.

* - EBITDA/(LBITDA) is defined as profit/(loss) before finance cost, depreciation & amortisation, exceptional items, income tax, minority interests and extraordinary items.

17.  Subsequent Material Events
There are no material events subsequent to the end of the quarter up to the date of the announcement that have not been reflected in the financial statements for the said period, other than disclosed in note 8.
	
18. Explanatory comments about the seasonality or cyclicality of operations
There are no seasonal or cyclical factors that should affect its operations in general, as the business is mostly project based.

19. Current Year Prospects
The Company continues to look forward to the successful completion of the entire corporate proposals which would reduce the level of borrowings and set the Company in a position to operate much more profitably. Upon the completion of the proposals, the Company would be able to increase its product offering being the exclusive Steelcase dealer in Malaysia.

The Company has undertaken and continues to undertake strategic measures such as brand positioning, improving efficiency and reducing cost through automation, investing in R&D and aggressive marketing in the international market to strengthen itself amidst the current economic condition and as preparation for further growth.

The Directors are also of the opinion that the results for the current financial period under review have not been affected by any other transaction or event of a material and unusual nature other than disclosed in note 8.

20. Variance of Actual Profit from Forecast Profit
The Company did not issue any profit forecast during the current quarter and financial period under review.

21. Dividend
No interim dividend is recommended for the current quarter and financial period under review.

Appendix 1

ARTWRIGHT HOLDINGS BERHAD & ITS SUBSIDIARIES ("THE GROUP’)

Status of the Corporate Proposals

A) 	Initial Proposals

On 30 September 1999  the Company announced the following:

(i)	a proposed bonus issue of 6,656,667 new AHB Shares on the basis of one (1) new AHB 	Share for every three (3) existing AHB Shares held on a date to be determined 	("Proposed Bonus Issue");

(ii)	a proposed renounceable rights issue of 13,313,333 new AHB Shares at an issue price of 	RM1.40 per new AHB Share payable in full on acceptance, on the basis of two (2) new 	AHB Shares for every three (3) existing AHB Shares held, together with 13,313,333 new 	free warrants issued on the basis of two (2) new free warrants for every three (3) existing 	AHB Shares held on a date to be determined ("Proposed Rights Issue with Warrants"); 	and

(iii)	a proposed executives' share option scheme ("Proposed ESOS"),

(collectively referred to as the "Initial Proposals").

The Initial Proposals were approved by the Securities Commission ("SC") on 13 December 1999. The shareholders of AHB had also approved the Initial Proposals at an extraordinary general meeting ("EGM") held on 22 December 2000.  The SC had also approved an extension of time for implementing the Initial Proposals by 30 June 2001.  However, as a result of the Proposed Strategic Alliance (defined below), the Company, accordingly at this juncture has not pursued further with the Initial Proposals.

B) Current Proposals

B.1)  Proposed Debt Restructuring and Proposed ESOS
 
The Group had, on 20 July 2000, announced it had reached an agreement in principle with certain financial institutions and non-financial institutions ("Scheme Creditors") to a proposed voluntary debt restructuring scheme, subject to the signing of a Debt Restructuring Agreement.  The Debt Restructuring Agreement was executed on 6 September 2000.

The Group had renegotiated with the Scheme Creditors and had reached an agreement with the Scheme Creditors to a revised proposed voluntary debt restructuring scheme ("Revised Proposed Debt Restructuring").  Consequently, on 17 August 2001, the Group and the Scheme Creditors had entered into a Supplementary Debt Restructuring Agreement ("SDRA") to formalise the agreement reached.  

The Revised Proposed Debt Restructuring, inter-alia, will involve the following:

(i) 	proposed settlement of the following amounts outstanding through the proceeds arising 	from the Proposed Disposals (as defined below) amounting to RM66.5mil of which 	RM58.0 would be utilised as repayment to Scheme Creditors, while the remaining 	RM8.5mil would be utilised for the estimated expenses relating to the proposals:

	(a)	payment to the secured creditors for the amounts outstanding of approximately 			RM36.159mil as at 1 September 1999 in connection with the facilities granted 			by the secured creditors to the Group; 

	(b)	payment to the hire purchase/leasing creditors for the amounts outstanding of 			approximately RM14.001mil, as at 1 October 2000 in connection with the hire 			urchase leasing facilities and the overdue hire purchase and leasing instalments 			nd all other charges accrued and accruing up to 30 June 1999; and

	(c)	payment to the unsecured creditors for the part settlement of amounts 				outstanding of approximately RM7.840mil as at 31 August 1999 to the 				unsecured creditors in connection with the unsecured facilities granted to the 			Group.

(ii)	proposed issuance of 1,908,994 new ordinary shares of RM1.00 each in AHB ("AHB 	Shares") at an issue price of RM1.89 per share to secured creditors and unsecured 	creditors of the Borrowers as settlement of the interest on the capitalised secured debts 	and capitalised unsecured debts totalling RM3,608,000 ("Proposed Debt to Equity 	Conversion");

(iii)	proposed issuance of RM14,410,000 nominal value of 5-Year 5.5% irredeemable 	convertible unsecured loan stocks ("ICULS") as part settlement of the unsecured debts 	amounting to RM29,089,910 to the unsecured creditors on the basis of RM1.00 nominal 	value of ICULS for every RM1.00 owing to the unsecured creditors ("Proposed ICULS 	Issue"); and

(iv)	proposed terming out of RM6,839,500 over twelve (12) quarterly instalments commencing 	two (2) years after the date of the completion of the Assets Sale Agreement. 

In addition, the Company also proposes to undertake an employee's share option scheme of up to ten per cent (10%) of the issued and paid-up share capital of the Company at any point in time ("Proposed ESOS").  

B.2)  Proposed Strategic Alliance

On 5 June 2001, the Company had announced its proposed strategic joint venture with Steelcase Inc. by participation as shareholders in a joint venture company, Rengard Industries Sdn Bhd, to carry on the business of manufacturing, selling, distributing and marketing office equipment, furniture and furnishings ("Proposed Strategic Alliance").  Pursuant to the announcement of the Proposed Joint Venture, the Company had, on 31 May 2001, entered into an Agreement for the Sale and Purchase of Assets ("Assets Sale Agreement") with Rengard to dispose the manufacturing assets and a piece land with buildings thereon belonging to the AHB Group to Rengard for US$17,500,000 (RM66,500,000) ("Proposed Disposals").  

The Proposed Revised Debt Restructuring, the Proposed ESOS, the Proposed Strategic Alliance and the Proposed Disposals are hereinafter collectively referred to as the "Current Proposals".

On 21 August 2001, the Company announced that it has submitted the applications to the relevant authorities in relation to the Current Proposals.

Further updates / Subsequent Material Events

On 27 September 2001, the Company obtained conditional approval from the SC on the proposed waiver from the requirement to undertake rating for the proposed Promissory Note to be issued by the Company to Steelcase.

On 5 October 2001, the Company obtained conditional approval from Bank Negara in relation to the Proposed Facility Arrangement.

On 31 October 2001, the Company obtained conditional approval from Foreign Investment Committee (FIC) on the Proposed Disposals.

On 1 November 2001, the Company obtained conditional approval from the Ministry of Trade and International Trade and Industry (MITI) on the Proposed Disposals.

On 28 November 2001, the Company obtained approval from the SC on the proposed exemption from complying with the requirements as set out under paragraphs 21.01 and 21.02 of the SC’s policies and guidelines on Issue/Offer of Securities (Guidelines) for the proposed issuance of RM14,410,000 nominal value of a new 5-year 5.5% irredeemable convertible unsecured loan stocks as part settlement of the unsecured debts.