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.
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