MATRIX HOLDINGS<1005> - Announcement


The Stock Exchange of Hong Kong Limited takes no responsibility 
for the contents of this announcement, makes no representation 
as to its accuracy or completeness and expressly disclaims any 
liability whatsoever for any loss howsoever arising from or in 
reliance upon the whole or any part of the contents of this 
announcement.

MATRIX HOLDINGS LIMITED 
(Incorporated in Bermuda with limited liability)

MENTAL RESOURCES LIMITED
(Incorporated in the British Virgin Islands with limited liability)

PROPOSED RESTRUCTURING FOR
MATRIX HOLDINGS LIMITED AND ITS SUBSIDIARIES

APPLICATION FOR A WHITEWASH WAIVER FROM ANY OBLIGATION OF MENTAL 
RESOURCES LIMITED TO MAKE A GENERAL OFFER

Connected Transaction

Financial adviser to Mental Resources Limited

Deloitte & Touche Corporation Finance Ltd

Restructuring Proposal

On 21 and 22 December 1999, the Company entered into the 
Restructuring Agreements with MRL, Oilpro, the Financial 
Creditors and liquidators of MIL. The Restructuring Proposal 
comprises:

1.      Capital reduction of 90% and consolidation of every 10 of 
such reduced shares into 1 New Share of HK$0.10 each;

2.      Issue of 100,000,000 New Shares at HK$0.10 per share to MRL 
for HK$10 million in cash;

3.      Issue of irredeemable convertible loan stock with conversion 
price of HK$0.10 to MRL for HK$30 million in cash;

4.      Cash payment of HK$6.3 million to the liquidators of MIL as 
full and final settlement of HK$68 million due by the Group to 
MIL;

5.      Cash payment of HK$14 million and issue of irredeemable 
convertible loan stock of HK$14 million to Financial Creditors 
as full and final settlement of HK$155.6 million due by the Group 
to Financial Creditors;

6.      An option granted to Financial Creditors by Oilpro for the 
sale of the irredeemable convertible loan stock to be issued 
to them under point 5 above to Oilpro at a 50% discount;

7.      Standstill by MIL's liquidators and Financial Creditors till 
30 April 2000.

Completion of the Restructuring Proposal is conditional on the 
following conditions:

1.      approval of Bermuda Monetary Authority to the issue of New 
Shares, irredeemable convertible loan stock and New Shares upon 
conversion of the irredeemable convertible loan stock;

2.      approval of the Company's independent shareholders at a 
general meeting to be convened specifically therefor and such 
other matters relating thereto, including the approval by the 
independent shareholders of the Company to the Restructuring 
Proposal and the Whitewash Waiver (if granted by the SFC);

3.      grant of a waiver by the SFC to MRL of a mandatory
general offer for any of the shares in the Company not already 
owned by MRL, Oilpro and/or Mr. James Wong or parties acting 
in concert with any of them;

4.      approval from the Stock Exchange for the listing of and 
permission to deal in the New Shares resulted from the capital 
reduction, the New Shares to be issued to MRL and the New Shares 
to be issued upon the conversion of the irredeemable convertible 
loan stock; and

5.      the approval in principle of the Stock Exchange to the 
resumption of trading in the shares of the Company conditional 
on the completion of the Restructuring Proposal and on the 
restoration of the minimum public float of 25% within one month 
after Completion.

Prior to Completion, Mr. James Wong has advanced approximately 
HK$5.4 million and MRL has agreed to advance up to HK$15 million 
to the Company respectively to pay for its operating expenses. 
The advance from Mr. Wong is interest free and secured by a first 
floating charge over the assets, excluding investments in 
subsidiaries, of MML. The advance from MRL is interest free and 
unsecured.

Both advances will be netted off against the consideration in 
respect of the issue of New Shares and irredeemable convertible 
loan stock to MRL upon Completion and that the security held 
by Mr. Wong will then be discharged.

Immediately upon Completion and prior to the conversion of the 
irredeemable convertible loan stock, MRL will acquire 69.1% of 
the issued shares of the Company and, together with Best Fortune, 
will own 92.2% of the issued shares of the Company. Accordingly, 
in the absence of the Whitewash Waiver, MRL will be required 
under Rule 26 of the Code to make a general offer for all the 
shares of the Company. MRL has applied to the Executive for the 
Whitewash Waiver.

Upon Completion and prior to the conversion of the irredeemable 
convertible loan stock, the public float of the Company's shares 
is expected to be only about 7.8%. MRL, Best Fortune and Mr. 
James Wong jointly and severally undertake to the Stock Exchange 
that they will use their best endeavours to place down their 
shares in order to meet the requirement of Rule 8.08 of the 
Listing Rules within one month after the Completion. The trading 
of the Company's shares will remain suspended until its public 
float restores to 25%.

Breaches of the Listing Rules and the Listing Agreement

Pursuant to the Listing Rules, the security given to Mr. James 
Wong in respect of his advance of approximately HK$5.4 million 
to the Company constitutes connected transaction which would 
require independent shareholders' approval. The Company has 
inadvertently misinterpreted the Listing Rules and therefore 
has not sought independent shareholders' approval for the 
security given to Mr. Wong. As a result, the Company is in breach 
of the Listing Rules and the advance from Mr. Wong and the grant 
of the security to Mr. Wong will be put forward to independent 
shareholders' approval at the forthcoming Special General 
Meeting. The Stock Exchange has informed the Company that it 
will take appropriate actions regarding the breach.

The Company is in breach of the Listing Rules and the Listing 
Agreement as it has not released its annual reports and audited 
final results for the year ended 31 December 1998 and unaudited 
interim results for the six months ended 30 June 1999 and has 
not convened its Annual General Meeting for the year ended 31 
December 1998. The breach of the Listing Rules 
arose because the Company has been in financial difficulties 
and has not had funds to maintain its 
accounting function and settle its outstanding audit fees.

The board meeting of the Company for the release of its audited 
results, which was originally convened on 6 April 2000, has now 
been rescheduled to 5 April 2000. It is expected that the Company 
will announce its audited final results for the year ended 31 
December 1998 and interim results for the six months ended 30 
June 1999 on 5 April 2000. Besides, the Company will seek a 
sanction from the Registrar of Companies of Bermuda to convene 
the belated Annual General Meeting for the year ended 31 December 
1998. After the sanction is obtained, the Company will convene 
the Annual General Meeting for both the year ended 31 December 
1998 and 1999 together before 30 June 2000. The Stock Exchange 
has informed the Company that it will take appropriate actions 
regarding the breaches.

Since 11 March 1999, trading of the shares of the Company has 
been suspended, and the Company has submitted resumption 
proposals to the Stock Exchange on 2 March 2000.

The circular to shareholders of the Company convening the Special 
General Meeting to be held on 29 April 2000 regarding the 
Restructuring Proposal, the Whitewash Waiver, the advance from 
Mr. Wong and the grant of the security to Mr. Wong is expected 
to be despatched on 6 April 2000. Best Fortune, Mr. Wong and 
their respective associates will abstain from voting at the 
Special General Meeting.

The release of this announcement does not in any way indicate 
that the trading in the shares of the Company will be resumed 
and that the Restructuring Proposal will necessarily be 
implemented and completed.

THE RESTRUCTURING AGREEMENTS AND RESTRUCTURING PROPOSAL

On 21 and 22 December 1999, the Company entered into:

a)      a subscription agreement with MRL;

b)      a settlement deed with Financial Creditors, MRL, and Oilpro; 
and

c)      a settlement deed with its subsidiary, MILand MIL's 
liquidators.

Other than MIL and the Financial Creditors, the Group owed to 
other creditors approximately HK$14 million as at 31 December 
1999. The other creditors include material suppliers and service 
providers who are not parties to the Restructuring Agreements. 
The Group has commenced negotiation with these creditors 
regarding settlement arrangements and no repayment schedule has 
been made. As of the date of the announcement, none of the other 
creditors have instituted any action against the Group. The 
Company do not expect that any of the other creditors will make 
an attempt to block the Restructuring Proposal.

On 29 February 2000, all the parties to the Restructuring 
Agreements entered into a deed of variation, pursuant to which 
the latest date for the completion of the Restructuring 
Agreements was extended to 30 April 2000.

The Restructuring Proposal comprises :

1.      Capital reduction

The par value of the Company's issued and paid up shares will 
be reduced by 90% from HK$0.10 per share to HK$0.01 per share. 
Every 10 of such reduced shares will then be consolidated into 
1 New Share of HK$0.10.

2.      Issue of New Shares

MRL, which is beneficially owned as to 12.5% by Mr. James Wong, 
Chairman of the Company, and as to 87.5% by Oilpro (a company 
100% beneficially owned by Mr. Low), has agreed to subscribe 
for 100,000,000 New Shares to be issued by the Company at HK$0.10 
per share for a total cash consideration of HK$10 million.

3.      Issue of irredeemable convertible loan stock

MRL has agreed to subscribe for irredeemable convertible loan 
stock with a face value of HK$30 million to be issued by the 
Company for a cash consideration of HK$30 million.

4.      Settlement arrangement with MIL (in liquidation)

MIL's liquidators, who claimed a net amount of approximately 
HK$68 million due to MIL from other members of the Group, have 
agreed to accept cash payment of HK$6,344,627 from the Company 
as full and final settlement for all claims between MIL and other 
members of the Group.

5.      Settlement arrangement with Financial Creditors

The Financial Creditors, comprising banks, finance companies 
and the landlord of its previous Hong Kong office, have agreed 
with the Group that the total outstanding unsecured debts owed 
to them by the Group amount to HK$155.6 million. Under the 
Restructuring Proposal, the Financial Creditors have agreed to 
accept the following full and final settlement arrangement:

                                HK$ million

To be settled by cash proceeds  14.0    9%

To be settled by the issue of irredeemable convertible loan stock 
with a face value of 
  HK$14 million to the Financial Creditors      14.0    9%

To be waived by Financial Creditors     127.6   82%
    
                                        155.6   100%

The HK$14 million irredeemable convertible loan stock has the 
same terms as and ranks pari passu in all respects, including 
all rights as regards to dividends, voting and return of capital, 
with the irredeemable convertible loan stock to be issued to 
MRL. In addition, Oilpro has agreed to grant an option to the 
Financial Creditors whereby each member of the Financial 
Creditors can sell all of its loan stock to Oilpro at a 50% 
discount to face value on or before 17 May 2000.

Upon Completion, the HK$14 million cash and the HK$14 million 
loan stock will be distributed to each financial creditor in 
accordance with the respective proportions of their debts to 
the total agreed debt.

6.      Standstill

Pursuant to the terms of the Restructuring Agreements, MIL's 
liquidators and the Financial Creditors have agreed to refrain 
from making any demand for repayments or exercising any rights 
of enforcement (including without limitation the appointment 
of a liquidator, garnishee action or attachment of debts) until 
30 April 2000 or such later date as the parties may agree.

TERMS OF THE IRREDEEMABLE CONVERTIBLE LOAN STOCK

The irredeemable convertible loan stock is transferrable without 
any restriction, unsecured, bears a coupon rate of 5% p.a. and 
can be converted into New Shares by the holder at a predetermined 
fixed price of HK$0.10 per New Share, which is equal to the issue 
price of the New Shares to be issued to MRL as detailed above, 
commencing from the 3rd year after the date of issue. At the 
end of its 5-year term, all the outstanding amount of the loan 
stock must be converted into New Shares. The Company undertakes 
to notify the Stock Exchange in case of any transfer of the 
irredeemable convertible loan stock.

ADVANCES AND DEPOSITS FROM MR. JAMES WONG & MRL

In early 1999 the Group suspended its sales and manufacturing 
operations. Following the entering into of the Restructuring 
Agreements in December 1999, the Group has started to resume 
its operations. As a result, prior to Completion, the Company 
has been and will be in need of cash to finance its operating 
expenses and payments of fees for audit and other professional 
services.

Advance from Mr. James Wong

Mr. James Wong has advanced to the Company approximately HK$5.4 
million, which is secured by a first floating charge over the 
assets, excluding investments in subsidiaries, of MML with the 
approval of the Financial Creditors. The advance was also 
previously secured by a fixed charge over all moneys placed by 
the Company with any bank or other financial institution together 
with all interest accrued thereon and all other book debts at 
any time during the continuance of the security due or owing 
to the Company. On 10 March 2000, Mr. James Wong entered into 
a deed of discharge and release in favour of the Company to 
release the fixed charge over all moneys placed by and all book 
debts due to the Company.

Based on the most recent draft audited accounts of MML and the 
Company for the year ended 31 December 1999, MML and the Company 
had total assets (excluding their investments in subsidiaries) 
of approximately HK$60,000 and HK$2,000 respectively. The total 
assets consisted of fixed assets and cash for MML and cash only 
for the Company. Mr. Wong is aware that the aggregate realisable 
value of the security may not be sufficient to cover the whole 
amount of his advance.

Pursuant to the Listing Rules, the security given to Mr. James 
Wong in relation to his advances to the Company constitutes 
connected transaction which would require independent 
shareholders' approval. The Company has inadvertently 
misinterpreted the Listing Rules and therefore has not sought 
independent shareholders' approval for the security given to 
Mr. Wong. As a result, the Company is in breach of the Listing 
Rules and the advance from Mr. Wong and the grant of the security 
to Mr. Wong will be put forward to independent shareholders' 
approval at the forthcoming Special General Meeting. The Stock 
Exchange has informed the Company that it will take appropriate 
actions regarding the breach.

Advance from MRL

MRL has agreed since January 2000 to provide up to HK$15 million 
to finance the Group's operation prior to completion of the 
Restructuring Proposal. MRL has already advanced about HK$13.5 
million to the Company for payment of operating expenses. The 
remaining cash for the HK$1.5 million facility has been deposited 
in an escrow account with CMS Cameron McKenna, legal adviser 
to the Company, which will release further funds (from the HK$1.5 
million) as required by the Group's operation. The HK$15 million
facility from MRL is unsecured and interest free.

It is expected that the aggregate of the advances from Mr. Wong 
and MRL of up to HK$20 million will be netted off against the 
aggregate consideration of HK$40 million in respect of the issue 
of New Shares and irredeemable convertible loan stock to MRL 
upon Completion and that the remaining security held by Mr. Wong 
will then be discharged.

Prior to the signing of the Restructuring Agreements, MRL and 
Mr. James Wong placed deposits of HK$27 million and HK$344,627 
respectively in an interest bearing escrow account in December 
1999. The deposits will be refundable together with interest 
earned on the escrow fund if Completion does not take place on 
or before 30 April 2000.

The total deposit of HK$27.3 million placed by MRL and Mr. James 
Wong represents the total amount of settlement payable to 
Financial Creditors of HK$14 million and MIL's liquidators of 
approximately HK$6.3 million under the Restructuring Proposal, 
and HK$7 million for which the Financial Creditors may sell to 
Oilpro all the irredeemable convertible loan stock issued to 
them pursuant to the option granted by Oilpro. The HK$27.3 
million is deposited solely for settlements to Financial 
Creditors and MIL's liquidators upon Completion, and the amount 
will not be withdrawn for other purposes prior to Completion.

MRL has also undertaken to arrange for or provide to the Group 
working capital or standby credit facilities of up to HK$10 
million for the Group's operations in the coming year. The 
facilities, if provided by MRL, will be unsecured and interest 
free.

CONDITIONS PRECEDENT TO COMPLETION OF THE RESTRUCTURING PROPOSAL

Completion of the subscription for New Shares and irredeemable 
convertible loan stock and the settlement with MIL and the 
Financial Creditors is inter-conditional. Completion of the 
Restructuring Proposal is conditional on the following 
conditions being satisfied on or before 30 April 2000 or on such 
later date as the parties may agree in writing:

1.      approval of Bermuda Monetary Authority to the issue of New 
Shares, irredeemable convertible loan stock and New Shares upon 
conversion of the irredeemable convertible loan stock;

2.      approval of the Company's independent shareholders at a 
general meeting to be convened specifically therefor and such 
other matters relating thereto, including the approval by the 
independent shareholders of the Company to the Restructuring 
Proposal and the Whitewash Waiver (if granted by the SFC);

3.      grant of a waiver by the SFC to MRL of a mandatory general 
offer for any of the shares in the Company not already owned 
by MRL, Oilpro and/or Mr. James Wong or parties acting in concert 
with any of them;

4.      approval from the Stock Exchange for the listing of and 
permission to deal in the New Shares resulted from the capital 
reduction, the New Shares to be issued to MRL and the New Shares 
to be issued upon the conversion of the irredeemable convertible 
loan stock; and

5.      the approval in principle of the Stock Exchange to the 
resumption of trading in the shares of the Company conditional 
on the Completion and on the restoration of the minimum public 
float of 25% within one month after Completion.

None of the above conditions will be waived. If all the conditions 
precedent to Completion are fulfilled, the Restructuring 
Proposal is expected to be completed and effective on or before 
30 April 2000.

The Company intends to convene the Special General Meeting on 
29 April 2000 to approve the Restructuring Proposal, the 
Whitewash Waiver and the advance from Mr. Wong and the grant 
of the security to Mr. Wong. Best Fortune, Mr. Wong and their 
respective associates will abstain from voting at the Special 
General Meeting. The circular is expected to be despatched on 
6 April 2000.

SHARE CAPITAL

As at the date of this announcement, the Company has an authorised 
share capital of HK$70 million divided into 700,000,000 shares 
of HK$0.10 each, of which 447,200,000 shares have been issued 
and are fully paid. Immediately after the capital reduction and 
share consolidation, the issued and paid up share capital of 
the Company will be reduced from HK$44,720,000 to HK$4,472,000, 
and the number of issued shares will be reduced from 447,200,000 
shares to 44,720,000 New Shares. The entire credit amount arising 
from the capital reduction of HK$40,248,000 shall be applied 
to write off part of the accumulated losses of the Company brought 
forward which amounted to approximately HK$281 million as at 
31 December 1999.

SHAREHOLDING STRUCTURE

(for the interests of Mr. James Wong in the share capital of the 
Company are set out as follows. In addition, under the 
Restructuring Proposal, after capital reduction and share 
consolidation, 100,000,000 New Shares will be issued upon 
Completion and 540,000,000 New Shares upon conversion of all 
the irredeemable convertible loan stock according to the 
following schedule, please refer to the press announcement today.)

Upon Completion and prior to the exercise of the irredeemable 
convertible loan stock, MRL, Best Fortune and Mr. James Wong 
together will own more than 75% of the share capital of the 
Company and the public float is expected to be only about 7.8%.

MRL, Mr. James Wong and Best Fortune jointly and severally 
undertake to the Stock Exchange that they will use their best 
endeavours to place down their New Shares in order to meet the 
requirement of Rule 8.08 of the Listing Rules within one month 
after the Completion. OSK Asia Securities Limited has been 
appointed as the placing agent of MRL. The trading of the 
Company's shares will remain suspended until its public float 
restores to 25%.

Save for the interests of Best Fortune and Mr. James Wong as 
disclosed above, MRL and Oilpro and parties acting in concert 
with each of them do not own any shares of the Company.

Best Fortune and Mr. James Wong, MRL and Oilpro and parties acting 
in concert with each of them did not deal in the shares of the 
Company during the past 6 months preceding the date of this 
announcement.

BACKGROUND OF MRL AND OILPRO

MRL, beneficially owned as to 12.5% by Mr. James Wong and 87.5% 
by Oilpro, was incorporated on 2 July 1999 in the British Virgin 
Islands and has not engaged in any business activities. The 
directors of MRL are Mr. James Wong and Mr. Low. It is intended 
that MRL will only invest in the Company and will not be engaged 
in other business activities.

Oilpro, incorporated in Hong Kong on 6 March 1990, is an 
investment holding company since incorporation and is 100% 
beneficially owned by Mr. Low. The directors of Oilpro are Mr. 
Low and Mr. Teoh Beng Leong. Since incorporation, Oilpro has 
not made any significant share investment except MRL and its 
assets comprise its investment in and shareholder loan to MRL.

Mr. Low is qualified as a chartered secretary and has about 30 
years' experience in corporate management and investment. He 
is an executive director of Bukit Melita Sdn. Bhd., a company 
incorporated in Malaysia with limited liability and engaged in 
plantation business. BMSB and its associates own approximately 
2000 acres of rubber plantation in the Pahang State of Malaysia. 
Mr. Low has no shareholding interest in BMSB.

Mr. Low is also an independent non-executive director of 
Diversified Resources Berhad, a listed company on the Kuala 
Lumpur Stock Exchange. DRB is engaged in the manufacture and 
distribution of automobiles, property development and financial 
services.

Previously Mr. Low was an executive director of Kampong Lanjut 
Tin Dredging Bhd and chief executive officer and a director of 
Ayer Hitam Tin Dredging (Malaysia) Berhad. Both of these two 
companies are engaged in tin mining business and are listed on 
the Kuala Lumpur Stock Exchange.

Both Oilpro and Mr. Low have no prior business relationships 
with the Group or Mr. James Wong. Oilpro, Mr. Low and 
Mr. Teoh Beng Leong have not hold any shares
of the Company and are independent third parties not connected 
with (as defined in the Listing Rules) the Company or any of 
its subsidiaries or their executive and non-executive directors 
or their substantial shareholders or any of their respective 
associates (as defined in the Listing Rules). Mr. Low has not 
been a director of any listed companies in Hong Kong.

MRL has appointed Deloitte & Touche Corporate Finance Ltd. as 
its financial adviser. DTCFL is satisfied that MRL will have 
sufficient financial resources to complete the transaction.

DTCFL is an associate of Deloitte Touche Tohmatsu, auditors of 
the Company. DTT and DTCFL maintain separate management and staff 
and have two separate teams of professionals on the audit and 
financial advisory assignments.

INTENTION OF MRL AND OILPRO

It is the intention of MRL and Oilpro that after Completion, 
they will remain as the controlling shareholders of the Company 
and the Company will remain focused on its core business of 
designing, manufacturing and marketing specialised gift 
products and take the steps as detailed in the section headed 
'Future plans of the Group' below. MRL and Oilpro intend that 
they will assist the Group in strengthening its financial 
management and developing new markets in South East Asia. 
Although the Group will look for new business opportunities in 
its ordinary course of business, MRL and Oilpro have no immediate 
plan for the Group to acquire any new businesses.

MRL, Best Fortune, Mr. James Wong, Mr. Low and their respective 
associates (as defined in the Listing Rules) have no intention 
to inject assets into the Company. Mr. James Wong and Mr. Low 
jointly and severally undertake to the Stock Exchange that they 
will not inject assets into the Company for a period of twelve 
months after Completion. The Stock Exchange has stated that, 
if the Company remains a listed company on the Stock Exchange, 
any future injections of assets into or disposals of assets by 
the Company will be subject to the provisions of the Listing 
Rules. Pursuant to the Listing Rules, the Stock Exchange has 
the discretion to require the Company to issue a circular to 
the Shareholders where any acquisition or disposal, irrespective 
of the size, represents a departure from the principal activities 
of the Group following completion of the Restructuring Proposal. 
the Stock Exchange also has the power, pursuant to the Listing 
Rules, to aggregate a series of acquisitions, or proposals by 
the Company and any such acquisitions or disposals may, in any 
event, result in the Company being treated as a new applicant 
for listing and subject to the requirement for new applicants 
as set out in the Listing Rules.

WHITEWASH WAIVER

Upon Completion, MRL will hold more than 35% of the voting rights 
of the Company which would (give rise to a mandatory general 
offer obligation under Rule 26 of the Hong Kong Code on Takeovers 
and Mergers. MRL has applied to the SFC for the Whitewash Waiver. 
Such Whitewash Waiver and the Restructuring Proposal would be 
subject to the independent shareholders' approval of the Company 
at a special general meeting, resolution of which will be subject 
to a poll.

FINANCIAL EFFECTS OF THE RESTRUCTURING PROPOSAL

The principal financial effects of the Restructuring Proposal 
are to reduce the current liabilities and indebtedness 
of the Group and strengthen its capital base
with the issue of New Shares and convertible loan stock. The 
reduction in the indebtedness will also reduce the Group's 
interest cost, with positive effect on the Group's earnings and 
cashflow.

Upon Completion, the Group will receive equity and debt capitals 
of HK$54 million, comprising HK$10 million from the issue of 
New Shares and HK$44 million from the issue of irredeemable 
convertible loan stock to MRL and the Financial Creditors. It 
is expected Mr. James Wong and MRL will net off the outstanding 
balances of the advances (of up to HK$20 million in aggregate) 
to the Company against the consideration of HK$40 million payable 
by MRL. After repayment to the Financial Creditors and MIL (in 
liquidation) and settlement of the restructuring costs, the 
Group will have cash of about HK$11 million as the working capital 
of the Group. It is the intention of the Company that the Group 
will consider various financing alternatives for its working 
capital requirements as and when it receives more sales orders 
after Completion. MRL has undertaken to provide to the Group 
standby credit facilities of up to HK$10 million for the Group's 
operations in the coming year.

In addition, the financial effect of the Restructuring Proposal 
upon the retained losses of the Group is set out as follows:

                                        HK$ million

Capital reduction                               40
Outstanding balance waived by MIL's liquidators 62
Debts waived by Financial Creditors             127
Accrual for restructuring costs                 (5)
        

Reduction in retained losses                    224
        

As at 31 December 1999, the Group's unaudited net current 
liabiliites, net liabilities and retained losses are 
approximately HK$242 million, HK$165 million and HK$281 million 
respectively. Upon completion of the Restructuring Proposal, 
the Group's proforma unaudited net current liabilities, net 
assets and retained losses will be approximately HK$4 million, 
HK$30 million and HK$56 million respectively. As the Group has 
not completed its audited accounts for the year ended 31 December 
1999, these exact balances are not known yet. It is expected 
that the announcement on the audited results of the Group for 
the years ended 31 December 1998 and 1999 and the unaudited 
results of the Group for the six months ended 30 June 1999 will 
be released in on 5 April 2000. The circular containing 
information on the Restructuring Proposal, which is expected 
to be despatched to shareholders in on 6 April 2000, will include 
the audited balance of the Group's net current assets or 
liabilities and net deficit or asset as at 31 December 1999 and 
the proforma balance of the Group's net current assets or 
liabilities and net deficit or asset after Completion.

FUTURE PLANS OF THE GROUP

In early 1999 the Group suspended its sales and manufacturing 
operations. MIL, the Group's former sales and marketing arm in 
Hong Kong, is in liquidation. Notwithstanding this, the Group 
has continued to invest in product design and development 
sub-contracted to outside contractors with cash advances from 
Mr. James Wong and MRL. Mr. Wong has also maintained contact 
with the Group's customers, presented to them new products 
developed by the Group and discussed with them about sales orders 
for 2000.

Since July 1999 and January 2000, Mr. Wong and MRL have each 
made cash advances of HK$5.4 million and HK$13.5 million 
respectively to the Company for it to resume its operation, 
including the sub-contracting of its product design and 
development work to outside sub-contractors. In addition, MRL 
has deposited HK$1.5 million in an escrow account with CMS 
Cameron Mckenna, legal adviser to the Company, which will release 
further funds as required by the Group's operation.

In February 2000, the Group set up a new sales and marketing 
operation in Hong Kong. Mr. James Wong contacted some of the 
previous key staff and secured their employment with the Group. 
In addition, the Group retains its interest in its manufacturing 
operation in the PRC and has kept its production facilities in 
good condition. The Group has now recruited more than 1,000 
workers and has resumed its manufacturing operation in Zhongshan 
in the first week of January 2000 for new orders already verbally 
indicated to the Group by its customers. It is the industry's 
normal practice to start production for selected products at 
the beginning of the year on the basis of customers' verbal 
indications so that it could spread out its production schedule 
and cope with an increase in production in the peak season from 
May to September.

It is expected that the Group will resume its sales and 
manufacturing operations in full scale in a short span of time 
after the new capital injection. Some of the Group's customers 
have already indicated that they will continue to support the 
Group as its established track record in the industry has been 
well recognised.

On the basis of the customers' initial indications and taking 
into account of the robust retail market in the U.S. for 1999, 
management of the Company are confident that the Group will be 
able to secure a significant amount of sales orders for 2000.

In addition, it is the intention of the Company that the following 
steps will be taken to revive its business:

Focus on core business

After reviewing its existing operation, management of the 
Company has decided that the Group will remain focused on its 
core business of designing, manufacturing and marketing 
specialised gift products for private label customers and for 
retailers under its own brand name "Matrix".

The Group's major market will remain North America. The Company 
will regularly assess opportunities to expand sales to Europe 
and South East Asia.

Outsourcing

In order to reduce the level of fixed manufacturing overheads 
borne by the Group and in view of the lower margin of the 
manufacturing operation, management of the Company plans to 
sub-contract more production orders to outside factories. It 
is expected that the Group will cautiously monitor the scale 
of its manufacturing operation and close down or dispose of some 
of its peripheral production assets.

The Group will also focus more of its manpower and resources 
on product design, marketing and quality control, which 
represent the competitive edge of the Group when compared with 
other manufacturers in the region.

Financial management

In order to strengthen its financial management and
reduce its operating overheads, management of the Company will 
install a new budgeting and financial control system and maintain 
a lean and efficient management structure.

E-commerce

Management of the Company will explore the use of e-commerce 
in marketing and retailing its products as part of its marketing 
plan to expand its distribution channels and in placing purchase 
orders with its suppliers and sub-contractors.

As the U.S. market continues to grow and many of the Asian 
economies are already showing signs of recovery, management of 
the Company believes that the Group will have good prospects 
as it is one of the very few players in the Asia Pacific region 
that possess the skill and expertise in designing, manufacturing 
and marketing specialised gift products.

MRL does not plan to impose any major change to the existing 
businesses of the Group or to inject any assets or businesses 
into the Group after Completion.

MANAGEMENT OF THE COMPANY AFTER COMPLETION

Upon Completion, all the existing directors of the Company, 
comprising Mr. James Wong, Chairman of the Company, and Mr. Heng 
Kwoo Seng, the independent non-executive director, will remain 
on the board of the Company.

Mr. Low, sole shareholder and a director of Oilpro, will be 
appointed as an executive director and Deputy Chairman of the 
Company upon Completion. It is anticipated that Mr. Low will 
continue to be based in Malaysia and will come to Hong Kong and 
the PRC to oversee the Group's operations on a monthly basis. 
Details of the curriculum vitae of Mr. Low are set out in the 
section headed "Background of MRL and Oilpro" above.

Dr. Yap Set who is nominated by Mr. Low will be appointed as 
a non-executive director of the Company upon Completion. Dr. 
Yap holds a master degree in business administration and a Phd 
degree in chemical engineering. He has more than 25 years' 
experience in corporate management relating to mobile satellite 
telecommunciations, lotteries, property development, and 
commodity trading. Dr. Yap Set has not hold any shares of the 
Company and is an independent third party not connected with 
(as defined in the Listing Rules) the Company or any of its 
subsidiaries or their executive and non-executive directors or 
their substantial shareholders or any of their respective 
associates (as defined in the Listing Rules).

It is expected that one additional non-executive director will 
be appointed to the board of the Company and that two authorised 
representatives as required under the Listing Rules will be 
appointed before the resumption of the trading of the Company's 
shares. A qualified accountant will be recruited as financial 
controller to take charge of financial, accounting and treasury 
functions. All the existing staff will continue to be employed.

BREACHES OF THE LISTING RULES AND LISTING AGREEMENT

As the Group has not had funds to maintain its accounting function 
and settle outstanding audit fees, it has not been able to release 
its annual reports and audited final results for the year ended 
31 December 1998 and unaudited interim results for the six months 
ended 30 June 1999. In addition, the Company has not convened 
its Annual General Meeting for the year ended 31 December 1998. This
is in breach of the requirements of the Listing Rules and the 
Listing Agreement. The Stock Exchange has informed the Company 
that it will take appropriate actions regarding the breaches.

With the cash advances available from Mr. James Wong and MRL 
since July 1999 and January 2000 respectively, audit work on 
the final results for the years ended 31 December 1998 and 1999 
has been commenced. It is expected that the announcement on the 
audited results of the Group for the years ended 31 December 
1998 and 1999 and the unaudited results of the Group for the 
six months ended 30 June 1999 will be released and the annual 
reports will be despatched to shareholders at the beginning of 
April 2000. Besides, the Company will seek a sanction from the 
Registrar of Companies of Bermuda to convene the belated Annual 
General Meeting for the year ended 31 December 1998. After the 
sanction is obtained, the Company will jointly convene the Annual 
General Meeting for both the years ended 31 December 1998 and 
1999 before 30 June 2000.

As detailed in the subsection headed "Advance from Mr. James 
Wong", the advance from Mr. Wong and the security granted to 
him have not been approved by the independent shareholders. This 
is in breach of rule 14.26(8) of the Listing Rules. The Directors 
intend to propose at the Special General Meeting a resolution 
to approve the advance from Mr. Wong and the grant of the security 
to Mr. Wong. Best Fortune, Mr. Wong and their respective 
associates will abstain from voting at the Special General 
meeting on this resolution. The Stock Exchange has informed the 
Company that it will take appropriate actions regarding the 
breach.

GENERAL

Mr. Heng Kwoo Seng, the only independent non-executive director 
of the Company, will give advice to the independent shareholders 
of the Company in relation to the Restructuring Proposal. The 
Company has appointed Pacific Challenge Capital Limited as an 
independent financial adviser to advise its independent director 
and independent shareholders in respect of the Restructuring 
Proposal, the Whitewash Waiver and the advance from and the grant 
of the security to Mr. James Wong.

A special general meeting of the Company will be convened in 
order for the independent shareholders of the Company to consider 
and, if thought fit, to approve the Restructuring Proposal, the 
Whitewash Waiver, and matters relating thereto and the advance 
from and the grant of the security to Mr. James Wong. A circular 
will be despatched to shareholders giving further information 
relating to the Restructuring Proposal.

Mr. James Wong, who has an interest in the Company with his 
personal shareholding and via his interest in Best Fortune, and 
who is involved in the Restructuring Proposal via his interest 
in MRL, has undertaken that both he and Best Fortune will abstain 
from voting on the resolutions to approve the Restructuring 
Proposal, the Whitewash Waiver and the advance from and the grant 
of the security to Mr. James Wong at the special general meeting.

EXPECTED TIMETABLE

The board meeting of the Company for the release of its audited 
results, which was originally convened on 6 April 2000, has now 
been rescheduled to 5 April 2000. It is expected that the Company 
will announce its audited final results for the year ended 31 
December 1998 and interim results for the six months ended 30 
June 1999 on 5 April 2000. Besides, the Company will seek a 
sanction from the Registrar of Companies of Bermuda to convene the belated
Annual General Meeting for the year ended 31 December 1998. 
After the sanction is obtained, the Company will convene the 
Annual General Meeting for both the year ended 31 December 1998 
and 1999 together before 30 June 2000. The Stock Exchange has 
informed the Company that it will take appropriate actions 
regarding the breaches.

Events                          Expected timeframe

Announcement of the final results for the years ended 31 December 
1998 & 1999 and the interim results 
  for the six months ended 30 June 1999 5 April 2000
Despatching circulars   6 April 2000
Despatching annual reports      6 April 2000
Convening special general meeting       29 April 2000
Announcement of the results of the Special General Meeting and 
the completion of the Restructuring Proposal    29 April 2000
Resumption of the trading of the New Shares on the Stock Exchange
        2 May 2000

The above dates are tentative. Further announcement will be made 
if there is any change in the timetable.

RESUMPTION OF TRADING IN SHARES OF THE COMPANY

Since 11 March 1999, trading of the shares of the Company has 
been suspended, and since 11 September 1999, the Company has 
entered into the second stage of delisting procedures under 
Practice Note 17 of the Listing Rules. At the second stage, the 
Company is required to submit resumption proposals within six 
months which was made on 2 March 2000.

The release of this announcement does not in any way indicate 
that the trading in the shares of the Company will be resumed 
and that the Restructuring Proposal will necessarily be 
implemented and completed.

DEFINITIONS

"Best Fortune"  Best Fortune Profits Limited, a company 
incorporated in the British Virgin Islands with limited 
liability and wholly owned by a discretionary trust, the eligible 
beneficiaries of which include Mr. Wong and his family members

"BMSB"  Bukit Melita Sdn. Bhd., a company incorporated in Malaysia 
with limited liability and engaged in plantation business

"Company"       Matrix Holdings Limited, incorporated in Bermuda with 
limited liability and the shares of which are listed on the Stock 
Exchange

"Completion"    Completion of the Restructuring Proposal

"DRB"   Diversified Resources Berhad, a company incorporated in 
Malaysia with limited liability and listed on the Kuala Lumpur 
Stock Exchange

"DTCFL" Deloitte & Touche Corporate Finance Limited, a 
registered investment adviser under the Securities Ordinance 
(Chapter 333 of the Laws of Hong Kong)

"DTT"   Deloitte Touche Tohmatsu, auditors of the Company

"Financial Creditors"   Nine financial institutions and the 
landlord of the Company's previous office in Hong Kong

"Group" Matrix Holdings Limited and its subsidiaries

"MIL"   Matrix Industries Limited, a company incorporated in the 
British Virgin Islands with limited liability and a wholly owned 
subsidiary of the Company, which is in liquidation

"MML"   Matrix Manufacturing Limited, a company incorporated in 
the British Virgin Islands with limited liability and a wholly 
owned subsidiary of the Company

"MRL"   Mental Resources Limited, a company incorporated in the 
British Virgin Islands with limited liability and beneficially 
owned as to 87.5% by Oilpro and 12.5% by Mr. James Wong

"Mr. Low"       Mr. Low Hyap Heng, a director of MRL and Oilpro

"New Share(s)"  New Share(s) of HK$0.10 each upon capital 
reduction and share consolidation becoming effective

"Oilpro"        Oilpro (Asia) Limited, incorporated in Hong Kong with 
limited liability and wholly owned by Mr. Low

"Restructuring Agreements"      the subscription agreement dated 
22 December 1999 between the Company and MRL and the settlement 
deeds dated 21 and 22 December 1999 respectively between the 
Company, the Financial Creditors, Oilpro, MRL, MIL and MIL's 
liquidators as varied by the supplemental deeds entered into 
between the same parties on 29 February 2000

"Restructuring Proposal"        the arrangements contained in the 
Restructuring Agreements

"SFC"   Securities and Futures Commission

"Stock Exchange"        The Stock Exchange of Hong Kong Limited

"Whitewash Waiver"      a waiver from the SFC in respect of the 
obligations of MRL and parties acting in concert with it to make 
a general offer for all the shares of the Company not already 
owned or agreed to be acquired by them upon Completion

By Order of the Board           By Order of the Board
MATRIX HOLDINGS LIMITED         MENTAL RESOURCES LIMITED
Mr. Wong Chak Hung, James       Mr. Low Nyap Heng
Chairman                        Director

Hong Kong, 30 March 2000

The directors of Matrix Holdings Limited jointly and severally 
accept full responsibility for the accuracy of the information 
contained in this announcement, other than for information 
relating to MRL, Oilpro and Mr. Low, and confirm, having made 
all reasonable enquiries, that to the best of their knowledge, 
opinions expressed in this announcement have been arrived at 
after due and careful consideration and there are no other facts 
not contained in this announcement, the omission of which would 
make any statement in this announcement misleading.

The directors of Mental Resources Limited jointly and severally 
accept full responsibility for the accuracy of the information 
contained in this announcement, other than for information 
relating to the Group, and confirm, having made all reasonable 
enquiries, that to the best of their knowledge, opinions 
expressed in this announcement have been arrived at after due 
and careful consideration and there are no other facts not 
contained in this announcement, the omission of which would make 
any statement in this announcement misleading.