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

The figures have not been audited.

Explanatory Notes To the Accounts For Financial Quarter Ended 31 March 2002

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 31 March 2002 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 other than the completion of the corporate exercise as disclosed in note 9(a). The Group’s principal activities have changed from “manufacturing and trading of” to “trading of” drafting equipment, office furniture and specialised computer furniture.

8.  Status of Corporate Proposals
(a)	Please refer to Appendix 1.

(b)	The status of the utilisation of proceeds raised from the corporate proposal as stated in 	(a) above is as follows:

	
	As approved by SC (RM’000)	Actual amount disbursed as at to date (RM’000)	
Part settlement of debts	58,000	58,000	
Expenses related to the Proposed Disposals including repayments to creditors	8,500	2,535
	
	66,500	60,535	

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, except the following:
Issuance of shares - 1,908,994 new ordinary shares of RM1.00 each in AHB
Issuance of ICULS - RM14,410,000 nominal value of 5-Year 5.5% ICULS

10. Group borrowings and Debt Securities
The Group’s borrowings are as follows:						RM

Unsecured loan                                        			38,047,054								 			=========

Short Term Borrowings						     172,554
Long Term Borrowings	-  Steelcase Loan           16,675,000			
		           *	-  ICULS		14,410,000 
			-  Term Out Loan	  6,839,500	37,874,500
								---------------
								38,047,054
								=========
* 5-year 5.5% Irredeemable Convertible (@RM2.14/share) Loan Stock expiring March 18, 2007.

11. Contingent Liabilities
As at the last annual balance sheet date on 30 June 2001, the Company had 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. However, on 8 February 2002, the contingent liabilities would have been reduced accordingly in view of the debt settlement as disclosed in note 9. The extent of the reduction of the contingent liabilities would be ascertained upon completion of the year end audit.

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. As at to date, the amount owe to the supplier is approximately RM266,000.

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 trading of office furniture.

15.  Results of the current quarter as compared with immediate preceding quarter - The Group
The Group’s profit before taxation (PBT) for the current quarter has improved to RM34.234 million as compared with the immediate preceding quarter loss before taxation (LBT) of RM1.687 million, mainly due to profits from the sale of a factory land and the buildings thereof and plant & machinery.

16. Review of Performance of the Company and its Principal Subsidiaries (the Group)
The Group recorded a positive EBITDA* of RM35.613 million for the current quarter compared to a positive EBITDA of RM0.823 million for the preceding year corresponding quarter.

The Group’s revenue for the current quarter is RM6.827 million compared to corresponding preceding year quarter of RM7.797 million. The Group’s PBT for the current quarter is RM34.234 million, compared with the preceding year corresponding quarter LBT of RM1.857 million. 
* - 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 has successfully completed the strategic alliance with Steelcase Inc, USA on February 8th 2002, and consequently repaid RM58 million to financial institutions.

The improved financial liquidity arising from the receipt of approximately RM66.5 million from Steelcase Inc would assist in the eventual performance of the Artwright Group. 

The Company further seeks to improve performance of the Group with the increase of its product offerings after having executed an exclusive Steelcase distribution agreement for Malaysia.  These products would be in addition to the Artwright product offerings to the market.

The Group has successfully held an Artwright International Dealership Convention on January 21st to 26th 2002 attended by more than 40 international and local members.  During the convention, Artwright also introduced two new product ranges known as Pronto (versatile office open plan system), and KEEP (office storage system).

The Company would continue 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 (“THE COMPANY”/”AHB”) & ITS SUBSIDIARIES (“THE GROUP”)

Status of the Corporate Proposals

Current Proposals

(1)	Proposed Voluntary Debt Restructuring and Proposed Employees' Share Option Scheme 	(“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 Voluntary 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 RM66.5million of which 	RM58.0 miilion would be utilised as repayment to the Scheme Creditors, while the 	remaining RM8.5million would be utilised for the estimated expenses relating to the 	proposals:
	(a)	payment to the secured creditors for the amounts outstanding of approximately RM36.159 million 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 RM14.001million, as at 1 October 2000 in connection with the hire purchase leasing facilities and the overdue hire purchase and leasing instalments and 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 RM7.840 million 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 agreement dated 31 May 2001 for the sale and purchase of the manufacturing  assets entered into between Artwright Manufacturing Sdn Bhd and Artwright Technology Sdn Bhd with Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) for a total cash consideration amounting to US$17.5 million (RM66.5 million) (“Assets Sale & Purchase Agreement”)

In addition, the Company also proposes to undertake an employees’ 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").  

(2)  Proposed Strategic Alliance

On 5 June 2001, the Company had announced its proposed strategic joint venture with Steelcase Inc. (“Steelcase”) by participation as shareholders in a joint venture company, Steelcase Artwright Manufacturing Sdn Bhd (formerly known as 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 Assets Sale and Purchase Agreement with Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) to dispose the manufacturing assets and a piece land with buildings thereon belonging to the AHB Group for US$17.5 million (RM66.5 million) ("Proposed Disposals").  

The Revised Proposed Voluntary 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 5 October 2001, the Company obtained conditional approval from Bank Negara Malaysia (“BNM”) in relation to the proposed facility arrangement between AHB and Steelcase pursuant to which Steelcase will grant the loan to AHB for purpose of subscribing for the 25,000 new shares in Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd). Pursuant thereto, BNM vide a letter dated 21 December 2001, approved the loan on condition that the loan be disbursed by 20 June 2002, being six (6) months from the date of the BNM’s approval.

On 31 October 2001, the Company obtained conditional approval from Foreign Investment Committee (FIC) on the Proposed Disposals, the subscription of 25,000 and 75,000 new Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) ordinary shares of RM1.00 each representing 25% and 75% of the enlarged issued and paid-up share capital of Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) by AHB and Steelcase, for a subscription sum of US$4.375 million (RM16.625 million) and US$13.125 million (RM49.875 million) respectively (“Proposed Subscriptions”) and the Proposed Debt to Equity Conversion.

On 1 November 2001, the Company obtained conditional approval from the Ministry of Trade and International Trade and Industry on the Proposed Disposals and Proposed Debt to Equity Conversion.

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.

On 25 January 2002, the shareholders of the Company have approved all the resolutions tabled at the EGM in relation to the abovementioned Proposed Disposals.

On 28 January 2002, the SC approved the Proposed Disposals subject to the following conditions:
(i) 	The approval from the SC is required for any changes to the proposed utilisation (see 	note) if the said changes involve the utilisation for the purposes other than for the core 	business of AHB;

	Note: the proposed utilisation approved by the SC  is as follows:
	RM’000
	Part settlement of debts	58,000
	Expenses related to the Proposed Disposals	8,500
		----------
		66,500
		----------	

(ii)  	The approval of the shareholders of AHB is required for any subsequent changes of 25% 	or more to the proposed utilisation. For changes of less than 25%, appropriate disclosure 	must be made to the shareholders of AHB;
(iii)	Any extension to the timeframe for the Proposed Utilisation determined by AHB must be 	approved  by the Board of Directors of AHB through an unconditional resolution and 	should be fully disclosed to the Kuala Lumpur Stock Exchange; and
(iv)	Appropriate disclosure in respect of the status of the proposed utilisation must be made 	in the Quarterly Reports and the Annual Reports of AHB until the proceeds have been 	fully utilised.

The approval of SC is also subject to inter alia the following conditions:
(i)	AHB is required to ensure full compliance with the requirements of Paragraph 11.12 of the SC’s Guidelines which states that the listing of trading / retailing companies is allowed only on the Main Board of the KLSE or operate a core business for which listing on the Second Board of the KLSE is allowed within two (2) years from the date of the SC’s letter of approval. The SC has noted that the core business activity of the Company after the Proposals is as a trading company.
(ii)	AHB is required to eliminate the accumulated losses of the Group within 2 1/2 years from 	the date of the SC’s letter of approval;
(iii)	In relation to the Proposed ICULS Issue, Alliance Merchant Bank Berhad (the Company’s 	Merchant Banker) is required to:
	(a)	obtain the SC’s approval for any changes made to the terms and conditions of the ICULS; and
	(b) 	furnish a copy of the executed Trust Deed for the SC’s record.

The SC has also informed that it has no objection to the proposed five-year term loan from Steelcase to AHB of US$4,375,000.00 (RM16,675,000.00) at an interest rate of 6.375% per annum (“Proposed Term Loan”) without any conditions attached. The SC has also exempted the Proposed Term Loan from compliance with the requirements of the Private Debt Securities Guidelines provided the Proposed Term Loan being a private term loan between AHB and Steelcase and being non-transferable and non-tradeable.

On 31st January 2002, all the conditions precedent as detailed under Clause 4.1 of the Assets Sale & Purchase Agreement (“ASPA”) between AHB and Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) have been fuilfilled. Accordingly, the said agreement has become unconditional.

On 7 February 2002, the Company has entered into a Supplementary ASPA with Steelcase Artwright Manufacturing Sdn Bhd (formerly known as Rengard Industries Sdn Bhd) pursuant to the ASPA dated 31 May 2001.

On 8 February 2002, the ASPA (as amended in the Supplemental ASPA) has been completed and the ancillary agreements as detailed in the ASPA, namely the Share Subscription Agreement, the Joint Venture Agreement, the Distribution Agreement, the Share Charge Agreement, the Tenancy Agreement, two (2) Contract Manufacturing Agreements and an escrow Agreement have been duly executed.

On 18 March 2002, 1,908,994 new ordinary shares of RM1.00 each in AHB and the RM14,410,000 nominal value of 5-year 5.5% Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) issued to the creditors of the AHB Group in accordance with the SDRA dated 17 August 2001 were officially listed and quoted in the Kuala Lumpur Stock Exchange.

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