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Hang Ten Group Holdings Limited

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					THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this document or as to the action to be taken, you should consult your stockbroker or other registered
dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Akai Holdings Limited (In Compulsory Liquidation), you should at once hand this document
together with the enclosed forms of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or
transfer was effected for transmission to the purchaser or transferee.
The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this
document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising
from or in reliance upon the whole or any part of the contents of this document.
This document does not constitute a public offering of securities nor is it calculated to invite public offers for securities and it must not be used for
the purposes of offering or inviting offers for any securities to the public.



                                                                    Proposal for
                    Akai Holdings Limited (In Compulsory Liquidation)
                                                   (incorporated in Bermuda with limited liability)
                                         by way of a shareholders’ scheme of arrangement
                                              (under section 99 of the Companies Act 1981 of Bermuda)
                                                         and
        withdrawal of the listing of the shares of Akai Holdings Limited (In Compulsory Liquidation) and
                                        the listing of the ordinary shares of




                                    Hang Ten Group Holdings Limited
                                                   (incorporated in Bermuda with limited liability)
                                on The Stock Exchange of Hong Kong Limited by way of introduction

                                                                      Sponsor



                                              Kim Eng Capital (Hong Kong) Limited

                                                                    Co-Sponsor




        Independent financial adviser to shareholders of Akai Holdings Limited (In Compulsory Liquidation)




A letter from the joint and several liquidators of Akai Holdings Limited (In Compulsory Liquidation) is set out on pages 38 to 41 of this document.
A letter from Horwath Capital Asia Limited, the independent financial adviser to shareholders of Akai Holdings Limited (In Compulsory Liquidation),
is set out on pages 91 to 101 of this document. A letter from the board of directors of Hang Ten Group Holdings Limited is set out on pages 42 to
90 of this document.
Notices of meetings of shareholders of Akai Holdings Limited (In Compulsory Liquidation) to be held at Plaza I-III, Lower Lobby, Novotel
Century Hong Kong, 238 Jaffe Road, Wan Chai, Hong Kong on 25 November 2002 are set out on pages 366 to 368 of this document. Whether or
not you intend to attend any of the meetings, you are requested to complete the enclosed forms of proxy and return them in accordance with the
instructions printed respectively thereon as soon as possible and in any event not less than 48 hours before the times appointed for the holding of
the meetings.
This document is published in connection with the introduction on The Stock Exchange of Hong Kong Limited of the entire issued and proposed
issued ordinary share capital of Hang Ten Group Holdings Limited and contains particulars given in compliance with the Companies Act 1981 of
Bermuda, the Hong Kong Code on Takeovers and Mergers, the Securities (Stock Exchange Listing) Rules of Hong Kong and the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to Akai Holdings Limited
(In Compulsory Liquidation), Hang Ten Group Holdings Limited and its subsidiaries, the Proposal (as defined herein), and the Scheme (as defined
herein).
Subject to the granting of the listing of, and permission to deal in, the shares of HK$0.001 each in the capital of Hang Ten Group Holdings Limited
on The Stock Exchange of Hong Kong Limited as well as compliance with the stock admission requirements of Hong Kong Securities Clearing
Company Limited, the shares will be accepted as eligible securities by Hong Kong Securities Clearing Company Limited for deposit, clearance and
settlement in the Central Clearing and Settlement System with effect from the commencement date of dealings in the shares or such other date as
determined by Hong Kong Securities Clearing Company Limited. All activities under the Central Clearing and Settlement System are subject to the
General Rules of the Central Clearing and Settlement System and Central Clearing and Settlement System Operational Procedures in effect from
time to time.


                                                                                                                                  31 October 2002
                                                                       CONTENTS


       Neither Akai Holdings Limited (In Compulsory Liquidation) nor the joint and several liquidators
  of Akai Holdings Limited (In Compulsory Liquidation) nor Hang Ten Group Holdings Limited have
  authorised anyone to provide you with information that is different from the contents of this document.
  You should rely only on the information contained in this document.

        Any information or representation not contained in this document must not be relied on by you
  as having been authorised by Akai Holdings Limited (In Compulsory Liquidation), the joint and
  several liquidators of Akai Holdings Limited (In Compulsory Liquidation), Hang Ten Group Holdings
  Limited, Kim Eng Capital (Hong Kong) Limited, Asian Capital (Corporate Finance) Limited, Horwath
  Capital Asia Limited or the directors of any of them or any other person involved in the Proposal (as
  defined herein).

                                                                                                                                                                Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1

Important note on information relating to Akai Holdings Limited
  (In Compulsory Liquidation) and its subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       10

Responsibility statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 11

Summary of the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  13

Parties involved in the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     22

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           23

Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     25

Directors of Hang Ten Group Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                     31

Corporate information relating to Hang Ten Group Holdings Limited . . . . . . . . . . . . . . . . . . . .                                                        32

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          34

Letter from the joint and several liquidators of Akai Holdings Limited
  (In Compulsory Liquidation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      38

Letter from the board of directors of Hang Ten Group Holdings Limited . . . . . . . . . . . . . . . . .                                                          42

Letter from Horwath Capital Asia Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 91

Explanatory statement (in compliance with
  Section 100 of the Companies Act 1981 of Bermuda) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                          102




                                                                                 –i–
                                                                  CONTENTS


                                                                                                                                                    Page

Appendix I                – Summary of the terms of the Warrants and CPS . . . . . . . . . . . . . . . . . . . . .                                   120

Appendix II               – Accountants’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        123

Appendix III              – Pro forma financial information about
                              Hang Ten Group Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          161

Appendix IV               – Valuation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     166

Appendix V                – Information on Akai Holdings Limited
                              (In Compulsory Liquidation) and its subsidiaries . . . . . . . . . . . . . . . . . .                                   198

Appendix VI               – Summary of the constitution of Hang Ten Group Holdings Limited
                              and Bermuda company law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    236

Appendix VII              – Statutory and general information on
                              Hang Ten Group Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          259

Scheme of arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    353

Order on originating summons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           363

Notice of Scheme Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     366

Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            368



Form of proxy for Scheme Meeting

Form of proxy for Special General Meeting




                                                                          – ii –
                                          DEFINITIONS


      In this document (other than the scheme of arrangement, the notice of the scheme meeting, the
notice of the special general meeting, the order on originating summons, the form of proxy for the
scheme meeting and the form of proxy for the special general meeting) the following expressions shall,
unless the context otherwise requires, have the meanings respectively set out opposite such expressions:

“Akai”                             Akai Holdings Limited (In Compulsory Liquidation), an exempted
                                   company incorporated in Bermuda with limited liability

“Akai Directors”                   the directors of Akai

“Akai Group”                       Akai and its Subsidiaries

“Akai Share(s)”                    the issued ordinary share(s) of HK$0.10 each credited as being fully
                                   paid up in the share capital of Akai

“Akai Shareholders”                the Persons listed in Akai’s register of members as shareholders of
                                   Akai from time to time

“Announcement Date”                the date of the announcement of the Proposal on 13 May 2002

“Asian Capital”                    Asian Capital (Corporate Finance) Limited, an investment adviser
                                   and dealer registered under the Securities Ordinance (Chapter 333 of
                                   the Laws of Hong Kong), co-sponsor of the Introduction

“Asian Wide”                       Asian Wide Services Limited, a company incorporated in BVI and
                                   owned as to 30% by Mr. Kenneth Hung, 30% by Mrs. Hung Cheng
                                   Sui Tsen, the mother of Mr. Kenneth Hung, and 20% each by Ms.
                                   Peggy Hung and Ms. Pamela Hung, both of them being sisters of Mr.
                                   Kenneth Hung

“associate(s)”                     has the meaning ascribed thereto under the Listing Rules

“Bermuda Court”                    the Supreme Court of Bermuda

“Best Standand”                    Best Standand Limited, a party acting in concert with the Investors
                                   which is beneficially owned as to 50% each by Mr. Chow Sik Wak
                                   and Ms. Wang Xin, each of whom is not connected with any of the
                                   directors, chief executive or substantial shareholders of Hang Ten or
                                   its subsidiaries or any of their respective associates (as defined under
                                   the Listing Rules) and will be subscribing for an interest of
                                   approximately 2.10% in the enlarged share capital of Hang Ten (BVI)
                                   for cash consideration of HK$20 million. Upon or prior to Closing,
                                   the equity interest in Hang Ten (BVI) held by Best Standand will be
                                   exchanged for 463,000,000 Hang Ten Shares (with one Warrant for
                                   every five Hang Ten Shares) and 153 CPS

“Business Day”                     a day (other than Saturday or Sunday) on which banks are open for
                                   ordinary banking business in Hong Kong and Bermuda


                                                 –1–
                                     DEFINITIONS


“BVI”                          the British Virgin Islands

“CCASS”                        the Central Clearing and Settlement System established and operated
                               by HKSCC

“Claim”                        any debt, liability or obligation of Akai which would be admissible
                               to proof in an insolvent winding-up of Akai under the Companies
                               Ordinance or the Companies Act commencing on the Effective Date

“Closing”                      the successful implementation of the Proposal

“Closing Date”                 the Business Day on which the Liquidators issue the Closing Notice

“Closing Notice”               the written closing notice to be given by the Liquidators to Hang Ten
                               under the Restructuring Agreement to indicate to the other parties to
                               the Restructuring Agreement that the Liquidators are in a position to
                               complete the Proposal

“Code”                         the Hong Kong Code on Takeovers and Mergers

“Committee of Inspection”      the committee of inspection of Akai

“Companies Act”                the Companies Act 1981 of Bermuda as amended

“Companies Ordinance”          the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

“Costs”                        the fees, costs and expenses of the Liquidators, their advisers and
                               Akai associated with the negotiation, preparation and implementation
                               of the Proposal

“Courts”                       collectively, the Hong Kong Court and the Bermuda Court

“CPS”                          7,307 convertible preference shares of HK$10,000 each to be issued
                               on the Closing Date by Hang Ten, convertible into Hang Ten Shares
                               at a conversion price of HK$0.001 per Hang Ten Share (subject to
                               adjustments)

“Creditors”                    any Person with a Claim

“Creditors’ Scheme Meetings”   the meetings of the Creditors convened on 26 September 2002 by the
                               direction of the Bermuda Court and the Hong Kong Court for the
                               purpose of considering and, if thought fit, approving the Creditors’
                               Schemes




                                             –2–
                                      DEFINITIONS


“Creditors’ Schemes”            the proposed schemes of arrangement for Akai pursuant to section
                                166 of the Companies Ordinance and section 99 of the Companies
                                Act made between Akai and the Creditors, with or subject to any
                                modification thereof, or addition thereto or conditions approved by
                                the Hong Kong Court or the Bermuda Court

“Creditors’ Share Allocation”   2,100,000,000 Hang Ten Shares to be allotted to Akai on the terms
                                set out in the Restructuring Agreement

“Designated Person”             Metro Capital Holdings Limited, a company wholly-owned by Mr.
                                Lo Bing Kuen and his family members, a party acting in concert with
                                the Investors, which is designated by the Investors to receive Hang
                                Ten Shares (with associated Warrants) to be issued pursuant to the
                                Sale and Purchase Agreement in consideration of its provision of
                                consulting services to the Investors in connection with the Proposal

“Director(s)”                   the director(s) of Hang Ten

“Effective Date”                the date on which the Schemes become effective by virtue of the
                                delivery of an office copy of the order of the Bermuda Court
                                sanctioning the Scheme and the Creditors’ Scheme to the Registrar
                                of Companies in Bermuda for registration and the delivery of an
                                office copy of an order of the Hong Kong Court sanctioning the
                                Creditors’ Scheme to the Registrar of Companies in Hong Kong for
                                registration

“Eligible Employee”             any employee (whether full time or part time employee, including
                                any executive directors but not any non-executive directors) of Hang
                                Ten, its subsidiaries or any Invested Entity

“Executive”                     the Executive Director of the Corporate Finance Division of the SFC
                                or any delegate of the Executive Director

“Explanatory Statement”         the explanatory statement relating to the Scheme as required by section
                                100 of the Companies Act, the text of which is set out on pages 102
                                to 119 of this document

“Final Record Date”             the final record date for determining the entitlements of the Akai
                                Shareholders under the Scheme, being the Business Day immediately
                                preceding the Effective Date

“Hang Ten”                      Hang Ten Group Holdings Limited, a company incorporated in
                                Bermuda with limited liability on 17 July 2002, the ordinary shares
                                of which, subject to the Scheme becoming effective, are proposed to
                                be listed on the Stock Exchange by way of Introduction and which
                                will become the holding company of Hang Ten (BVI) upon completion
                                of the Sale and Purchase Agreement on or before the Closing Date
                                              –3–
                               DEFINITIONS


“Hang Ten (BVI)”         Hang Ten International Holdings Limited, a company incorporated in
                         the British Virgin Islands with limited liability, which is owned as to
                         63% by Asian Wide, 4% by Mr. Kenneth Hung, 2% by each of Mr.
                         Dennis Kung, Ms. Peggy Hung and Ms. Pamela Hung, 25% by YGM
                         and 2% by Ms. Wang and Ms. Kao collectively as at the Latest
                         Practicable Date and will become a wholly-owned subsidiary of Hang
                         Ten upon completion of the Sale and Purchase Agreement

“Hang Ten (BVI) Group”   Hang Ten (BVI) and its subsidiaries

“Hang Ten Group”         Hang Ten and its subsidiaries following completion of the Sale and
                         Purchase Agreement

“Hang Ten Korea”         Hang Ten Korea Corp., a company incorporated in South Korea with
                         limited liability and owned as to 92% by ILC as at the Latest
                         Practicable Date

“Hang Ten Shares”        ordinary share(s) of HK$0.001 each in the share capital of Hang Ten

“HKSCC”                  Hong Kong Securities Clearing Company Limited

“Hong Kong”              the Hong Kong Special Administrative Region of the PRC

“Hong Kong Court”        the High Court of Hong Kong

“Horwath”                Horwath Capital Asia Limited, an investment adviser registered under
                         the Securities Ordinance (Chapter 333 of the Laws of Hong Kong),
                         the independent financial adviser to the Akai Shareholders

“ILC”                    ILC International Corporation, a company incorporated in the British
                         Virgin Islands with limited liability, a subsidiary owned as to 97.01%
                         and 2.99% by Hang Ten (BVI) and China Investment & Development
                         Company Limited respectively

“ILC Group”              ILC and its subsidiaries

“Introduction”           the listing of the Hang Ten Shares on the Stock Exchange by way of
                         introduction

“Invested Entity”        any entity in which any member of the Hang Ten Group holds any
                         equity interest

“Investors”              YGM, the Kung Family, Ms. Wang and Ms. Kao who are all
                         shareholders of Hang Ten (BVI) as at the Latest Practicable Date




                                       –4–
                                           DEFINITIONS


“Investors’ Securities Allocation”   (a)   21,200,000,000 Hang Ten Shares credited as fully paid up;

                                     (b)   7,038 CPS; and

                                     (c)   one Warrant for every 5 such Hang Ten Shares

                                     to be issued to the Investors and the Designated Persons

“Kim Eng”                            Kim Eng Capital (Hong Kong) Limited, an investment adviser
                                     registered under the Securities Ordinance (Chapter 333 of the Laws
                                     of Hong Kong), the sponsor of the Introduction

“Kung Family”                        Mr. Dennis Kung, Mr. Kenneth Hung, Ms. Peggy Hung, Ms. Pamela
                                     Hung and Asian Wide

“Latest Practicable Date”            28 October 2002, being the latest practicable date prior to the printing
                                     of this document for ascertaining certain information for inclusion in
                                     this document

“Liquidators”                        collectively, Messrs. Nicholas Timothy Cornforth Hill and Fan Wai
                                     Kuen, Joseph of RSM Nelson Wheeler Corporate Advisory Services
                                     Limited and Mr. R. Craig Christensen of Arthur Morris and Co. of
                                     Hamilton, Bermuda, being the joint and several liquidators of Akai

“Listing Rules”                      The Rules Governing the Listing of Securities on the Stock Exchange

“Long Stop Date”                     31 December 2002 or such later date as may be agreed between
                                     Hang Ten (BVI), the Investors, Akai (acting through the Liquidators)
                                     and the Liquidators and approved in its discretion by the Stock
                                     Exchange

“Macau”                              the Macau Special Administrative Region of the PRC

“Mr. Dennis Kung”                    Mr. Dennis Kung Ging Kong, who is the father of Mr. Kenneth Hung,
                                     Ms. Peggy Hung and Ms. Pamela Hung

“Mr. Kenneth Hung”                   Mr. Kenneth Hung, an executive Director and a shareholder of Asian
                                     Wide which will be the controlling shareholder of Hang Ten upon
                                     Closing

“Ms. Kao”                            Ms. Kao Yu Chu, an executive Director

“Ms. Wang”                           Ms. Wang Li Wen, an executive Director

“Option”                             any option that may be granted under the Share Option Scheme



                                                   –5–
                                     DEFINITIONS


“Other Investors”              Best Standand and Raytop, being the Persons listed in Hang Ten
                               (BVI)’s register of members, other than the Investors, immediately
                               prior to the issue of the Closing Notice, who, for the avoidance of
                               doubt, are not connected with the directors, the chief executives and
                               the substantial shareholders of Hang Ten and its Subsidiaries and
                               their respective associates (within the meaning of the Listing Rules)
                               and each of the Other Investors is a party acting in concert with the
                               Investors

“Other Investors’ Securities   (a)   810,000,000 Hang Ten Shares credited as fully paid up;
  Allocation”
                               (b)   269 CPS; and

                               (c)   one Warrant for every 5 such Hang Ten Shares

                               to be issued to the Other Investors

“Person”                       an individual, partnership, company, body corporate, joint stock
                               company, trust, unincorporated association or body of persons
                               (including a partnership or consortium), joint venture or other entity,
                               or a government or any political subdivision or agency thereof

“Petitioning Creditors”        Den Danske Bank Aktieseleskab, Hong Kong Branch, Bank of
                               Scotland, Hong Kong Branch and Emirates Bank International (Public
                               Joint Stock Company), Hong Kong Branch

“PRC”                          the People’s Republic of China, excluding Taiwan, Hong Kong and
                               Macau for the purpose of this document

“Proposal”                     the proposal involving the Schemes, completion of the Restructuring
                               Agreement and the acquisition of Hang Ten (BVI) by Hang Ten as
                               described in the section headed “Explanatory Statement (in compliance
                               with Section 100 of the Companies Act 1981 of Bermuda)” in this
                               document

“Proposed Spin-off”            the proposed separate listing of YGM’s interest in Hang Ten (BVI)
                               on the Stock Exchange pursuant to the implementation of the Proposal

“Raytop”                       Raytop Limited, a party acting in concert with the Investors which is
                               beneficially wholly-owned by Mr. Ng Kwok Wah, who is not
                               connected with any of the directors, chief executive or substantial
                               shareholders of Hang Ten or its subsidiaries or any of their respective
                               associates (as defined under the Listing Rules) and will be subscribing
                               for an interest of approximately 1.58% in the enlarged share capital
                               of Hang Ten (BVI) for cash consideration of HK$15 million. Upon
                               or prior to Closing, the equity interest in Hang Ten (BVI) held by
                               Raytop will be exchanged for 347,000,000 Hang Ten Shares (with
                               one Warrant for every five Hang Ten Shares) and 116 CPS

                                             –6–
                                      DEFINITIONS


“Relevant Period”               a period that commences from the six calendar months prior to the
                                Announcement Date up to and including the Latest Practicable Date

“Restructuring Agreement”       the restructuring agreement dated 16 April 2002 as amended by the
                                supplemental agreement dated 14 May 2002 between, amongst others,
                                Akai (acting through the Liquidators), the Liquidators, Hang Ten
                                (BVI) and the Investors in relation to the implementation of the
                                Proposal

“Restructuring Documents”       collectively the Restructuring Agreement, the Scheme, the Sale and
                                Purchase Agreement, the Warrant Instrument and all other documents
                                necessary to implement the Proposal

“RSM Corporate”                 RSM Nelson Wheeler Corporate Advisory Services Limited

“Sale and Purchase Agreement”   the agreement entered into between the Investors, the Other Investors
                                and Hang Ten on 28 October 2002 pursuant to which the Investors
                                and the Other Investors will, on or before the Closing Date, transfer
                                their respective shares in Hang Ten (BVI) to Hang Ten in consideration
                                of the Investors’ Securities Allocation and the Other Investors’
                                Securities Allocation

“Scheme”                        the proposed scheme of arrangement in relation to Akai pursuant to
                                section 99 of the Companies Act and made between Akai and the
                                Akai Shareholders, with or subject to any modification thereof or
                                addition thereto or condition approved or imposed by the Bermuda
                                Court

“Scheme Costs”                  those costs, charges, expenses and disbursements necessarily and
                                properly incurred after the Effective Date, in connection with the
                                administration and implementation of the Scheme including the fees
                                and remuneration of the Scheme Trustee

“Scheme Fund”                   all amounts credited from time to time to the Scheme Fund Account

“Scheme Fund Account”           an interest bearing trust account to be opened in the name of the
                                Scheme Trustee or the Scheme Trustee’s nominee with a licensed
                                bank in Hong Kong for the purposes of and for the benefit of those
                                Persons entitled under the Scheme into which the Scheme Trustee
                                shall place and deposit the Scheme Fund

“Scheme Meeting”                the meeting of Akai Shareholders to be convened by direction of the
                                Bermuda Court for the purpose of considering and if thought fit,
                                approving the Scheme, the notice of which is set out on pages 366
                                and 367 of this document, or any adjournment thereof



                                              –7–
                                  DEFINITIONS


“Scheme Trustee”            such Person as the Liquidators may nominate to hold on trust the
                            Scheme Fund

“Schemes”                   collectively, the Scheme and the Creditors’ Schemes

“SDI Ordinance”             the Securities (Disclosure of Interests) Ordinance (Chapter 396 of
                            the Laws of Hong Kong) as amended from time to time

“Securities Ordinance”      the Securities Ordinance (Chapter 333 of the Laws of Hong Kong) as
                            amended from time to time

“Security Interest”         any mortgage, pledge, lien, charge, assignment, hypothecation or other
                            agreement having the effect of conferring security

“SFC”                       the Securities and Futures Commission

“Share Option Scheme”       the share option scheme conditionally adopted by Hang Ten on
                            24 October 2002, the terms of which are set out in the paragraph
                            headed “Share Option Scheme” in Appendix VII

“Special General Meeting”   the special general meeting of the Akai Shareholders to be held
                            immediately after the Scheme Meeting at the same venue and any
                            adjournment thereof, the notice of which is set out on page 368 of
                            this document

“Sponsors”                  collectively, Kim Eng and Asian Capital

“Stock Exchange”            The Stock Exchange of Hong Kong Limited

“Subsidiary”                (in relation to any Person) any corporation, partnership, joint venture,
                            trust or estate of which more than 50 per cent. of:

                            (a)   the issued capital stock having ordinary voting power to elect a
                                  majority of the board of directors of that corporation
                                  (irrespective of whether at the time capital stock of any other
                                  class or classes of that corporation shall or might have voting
                                  power upon the occurrence of any contingency);

                            (b)   the interest in the capital or profits of that partnership or joint
                                  venture; or

                            (c)   the beneficial interest in that trust or estate,

                            is at the time directly or indirectly owned or controlled by that Person,
                            by that Person and one or more of its other Subsidiaries or by one or
                            more of that Person’s other Subsidiaries

                                          –8–
                                          DEFINITIONS


“US”                               the United States of America

“Voting Record Date”               23 November 2002, being the date for determining the entitlements
                                   of Akai Shareholders to vote at the Scheme Meeting

“Warrant Instrument”               the instrument that sets out the terms and conditions of the Warrants

“Warrant(s)”                       the unlisted and transferrable warrant(s) exercisable at any time within
                                   3 years from the Closing Date to be issued by Hang Ten to the
                                   Investors and the Other Investors pursuant to the Sale and Purchase
                                   Agreement which will entitle the holders thereof to subscribe for
                                   Hang Ten Shares at HK$0.01 each (subject to adjustments)

“Yangtze”                          Yangtze Apparel Taiwan Enterprise Limited, a company incorporated
                                   in Taiwan with limited liability and beneficially and wholly-owned
                                   by ILC

“YGM”                              YGM Trading Limited, a company incorporated in Hong Kong with
                                   limited liability and the ordinary shares of which are listed on the
                                   Stock Exchange and a substantial shareholder of Hang Ten upon
                                   completion of the Sale and Purchase Agreement

“HK$”                              Hong Kong dollars, the lawful currency of Hong Kong

“NT$”                              New Taiwan dollars, the lawful currency of Taiwan

“P$”                               Philippines Peso, the lawful currency of Philippines

“S$”                               Singapore dollars, the lawful currency of Singapore

“US$”                              U.S. dollars, the lawful currency of the U.S.

“W$”                               Korean Won, the lawful currency of South Korea

“sq. ft.”                          square feet

“sq. m.”                           square metres

“%”                                per cent.

      Unless otherwise specified, the conversion of US dollars into Hong Kong dollars in this document
is based on an exchange rate of HK$7.8 to US$1.0 and the conversion of NT$ into Hong Kong dollars in
this document is based on an exchange rate of HK$1.0 to NT$4.45. These exchange rates have been used,
where applicable, for illustration purposes only and do not constitute a representation that any amounts
have been, could have been or may be exchanged at these or any other rates.



                                                   –9–
IMPORTANT NOTE ON INFORMATION RELATING TO AKAI HOLDINGS LIMITED
        (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


      The following factual information concerning the progress of the liquidation of Akai should be
considered carefully when coming to any decision based on the contents of this document. This document
contains various historic financial information relating to the Akai Group.

      The Liquidators are not directors of Akai. The principal function of the Liquidators is to collect and
realise the assets of Akai and distribute such realisations for the benefit of all Persons which have an
interest in Akai’s winding up.

      Prior to their appointment, the Liquidators had no power to exercise nor exercised any control over
the business, property and affairs of the Akai Group. From the dates of their appointments to the date of
this document, the Liquidators have not had significant funds to exercise control over the business,
property and affairs of the Akai Group and therefore the extent of their control has been extremely
limited. In preparing the historic financial information on the share capital, material changes, indebtedness,
material litigation, material contracts, dividends and other historic financial information on the Akai
Group set out in Appendix V of this document, the Liquidators have been severely restricted by the
limited number of books and records of the Akai Group recovered by them.

      Persons receiving this document should note the very limited extent to which the Liquidators have
been able to verify information in relation to the business, property and affairs of the Akai Group and
should, in particular, bear these limitations in mind when reviewing the historic accounting information
in relation to the Akai Group.




                                                   – 10 –
                              RESPONSIBILITY STATEMENTS


      This document contains particulars given in compliance with the Companies Act, the Code and the
Listing Rules for the purpose of giving information to the public with regard to Akai, the Hang Ten
Group and the Proposal.

      The Directors jointly and severally accept full responsibility for the accuracy of the information in
this document (other than that concerning the Akai Group) and confirm, having made all reasonable
enquiries, that to the best of their knowledge and belief, the opinions expressed in this document other
than those concerning the Akai Group have been arrived at after due and careful consideration and there
are no other facts not contained in this document the omission of which would make any statements in
this document, other than those concerning the Akai Group, misleading.

      The Liquidators jointly and severally accept full responsibility for the accuracy of the information
in this document concerning the Akai Group and themselves and confirm, having made all reasonable
enquiries, that to the best of their knowledge and belief, the opinions expressed in this document concerning
the Akai Group and themselves have been arrived at after due and careful consideration and there are no
other facts not contained in this document the omission of which would make any statements in this
document concerning the Akai Group and themselves misleading.

     This document may not be used for the purpose of, and does not constitute, an offer or invitation in
any jurisdiction or in any circumstances in which such offer or invitation is not authorised or to any
Persons to whom it is unlawful to make such an offer or invitation.

      The Directors and the Liquidators recommend that Akai Shareholders consult their professional
advisers if they are in any doubt as to the tax implications of the Scheme or the holding of, or dealings
in, the Hang Ten Shares. It is emphasised that neither Akai, the Liquidators, Hang Ten, any member of
the Hang Ten (BVI) Group, the Sponsors or the Investors or any of their respective employees and
directors or any of the other parties involved in the Proposal accepts responsibility for any tax effects on,
or liabilities of the Akai Shareholders.

      It is the responsibility of any Akai Shareholder outside of Hong Kong wishing to accept the Hang
Ten Shares under the Scheme to satisfy himself as to the observance of the laws and regulations of all
relevant territories, including the obtaining of any governmental or other consents, and to pay any taxes
and duties required to be paid in such territories in connection therewith. Subject to the Executive’s
approval, Hang Ten Shares will not be allotted and issued pursuant to the Scheme to the Akai Shareholders
whose registered addresses are in a place outside of Hong Kong and where in the opinion of the Directors
and the Liquidators, Hang Ten Shares may not be allotted and issued without compliance with registration
and/or other legal or regulatory requirements or other special formalities in such jurisdictions or where it
is unduly onerous, impracticable or uneconomic for Hang Ten to comply with such local legal, regulatory
or other requirements (including Malaysia). Hang Ten reserves the right to refuse to allot and issue the
Hang Ten Shares to such Akai Shareholders where it believes that doing so would violate any applicable
securities or other laws or regulations or where it would be impracticable or uneconomic to do so. Akai
Shareholders whose registered addresses are in Malaysia should review pages 113 and 114 of this document.




                                                   – 11 –
                            RESPONSIBILITY STATEMENTS


      This document will be distributed to two Akai shareholders with registered addresses in Spain and
the Hang Ten Shares will be issued to those shareholders under the Scheme. However, the Hang Ten
Shares are not offered in Spain by means of a public offer as defined and construed by Spanish law nor
have they been notified to or registered by the Comisión Nacional del Mercado de Valores. The Directors
and the Liquidators acknowledge that the Hang Ten Shares may not be offered or sold in Spain by means
of a public offer as defined and construed by Spanish law but may be offered or sold in Spain in
compliance with the requirements of Law 24/1988, of 28 July (as amended by Law 37/1998, of 16
November), on the Spanish Securities Market and the Royal Decree 291/1992, of 27 March (as amended
by Royal Decree 2590/1998 of 7 December), on issues and public offers for the sale of securities.




                                                – 12 –
                              SUMMARY OF THE PROPOSAL


      This section aims to provide you with an overall summary of the Proposal. This summary does not
contain all the information required for you to make an informed decision about the Proposal and it
should be read in conjunction with the rest of this document which describes the Proposal in more detail.
Some of the particular risks relating to the Hang Ten (BVI) Group and the retail industry are set out in
the section headed “Risk Factors” which should be read carefully before you make any decision about
the Proposal.

BACKGROUND

Appointment of Liquidators

      On 13 January 2000, the Petitioning Creditors filed a winding up petition in Hong Kong. On 23
August 2000, the Hong Kong Court ordered that Akai be wound-up and appointed the Official Receiver
as provisional liquidator of Akai pursuant to section 194 (1)(a) of the Companies Ordinance pending the
first meeting of Creditors. On 24 May 2001, the Liquidators were appointed as the joint and several
liquidators of Akai by the Hong Kong Court.

      On 28 August 2000, the Petitioning Creditors filed a winding-up petition in Bermuda. On that same
day, the Bermuda Court appointed R. Craig Christensen as provisional liquidator and, on 1 September,
2000, the Bermuda Court appointed Fan Wai Kuen, Joseph and Damien Hodgkinson, together with R.
Craig Christensen, as joint and several provisional liquidators of Akai pursuant to section 170(2) of the
Companies Act pending a first meeting of Creditors. On 29 September 2000, the Bermuda Court ordered
that Akai be wound up. On 16 March 2001, the Liquidators were appointed as the joint and several
liquidators of Akai by the Bermuda Court.

Progress of Liquidation

      Following their appointment, the Liquidators took into their custody the limited number of assets,
books and records of the Akai Group which were identifiable and made available to them. Due to the
inadequate information and funds available to the Liquidators, their investigations of the Akai Group
have been and continue to be severely restricted. Consequently, as at the Latest Practicable Date, the
return to Creditors, if any, from the proceeds of the realisation of the Akai Group’s assets is not known.
As at the Latest Practicable Date, the Liquidators have received proofs of debt with claims in aggregate
in the amount of HK$9,855,359,252, in respect of the winding-up in Hong Kong and HK$8,975,675,776
in respect of the winding-up in Bermuda. However, the Liquidators have not yet completed their
adjudication of the Claims.

      At present, there are few tangible assets under the control of the Liquidators. However, if the
Proposal is successfully implemented, there will be gross realisations of HK$12,000,000 in cash and the
proceeds of sale of the Creditors’ Share Allocation which will be the first material realisations in the
winding-up of Akai. A number of legal claims against various parties have been identified by the
Liquidators. As at the Latest Practicable Date, it is not known whether these claims are worth pursuing as
there are insufficient funds available to the Liquidators to undertake the necessary investigations or to
obtain legal advice.

      Given the lack of funds and limited information available to the Liquidators, as at the Latest
Practicable Date, the Liquidators are unable to estimate with any degree of certainty what, if any,
realisations may be available from the winding-up of Akai apart from the realisations achieved if the
Proposal is successfully implemented.
                                               – 13 –
                              SUMMARY OF THE PROPOSAL


Role of Liquidator

      The role of a liquidator is to collect and realise the assets of a company. The proceeds from the
realisation of a company’s assets are applied in discharging all of the company’s debts and liabilities
after paying the costs and expenses of the winding-up. Any balance that remains is distributed among the
company’s shareholders according to their rights and interests or otherwise dealt with as the company’s
memorandum of association and bye-laws direct.

De-listing Procedure

      The Stock Exchange placed Akai in the de-listing procedure set out in Practice Note 17 to the
Listing Rules with effect from 23 August 2000.

       On 10 September 2001, the Stock Exchange advised Akai that it was in the third stage of the de-
listing procedure and that, unless a resumption proposal was submitted to the Stock Exchange by no later
than 11 March, 2002, the listing of the Akai Shares on the Stock Exchange would be cancelled.

      On 28 February 2002, Akai submitted the Proposal to the Stock Exchange. On 8 March 2002, the
Stock Exchange advised Akai that the Listing Committee had approved the extension for the cancellation
of the listing of the Akai Shares up to 17 July 2002 to enable the Proposal to be progressed.

     On 12 July 2002, the Stock Exchange advised Akai that the Listing Committee had approved the
extension for the cancellation of the listing of the Akai Shares up to 29 November 2002 to enable Akai to
proceed with the Proposal and the new listing application of Hang Ten under the Proposal.

      On 23 October 2002, the Stock Exchange advised Akai that the Listing Committee had approved a
further extension for the cancellation of the listing of the Akai Shares up to 22 January 2003 to enable
Akai to proceed with the Proposal and the new listing application of Hang Ten under the Proposal.

      The extension was granted in respect of the Proposal and not any other resumption proposal. If the
Proposal is not successfully implemented, the Stock Exchange is unlikely to grant a further extension
regardless of whether or not an alternative resumption proposal is made. If this were to occur, the Akai
Shares will be de-listed and the Akai Shares will have no value.

THE PROPOSAL

Summary

     In summary, the Proposal is as follows:

     (a)   Hang Ten will acquire the entire issued share capital of Hang Ten (BVI) from the Investors
           and the Other Investors in consideration of the Investors’ Securities Allocation and the Other
           Investors’ Securities Allocation respectively, as a result of which the Investors will hold a
           controlling interest in Hang Ten.




                                                 – 14 –
                              SUMMARY OF THE PROPOSAL


     (b)   Under the Scheme, Akai Shareholders on the Final Record Date will transfer all of their Akai
           Shares to Hang Ten. In consideration of this transfer, Akai Shareholders on the Final Record
           Date will receive in aggregate 300,000,000 Hang Ten Shares, credited as fully paid up, to be
           distributed among Akai Shareholders pro rata in accordance with their respective holdings of
           Akai Shares (subject to rounding down) held on the Final Record Date.

     (c)   Hang Ten will:

           (i)    pay to Akai cash consideration of HK$12,000,000, financed by the net proceeds to be
                  derived from the subscription of new shares in Hang Ten (BVI) by the Other Investors;
                  and

           (ii)   issue and allot the Creditors’ Share Allocation to Akai, being 2,100,000,000 Hang Ten
                  Shares, credited as fully paid up, and ranking pari passu with all other Hang Ten Shares
                  in issue on the Closing Date.

     (d)   Listing of the Akai Shares will be withdrawn from the Stock Exchange and the Hang Ten
           Shares will be listed on the Stock Exchange by way of Introduction.

     (e)   On the Closing Date, Hang Ten will transfer all of the Akai Shares to the Liquidators (or their
           nominees) for the sum of HK$1.00.

     (f)   If there is any surplus available for Akai Shareholders after the discharge of the costs and
           expenses of the winding-up of Akai and the payment in full of the Claims of the Creditors,
           such surplus will be held on trust by the Scheme Trustee for the Akai Shareholders.

     (g)   The Investors have agreed that Hang Ten will pay costs and expenses incurred by Akai of
           implementing the Proposal including the costs and expenses of the Liquidators and their
           advisers not exceeding HK$6,450,000, being the estimated costs and expenses of implementing
           the Proposal on the basis of quotations received from the relevant professional advisers.
           According to the Liquidators and in accordance with the Restructuring Agreement, of the
           HK$6,450,000 to date, HK$1,250,000 has been paid by the Investors to the Liquidators.
           Although it is likely that the costs incurred to date exceed this amount, the costs and expenses
           incurred by Akai of implementing the Proposal are limited to HK$6,450,000 under the
           Restructuring Agreement. On Closing, amounts paid by Hang Ten in respect of such costs
           will be treated as part of the Scheme Fund. In the event that costs and expenses of implementing
           the Proposal (including those incurred by the Liquidators) exceed HK$6,450,000, the additional
           amount will be borne as an expense in relation to the liquidation of Akai and be payable from
           the proceeds generated therein.

Acquisition of Hang Ten (BVI) by Hang Ten

      On 28 October 2002, Hang Ten entered into the Sale and Purchase Agreement under which it will
acquire the entire issued share capital of Hang Ten (BVI) from the Investors and the Other Investors. The
consideration to the Investors will be satisfied by 21,200,000,000 Hang Ten Shares credited as fully paid
(with one Warrant for every five Hang Ten Shares) and 7,038 CPS to the Investors. The Warrants will be

                                                 – 15 –
                                SUMMARY OF THE PROPOSAL


issued on the Closing Date. A total of 4,402,000,000 Hang Ten Shares will be issued on exercise of the
Warrants, representing approximately 18.03% of the issued ordinary share capital of Hang Ten immediately
after such Warrants are issued. Out of the 21,200,000,000 Hang Ten Shares, the Investors will direct
Hang Ten to issue and allot 1,200,000,000 Hang Ten Shares (with associated Warrants) to the Designated
Person in consideration of consultancy services provided by the Designated Person to the Investors in
relation to the restructuring of Akai.

      In order to maintain a sufficient public float for the Hang Ten Shares upon Closing, Hang Ten
(BVI) will, prior to completion of the Sale and Purchase Agreement, issue shares, representing
approximately 3.7% of its enlarged issued share capital, to the Other Investors, who are not connected
with the directors, the chief executives and the substantial shareholders of Hang Ten and its subsidiaries
and their respective associates. Pursuant to the Sale and Purchase Agreement, the Other Investors will
transfer their portion of the entire equity interests in Hang Ten (BVI) to Hang Ten, and to satisfy the
consideration to the Other Investors, Hang Ten will issue 269 CPS and 810,000,000 Hang Ten Shares
(with one Warrant for every 5 Hang Ten Shares so issued) to the Other Investors which Hang Ten Shares
will represent approximately 3.32% of the issued ordinary share capital of Hang Ten on the Closing Date
but before any conversion of the CPS or exercise of the Warrants.

     In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other
Investors have agreed to convert the 269 CPS into 2,690,000,000 Hang Ten Shares upon Closing but
before the commencement of dealing in the Hang Ten Shares. Accordingly, there will be 3,500 million
Hang Ten Shares held by the Other Investors upon listing of the Hang Ten Shares, representing
approximately 12.92% of the issued ordinary share capital of Hang Ten following Closing but before any
conversion of the CPS issued to the Investors or exercise of the Warrants.

        Completion of the Sale and Purchase Agreement will take place on or before the Closing Date.

Conditions Precedent to the Proposal

        Closing is conditional on each of the following conditions being satisfied prior to the Long Stop
Date:

        (a)   The passing of all necessary resolutions by the Akai Shareholders (other than (a) the Investors
              or any persons acting in concert with them, who are not permitted to vote pursuant to the
              Code and (b), the directors, chief executive and any controlling shareholder of Akai or their
              respective associates pursuant to Rule 6.12 of the Listing Rules) approving the implementation
              of the Proposal to be proposed at the Special General Meeting.

        (b)   The approval of the Creditors’ Schemes by a majority in number representing not less than
              three-fourths in value of the Creditors present and voting in person or by proxy at the
              Creditors’ Scheme Meetings, the sanction by the Courts of the Creditors’ Schemes and delivery
              of office copies of the orders of the Hong Kong Court and the Bermuda Court to the Registrar
              of Companies in Hong Kong and the Registrar of Companies in Bermuda respectively for
              registration.




                                                    – 16 –
                              SUMMARY OF THE PROPOSAL


     (c)   The approval of the Scheme by a majority in number representing not less than three-fourths
           in value of Akai Shareholders at the Voting Record Date present and voting in person or by
           proxy at the Scheme Meeting, the sanction by the Bermuda Court of the Scheme and the
           delivery of an office copy of the order of the Bermuda Court to the Registrar of Companies in
           Bermuda.

     (d)   In addition, Rule 2.10 of the Code provides that the Scheme may only be implemented if:

           (i)    the Scheme is approved by at least 75% of the votes attaching to the disinterested Akai
                  Shares that are cast either in person or by proxy at the Special General Meeting by way
                  of a poll; and

           (ii)   the number of votes cast against the resolution to approve the Scheme at the Special
                  General Meeting is not more than 10% of the votes attaching to all disinterested Akai
                  Shares.

     (e)   Approval by the Listing Committee of the Stock Exchange of the withdrawal of the listing of
           the Akai Shares.

     (f)   Approval by the Listing Committee of the Stock Exchange to the granting of the listing of
           and permission to deal in the Hang Ten Shares in issue and to be issued pursuant to the
           Restructuring Documents.

     (g)   Appropriate approval from the SFC relating to the Proposal.

     (h)   Approval by all relevant authorities for the issue of the Hang Ten Shares pursuant to the
           Proposal.

     (i)   Consents and approvals of all relevant government and regulatory authorities and any other
           Persons necessary for the implementation of the Proposal including, without limitation, the
           approval (referred to in (d) above) required under Rule 2.10 of the Code, the written
           confirmation by the Hong Kong Securities Clearing Company Limited that the share capital
           of Hang Ten has been accepted as eligible securities for deposit, clearance and settlement in
           CCASS.

     (j)   Duly executed Warrant Instrument.

     (k)   The Sale and Purchase Agreement being duly executed, the completion of which is conditional
           only on the issue of the Closing Notice.

      The conditions listed at (a) to (k) above must be satisfied (to the extent not amended or waived in
writing by the Liquidators and the Investors) before Closing in order for the Proposal to be successfully
implemented.




                                                 – 17 –
                               SUMMARY OF THE PROPOSAL


        The Creditors’ Schemes have been approved by the requisite majority in number and value of the
Creditors at the Creditors’ Scheme Meetings held on 26 September 2002 and on 25 October 2002 the
Bermuda Court made an order sanctioning the Creditors’ Scheme proposed under section 99 of the
Companies Act. The Sale and Purchase Agreement was executed by the parties thereto on 28 October
2002. Save as mentioned, all other conditions listed above remained outstanding as at the Latest Practicable
Date. The Liquidators and the Investors will not waive any of the conditions (including the condition
listed in (c) above) the fulfilment of which is required by the Code, the Listing Rules or other applicable
laws in order for the Scheme to be successfully implemented.

       If each of the conditions listed above is satisfied, it is anticipated that the Effective Date for the
Schemes will be on or before 4 December 2002 and the Closing Date for the implementation for the
Proposal will be on 5 December 2002. If any of the conditions precedent listed above have not been
fulfilled by 31 December 2002, the Proposal will lapse unless a later date is agreed among the parties to
the Restructuring Agreement.

      Akai Shareholders will be notified by an announcement placed in one English language newspaper
and one Chinese newspaper circulated in Hong Kong and one English newspaper circulated in Bermuda
of the Closing Date or that the Proposal has lapsed.

     Should the Proposal fail, the Akai Shares will be delisted in accordance with Practice Note 17 of
the Listing Rules. Should this occur, the Liquidators believe that there will be no return to the Akai
Shareholders.




                                                   – 18 –
                                           SUMMARY OF THE PROPOSAL


Shareholding Structure of Hang Ten

     The Proposal contemplates the following shareholding structure of Hang Ten upon Closing,
conversion of the CPS and exercise of the Warrants.

                                                                      Upon Closing                     Upon Closing                        Upon Closing
                                                                  with no CPS issued to                 with all CPS                        with all CPS
                                                                       the Investors               issued to the Investors             issued to the Investors
                                                                         converted                  converted but before                   converted and
                                     Before Closing               or Warrants exercised           exercise of the Warrants            all Warrants exercised
                            Number of                         Number of                          Number of                           Number of
                           Akai Shares                  Hang Ten Shares                    Hang Ten Shares                     Hang Ten Shares
                       (million shares)             %    (million shares)             %     (million shares)               %    (million shares)               %

     THE INVESTORS
      The Kung
        Family
        (Notes 1 &3)
      Asian Wide                    –               –            12,600         46.49%               56,940          58.41%           59,460.00          58.36%
      Mr. Kenneth Hung              –               –               800          2.94%                3,620           3.71%            3,780.00           3.71%
      Mr. Dennis Kung               –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
      Ms. Peggy Hung                –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
      Ms. Pamela Hung               –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%

       YGM (Note 3)                 –               –             5,000         18.45%               22,590          23.18%           23,590.00          23.15%

       Ms. Kao (director
        of Hang Ten)
        (Note 3)                    –               –               200            0.74%                900           0.92%              940.00           0.92%
       Ms. Wang
        (director of
        Hang Ten)
        (Note 3)                    –               –               200            0.74%                900           0.92%              940.00           0.92%

     Sub-total                      –               –            20,000         73.80%               90,380         92.72%            94,380.00         92.64%

     OTHER INVESTORS
      (Notes 2 & 3)
      Best Standand                 –               –             1,993            7.36%              1,993           2.05%            2,085.60           2.06%
      Raytop                        –               –             1,507            5.56%              1,507           1.54%            1,576.40           1.54%

     DESIGNATED PERSON
        (Note 3)                    –               –             1,200            4.43%              1,200           1.23%            1,440.00           1.41%

     AKAI SHAREHOLDERS 2,191                 100.00%                300            1.10%                300           0.31%              300.00           0.29%

     LIQUIDATORS
        (for the benefit
        of the Creditors)           –               –             2,100            7.75%              2,100           2.15%            2,100.00           2.06%

     Sub-total                  2,191        100.00%              7,100         26.20%                7,100          7.28%             7,502.00          7.36%

     Total                      2,191        100.00%             27,100        100.00%               97,480        100.00%           101,882.00        100.00%

                                                                          – 19 –
                                          SUMMARY OF THE PROPOSAL


                                                                  Upon Closing                 Upon Closing                   Upon Closing
                                                              with no CPS issued to        with all CPS issued to         with all CPS issued to
                                                                  the Investors           the Investors converted        the Investors converted
                                                                    converted                    but before                 and all Warrants
                                    Before Closing            or Warrants exercised        exercise of Warrants                  exercised
                            Number of                     Number of                      Number of                       Number of
                          Akai Shares                Hang Ten Shares                Hang Ten Shares                 Hang Ten Shares
                       (million shares)            % (million shares)            % (million shares)               % (million shares)             %

     The concert
       group
     The Investors
       (Note 3)                    –             –             20,000        73.80%           90,380       92.72%             94,380       92.64%
     Other Investors
       (Note 3)                    –             –             3,500         12.92%            3,500        3.59%              3,662        3.60%
     Designated
       Person (Note 3)             –             –             1,200         4.43%             1,200        1.23%              1,440        1.41%

     Sub-total                     –             –             24,700       91.15%            95,080       97.54%             99,482       97.65%

     Akai Shareholders          2,191      100.00%               300          1.10%              300        0.31%                300        0.29%

     Liquidators
        (for the benefit
     of the Creditors)              –            –              2,100         7.75%            2,100        2.15%              2,100        2.06%

     Total                      2,191     100.00%              27,100       100.00%           97,480      100.00%            101,882      100.00%

     Note 1: Out of the 14,600 million Hang Ten Shares issued to members of the Kung Family upon Closing but before
             conversion of the CPS held by the Investors or exercise of the Warrants, Mr. Kenneth Hung, Mr. Dennis Kung,
             Ms. Peggy Hung, Ms. Pamela Hung and Asian Wide will be interested in 800 million, 400 million, 400 million,
             400 million and 12,600 million Hang Ten Shares respectively.

     Note 2: In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have
             agreed to convert the 269 CPS to be issued to them under the Sale and Purchase Agreement into Hang Ten Shares
             upon Closing but before the commencement of dealing in Hang Ten Shares. Accordingly, there will be 27,100
             million Hang Ten Shares and 7,038 CPS issued and credited as fully paid upon listing of the Hang Ten Shares.

     Note 3: The Investors, the Other Investors and the Designated Person are concert parties pursuant to the Code and
             together hold approximately 91.15% of the issued ordinary share capital of Hang Ten upon Closing with no CPS
             issued to the Investors converted or Warrants exercised.


      As shown from the first shareholding table above, the Investors will be interested in approximately
73.80% of the entire issued ordinary share capital of Hang Ten upon Closing. The remaining 26.20% of
the issued ordinary share capital of Hang Ten will collectively be held by the Akai Shareholders, the
Liquidators, the Designated Person and Other Investors. The Designated Person and the Other Investors
are all not connected with the directors, the chief executives and the substantial shareholders of Hang
Ten and its subsidiaries and their respective associates. Accordingly, not less than 25% of Hang Ten’s
issued ordinary share capital will be held by the public immediately upon commencement of dealings in
the Hang Ten Shares and prior to the conversion of any CPS held by the Investors or exercise of any
Warrants in compliance with the public float requirements stipulated under Rule 8.08 of the Listing

                                                                        – 20 –
                              SUMMARY OF THE PROPOSAL


Rules. It will be a term of the issued Warrants and CPS that no holders thereof shall be entitled to
exercise the conversion right if such conversion would result in the public float falling below the
minimum prescribed percentage required under the Listing Rules.

     The Stock Exchange has stated that in the event that less than 25% of the issued Hang Ten
Shares are in public hands after Closing or if the Stock Exchange believes that:

     •     a false market exists or may exist in the trading of the Hang Ten Shares; or

     •     there are insufficient Hang Ten Shares in public hands to maintain an orderly market,

     it will consider exercising its discretion to suspend dealings in the Hang Ten Shares.

       The Stock Exchange has further stated that, if Hang Ten remains listed on the Stock Exchange,
any asset dispositions or asset acquisitions by Hang Ten and its subsidiaries will be subject to the
relevant provisions of the Listing Rules. The Stock Exchange has the discretion to require Hang Ten
to issue an announcement and/or a circular to the shareholders of Hang Ten irrespective of the size
of the proposed transaction, particularly when such proposed transaction represents a departure
from the principal activities of the Hang Ten Group. The Stock Exchange also has the power to
aggregate a series of transactions and any such transaction(s) may result in Hang Ten being treated
as if it were a new listing applicant.

INFORMATION ON THE HANG TEN GROUP

      Hang Ten was incorporated in Bermuda on 17 July 2002 and, on completion of the Sale and
Purchase Agreement, will be an investment holding company whose principal asset is its interest in the
entire issued share capital of Hang Ten (BVI). Hang Ten (BVI) was incorporated in the British Virgin
Islands and is an investment holding company whose principal asset is its 97.01% equity interest in ILC.

      The Hang Ten (BVI) Group is principally engaged in the business of designing, marketing and sale
of apparel and accessories under the brandname of “Hang Ten” in Asian countries including Taiwan,
South Korea, Singapore, Philippines and Malaysia. The portfolio of the apparel under the brandname of
“Hang Ten” comprises jackets, vests, T-shirts, skirts, pants and jeans as well as other accessories such as
bags, caps, socks, shoes, belts and umbrellas, which are targeted at customers aged between 15 and 45.
The Directors believe that “Hang Ten” is one of the leading brand names for money-for-value apparel
and accessories in the Asian region. The Hang Ten (BVI) Group is the owner of the trademark “Hang
Ten” which is also licensed to independent third parties for distribution and production of apparel and
accessories in over 50 countries, including the US, Europe, Japan, Australia, South America and South
Africa. The Hang Ten (BVI) Group operates a retail network of over 300 outlets in the Asian region. The
Hang Ten (BVI) Group is also engaged in the wholesaling of products bearing the brandname “Hang
Ten” through a number of authorised local distributors in Taiwan.

RISK FACTORS

      In considering the Proposal, Akai Shareholders and the Creditors should also take into account the
risk factors relating to the Hang Ten Group contained in the section headed “Risk Factors” set out on
pages 25 to 30 of this document.
                                                  – 21 –
                      PARTIES INVOLVED IN THE PROPOSAL


Sponsor                                 Kim Eng Capital (Hong Kong) Limited
                                        Room 1901, 19th Floor
                                        Bank of America Tower
                                        12 Harcourt Road
                                        Central
                                        Hong Kong

Co-sponsor                              Asian Capital (Corporate Finance) Limited
                                        Suite 3104, 31st Floor
                                        Nine Queen’s Road Central
                                        Central
                                        Hong Kong

Independent financial adviser to        Horwath Capital Asia Limited
  Akai Shareholders                     601 Dah Sing Financial Centre
                                        108 Gloucester Road
                                        Wanchai
                                        Hong Kong

Legal advisers to the Liquidators       Allen & Overy
                                        9th Floor
                                        Three Exchange Square
                                        Central
                                        Hong Kong

Legal advisers to Hang Ten
  as to Hong Kong Law                   Preston Gates Ellis
                                        10th Floor
                                        Hutchison House
                                        10 Harcourt Road
                                        Central
                                        Hong Kong

  as to Bermuda Law                     Conyers Dill & Pearman
                                        2801 One Exchange Square
                                        8 Connaught Place
                                        Central
                                        Hong Kong

Auditors and reporting accountants      KPMG
                                        8th Floor, Prince’s Building
                                        10 Chater Road
                                        Central
                                        Hong Kong

Property valuer                         Chesterton Petty Ltd
                                        16th Floor
                                        CITIC Tower
                                        1 Tim Mei Avenue
                                        Central
                                        Hong Kong


                                     – 22 –
                                                    EXPECTED TIMETABLE


Expected timetable (Note 1)

                                                                                                                                                       2002

Voting Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 November

Latest time to lodge forms of proxy in respect of the:
  Scheme Meeting (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on 23 November
  Special General Meeting (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:30 a.m. on 23 November

Scheme Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on 25 November

Special General Meeting (or as soon as the Scheme Meeting
  has been concluded or adjourned) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:30 a.m. on 25 November

Announcement of the results of the Scheme Meeting and
  the Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 November

Bermuda Court hearing of petition to sanction the Scheme (Note 1) . . . . . . . . . . . . . . . . . . . 29 November

Final Record Date (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 December

Effective Date (Notes 1 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 December

Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 December

Despatch of certificates for Hang Ten Shares (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 December

Listing of Akai Shares withdrawn from the Stock Exchange
  at the close of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 December

First day of dealing in Hang Ten Shares on the Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . 9 December

First day of operation of odd lot trading facility (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 December

                                                                                                                                                       2003

Last day of operation of odd lot trading facility (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 January




                                                                          – 23 –
                                              EXPECTED TIMETABLE

Notes:

1.       The dates listed in the expected timetable are subject to the Courts’ availability and may change.

2.       Akai Shareholders are requested to lodge the yellow form of proxy for the Scheme Meeting and the power of attorney or
         other authority, if any, under which it is signed or a notarially certified copy of that power or authority at the principal
         place of business of Akai at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong by the time
         stated above. Completion and return of the yellow form of proxy will not preclude an Akai Shareholder from attending the
         Scheme Meeting and voting in person at the meeting. In such event, his yellow form of proxy will be deemed to have been
         revoked.

3.       The blue form of proxy for the Special General Meeting and the power of attorney or other authority, if any, under which it
         is signed or a notarially certified copy of that power or authority should be lodged at the principal place of business of
         Akai at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong by the time stated above. Completion
         and return of the blue form of proxy will not preclude an Akai Shareholder from attending the Special General Meeting
         and voting in person. In such event, his blue form of proxy will be deemed to have been revoked.

4.       Under the Scheme, the Final Record Date, being the time for determining the entitlements under the Scheme, is fixed at
         the Business Day immediately preceding the Effective Date. A press announcement will be placed in one English newspaper
         and one Chinese newspaper circulating in Hong Kong and one newspaper circulating in Bermuda if circumstances arise
         which may result in any of the times or dates in the expected timetable being different from that indicated above.

5.       The Schemes will become effective when an office copy of the Bermuda Court order sanctioning the Scheme and the
         Creditors’ Scheme (with or without modification) is delivered to the Registrar of Companies in Bermuda for registration
         and an office copy of the order of the Hong Kong Court sanctioning the Creditors’ Scheme (with or without modification)
         is delivered to the Registrar of Companies in Hong Kong for registration. This is expected to take place on or about 4
         December 2002 but is subject to the availability of the Bermuda Court to hear the petition to sanction the Scheme.

6.       Assuming that the Scheme becomes effective, as from the Effective Date, all existing certificates representing Akai Shares
         will cease to have effect as evidence of ownership of the Akai Shares represented by such certificates. In the absence of
         any specific instructions to the contrary received in writing by the relevant Person(s) entitled to receive Hang Ten Shares
         under the Scheme, certificates representing the Hang Ten Shares will be distributed pursuant to the Scheme to the Persons
         entitled thereto at their respective registered addresses as set out in the register of members of Akai or, in the case of joint
         holders, to the registered address of that joint holders whose name stands first on the register of members of Akai in
         respect of the joint holding. All such certificates will be sent at the risk of the Persons to whom they are addressed.

7.       For the purpose of alleviating difficulties that may arise for Akai Shareholders who will be holding odd lots of Hang Ten
         Shares, Hang Ten has appointed Kim Eng Securities (Hong Kong) Limited to match the sale and purchase of odd lots of
         Hang Ten Shares during the one month period from the first day of operation of the odd lot trading facility to the last day
         of the odd lot trading facility, both days inclusive. Any Person wishing to take advantage of the odd lot trading facility
         should contact Ms. Amy Wu (Telephone: 2532 8229) or Ms. Sandy Yuen (Telephone: 2532 8226) during this period. Any
         Person holding Hang Ten Shares in odd lots should note that the matching of sale and purchase of odd lots of the Hang Ten
         Shares is not guaranteed and should consult their professional advisers if they are in any doubt about the odd lot trading
         facility. For more details please refer to the paragraph headed “Arrangements for odd lot trading” in the Explanatory
         Statement on page 118 of this document.




                                                                 – 24 –
                                         RISK FACTORS


      In evaluating the business of the Hang Ten Group, Akai Shareholders should consider carefully all
the information contained in this document including the risk factors summarised below.

Risks relating to the Hang Ten Group

Reliance on the Taiwan retail market

      For each of the years ended 31 March 2000, 2001 and 2002, sales of the Hang Ten (BVI) Group
derived from the Taiwan market amounted to US$134,483,000, US$131,315,000 and US$112,260,000
respectively, representing approximately 92.67%, 89.98% and 70.45% respectively of the Hang Ten
(BVI) Group’s total turnover. In the event of any adverse change in the Taiwan economy or consumer
behaviour, the business performance and the profitability of the Hang Ten Group may be adversely
affected.

Seasonality

      The Hang Ten (BVI) Group experiences seasonal fluctuations in its revenues and operating income
and generally records higher sales revenue during holiday seasons, such as Christmas and Chinese New
Year. As a result, the sales strategy of the Hang Ten (BVI) Group is to launch two principal series of
casual wear in a year, namely a spring/summer series and a winter series. This strategy may be adjusted
taking into consideration the weather of each market in each year. Any substantial change in temperatures
in the markets where the Hang Ten Group operates during the peak seasons may have a material impact
on the Hang Ten Group’s turnover and profitability.

Non-renewal of leases or increase in rental

      All of the retail shops (except for one in Taipei) operated by the Hang Ten (BVI) Group are leased
at market rent. Operating lease rental charges of the Hang Ten (BVI) Group for the retail shops for each
of the years ended 31 March 2000, 2001 and 2002 amounted to approximately US$19,180,000,
US$21,068,000 and US$20,718,000 respectively, representing approximately 13.22%, 14.44% and 13.00%
of the Hang Ten (BVI) Group’s total turnover respectively. On the expiry of such leases, the Hang Ten
(BVI) Group is required to negotiate with the relevant lessors the renewal and terms thereof. There is no
assurance that any such leases will be renewed upon their expiry or on terms and conditions that will be
acceptable to the Hang Ten Group. If such leases cannot be renewed or are renewed with unfavourable
terms, the Hang Ten Group may need to relocate some of its retail outlets to new alternative premises and
its operation and profitability may be adversely affected.

High gearing position

     At the close of business on 31 August 2002, being the latest practicable date for the purpose of this
indebtedness statement prior to the printing of this document, the Hang Ten (BVI) Group had outstanding
borrowings totalling approximately US$40.0 million. These borrowings comprise unsecured bank overdrafts
of US$0.4 million, secured bank loans of approximately US$18.9 million, unsecured bank loans of
approximately US$3.8 million, unsecured loans advanced by the Investors of US$16.4 million and
unsecured loans advanced by a minority shareholder of a subsidiary of US$0.5 million. The relatively
higher gearing position of the Hang Ten (BVI) Group was mainly a result of the completion of the

                                                 – 25 –
                                         RISK FACTORS


acquisition of ILC in December 2001. The acquisition of ILC by Hang Ten (BVI) was partly financed by
bank loans and shareholders’ loans of US$17.6 million and US$20 million respectively. Accordingly,
finance costs of the Hang Ten (BVI) Group for the year ended 31 March 2002 included interest payable
on these loans for the period from 1 January 2002 to 31 March 2002. If the acquisition of ILC had been
completed on 1 April 1999 and the loans had been in existence throughout the relevant period, finance
costs for each of the three years ended 31 March 2002 would have increased by approximately US$1.9
million, US$1.9 million, and US$1.4 million respectively on assumption that the prevailing interest rates
during the period from 1 January 2002 to 31 March 2002 are also applicable to the prior periods. Given
that (a) the total outstanding borrowings of the Hang Ten (BVI) Group totalled approximately US$40.0
million as at 31 August 2002, representing about 47.6% of the audited total assets of the Hang Ten (BVI)
Group as at 31 March 2002 and (b) the Hang Ten (BVI) Group’s gearing ratio, which is represented by
the interest-bearing borrowings as a percentage of the Hang Ten (BVI) Group’s total assets as at 31
March 2002, amounted to approximately 57.9%, there may be an adverse impact on the Hang Ten
Group’s future cashflow and earnings should the Hang Ten Group be unable to repay the loans and/or any
interests incurred when due.

Reliance on shareholders’ loans

      As at the Latest Practicable Date, aggregate principal amounts of US$12.3 million and US$4.1
million were owed by Hang Ten (BVI) under the shareholders’ loans granted to it by members of the
Kung Family and YGM respectively. The purpose of the shareholders’ loans was to facilitate the acquisition
by Hang Ten (BVI) of ILC in December 2001, details of which are set out under the section headed
“Financial Information” in the Letter from the Board of Directors of Hang Ten Group Holdings Limited.
Pursuant to the terms of the shareholder’s loan agreements, these shareholders’ loans are unsecured and
repayable by Hang Ten (BVI) in one lump sum on 8 November 2011 or earlier if an event of default
occurs under these agreements. The loans bear interest at the rate of 6% per annum payable yearly in
arrears unless Hang Ten (BVI) elects to capitalise such interest in which event it will form part of the
principal amount of the loans and will bear interest at the same rate.

       Save for the aforesaid shareholders’ loans and as at the Latest Practicable Date, the Hang Ten
(BVI) Group had aggregate banking facilities of US$36.75 million, of which US$23.1 million had been
utilized. Given that the shareholders’ loans accounted for about 41.2% of the Hang Ten (BVI) Group’s
total indebtedness as at 31 March 2002, it should be noted that the Hang Ten (BVI) Group relies heavily
on the financial support of the Kung Family and YGM. In the event that an event of default occurs under
the agreements for the granting of these shareholders’ loans and the Hang Ten (BVI) Group is required to
repay the shareholders’ loans immediately, the working capital level and the financial position of the
Hang Ten (BVI) Group may be adversely affected.

Tax contingency

      In 1997, ILC, a subsidiary of Hang Ten (BVI), entered into a two-year service agreement with the
Taiwan branch of another subsidiary, Hang Ten Enterprises Ltd. (the “Branch”). Pursuant to the agreement,
ILC provided decoration design service to retail stores operated by the Branch as well as sales promotion
support service to the Branch. The service fees amounted to US$3,200,000 for each of the two years
ended 31 March 1998 and 1999. In accordance with the Income Tax Law (the “Law”) of Taiwan, the
service fees are subject to 20% withholding tax. However, the withholding tax rate may be reduced to
3.75% under Article 25 of the Law subject to approval of the Taiwan Tax Authority. As at the Latest
                                                 – 26 –
                                          RISK FACTORS


Practicable Date, the application filed by ILC with the Tax Authority for a reduction of the withholding
tax rate to 3.75% had not yet been approved. If the application is not successful, ILC will be liable to pay
an additional withholding tax of approximately US$1,040,000. No provision for this amount has been
made as the Directors consider it highly likely that the Taiwan Tax Authority will approve the application,
on the basis of the success of similar applications previously made by ILC. In the event that the Taiwan
Tax Authority rejected the application filed by ILC and ILC is required to pay the additional withholding
tax, the working capital level and the financial position of the Hang Ten (BVI) Group may be adversely
affected.

Reliance on key management

       The Hang Ten (BVI) Group’s success is, to a significant extent, attributable to the management
skill, experience and expertise of the directors and its senior management. There may be an adverse
impact on the Hang Ten Group’s operations and profitability in the event that the directors and senior
management of the Hang Ten (BVI) Group cease to be involved in the Hang Ten Group’s management.

      Further details of the service agreements entered into between the Hang Ten Group and the Directors
are set out in the paragraph headed “Particulars of service contracts” in Appendix VII of the document.

Non-inclusion of a profit forecast for the year ending 31 March 2003

      A profit forecast for the year ending 31 March 2003 has not been included in this document since it
is not possible to predict with certainty the turnover and profitability of the Hang Ten Group. During
each of the years ended 31 March 2000, 2001 and 2002, the Hang Ten (BVI) Group derived approximately
90.5%, 89.8% and 93.6% respectively of its total turnover from its retail operation. Hence, the business
of the Hang Ten (BVI) Group is considered to be “retail” in nature, without long-term contracts or firm
orders. The Directors do not consider that it is appropriate to prepare a profit forecast for the Hang Ten
Group for the year ending 31 March 2003. Investors should be aware that there is no assurance that the
Hang Ten Group can maintain or increase its levels of revenue or profitability and that the historical
results of the Hang Ten (BVI) Group should not, therefore, be used as an indication of the future
performance of the Hang Ten Group.

Dividend policy

      For each of the years ended 31 March 2000 and 2001, the Hang Ten (BVI) Group paid dividends in
the amounts of approximately US$7,021,000 and US$28,038,000 respectively, representing approximately
64.2% and 258% of the profit attributable to shareholders for the respective periods. No dividend was
declared and paid for the year ended 31 March 2002. The payment of these dividends was financed by
internal resources and bank borrowings of the Hang Ten (BVI) Group. Potential investors should note
that the above dividend payments should not be used as a reference for Hang Ten’s future dividend
policy.

Reliance on major suppliers

     The Hang Ten (BVI) Group does not have its own production facilities and relies on a number of
Taiwan and Hong Kong suppliers to manufacture “Hang Ten” branded products. For each of the three

                                                  – 27 –
                                           RISK FACTORS


years ended 31 March 2002, the largest supplier of the Hang Ten (BVI) Group accounted for approximately
38%, 38% and 27% respectively of Hang Ten (BVI) Group’s total purchases. For each of the same
periods, the five largest suppliers accounted for approximately 64%, 66% and 61% respectively of the
Hang Ten (BVI) Group’s total purchases. There is no guarantee that the Hang Ten (BVI) Group’s suppliers
will continue to conduct business with the Hang Ten (BVI) Group in the future. Should these major
suppliers cease to conduct business with the Hang Ten (BVI) Group and the Hang Ten (BVI) Group fails
to find replacement suppliers for the supply of its products on competitive terms, profitability of the
Hang Ten (BVI) Group may be adversely affected.

Legality and validity of all leases and sub-leases for the leased properties of Hang Ten (BVI) Group

       The Hang Ten (BVI) Group has over 300 leased properties situated in various jurisdictions outside
Hong Kong, primarily representing shops and department store counters operated by it for the distribution
of its products. Given the nature of its business, these shops and counters are opened and closed on a
recurring basis in the ordinary and usual course of business of the Hang Ten (BVI) Group and the
composition of its leased properties at any one time is subject to frequent changes. Accordingly, it would
not be feasible to obtain confirmation of the legality and validity of all the leases and sub-leases currently
subsisting for the leased properties of the Hang Ten (BVI) Group. In the event that there are any material
defects in title to all or a significant portion of its leased properties and the relevant outlets of the Hang
Ten (BVI) Group are unable to move to alternative locations for business, the operations and hence
profitability of the Hang Ten (BVI) Group may be adversely affected.

     As part of the due diligence process, a sample of leased properties based on their respective
volume of business, turnover, profitability, locations and countries has been selected and reviewed.
Further details in respect of the due diligence results are set out under the section headed “Leased
Properties” in the “Letter from the Board of Directors of Hang Ten Group Holdings Limited” in this
document.

      The Investors have confirmed that they will provide an indemnity to Hang Ten to compensate any
losses suffered by the relevant subsidiaries of Hang Ten as tenants in the event that any of them were
unable to enjoy continued use of the leased properties in accordance with the subsisting lease agreements
owing directly to the reasons described in paragraphs (a) to (c) under the section headed “Leased
Properties” referred to above and the relevant member of the Hang Ten Group were unable to secure
alternative locations for its operations on terms that it considers to be reasonably acceptable. In the event
that there are any material losses suffered by the relevant subsidiaries of Hang Ten as tenants and the
Investors are unable to fulfil their respective obligations pursuant to the said indemnity, the operations of
the Hang Ten Group may be adversely affected.

Risks relating to the industry of the Hang Ten Group

Competition

       The Directors do not consider that there are any significant barriers of entry into the business of
retailing and wholesaling of casual wear. The Directors consider that all companies engaged in the
retailing and wholesaling of casual wear and complementary accessories are, at varying degrees,
competitors of the Hang Ten Group. To the extent that competitors become more successful with respect
to key competitive factors such as brand name recognition, product range, product quality, costing,
pricing and services, the Hang Ten Group’s future growth and profitability may be adversely affected.



                                                   – 28 –
                                         RISK FACTORS


Trademark protection

      The Hang Ten (BVI) Group has registered its “Hang Ten” trademarks and service marks in numerous
countries worldwide. Further details of the intellectual property rights of the Hang Ten (BVI) Group are
set out in the paragraph headed “Intellectual property rights” in the section headed “Further information
about the business” in Appendix VII to this document.

      The Directors are not aware of any infringement of the Hang Ten (BVI) Group’s trademarks and
service marks in the past. However, the Hang Ten Group’s image and profitability may be adversely
affected if there is any infringement of its trademarks and service marks in the future.

Fashion and apparel industry risks

      The Directors believe that the success of the Hang Ten (BVI) Group depends substantially on its
ability to create and define product and fashion trends as well as to anticipate, gauge and react to
changing consumer behaviour and demands in a timely manner. There can be no assurance that the Hang
Ten Group will continue to be successful in this regard.

      The industry in which the Hang Ten (BVI) Group operates is cyclical. Purchases of apparel and
related merchandise tend to decline during recession periods. There can be no assurance that the Hang
Ten Group will be able to maintain the historical growth of the Hang Ten (BVI) Group in revenues or
earnings, or remain profitable in the future. Further, a recession in the general economy of Taiwan or
uncertainties regarding future political and economic prospects of Taiwan could affect consumer spending
habits and could have an adverse effect on the results of the Hang Ten Group’s operations.

Risks relating to the Taiwan market

Economic condition of Taiwan

       The New Taiwan Dollar has experienced considerable volatility and depreciation as a result of
economic turmoil in Asia. During the period between 1 April 1997 and 30 September 2000, the exchange
rate of New Taiwan Dollars against the U.S. dollars depreciated substantially, partly because of the Asian
economic crisis and partly because of the overall economic performance of Taiwan. Continued volatility
and depreciation of the New Taiwan dollars may have a material effect on the business and profitability
of the Hang Ten Group in future.

Earthquake

      Taiwan is susceptible to earthquakes. In September 1999 and March 2002, Taiwan experienced
severe earthquakes which caused serious damages to infrastructure and losses of life, particularly in the
central part of Taiwan. Such earthquakes resulted in material disruptions to power supply in many areas,
damages to buildings and infrastructure were widely recorded and many rural areas were isolated as
highways and roads were completely demolished. Although the Hang Ten (BVI) Group currently has no
production facilities in Taiwan, earthquakes could indirectly result in a decline in the demand for its
products and could change the consumption pattern of the target customers of the Hang Ten Group.
Earthquakes could also lead to economic downturn, which could affect the retail business as a whole.



                                                 – 29 –
                                          RISK FACTORS


Accordingly, in the event that a major earthquake occurs in Taiwan in the future, it may severely disrupt
the normal operations of business and could have a material adverse impact on the business and profitability
of the Hang Ten Group.

Political consideration

      The Republic of China has a unique international political status. Both the Republic of China and
the PRC assert sovereignty over all of China, including Taiwan. The PRC government does not recognise
the legitimacy of the Republic of China government. Although significant economic and cultural relations
have been established in recent years between the Republic of China and the PRC, relations have often
been strained and the PRC government has indicated that it does not rule out the use of military force to
gain control over Taiwan in some circumstances, such as the declaration of independence by the Republic
of China. Relations between the Republic of China and the PRC have been particularly strained in recent
years. Following the results of the presidential elections for the Republic of China held in March 2000,
the new President of the Republic of China was sworn in on 20 May 2000. Past developments in relations
between the Republic of China and the PRC have on occasion depressed the economic performance of
Taiwan. Relations between the Republic of China and the PRC and other factors affecting the political,
social or economic stability in Taiwan could have a material adverse impact on the financial condition
and operations of the Hang Ten Group, as well as the market price and the liquidity of the Hang Ten
Shares.

Risks relating to the South Korean market

     The Korean Won has experienced considerable volatility and depreciation as a result of the economic
turmoil in Asia in 1997. During the period between 1997 and 1998, the exchange rate of the Korean Won
against the U.S. dollar depreciated substantially, partly because of the Asian economic crisis and partly
because of the overall economic performance of South Korea. Continuing volatility of the Korean Won
may have a material effect on the business and profitability of the Hang Ten Group in the future.

      South Korea has experienced intense political tensions including the reunification issue between
North and South Korea, low export demand, decrease in manufacturing output and consumer demand
have contributed to a decline in the South Korean economy since the economic turmoil in Asia in 1997.
The resistance of South Korea’s huge conglomerates against restructuring demands by the International
Monetary Fund has placed greater pressure on the South Korean government to take forceful action. The
South Korean government has proposed a program of fiscal and monetary expansion that could implement
the reforms demanded by the International Monetary Fund and other international lenders. It could have
a material adverse effect on the economy and hence operations of the Hang Ten Group if the reforms
proposed by the South Korean government could not be successfully implemented.




                                                  – 30 –
          DIRECTORS OF HANG TEN GROUP HOLDINGS LIMITED


Name                                  Address                   Nationality

Executive Directors

Chan Wing Sun                         12B Bowen Road            British
                                      Hong Kong

Hung, Kenneth                         Unit E, 12th Floor        Chinese
                                      Tower 8, Island Resort
                                      28 Siu Sai Wan Road
                                      Chai Wan
                                      Hong Kong

Wang Li Wen                           87 Jungyang 3rd Street    Taiwanese
                                      Shindian
                                      Taipei
                                      Taiwan

Kao Yu Chu                            Unit 1, 8th Floor         Taiwanese
                                      458 Guangfu South Road
                                      Shinyi
                                      Taipei
                                      Taiwan

Independent non-executive directors

Kwong Chi Keung                       Block A, 3rd Floor        Chinese
                                      No. 22, Fontana Gardens
                                      Tai Hang Road
                                      Causeway Bay
                                      Hong Kong

So Hon Cheung Stephen                 1st Floor, Flat B         Canadian
                                      Sunny Villa
                                      69 Blue Pool Road
                                      Happy Valley
                                      Hong Kong

Audit committee

Kwong Chi Keung                       Block A, 3rd Floor        Chinese
                                      No. 22, Fontana Gardens
                                      Tai Hang Road
                                      Causeway Bay
                                      Hong Kong

So Hon Cheung Stephen                 1st Floor, Flat B         Canadian
                                      Sunny Villa
                                      69 Blue Pool Road
                                      Happy Valley
                                      Hong Kong


                                                – 31 –
                    CORPORATE INFORMATION RELATING TO
                     HANG TEN GROUP HOLDINGS LIMITED


Registered office                         Clarendon House
                                          2 Church Street
                                          Hamilton HM 11
                                          Bermuda

Principal place of business in Taiwan     International Commercial Building
                                          8th Floor, No. 23, Sec 1
                                          Chang An E. Road
                                          Taipei
                                          Taiwan

Principal place of business in Hong Kong Room 107, 1st Floor
                                         St. George’s Building
                                         2 Ice House Street
                                         Central, Hong Kong

Company secretary                         Lam Wai Ho, Stephen, HKSA, CPA (Aust.), who will be
                                          appointed as the secretary of Hang Ten upon the listing of
                                          the Hang Ten Shares on the Stock Exchange

                                          Ira Stuart Outerbridge III, FCIS , who will resign as secretary
                                          of Hang Ten upon the listing of the Hang Ten Shares on the
                                          Stock Exchange and will thereafter be appointed as assistant
                                          secretary of Hang Ten

Authorised representatives                Chan Wing Sun
                                          Kenneth Hung

Principal banker                          The Hongkong and Shanghai Banking Corporation Limited
                                          Main Office
                                          1 Queen’s Road Central
                                          Hong Kong

                                          The Hongkong and Shanghai Banking Corporation Limited
                                          Taipei Branch
                                          13th Floor, No. 333 Section 1
                                          Keelung Road
                                          Taipei
                                          Taiwan

                                          Chang Hwa Commercial Bank Limited
                                          No. 23, Section 1
                                          Chang An East Road
                                          Taipei
                                          Taiwan

                                             – 32 –
                    CORPORATE INFORMATION RELATING TO
                     HANG TEN GROUP HOLDINGS LIMITED


                                 Hua Nan Commercial Bank Limited
                                 No. 18, Section 1
                                 Chang An East Road
                                 Taipei
                                 Taiwan

                                 Bank of Taiwan
                                 No. 150, Section 1
                                 Chung Shan North Road
                                 Taipei
                                 Taiwan

                                 First National Bank of San Diego
                                 P.O. Box 85625 San Diego
                                 California
                                 US

Principal share registrar        The Bank of Bermuda Limited
                                 Bank of Bermuda Building
                                 6 Front Street
                                 Hamilton HM 11
                                 Bermuda

Branch share registrar           Standard Registrars Limited
                                 5th Floor
                                 Wing On Centre
                                 111 Connaught Road Central
                                 Hong Kong




                                    – 33 –
                                         INDUSTRY OVERVIEW


INDUSTRY OVERVIEW

      The consumer product retail industry is generally affected by the general state of the economy and
the purchasing power of the population. In nearly every major emerging market in the world, the retailing
industry faces severe challenges. These include economic recession in the short term, increased economic
competition from the world’s largest emerging market in the long term, increasing regulation of foreign
investment, increasing restrictions on large store development, and increasing saturation by modern retail
formats.

TAIWAN MARKET

Overview of Taiwan economy

      Taiwan has a dynamic capitalist economy with gradually decreasing regulation of investment and
foreign trade by government authorities. Real growth in GDP has averaged about 8.5% a year during the
past three decades. The compound annual growth rate of the GDP and the per capita GDP over the period
from 1994 to 2000 were approximately 7% and approximately 6.3% respectively. Taiwan’s GDP per
person in 2000 was approximately HK$100,278 and was almost half of that of Hong Kong for the
corresponding year. Also, positive growth GDP and the per capita GDP were recorded for the year of
1998 and 1999 in Taiwan while there were downturns elsewhere in Asia during the same period.

     The following table shows the total GDP, retail sales in Taiwan and retail sales as a percentage of
GDP in Taiwan during the period from 1996 to 2001:

                                                   1996             1997      1998      1999      2000      2001

     GDP (NT$ billion)                           7,678          8,329        8,939      9,290     9,663     9,542
     Per capita GDP (NT$)                      357,599        384,126      408,715    421,621   435,992   434,954
     Retail sales (NT$ billion)                    233            254          274        299       313       305
     Retail sales as a
       percentage of GDP (%)                        3.03            3.05       3.07      3.22      3.24      3.20

     Sources: National Statistics of Taiwan, the Republic of China (September 2002)


SOUTH KOREA MARKET

Overview of South Korean economy

      The Asian financial crisis of 1997 to 1999 exposed certain longstanding weaknesses in South
Korea’s development model, including high debt/equity ratios, massive foreign borrowing, and an
undisciplined financial sector. By 1999, the growth in GDP of South Korea had recovered, reversing the
substantial decline of 1998. The GDP and the per capita GDP of South Korea in 2001 were approximately
US$471,135 million and approximately US$9,841 respectively, representing a growth of 3% and 0.9%
respectively compared to 2000. The South Korean Government has pressed the country’s largest business
groups to restructure and to strengthen their financial base. It is expected that the growth in GDP in 2002
will be at a more sustainable rate.


                                                           – 34 –
                                           INDUSTRY OVERVIEW


     The following table shows the total GDP, retail sales in South Korea and retail sales as a percentage
of GDP in South Korea during the period from 1996 to 2001:

                                    Note             1996          1997          1998          1999          2000          2001

     Retail sales (W$ million)       1          84,490,000    89,231,000    84,220,000    93,300,000   102,040,000   109,428,470
     Retail sales (US$ million)      2             105,028        93,800        60,095        78,481        90,224        91,010
     GDP (W$ million)                3         418,479,000   453,276,000   444,366,000   482,744,000   517,097,000   589,532,580
     GDP (US$ million)               4             520,205       476,486       317,078       406,070       457,220       471,135
     Population (‘000)               5              45,769        46,211        46,644        47,074        47,437        47,874
     GDP per capita (W$ million)                 9,143,285     9,808,833     9,526,756    10,255,003    10,900,710    12,314,253
     GDP per capita                                 11,366        10,311         6,798         8,626         9,638         9,841
     Retail sales as a percentage
       of GDP (%)                                    20.19         19.69         18.95         19.33         19.73         19.32

SINGAPORE MARKET

Overview of Singaporean economy

      The Singaporean economy was hit by the Asian financial crisis that started with the devaluation of
the Thai Baht in July 1997. Although Singapore’s financial and economic fundamentals were sound, the
rapidly deteriorating external environment in Asia generally affected Singapore adversely due to its close
links with regional economies. The Singaporean economy contracted 0.1% in 1998, after achieving 8.5%
growth in 1997. After recovery in 1999 and 2000, Singapore was hit by another recession in 2001 and its
economy fell by 2%, down from 10% growth in 2000. The GDP and the per capita GDP of Singapore in
2001 were approximately S$153,455 million and approximately S$37,433 respectively.

     The following table shows the total GDP, retail sales in Singapore and retail sales as a percentage
of GDP in Singapore during the period from 1997 to 2001:

                                         Note                      1997          1998          1999          2000          2001

     GDP (S$ million)                      6                    140,279       137,618       140,070       159,888       153,455
     Per capita GDP (S$)                   6                     39,394        37,193        36,323        40,051        37,433
     Retail sales (S$ million)             1                     17,340        15,500        16,380        17,130        18,472
     Retail sales (US$ million)            2                     11,716         9,261         9,664         9,936        10,460
     Retail sales as a percentage
       of GDP (%)                                                 12.36         11.26         11.69         10.71         12.04




                                                              – 35 –
                                           INDUSTRY OVERVIEW


THE PHILIPPINES MARKET

Overview of the economy of the Philippines

      The economy of the Philippines had a strong performance in 2001 despite generally weak global
conditions and challenges in the domestic front, including a political transition and concerns about the
peace and order situation. The peso remained broadly stable even though it experienced depreciation
pressures in 2001 due to domestic and external factors. Stronger macroeconomic fundamentals, including
lower inflation, a generally improved fiscal position, and a more flexible exchange rate which increased
the room for policy manoeuvre and resilience to external shocks. Moreover, the sustained implementation
of structural reforms enabled the government of the Philippines to continue laying solid foundations for
broad-based economic growth.

     The following table shows the total GDP, retail sales in the Philippines and retail sales as a
percentage of GDP in the Philippines during the period from 1996 to 2001:

                                    Note          1996          1997          1998          1999          2000        2001

     Retail sales (P$ million)        1        932,000      1,037,700     1,015,400     1,188,500     1,364,701   1,929,405
     Retail sales (US$ million)       2         35,545         35,212        24,831        30,405        30,881      38,855
     GDP (P$ million)                 3      2,171,920      2,426,740     2,665,060     2,976,900     3,302,590   3,612,181
     GDP (US$ million)                4         82,834         82,346        65,172        76,157        74,732      83,105
     Population (’000)                5         70,742         72,335        73,927        75,522        76,823      78,330
     GDP per capita (P$ million)                30,702         33,549        36,050        39,418        42,990      46,115
     GDP per capita (US$ million)                1,171          1,138           882         1,008           973       1,061
     Retail sales as a
       percentage of GDP (%)                      42.91         42.76         38.10         39.92        41.32       46.75

     Notes:

     (1)      sources from database of euromonitor 2002

     (2)      sources from Euromonitor – International Marketing Data and Statistics 2002, page 404

     (3)      sources from Euromonitor – International Marketing Data and Statistics 2002, page 165

     (4)      sources from Euromonitor – International Marketing Data and Statistics 2002, page 177

     (5)      sources from Euromonitor – International Marketing Data and Statistics 2002, page 99

     (6)      The Singapore Department of Statistics – GDP at current market prices (updated 1 March 2002)




                                                           – 36 –
                                   INDUSTRY OVERVIEW


THE CLOTHING INDUSTRY

      Casual wear will continue to dominate the product scene in the clothing market as the pursuit of a
leisurely lifestyle becomes increasingly popular worldwide. Consumer expectations for the shopping
experience are getting increasingly higher. In part, this is because today’s customers demand more from
the shopping experience such as service, convenience, information, quality, innovation, and enjoyment.

      Increasingly, consumers are less willing to compromise. If they cannot find a specific item at one
store, they will move onto the next store rather than settle for something that is not exactly what they
want. At the same time, consumers are also more likely to be loyal to companies that make an effort to
get to know what their needs and tastes are.




                                                – 37 –
       LETTER FROM THE JOINT AND SEVERAL LIQUIDATORS OF
       AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION)


                           AKAI HOLDINGS LIMITED
                                       (In Compulsory Liquidation)
                                  (incorporated in Bermuda with limited liability)


The Liquidators:                                                          Registered Office:
Nicholas Timothy Cornforth Hill                                           Clarendon House
Fan, Wai Kuen Joseph                                                      2 Church Street
R. Craig Christensen                                                      Hamilton HM 11
                                                                          Bermuda

                                                                          Principal Place of Business:
                                                                          7th Floor
                                                                          Allied Kajima Building
                                                                          138 Gloucester Road
                                                                          Wanchai
                                                                          Hong Kong

                                                                          31 October 2002

To Akai Shareholders

Dear Sir/Madam,

    PROPOSAL FOR AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION)
BY WAY OF A SHAREHOLDERS’ SCHEME OF ARRANGEMENT PURSUANT TO SECTION 99
  OF THE COMPANIES ACT AND WITHDRAWAL OF THE LISTING OF THE SHARES OF
AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION) AND THE LISTING OF THE
         ORDINARY SHARES OF HANG TEN GROUP HOLDINGS LIMITED ON
                THE STOCK EXCHANGE OF HONG KONG LIMITED
                         BY WAY OF INTRODUCTION

      On 23 August 2000, the Hong Kong Court ordered that Akai be wound-up and appointed the
Official Receiver as provisional liquidator of Akai pursuant to section 194(1)(a) of the Companies
Ordinance, pending a first meeting of Creditors. On 24 May 2001, the Liquidators were appointed as the
joint and several liquidators of Akai by the Hong Kong Court.

      On 28 August 2000 and 1 September 2000, the Bermuda Court appointed Fan Wai Kuen, Joseph, R.
Craig Christensen and Damien Hodgkinson as joint and several provisional liquidators of Akai pursuant
to section 170(2) of the Companies Act, pending a first meeting of Creditors. On 29 September 2000, the
Bermuda Court ordered that Akai be wound up. On 16 March 2001, the Liquidators were appointed as
the joint and several liquidators of Akai by the Bermuda Court.

     On 23rd August 2000 (the date of the winding-up order of the Hong Kong Court), all the powers of
Akai’s directors ceased and Akai ceased to carry on business.



                                                      – 38 –
        LETTER FROM THE JOINT AND SEVERAL LIQUIDATORS OF
        AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION)


      Trading in Akai Shares on the Stock Exchange has been suspended since 23 August 2000, being the
date the Hong Kong Court ordered Akai to be wound up. The Stock Exchange followed the delisting
procedure set out in Practice Note 17 of the Listing Rules and, on 10 September 2001, Akai was placed
into the third stage of the delisting procedure. The Stock Exchange imposed a six (6) month period from
11 September 2001 to 11 March 2002 for Akai to submit a resumption proposal. If a resumption proposal
had not been submitted within that time the listing of the Akai Shares would have been cancelled.

      On 28 February 2002, Akai submitted the Proposal to the Stock Exchange and requested an extension
for the cancellation of the listing of the Akai Shares. On 8 March 2002, the Stock Exchange gave in-
principle approval to the Proposal and advised Akai that the Listing Committee had approved the extension
for the cancellation of the listing of the Akai Shares up to 17 July 2002, to enable the Proposal to be
progressed.

      On 10 July 2002, Akai applied to the Stock Exchange for an extension of the deadline for the
cancellation of the listing of the Akai Shares. On 12 July 2002, the Stock Exchange advised that the
Listing Committee had approved the extension for the cancellation of the listing of the Akai Shares up to
29 November 2002.

      On 23 October 2002, the Stock Exchange advised Akai that the Listing Committee had approved a
further extension for the cancellation of the listing of the Akai Shares up to 22 January 2003 to enable
Akai to proceed with the Proposal and the new listing application of Hang Ten under the Proposal.

      The Proposal involves a number of inter-related transactions, including the Scheme. Under the
terms of the Scheme, Akai Shareholders on the Final Record Date will exchange their Akai Shares for an
aggregate of 300,000,000 Hang Ten Shares which will be distributed among the Akai Shareholders pro
rata in accordance with their respective holdings of Akai Shares (subject to rounding down) held on the
Final Record Date. The purpose of this document is to set out for Akai Shareholders the terms and
conditions of the Proposal and provide information in connection with the Scheme.

      The listing of the Akai Shares on the Stock Exchange has an intrinsic value that is capable of being
realised. The realisation of value from the listing of a company’s shares on the Stock Exchange is
different to other assets realised in an insolvent winding-up in that shareholders of an insolvent company
can obtain a benefit from their co-operation in the realisation of value from the listed status of a
company’s shares through a scheme of arrangement that facilitates a listing of another company’s shares
by way of Introduction.

      On the basis that the Stock Exchange will only consider the Proposal, the value of the listed status
of the Akai Shares can only be realised if you vote in favour of the Scheme. This document sets out the
transactions which will enable you to obtain a benefit from your co-operation in the realisation of the
value ascribed to the listed status of the Akai Shares by the Investors.

     The Scheme is set out at pages 353 to 362 of this document. It should be read together with the
Explanatory Statement set out at pages 102 to 119 of this document and the additional information on the
Akai Group set out at Appendix V to this document. The notices of the Scheme Meeting and the Special
General Meeting are set out in pages 366 to 368 of this document.

                                                 – 39 –
        LETTER FROM THE JOINT AND SEVERAL LIQUIDATORS OF
        AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION)


      A letter from the board of directors of Hang Ten is set out on pages 42 to 90 of this document and
financial and other information on the Hang Ten Group is set out in Appendices II to IV and Appendix
VII to this document.

     Horwath has been appointed as the independent financial adviser to the Akai Shareholders in
connection with the Proposal. The opinions and recommendations of Horwath are set out in its letter on
pages 91 to 101 of this document.

     It is our opinion that:

     (a)   it is highly unlikely that Akai Shareholders will receive a distribution in Akai’s winding-up;

     (b)   the Stock Exchange will not consider an alternative resumption proposal; and

     (c)   the successful implementation of the Proposal will not affect the rights of Creditors and Akai
           Shareholders to make Claims in the winding-up of Akai.

     It is our view that the successful implementation of the Proposal is in the best interests of Akai
Shareholders as it represents their only realistic prospect of realising any value from their Akai Shares.

Action to be taken

      The meetings of Akai Shareholders have been convened in connection with the implementation of
the Proposal.

     (a)   The Scheme Meeting

           The Scheme Meeting has been convened at the direction of the Bermuda Court for the
     purposes of considering and, if thought fit, approving (with or without modification) the Scheme.
     The formal notice of the Scheme Meeting is set out on pages 366 and 367 of this document.

          The Executive has determined that Rule 2.10 of the Code applies to the Proposal and thus,
     except with the consent of the Executive, the Scheme may only be implemented if:

           (i)    the Scheme is approved by at least 75% of the votes attaching to the disinterested Akai
                  Shares that are cast either in person or by proxy at the Special General Meeting by way
                  of a poll; and

           (ii)   the number of votes cast against the resolution to approve the Scheme at the Special
                  General Meeting is not more than 10% of the votes attaching to all disinterested Akai
                  Shares.




                                                 – 40 –
       LETTER FROM THE JOINT AND SEVERAL LIQUIDATORS OF
       AKAI HOLDINGS LIMITED (IN COMPULSORY LIQUIDATION)


     (b)    Special General Meeting

          The Special General Meeting has been convened for the purpose of considering and, if
     thought fit, passing the resolutions approving the implementation of Proposal.

     The formal notice of the Special General Meeting is set out on page 368 of this document.

     The Scheme Meeting will be held at 10:00 a.m. on 25 November 2002 at Plaza I-III, Lower Lobby,
Novotel Century Hong Kong, 238 Jaffe Road, Wan Chai, Hong Kong. The Special General Meeting will
be held at 10:30 a.m. on 25 November 2002 or as soon as the Scheme Meeting has been conducted or
adjourned. The Investors or any persons acting in concert with them are not permitted to vote at the
Special General Meeting pursuant to the Code and the directors, chief executive and any controlling
shareholder of Akai or their respective associates are not permitted to vote at the Special General
Meeting pursuant to Rule 6.12 of the Listing Rules.

     Enclosed with this document are:

     (i)    a yellow form of proxy for use at the Scheme Meeting; and

     (ii)   a blue form of proxy for use at the Special General Meeting.

      Whether or not you intend to attend the relevant meetings in person, please complete and return the
proxy forms as soon as possible and, in any event, not less than 48 hours before the time appointed for
the relevant meetings. Completed proxy forms should be returned to the principal place of business of
Akai at 7th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong. Proxy forms for
the relevant meeting may be handed to the Chairman of the meeting.

     Completion and return of forms of proxy will not preclude you from attending the relevant meetings
and voting in person should you so wish. In that event your form of proxy will be deemed to have been
revoked in respect of any meeting which you attend.



                                                                      Yours faithfully
                                                                    For and on behalf of
                                                                  Akai Holdings Limited
                                                               (In Compulsory Liquidation)
                                                             Nicholas Timothy Cornforth Hill
                                                                  Fan Wai Kuen Joseph
                                                                   R. Craig Christensen
                                                               Joint and Several Liquidators




                                                 – 41 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED




               HANG TEN GROUP HOLDINGS LIMITED
                                 (incorporated in Bermuda with limited liability)


Executive Directors:                                                 Registered Office:
Chan Wing Sun                                                        Clarendon House
Kenneth Hung                                                         2 Church Street
Wang Li Wen                                                          Hamilton HM 11
Kao Yu Chu                                                           Bermuda

Independent non-executive Directors:                                 Principal place of business in Taiwan:
Kwong Chi Keung                                                      International Commercial Building
So Hon Cheung, Stephen                                               8th Floor, No 23, Sec 1
                                                                     Chang An E. Road
                                                                     Taipei
                                                                     Taiwan

                                                                     Principal place of business in Hong Kong:
                                                                     Room 107, 1st Floor
                                                                     St. George’s Building
                                                                     2 Ice House Street
                                                                     Central, Hong Kong

                                                                     31 October 2002

To Akai Shareholders

Dear Sir or Madam,

                        Listing of Hang Ten Group Holdings Limited
                                   by way of Introduction

INTRODUCTION

      On 16 April 2002, the Investors entered into the Restructuring Agreement with, amongst others,
Akai and the Liquidators (as supplemented by an agreement dated 14 May 2002) in respect of the
Proposal. The principal terms of the Restructuring Agreement are set out in the Explanatory Statement
set out on pages 102 to 119 of this document.

      Upon completion of the Proposal, the entire issued share capital of Akai will be transferred to the
Liquidators for the benefit of the Creditors. All Akai Shareholders will become shareholders of Hang
Ten, the sole asset of which will be the Hang Ten (BVI) Group.



                                                     – 42 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


      The purpose of this letter is to provide you with additional information on the Hang Ten Group and
the future intention of the Hang Ten Group after completion of the Proposal.

     Your attention is drawn to the “Letter from the joint and several Liquidators of Akai Holdings
Limited” set out on pages 38 to 41 of this document, the “Explanatory Statement” set out on pages 102 to
119 of this document and the “Letter from Horwath” set out on pages 91 to 101 of this document.

INFORMATION ON HANG TEN

      Hang Ten was incorporated in Bermuda on 17 July 2002 and, on completion of the Sale and
Purchase Agreement, will be an investment holding company whose principal asset is its interest in the
entire issued share capital of Hang Ten (BVI). Hang Ten (BVI) was incorporated on 10 September 2001
in the British Virgin Islands and is an investment holding company whose principal asset is its 97.01%
equity interest in ILC.

      The Hang Ten (BVI) Group is principally engaged in the business of designing, marketing and sale
of apparel and accessories under the brandname of “Hang Ten” in Asian countries including Taiwan,
South Korea, Singapore, Philippines and Malaysia. The portfolio of the apparel under the brandname of
“Hang Ten” comprises jackets, vests, T-shirts, skirts, pants and jeans as well as other accessories such as
bags, caps, socks, shoes, belts and umbrellas, which are targeted at customers aged between 15 and 45.
The Directors believe that “Hang Ten” is one of the leading brand names for money-for-value apparel
and accessories in the Asian region. The Hang Ten (BVI) Group is the owner of the trademark “Hang
Ten” which is also licensed to independent third parties for distribution and production of apparel and
accessories in over 50 countries, including the US, Europe, Japan, Australia, South America and South
Africa. The Hang Ten (BVI) Group operates a retail network of over 300 outlets in the Asian region. The
Hang Ten (BVI) Group is also engaged in the wholesaling of products bearing the brandname “Hang
Ten” through a number of authorised local distributors in Taiwan. The Directors believe that there will be
no change in the nature of the business of the Hang Ten (BVI) Group upon the listing of the Hang Ten
Shares.




                                                  – 43 –
                                   LETTER FROM THE BOARD OF DIRECTORS OF
                                      HANG TEN GROUP HOLDINGS LIMITED


CORPORATE STRUCTURE

      The following chart illustrates the corporate structure, places of incorporation/establishment and
the main business activities of members of the Hang Ten Group immediately after the issue of Hang Ten
Shares to the Investors and the Other Investors and conversion of the 269 CPS issued to the Other
Investors upon Closing but before any issue of Hang Ten Shares to the Akai Shareholders, the Liquidators
(for the benefit of the Creditors) and the Designated Person or any conversion of the CPS issued to the
Investors or exercise of the Warrants:


               YGM                   The Kung Family                Other Investors             Ms. Wang
                                                                                               and Ms. Kao

                  21.28%                        62.13%                      14.89%                     1.70%




                                                     Hang Ten
                                            (Bermuda: investment holding)

                                                             100%



                                                    Hang Ten (BVI)
                                                                                                     Independent third party
                                                (BVI: investment holding)

                                                             97.01%                                              2.99%




                                                                                    ILC
                                                                         (BVI: investment holding)




           100%                      100%                    100%                      100%                     92%                       100%                   100%                  100%                   100%

                                                                                                                                                                                                       International
                                                   Hang Ten (Phils)                                                                                                             HTIL Holdings            Licensing
      Yangtze            Hang Ten Enterprises                               Hang Ten Enterprises       Hang Ten Korea          Hang Ten Enterprises       ILC Trademark
                                                      Holdings                                                                                                                    Corporation        (California) Corp
  (Taiwan: Taiwan              Limited                                           (PTE) Ltd.                 Corp.                 (M) Sdn Bhd               Corporation
                                                     Corporation                                                                                                               N.V. (Netherlands       (US: License
    retailing and          (BVI: Overseas                                   (Singapore: Singapore       (Korea: Korea          (Malaysia: Malaysia       (BVI: Trademark
                                                   (BVI: Investment                                                                                                                 Antilles:          management
 property holdings)          franchising)                                         retailing)              retailing)                retailing)              ownership)
                                                      holding)                                                                                                                Investment holding)   and sub-license for
                                                                                                                                                                                                       US territory)




                      100%                       100%        55%                                                                                                 100%                  100%

  Hang Ten Enterprises                                                                                                                                ILC (Cyprus) Limited.   HTIL Corporation,
        Limited                                                                                                                                        (Cyprus: Investment           B.V.
   (Taiwan branch)            Chinaway Trading           Hang Ten Phils., Corp                                                                              holding)            (Netherlands:
    (Taiwan: Taiwan               Co., Ltd.                   (Philippines:                                                                                                      Trademark
   domestic retailing         (BVI: Trading of            Philippines retailing                                                                                                   licensing)
                                                                                                                                                                 100%
   and wholesaling                apparels)                and wholesaling)
      and overseas
      wholesaling)                                                                                                                                    ILC Hungary Limited
                                                                                                                                                      (Hungary: Trademark
                                                                                                                                                           licensing)




                                                                                                       – 44 –
                                 LETTER FROM THE BOARD OF DIRECTORS OF
                                    HANG TEN GROUP HOLDINGS LIMITED


       The following chart illustrates the corporate structure, places of incorporation/establishment and
the main business activities of members of the Hang Ten Group immediately following Closing and
listing of the Hang Ten Shares on the Stock Exchange by way of Introduction but before any conversion
of the CPS issued to the Investors or exercise of the Warrants:

                                                                                        Liquidators (for the                                                                     Ms. Wang
     Akai Shareholders                 YGM                   The Kung Family                                           Other Investors              Designated Person
                                                                                      benefit of the Creditors)                                                                 and Ms. Kao

               1.10%                       18.45%                      53.87%                      7.75%                          12.92%                      4.43%                   1.48%




                                                 Hang Ten
                                        (Bermuda: investment holding)

                                                         100%


                                               Hang Ten (BVI)                                    Independent third party
                                           (BVI: investment holding)

                                                         97.01%                                              2.99%




                                                                                ILC
                                                                     (BVI: investment holding)




            100%                    100%                   100%                   100%                      92%                       100%                   100%                  100%                   100%

                                                                                                                                                                                                   International
                                                  Hang Ten (Phils)                                                                                                          HTIL Holdings            Licensing
       Yangtze          Hang Ten Enterprises                            Hang Ten Enterprises      Hang Ten Korea           Hang Ten Enterprises      ILC Trademark
                                                     Holdings                                                                                                                 Corporation        (California) Corp
  (Taiwan: Taiwan             Limited                                        (PTE) Ltd.                Corp.                  (M) Sdn Bhd              Corporation
                                                   Corporation                                                                                                             N.V. (Netherlands       (US: License
     retailing and        (BVI: Overseas                               (Singapore: Singapore       (Korea: Korea           (Malaysia: Malaysia      (BVI: Trademark
                                                 (BVI: Investment                                                                                                               Antilles:          management
  property holdings)        franchising)                                      retailing)             retailing)                 retailing)             ownership)
                                                     holding)                                                                                                             Investment holding)   and sub-license for
                                                                                                                                                                                                   US territory)




                       100%                    100%        55%                                                                                               100%                  100%

                                                                                                                                                  ILC (Cyprus) Limited.   HTIL Corporation,
   Hang Ten Enterprises                                                                                                                            (Cyprus: Investment           B.V.
         Limited                                                                                                                                        holding)            (Netherlands:
    (Taiwan branch)           Chinaway Trading       Hang Ten Phils., Corp                                                                                                   Trademark
    (Taiwan: Taiwan               Co., Ltd.               (Philippines:                                                                                                       licensing)
    domestic retailing        (BVI: Trading of        Philippines retailing                                                                                  100%
     and wholesaling              apparels)            and wholesaling)
       and overseas                                                                                                                               ILC Hungary Limited.
      wholesaling)                                                                                                                                (Hungary: Trademark
                                                                                                                                                       licensing)




                                                                                                     – 45 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


HISTORY AND DEVELOPMENT OF THE HANG TEN (BVI) GROUP

      Symbolised by a pair of bare feet, the brandname “Hang Ten” originated in the 1960s in Southern
California, US. At that time, the merchandise marketed under the brandname “Hang Ten” comprised
primarily basic, quality apparel based on an American lifestyle image. Given its well-established brandname
in the US, in 1991, a licence from Hang Ten International, an independent third party, was obtained to
use the trademark “Hang Ten” in Taiwan and Mr. Dennis Kung and YGM established Yangtze to commence
the business of marketing and selling apparel under the brandname “Hang Ten” in Taiwan and focused on
men’s casual wear.

      In 1993, the number of retail shops operated by Yangtze reached 100 and the products of Yangtze
diversified into women’s casual wear, kid’s casual wear and accessories.

     In 1994, ILC was established as a holding company of Yangtze and was beneficially owned as to
68% and 32% by YGM and Mr. Dennis Kung respectively.

      In 1995, Hang Ten Enterprises Limited, a wholly-owned subsidiary of ILC, established a branch
office in Taiwan to take over the retailing operations which was previously carried out by Yangtze.

      Recognising the potential of the “Hang Ten” brandname, ILC Group, in February 1996, acquired
from Hang Ten International, an independent third party, for a cash consideration of approximately
US$13 million, the “Hang Ten” trademark in the territories of Taiwan, Hong Kong, the PRC, Singapore,
Malaysia and Indonesia (the “Territories”). In the same year, ILC Group was also granted a master
licence to use the “Hang Ten” trademark for the rest of the world other than the Territories. In 1996,
following the introduction of two independent strategic investors, namely Citicorp Capital Asia Limited
and China Investment & Development Company Limited, ILC was owned as to approximately 63.92%,
30.08% and 6% by YGM, the Kung Family and the two strategic investors respectively.

      Given its strong established presence in the Taiwan retail apparel industry, ILC Group began to
expand their retail business outside Taiwan. In October 1996, Hang Ten Phils., Corp, a 55% owned
subsidiary of ILC, operated its first retail outlet in the Philippines through a franchise arrangement.
Portraying itself as a mid-to low price American lifestyle clothing retailer, the Directors believe that
“Hang Ten” has become one of the popular apparel brands in the Philippines. In November 1999, Hang
Ten Enterprises (PTE) Ltd., a wholly-owned subsidiary of ILC, set up its first retail outlet in Singapore
and within a period of six months, 6 additional retail outlets had been set up there.

      In 2000, the Hang Ten (BVI) Group acquired the “Hang Ten” trademark from Hang Ten International,
an independent third party, for a cash consideration of US$13.25 million for countries other than the
Territories and owned the trademark of “Hang Ten”.

      In September 2000, a total of 1,532 new shares of ILC, representing approximately 0.24% of the
then enlarged share capital ILC, were issued to Ms. Wang, Ms. Kao, Chen Tzu Kang, Chen Kin No and
Chen Lan Ying through exercises of their employee share options.

      In February 2001, Hang Ten Korea, a 70% owned subsidiary of ILC, set up its first franchised shop
in South Korea. Through a plan of opening franchised shops, the number of retail outlets in South Korea
had increased to 88 as at 31 March 2002.
                                                  – 46 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


      On 9 November 2001, YGM, Asian Wide, Mr. Dennis Kung, Ms Wang, Ms Kao, Gallant Top
Company Limited (a company owned by Asian Wide, Mr. Dennis Kung and Mrs. Hung Cheng Sui Tsen,
the wife of Mr. Dennis Kung), Mr. Chen Tzu Kang, Mr. Chen Kin No and Ms. Chen Lan Ying, and
another independent third party, namely Citicorp Capital Asia Limited, who together held approximately
97.01% of the issued share capital of ILC, entered into an agreement to sell their respective interests in
ILC to Hang Ten (BVI) for a total consideration of approximately US$54.6 million. On 9 November
2001, YGM, the Kung Family, Ms. Wang and Ms. Kao also entered into a subscription agreement with
Hang Ten (BVI) pursuant to which YGM, the Kung Family, Ms. Wang and Ms. Kao agreed to subscribe
for and Hang Ten (BVI) agreed to issue 250,000, 729,999, 10,000 and 10,000 new shares of US$0.1 each
respectively in the share capital of Hang Ten (BVI) at US$17 per share for a total subscription price of
US$16,999,983 (approximately HK$132,599,867).

      Upon completion of the reorganisation on 31 December 2001, (a) Hang Ten (BVI) held 97.01% of
the issued share capital of ILC and became its holding company while the remaining 2.99% of the issued
share capital of ILC is owned by China Investment & Development Company Limited, a strategic
investor who is an independent third party not connected with any of the directors, chief executive,
substantial shareholders of Hang Ten or any of its subsidiaries or their respective associates; and (b)
Hang Ten (BVI) was owned as to approximately 73% by the Kung Family, 25% by YGM and 2% by Ms.
Wang and Ms. Kao collectively. The acquisition of ILC and issue of shares to the Investors by Hang Ten
(BVI) in December 2001 are not included in the section headed “Corporate reorganisation” in Appendix
VII of this document since, at the time these transactions were entered into, the Introduction was not in
contemplation. As such, these transactions were not implemented as part of the reorganisation of the
Hang Ten (BVI) Group for the purpose of facilitating the listing of the Hang Ten Shares.

      On 16 April 2002, the Investors entered into the Restructuring Agreement with, amongst others,
Akai and the Liquidators (as supplemented by an agreement dated 14 May 2002) in respect of the
Proposal. The principal terms of the Restructuring Agreement are set out in the Explanatory Statement
set out on pages 102 to 119 of this document.

       In August 2002, Hang Ten Enterprises (M) Sdn Bhd, a wholly-owned subsidiary of ILC, set up its
retail outlet in Malaysia.

      On 11 October 2002, a board meeting of Hang Ten Korea, a company which was originally held as
to 70% by ILC and 30% by Global Inc., was held and approved the issuance of 440,000 new shares in its
share capital to be subscribed for by its shareholders in proportion to their existing shareholdings in
Hang Ten Korea. As Global Inc. had confirmed that it would waive its right to subscribe for its portion of
the new shares, ILC took up the entire portion of the newly issued shares at a cash consideration of
W$4,400 million (or approximately HK$27.8 million) pursuant to a joint venture agreement entered into
between the shareholders of Hang Ten Korea dated 23 October 2000. As a result of the said subscription,
Hang Ten Korea is owned as to 92% by ILC and 8% by Global Inc..

     On 28 October 2002, Hang Ten entered into the Sale and Purchase Agreement under which it will
acquire the entire issued share capital of Hang Ten (BVI) from the Investors and the Other Investors.

      The consideration payable to the Investors will be satisfied by 21,200,000,000 Hang Ten Shares
(with one Warrant for every five Hang Ten Shares) and 7,038 CPS to the Investors. The Warrants will be
                                                 – 47 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


issued on the Closing Date. A total of 4,402 million Hang Ten Shares will be issued on exercise of the
Warrants, representing approximately 18.03% of the issued ordinary share capital of Hang Ten at the
time such Warrants are issued. Out of the 21,200,000,000 Hang Ten Shares, the Investors will direct
Hang Ten to issue and allot 1,200,000,000 Hang Ten Shares (with associated Warrants) to the Designated
Person in consideration of consultancy services provided by the Designated Person to the Investors in
relation to the restructuring of Akai.

      In order to maintain a sufficient public float for the Hang Ten Shares upon Closing, Hang Ten
(BVI) will, prior to completion of the Sale and Purchase Agreement, issue shares, representing
approximately 3.7% of its enlarged issued share capital, to the Other Investors, who are not connected
with the directors, the chief executives and the substantial shareholders of Hang Ten and its subsidiaries
or their respective associates. Pursuant to the Sale and Purchase Agreement, the Other Investors will
transfer their portion of the entire equity interests in Hang Ten (BVI) to Hang Ten, and to satisfy the
consideration to the Other Investors, Hang Ten will issue 810,000,000 Hang Ten Shares (with one
Warrant for every 5 Hang Ten Shares so issued) and 269 CPS to the Other Investors. Such Hang Ten
Shares will represent approximately 3.32% of the issued ordinary share capital of Hang Ten on the
Closing Date but before any conversion of the CPS or exercise of the Warrants. In order to maintain
sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have agreed to convert
the 269 CPS into 2,690,000,000 Hang Ten Shares upon Closing but before the commencement of dealing
in Hang Ten Shares. Accordingly, there will be 3,500 million Hang Ten Shares held by the Other
Investors upon listing of the Hang Ten Shares, which will represent approximately 12.92% of the issued
ordinary share capital of Hang Ten immediately following such conversion but before any other conversion
of the CPS issued to the Investors or exercise of the Warrants.

     Further details of the corporate reorganisation of the Hang Ten Group are set out in the paragraph
headed “Corporate reorganisation” in Appendix VII to this document.

BUSINESS

Retail business

      With its headquarters in Taiwan, the Hang Ten (BVI) Group operated a total of 140 and 19 self-
operated retail shops in Taiwan and Singapore respectively as at 31 March 2002. The products bearing
the brandname of “Hang Ten” are principally sold through its self operated retail shops. The Directors
believe that the Hang Ten (BVI) Group is one of the leading casual wear retail chain operators in the
Asian region in terms of the number of retail shops operated by it.

      With the increasing demand for casual wear products, the Hang Ten (BVI) Group identified the
need to strengthen its retail distribution capability by forming business alliances with department stores.
With an objective of attracting a broader customer base, the Hang Ten (BVI) Group also sells “Hang
Ten” branded products through sales counters in department stores in the Asian region. Retail shops and
department store counters are directly managed and operated by members of the Hang Ten (BVI) Group.
The average floor area of a retail shop and a sales counter is approximately 119.85 sq.m. and 49.74 sq.m.
respectively.

      The Hang Ten (BVI) Group has entered into franchise arrangements with independent franchisees
in Taiwan, South Korea, Philippines and Macau with respect to operations of franchised shops selling
products bearing the brandname “Hang Ten”. Under the franchise agreements, the franchisees have
undertaken to engage exclusively in the sales and marketing of products bearing the brandname “Hang

                                                  – 48 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


Ten” through all distribution channels which shall be in conformity with the Hang Ten (BVI) Group’s
established merchandising and marketing policies. All franchisees can only purchase goods from the
Hang Ten (BVI) Group and the title of such goods are retained by the Hang Ten (BVI) Group until goods
are sold to ultimate customers of the franchised shops. The Hang Ten (BVI) Group is also required to
provide assistance from time to time to its franchisees relating to promotions and advertising campaigns,
product and sales training, and other operational aspects with the objective of ensuring consistency of its
retailing business in terms of service quality and retail image.

      For franchisees in the Philippines, the term of the franchise agreements is generally for a period of
up to 8 years. The franchisees are required to purchase goods from the Hang Ten (BVI) Group at the
prices set by the Hang Ten (BVI) Group. The franchisees can only sell the goods at the suggested retail
prices determined by the Hang Ten (BVI) Group. As part of the Hang Ten (BVI) Group’s advertising
policy for franchising arrangement, the franchisees are required to pay to the Hang Ten (BVI) Group a
quarterly advertising fee of 2% of the gross sales for the preceding quarter.

      The Hang Ten (BVI) Group has also entered into franchise arrangements in Taiwan and South
Korea with independent franchisees. The term of the franchise agreements ranges from 2 years to 3
years. Goods are sold to customers at the suggested retail prices determined by the Hang Ten (BVI)
Group. The franchisees are entitled to a certain amount of commission representing 28% to 31% of the
gross sales made by such franchisees. All payments made by the franchisees are settled in Korean Won or
NT$.

     As at 31 March 2002, the Hang Ten (BVI) Group has 103 franchised shops comprising 3, 28, 71
and 1 franchised shops in Taiwan, Philippines, South Korea and Macau respectively.

     During each of the years ended 31 March 2000, 2001 and 2002, the Hang Ten (BVI) Group’s
turnover derived from sales conducted in franchised shops accounted for approximately 5.9%, 6.7% and
18.9%, respectively, of its total turnover.

      As part of the brand building policy of the Hang Ten (BVI) Group, the retail shops, sales counters
in department stores and franchised shops selling “Hang Ten” products are required to conform with
standardised display, layout and decoration with the objective of portraying a consistent brand image to
its customers.

Licensing business

      ILC Trademark Corporation, a member of the Hang Ten (BVI) Group, is currently the owner of the
“Hang Ten” trademark. The Hang Ten (BVI) Group has established an international network of licenses
covering a number of major cities in Asia, Australia, the US, South America and Europe. The Hang Ten
(BVI) Group has, as at 31 March 2002, granted licences to use the “Hang Ten” trademark to 37 independent
licensees in over 15 countries, including the US, Europe, Japan, Australia, South America and South
Africa. Under the licensing agreements, the licensees are granted the right to design, manufacture and
source products using the “Hang Ten” trademark for terms ranging from 6 months to 12 years. These
products include apparel, footwear, fragrances, surfboards, accessories, toys, watches and stationery. The
licensees are also required to pay a royalty fee in the range of 2.5% to 6% to the Hang Ten (BVI) Group
based on the turnover of the licensees. For each of the three years ended 31 March 2002, the royalty
income of the Hang Ten (BVI) Group accounted for about 3.4%, 2.9% and 2.4% of its total turnover. The
Directors consider that the licensing operation generates a steady income to the Hang Ten (BVI) Group
and helps to build a global brand image of its products.


                                                  – 49 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


Wholesaling business

      To enhance the sales of “Hang Ten” branded products in a more cost-effective manner, the Hang
Ten (BVI) Group, in addition to its retailing and licensing business, also engages in the wholesaling of
“Hang Ten” branded products through the appointment of authorised distributors. These distributors are
mainly located in suburban areas so as to capture sales in districts which are away from the major city
centres. These local distributors, pursuant to the distribution agreements, are allowed to sell products
which are supplied by other third parties but are only permitted to sell the “Hang Ten” branded products
at designated locations to avoid direct competition with the local retail outlets and/or franchised shops of
the Hang Ten (BVI) Group.

      The following table shows a breakdown of the Hang Ten (BVI) Group’s audited turnover by retail,
licensing and wholesaling business for each of the three years ended 31 March 2000, 2001 and 2002.

                                                                       Year ended 31 March
                                                              2000             2001                  2002
                                                           US$’000          US$’000               US$’000

     Retail business:
     Retail shops                                          105,666            100,182               91,377
     Sales counters in department stores                    17,024             21,051               27,690
     Franchised shops                                        8,615              9,787               30,080

                                                           131,305            131,020              149,147

     Wholesale business                                      8,877             10,684                 6,322
     Licensing business                                      4,937              4,242                 3,877

                                                           145,119            145,946              159,346


     The following table shows a geographical breakdown of the Hang Ten (BVI) Group’s audited
turnover for each of the three years ended 31 March 2000, 2001 and 2002.

                                                                       Year ended 31 March
                                                              2000             2001                  2002
                                                           US$’000          US$’000               US$’000

     Taiwan                                                134,483            131,315              112,260
     Philippines                                             4,780              4,196                4,582
     Singapore                                                 919              3,872                8,471
     South Korea                                                 –              2,321               30,156
     Other                                                   4,937              4,242                3,877

                                                           145,119            145,946              159,346


                                                  – 50 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


RETAIL POLICIES

     The Directors believe that the Hang Ten (BVI) Group has established a competitive position in the
casual wear retail market in the Asian region. The Directors further consider that the Hang Ten (BVI)
Group’s accomplishment is a result of the successful implementation of the following business policies:

Value for money

      The Directors believe that the Hang Ten (BVI) Group has established a reputation for providing to
its customers “value for money” apparel and complementary accessories which are characterised by high
quality, fashionable design and competitive pricing.

Product variety

      The Hang Ten (BVI) Group of fers its customers a wide selection of fashionable casual wear
(including unisex apparel in a full range of colours and sizes). In addition to apparel products, the Hang
Ten (BVI) Group also offers a variety of matching complementary accessories such as bags, caps, socks,
shoes, belts and umbrellas.

Strategically located retail network

      It has been the Hang Ten (BVI) Group’s policy to strategically locate its retail outlets at prime sites
with high levels of shopping traffic and maximum visibility in order to provide its customers with a clean
and easily accessible shopping environment. Decisions to open retail shops are dependent primarily on
location, concentration of shoppers and youngsters and the consumption power of the relevant area. The
Directors believe that retail network of the Hang Ten (BVI) Group has been established with a prominent
presence in the principal shopping areas in each country in which it operates.

Quality customer service

      The Directors consider high quality customer service to be a valuable intangible asset to the Hang
Ten (BVI) Group’s and a key to its success. On a regular basis, the Hang Ten (BVI) Group conducts
training seminars for its sales staff, including those employed under franchise arrangements, on service
and product knowledge and updates on the latest fashion trends.

Inventory replenishment system

      The Directors recognise the importance of an efficient inventory replenishment system which
enables instant response to market demand and product performance and also minimises slow-moving
stock. Accordingly, the Hang Ten (BVI) Group has made a significant investment in developing a
management information system which incorporates an electronic point-of-sale system connecting all the
shops, department stores and franchised shops to closely monitor sales trends and stock levels.




                                                   – 51 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


PRODUCTS

      The Hang Ten (BVI) Group is principally engaged in the business of designing, marketing and
selling casual wear, apparel and accessories under the brandname of “Hang Ten” in Asian countries
including Taiwan, South Korea, Singapore and Philippines. “Hang Ten” branded products include jackets,
vests, T-shirts, skirts, pants and jeans as well as other accessories such as bags, caps, socks, shoes, belts
and umbrellas. The target customers of the Hang Ten (BVI) Group are primarily customers aged between
15 and 45 with contemporary attitude in their selection of fashionable casual clothing which is of high
quality and offers value for money. The Directors believe that the Hang Ten (BVI) Group is well-
positioned in the basic, comfortable and value-for-money casual wear market.

      During each of the three years ended 31 March 2002, approximately 90.5%, 89.8% and 93.6% of
the turnover of the Hang Ten (BVI) Group were derived from the retail business. As the business model
of the Hang Ten (BVI) Group is retail in nature, it is not appropriate to disclose details of the five largest
customers in this document.

       The Hang Ten (BVI) Group adopted a credit policy that allows (i) licensees to have a credit period
of 30 days; (ii) franchisees to have a credit period ranging from 7 to 15 days, after the date of invoice;
(iii) department store counters to have a credit period ranging from 30 to 45 days, after the date of
invoice to the department stores; and (iv) distributors and wholesalers to have a credit period of within
30 days.

      The Hang Ten (BVI) Group’s business of sales of apparels is mainly conducted on a cash basis.
Accordingly, provision for bad debt is made on a case by case basis by reviewing end of year balances as
to the age and specific circumstances of the debtors. For the licensing business, provision for bad debts is
also made on a case by case basis as above. In addition, a general provision of 10% is made in respect of
the outstanding royalty receivables at each year end date.

      According to the policy of the Hang Ten (BVI) Group, items sold can be replaced within one
month. As for the discount policy, no special discount to individual specific customer is allowed. Discounts
are generally made during promotion and offered up to approximately 40%.

      The breakdown of the audited turnover of the Hang Ten (BVI) Group by products for each of the
years ended 31 March 2000, 2001, and 2002 is as follows:

                                                                         Year ended 31 March
                                                               2000              2001                  2002
                                                            US$’000           US$’000               US$’000
      Retail business:
      Men’s casual wear                                      85,005              84,508               90,573
      Ladies’ causal wear                                    31,780              32,510               46,288
      Kid’s casual wear                                       6,066               6,268                7,587
      Accessories                                             8,454               7,734                4,699

                                                            131,305             131,020              149,147

      Wholesale business                                      8,877              10,684                 6,322
      Licensing business                                      4,937               4,242                 3,877

                                                            145,119             145,946              159,346

                                                   – 52 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


INVENTORY CONTROL AND CASH CONTROL

       Owing to the nature of the Hang Ten (BVI) Group’s businesses, many of the sales generated by the
Hang Ten (BVI) Group are settled in cash. The Hang Ten (BVI) Group’s management has set out specific
procedures in relation to the custody of cash including segregation of duties and daily reconciliations of
cash balances with sales amounts. The staff responsible for handling cash, mainly the cashiers, are
required to follow these procedures strictly. Area supervisors and shop supervisors of the Hang Ten
(BVI) Group and the Hang Ten (BVI) Group’s senior management are responsible for the supervision of
the compliance with these procedures. The Hang Ten (BVI) Group has not experienced any theft from its
retail stores during the three years ended 31 March 2002.

      Through the generation of accurate and up-to-date inventory records with the assistance of the
management information system, management of the Hang Ten (BVI) Group is able to gather information
on individual product and shop performance on a regular basis, identify market trends rapidly and
replenish products within a short time span so that the Hang Ten (BVI) Group is able to capture the
largest possible share of the market while maintaining a consistently low inventory level of approximately
16.5%, 19.5% and 19.6% to total asset value during the years ended 31 March 2000, 2001 and 2002
respectively. The Directors believe that low inventory levels are crucial to the Hang Ten (BVI) Group’s
stringent cost control policy since this not only minimises storage space and cost, but also avoids
unnecessary lock-up of working capital and reduces the risk of inventory obsolescence, both of which are
considered by the Directors as common problems encountered by retailers.

      Inventories are stated at lower of cost and net realisable value. Accumulated provision in the
amount of approximately US$1,860,000, US$794,000 and US$1,471,000 respectively was made as at 31
March 2000, 2001 and 2002 respectively. The Hang Ten (BVI) Group adopted a provision policy based
on the age of the inventories. No provision will be made for current seasons items; a 25% provision will
be made for those items aged between 1 /2 to 1 year; a 50% provision will be made for those items aged
between 1 to 11/2 years; a 75% provision will be made for those items aged between 11 /2 to 2 years; and a
full provision will be made for those items aged over 2 years.

      The Hang Ten (BVI) Group carries out an annual inventory-taking at the end of each financial year.
The Hang Ten (BVI) Group’s inventory control department is responsible for keeping an up-to-date stock
record. Apart from the annual full count stocktake, the Hang Ten (BVI) Group also conducts different
types of stocktake such as seasonal stocktake, random stocktake and ad-hoc stocktake. This policy is
effective given that the stock loss during the three years ended 31 March 2002 was negligible and mainly
related to internal transfer discrepancy among different outlets. The Hang Ten (BVI) Group has not
experienced any significant stock loss to its retail stores during the three years ended 31 March 2002.

SUPPLIERS

      Since the establishment of the Hang Ten (BVI) Group, all “Hang Ten” branded products are
manufactured by a number of Taiwan and Hong Kong suppliers engaged by the Hang Ten (BVI) Group in
order to enhance cost effectiveness and flexibility in utilisation of resources by the Hang Ten (BVI)




                                                 – 53 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


Group. The merchandising team has established a purchasing schedule based on the forecast of the
volume of sales, the actual sales volume of the previous season and timing for introduction of new
products. The merchandising team of the Hang Ten (BVI) Group regularly reviews the purchase orders
on hand and inventory levels to place orders to suppliers accordingly and determines the required
production schedule to be conducted by its suppliers. The Hang Ten (BVI) Group has about 38
merchandising staff for arranging purchase orders and monitoring the delivery of merchandise. The Hang
Ten (BVI) Group has a team of experienced quality control staff closely monitoring the quality of the
merchandise manufactured by its suppliers. Commercial production of the Hang Ten (BVI) Group’s
products by suppliers will only commence after production samples have been checked by the Hang Ten
(BVI) Group as to quality, design and colour. On-site quality inspection is performed at the suppliers’
premises before the merchandise is delivered to the Hang Ten (BVI) Group. The supplier is required to
source all raw materials and to manufacture the products in accordance with the Hang Ten (BVI) Group’s
design specifications.

      The Hang Ten (BVI) Group has about 35 suppliers. Although the Hang Ten (BVI) Group has not
entered into any long term agreements with its suppliers, the Hang Ten (BVI) Group maintains a good
working relationship with its suppliers. For the three years ended 31 March 2002, the Hang Ten (BVI)
Group’s largest supplier accounted for about 38%, 38% and 27%, respectively of the total purchases of
the Hang Ten (BVI) Group. For the three years ended 31 March 2002, the Hang Ten (BVI) Group’s five
largest suppliers accounted for about 64%, 66% and 61%, respectively of the total purchase of the Hang
Ten (BVI) Group. The Hang Ten (BVI) Group has established an amicable business relationship with its
principal suppliers for over 10 years. During the three years ended 31 March 2002, the Hang Ten (BVI)
Group has not encountered any delay in production by its suppliers and any significant return of goods as
a result of unsatisfactory quality of products manufactured by its suppliers. The Directors believe that
there are many suppliers in Taiwan, Hong Kong and other countries who can undertake the manufacturing
process of the Hang Ten (BVI) Group’s products of similar quality and quantity. As such, the existing
suppliers of the Hang Ten (BVI) Group can be easily replaced without causing major disruption to the
Hang Ten Group’s business operations. Each of the five largest suppliers of the Hang Ten (BVI) Group is
independent of and not connected with any of the directors, chief executive or substantial shareholders of
Hang Ten or any of its subsidiaries or their respective associates (as defined under the Listing Rules).

      Most of the Hang Ten (BVI) Group’s purchases are settled by letters of credit or on an open
account basis with credit terms up to 30 to 45 days. For the year ended 31 March 2002, about 55% of
total purchases were settled by letter of credits with a term of 15 days and about 45% of the total
purchases were settled on an open account basis with a credit term of up to 30 to 45 days. About 59%,
34%, 3% and 4% of the total purchases for the year ended 31 March 2002 were settled in HK$, NT$,
US$ and Korean Won respectively.

DESIGN AND PRODUCTION DEVELOPMENT

      All of the products manufactured by the Hang Ten (BVI) Group under its “Hang Ten” brandname
are designed by the Hang Ten (BVI) Group’s in-house design team of 13 staff. In order to keep abreast of
the latest fashion trends, members of the Hang Ten (BVI) Group’s design team frequently attend the
MAGIC International trade show biannually. In general, the Hang Ten (BVI) Group commences its
product design process eight months before the next season, during which time the design team carries

                                                 – 54 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


out research on market trends and conducts reviews on the performance of the previous season. The Hang
Ten (BVI) Group’s merchandise design team creates various design concepts or themes featuring the
latest fashion trends based on which design sketches are created. The Hang Ten (BVI) Group also
performs sales projections for the coming season before new designs are finalised and approved. The
Hang Ten (BVI) Group normally designs for two seasons every year: the spring/summer season and
autumn/winter season. On average, a total of 450 designs are created for each season for the Hang Ten
(BVI) Group’s products bearing the “Hang Ten” brandname.

QUALITY CONTROL

     The Directors place strong emphasis on quality control and have adopted stringent quality control
procedures and standards.

      The Hang Ten (BVI) Group has about 38 merchandising staff whose duties primarily include
arranging purchase orders and monitoring the delivery of merchandise. The Hang Ten (BVI) Group has a
team of experienced quality control staff closely monitoring the quality of the merchandise manufactured
by its suppliers. They regularly visit the suppliers’ manufacturing facilities to ensure their general
production capability. Commercial production of the Hang Ten (BVI) Group’s products by suppliers will
only commence after production samples have been checked by staff of the Hang Ten (BVI) Group as to
quality, design and colour. On-site quality inspection is performed at the suppliers’ premises before the
merchandise is delivered to the Hang Ten (BVI) Group.

MARKETING AND PROMOTION

      The Hang Ten (BVI) Group recognises the importance of establishing the corporate image of its
“Hang Ten” brandname. The Hang Ten (BVI) Group currently employs an experienced advertising team
of 43 staff. The Hang Ten (BVI) Group’s major promotion channels are through advertisement on billboards,
magazines, newspapers, radio and public buses. The Hang Ten (BVI) Group engages famous entertainment
celebrities to promote its products.

      The Hang Ten (BVI) Group is also very active in promoting its own brandnames to potential
licensees, franchisees and retailers in major trade shows. To promote the image of the “Hang Ten” brand,
the Hang Ten (BVI) Group participates in the MAGIC International trade show which is one of the
largest retail exhibitions for fashion held biannually at Las Vegas. The Hang Ten (BVI) Group also
attends other trade fairs participated by its licensees, such as the Action Sports Retail show. Advertising
includes editorial coverage in fashion magazines and product placement on television and movie
productions organised to enhance the public awareness of the “Hang Ten” brand. A biannual publication,
“Footprint”, which highlights the Hang Ten (BVI) Group’s latest marketing and design efforts and
provides updates on international licensee events and store openings, is distributed to licensees at trade
shows.

     For each of the three years ended 31 March 2002, the Hang Ten (BVI) Group’s advertising and
promotion expenses amounted to about 2.22%, 1.99%, and 1.87% of the Hang Ten (BVI) Group’s total
turnover, respectively.



                                                  – 55 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


SALES AND DISTRIBUTION

     The following table sets out the Hang Ten (BVI) Group’s retail distribution network for “Hang
Ten” branded products as at 31 March 2002:

                                                     Counters in
                                       Retail        department           Franchised
                                       shops              stores               shops                 Total

     Taiwan                               156                  48                   3                  207
     South Korea                            –                  17                  71                   88
     Singapore                             19                   2                   –                   21
     Philippines                            –                   6                  28                   34
     Macau                                  –                   –                   1                    1

     Total                                175                  73                 103                  351


      The Hang Ten (BVI) Group endeavours to secure the best possible locations for its shops, generally
seeking prime city sites which have a high volume of shopping traffic and high visibility. The Hang Ten
(BVI) Group has also strategically positioned shops in suburban districts to capture sales in these areas.
The Hang Ten (BVI) Group’s management conducts frequent visits to the retail shops for inspection.

      The Hang Ten (BVI) Group generally enters into or extends a lease for a shop after an assessment
of such shop’s profitability, taking into account the rental costs. It is the Hang Ten (BVI) Group’s policy
to maintain tight control over the rental level of its retail shops. The term of tenancies for most of the
Hang Ten (BVI) Group’s shops, other than franchised shops, ranges from two to six years. The leases for
the Hang Ten (BVI) Group’s shops normally provide for a fixed rental while the leases for some shop-in-
shop retail outlets provide for a certain percentage of the gross receipts to be paid as rental, some of
which are subject to a minimum amount. The Hang Ten (BVI) Group has not experienced any significant
difficulty in securing sites for its retail shops on satisfactory terms. For the three years ended 31 March
2002, rental expenses amounted to approximately 13.22%, 14.44% and 13.00% of the turnover of Hang
Ten (BVI) Group.

      The Hang Ten (BVI) Group’s shop design team and marketing team are responsible for the design
and layout of all the retail shops. Each of the Hang Ten (BVI) Group’s retail shops is designed to
enhance the customers’ shopping pleasure. Emphasis is placed on shop layout and product presentation
and shop window designs are changed once every 5 weeks on average. Large posters are used to attract
the attention of potential customers and to highlight the “Hang Ten” image. Mannequins are used to
present the mix and match of the collection in a creative and interesting way. The Hang Ten (BVI) Group
places great emphasis on customer service with all sales personnel receiving extensive training, typically
lasting up to seven days, in product knowledge and in-store service.




                                                  – 56 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


INTELLECTUAL PROPERTY RIGHTS

      The Hang Ten (BVI) Group is the owner of the trademark “Hang Ten”. In addition, Hang Ten
(BVI) Group is also a registered owner of the trademarks “Lightning Bolt” and “OZZY”. Further details
of the Hang Ten (BVI) Group’s intellectual property rights are set out in the paragraph headed “Intellectual
property rights” in the section headed “Statutory and general information on Hang Ten Group Holdings
Limited” in Appendix VII to this document.

       The Directors consider that it is important to protect the Hang Ten (BVI) Group against infringement
of its trademarks and are taking appropriate steps to protect these trademarks. Management of the Hang
Ten (BVI) Group regularly visit shopping areas to identify any possible infringement of the Hang Ten
Group’s trademarks. The Hang Ten (BVI) Group will take appropriate legal action to defend its trademarks
if its management finds any infringement of its trademarks.

      The Directors are not aware of any infringement of the Hang Ten (BVI) Group’s trademarks in the
past and the Directors believe that the Hang Ten (BVI) Group has taken all reasonable measures to deter
infringement of its trademarks.

LEASED PROPERTIES

      As part of the due diligence process, a sample of leased properties of the Hang Ten (BVI) Group
based on their respective volume of business, turnover, profitability, locations and countries has been
selected and reviewed. Based on legal advice obtained and public searches conducted in connection with
such sample, the following was revealed:

     (a)     Certain of these leased properties are subject to mortgages created by the owners of the
             properties. However, based on the public searches conducted, it is unclear whether the lease
             agreements for these properties have received the consent of the relevant mortgagees. To the
             extent that any such consent is required and not obtained, Hang Ten may not be able to
             enforce the lease agreements against these mortgagees in the event that they take possession
             of the leased properties in question pursuant to an enforcement of the mortgages.

     (b)     Certain leases were granted to members of the Hang Ten (BVI) Group by parties other than
             the owners of the properties in question. The Hang Ten (BVI) Group was informed by their
             landlords that they had prior arrangements in place with the owners of these properties
             which allow them to grant leases in respect of the properties. To the extent that any such
             prior arrangement is not in place or are terminated or varied to the detriment of the tenants,
             or the consent of the relevant owners of the properties are so required and not obtained, the
             relevant members of the Hang Ten (BVI) Group may not be entitled to continued possession
             and use of these leased properties.

     (c)     Certain of the leased properties of the Hang Ten (BVI) Group have been sub-let to other
             third parties. The lease agreements between the relevant members of the Hang Ten (BVI)
             Group and the landlords provide that no such sub-leases are allowed. Although no consent
             was expressly obtained from the landlords in relation to such sub-leases, business licences

                                                  – 57 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


             for these leased properties revealing the names of the actual users of the properties were
             supplied to the landlords each year. To the extent that the landlords have not explicitly
             consented to such sub-leases, they may claim a breach of the relevant lease agreements and
             may use this as a ground to terminate them, unless they are aware of the sub-leases and
             have consented to the sub-letting arrangements under such circumstances as would estop
             them from objecting to the sub-leases or claiming those as grounds for terminating the lease
             agreements.

      The Investors have confirmed that they will provide an indemnity to Hang Ten to compensate any
losses suffered by the relevant subsidiaries of Hang Ten as tenants in the event that any of them were
unable to enjoy continued use of the leased properties in accordance with the subsisting lease agreements
owing directly to the reasons described above and the relevant member of the Hang Ten Group were
unable to secure alternative locations for its operations on terms that it considers to be reasonably
acceptable.

COMPETITION

      The Directors believe that the apparel and accessories industry in the Asian region is highly
competitive and are aware that the Hang Ten (BVI) Group competes with numerous domestic and foreign
fashion retailers in Asia. Nevertheless, there are, to the best of the Directors’ belief, only a very few
number of competitors which are able to operate in Asia on a scale similar to that of the Hang Ten (BVI)
Group. The Directors are of the view that the Hang Ten (BVI) Group competes favourably with its
competitors in relation to fashion quality value and service by offering broad merchandise selections,
personalised service and convenience, as well as exclusive fashion designs bearing the “Hang Ten”
brandname, which distinguish its goods from the goods carried by these competitors. Accordingly, the
Directors believe that the Hang Ten (BVI) Group has established a strong position in the casual wear,
apparel and accessories industry in the Asian region.

RELATIONSHIPS WITH YGM

      As at the Latest Practicable Date (i) Mr. Chan Wing Sun was personally interested in 2,072,072
shares in YGM (representing about 1.34% of the issued share capital of YGM as at the Latest Practicable
Date); (ii) an aggregate of 29,932,264 shares of YGM (representing about 19.35% of the issued share
capital of YGM as at the Latest Practicable Date) were held under various trusts and companies established
for the benefit of Mr. Chan Wing Sun and his associates; (iii) 34,595,908 shares of YGM (representing
about 22.36% of the issued share capital of YGM as at the Latest Practicable Date) were held by Canfield
Holdings Limited, which is beneficially owned by Mr. Chan Wing Sun and his associates; and (iv)
2,917,480 shares of YGM (representing about 1.89% of the issued share capital of YGM as at the Latest
Practicable Date) were held by Hearty Development Limited which is beneficially owned by Mr. Chan
Wing Sun and his associates.

     Mr. Chan Wing Sun, together with his associates, is the controlling shareholder of YGM, a Hong
Kong listed company which is principally engaged in the manufacturing, retail and wholesale of apparel
and accessories bearing the brandnames of Michel Rene, Aquascutum, Ashworth and Daniel Hechter,
property investment and printing in Asia. In addition to the interests in YGM as disclosed in note 13(h)

                                                 – 58 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


on page 338 of this document, Mr. Kenneth Hung and his family members are interested in 32% of
Michel Rene Enterprise Limited, a 68% subsidiary of YGM which is principally engaged in the
manufacturing, retail and wholesale of apparel bearing the brandname of “Michel Rene”. The portfolio of
the apparel manufactured under the brandname of “Hang Ten”, which are targeted at customers aged
between 15 and 45 and which comprises jackets, vests, T-shirts, skirts, pants and jeans as well as other
accessories such as bags, caps, socks, shoes, belts and umbrellas, is substantially different to the products
bearing the brandnames of Michel Rene, Aquascutum, Ashworth and Daniel Hechter in terms of product
types, target customers and unit price. The Directors are of the view that the existing business of the
YGM group will not compete or is unlikely to compete with the business of the Hang Ten Group, prior to
and following the Introduction.

      Save as disclosed above, each of the Investors and the executive Directors, has confirmed that
neither he/she nor his/her associates (as defined in the Listing Rules) has any interest in any business or
businesses apart from the business of the Hang Ten Group, which competes or is likely to compete with
the business of the Hang Ten Group, prior to and following the Introduction.

PRINCIPAL STRENGTHS OF THE HANG TEN (BVI) GROUP

      The Directors believe that the Hang Ten (BVI) Group, through its sales network, has established a
strong recognition of the “Hang Ten” brandname in the regions where it operates. The Directors consider
that the Hang Ten (BVI) Group has the following principal strengths:

     –      well recognised “Hang Ten” brandname in the Asian region including Taiwan, South Korea,
            Singapore and Philippines;

     –      the extensive experience and expertise of the Hang Ten (BVI) Group’s management team in
            the retail and manufacturing industries for casual wear and apparel;

     –      the ability of the Hang Ten (BVI) Group’s design team to produce distinctive, quality
            merchandise of exceptional value;

     –      the ability of the Hang Ten (BVI) Group’s marketing team to enhance its brand image through
            advertising campaigns; and

     –      strategically located sales networks in the Asian region.




                                                   – 59 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


FINANCIAL INFORMATION

      Summarised audited combined results of the Hang Ten Group for each of the years ended 31 March
2000, 2001 and 2002 are set out below and have been prepared on the basis of preparation set out in
section A of the Accountants’ Report included as Appendix II to this document and are extracted therefrom:

                                                                           Year ended 31 March
                                                                   2000             2001          2002
                                                                US$’000          US$’000       US$’000

     Turnover                                                   145,119          145,946         159,346
     Cost of sales                                              (74,483)         (73,216)        (80,300)

                                                                  70,636          72,730           79,046
     Other revenue                                                 2,426           2,929            2,834
     Other net income/(loss)                                         738              55            (227)
     Selling expenses                                            (52,890)        (55,373)         (62,632)
     Administrative expenses                                      (6,256)         (5,784)          (5,574)
     Other operating expenses                                     (1,371)         (1,757)          (1,716)

     Profit from operations                                      13,283           12,800           11,731
     Finance costs                                                  (14)            (287)          (1,025)

     Profit from ordinary activities
       before taxation                                           13,269           12,513           10,706
     Taxation                                                    (1,796)          (1,192)          (1,126)

     Profit from ordinary activities
       after taxation                                             11,473          11,321            9,580
     Minority interests                                             (540)           (469)          (1,020)

     Profit attributable to shareholders                         10,933           10,852            8,560


     Dividends attributable to the year:
     Interim dividend declared during
        the year                                                       –           1,504                –
     Final dividend proposed after
        balance sheet date                                         7,021               –                –
     Special dividend                                                  –          26,534                –

                                                                   7,021          28,038                –


     Basic earnings per share                                 0.040 cent       0.040 cent      0.032 cent




                                                 – 60 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


Rule 8.06 of the Listing Rules

      The Directors are aware of the requirement of Rule 8.06 of the Listing Rules which states that
the latest financial period reported on by the reporting accountants must not have ended more than
six months before the date of the listing document. Hang Ten has sought and obtained a waiver
from strict compliance with such requirement from the Stock Exchange such that the accountants’
report only covers each of the three years ended 31 March 2002. The Directors confirm that they
have performed sufficient due diligence on the Hang Ten Group to ensure that, save as disclosed
herein, up to the date of issue of this document, there has been no material adverse change in the
financial position of the Hang Ten Group since 31 March 2002, and there is no event which would
materially affect the information shown in the accountants’ report set out in Appendix II to this
document.

For the year ended 31 March 2000

      The turnover of the Hang Ten (BVI) Group for the year ended 31 March 2000 was approximately
US$145,119,000, of which approximately 90.5%, 3.4% and 6.1% were attributable to retail business,
licensing business and wholesaling business respectively. In terms of geographical distribution,
approximately 92.7%, 3.3%, 0.6% and 3.4% of the turnover of the Hang Ten (BVI) Group was attributable
to sales in Taiwan, Philippines, Singapore and other countries respectively. Gross profit and profit
attributable to shareholders of the Hang Ten (BVI) Group for the year ended 31 March 2000 was
approximately US$70,636,000 and US$10,933,000 respectively, representing a gross profit margin of
approximately 48.7% and a net profit margin of approximately 7.5%. Debtors’ turnover days, creditors’
turnover days and inventory turnover days for the year were 11 days, 25 days and 70 days respectively.
The current ratio and quick ratio for the year were 3.98 and 2.94 respectively.

     The Hang Ten (BVI) Group declared a dividend of US$7,021,000 for the year ended 31 December
2000. Based on this and assuming 27,100,000,000 Hang Ten Shares were in issue as at 31 December
2000 (which is the number of Hang Ten Shares that will be in issue upon listing of the Hang Ten Shares
but before conversion of the CPS issued to the Investors or exercise of the Warrants), the dividend per
Hang Ten Share for the year ended 31 December 2000 would be US cent 0.026.

For the year ended 31 March, 2001

      The turnover of the Hang Ten (BVI) Group for the year ended 31 March 2001 was approximately
US$145,946,000, of which approximately 89.8%, 2.9% and 7.3% were attributable to retail business,
licensing business and wholesaling business respectively. In terms of geographical distribution,
approximately 90.0%, 2.9%, 2.6%, 1.6% and 2.9% of the turnover of the Hang Ten (BVI) Group was
attributable to sales in Taiwan, Philippines, Singapore, South Korea and other countries respectively.
Gross profit and profit attributable to shareholders of the Hang Ten (BVI) Group for the year ended 31
March 2001 was approximately US$72,730,000, and US$10,852,000 respectively, representing gross
profit margin of approximately 49.8% and a net profit margin of approximately 7.4%.

      Increase in the selling expenses for the year ended 31 March 2001 was mainly due to increase in
selling expenses in Singapore and South Korea amounted to approximately US$2,216,000. The operation

                                                – 61 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


in Singapore and South Korea was expanded during the year. Number of retail outlets in the two countries
increased from 7 at the end of March 2000 to 66 as at 31 March, 2001. Despite the expansion of the
operations in Singapore and South Korea, the turnover of the Hang Ten (BVI) Group increased by only
approximately 0.6% as compared to that for the year ended 31 March 2000 due to the sluggish retail
market in Taiwan. The turnover of the Hang Ten (BVI) Group attributable to sales in Taiwan decreased
by approximately 2.4%.

     Administrative expenses for the year ended 31 March 2001 decreased by approximately US$472,000
(about 7.5%) when compared to that for the year ended 31 March 2000. This was mainly attributed to a
decrease in provision for staff bonus of approximately US$270,000 and decrease in donation of
approximately US$300,000.

      Other operating expenses increased by approximately US$386,000 when compared to that of the
prior year which was attributed to an increase in the amount of amortization charge on trademarks of
approximately US$492,000 since a full year’s amortization was charged in that year for the trademarks
acquired during the previous year.

      Debtors’ turnover days increased slightly to 15 days. The balance of trade and other receivables as
at 31 March 2001 increased by approximately US$1,294,000 over the amount as at 31 March 2000. The
increase was partly due to the trade and other receivables of approximately US$830,000 arising from the
South Korean operation which commenced in February 2001. The balance of trade and other receivables
as at 31 March 2001 for the Singapore operation increased by about US$424,000 because of the increase
in the operation there. The balance of trade and other receivables for the Taiwan operation decreased by
approximately US$864,000 which was offset by the increase in the amount receivable in other geographical
locations of approximately US$812,000.

     Inventory turnover days for the year was 69 days which is comparable to that of the previous year.

      Creditors’ turnover days increased to 45 days as the Hang Ten (BVI) Group made maximum use of
the credit terms allowed by its suppliers. Trade and other payable balance as at 31 March 2001 amounted
to approximately US$13,321,000, representing an increase of approximately US$3,358,000 when comparing
to the balance as at 31 March, 2000. The increase was primarily due to substantial amount of purchases
of goods made in February and March of 2001 after the Chinese New Year holiday season.

      The current ratio and the quick ratio were 1.48 and 1.0 respectively as a result of a decrease in
working capital as the Hang Ten (BVI) Group paid approximately US$35 million of dividend during the
year.

     The Hang Ten (BVI) Group declared a dividend of US$28,038,000 for the year ended 31 December
2001. Based on this and assuming 27,100,000,000 Hang Ten Shares were in issue as at 31 December
2001 (which is the number of Hang Ten Shares that will be in issue upon listing of the Hang Ten Shares
but before conversion of the CPS issued to the Investors or exercise of the Warrants), the dividend per
Hang Ten Share for the year ended 31 December, 2001 would be US cent 0.103.

     Gearing ratio (percentage of total debts to total assets) increased from 0% for the previous year to
18.6% for the year ended 31 March 2001. In 2001, the Hang Ten (BVI) Group disposed of all the listed
                                                 – 62 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


funds in Taiwan, which were valued at US$13,385,000 as at 31 March 2000. The Hang Ten (BVI) Group
also declared dividends of US$35,059,000 for the two years ended 31 March, 2001 and the payment of
these dividends was financed by internal resources (including the proceeds derived from the disposal of
listed funds in Taiwan) and bank borrowings of the Hang Ten (BVI) Group.

For the year ended 31 March 2002

      The turnover of the Hang Ten (BVI) Group for the year ended 31 March 2002 was approximately
US$159,346,000, of which approximately 93.6%, 2.4% and 4.0% were attributable to retail business,
licensing business and wholesaling business, respectively. In terms of geographical distribution,
approximately 70.5%, 2.9%, 5.3%, 18.9% and 2.4% of the turnover of the Hang Ten (BVI) Group was
attributable to sales in Taiwan, the Philippines, Singapore, South Korea and other countries, respectively.
Gross profit and profit attributable to shareholders of the Hang Ten (BVI) Group for the year ended 31
March 2002 was approximately US$79,046,000 and US$8,560,000 respectively, representing a gross
profit margin of approximately 49.6% and a net profit margin of approximately 5.4%.

      The increase in the turnover of the Hang Ten (BVI) Group was mainly attributable to the increase
in sales in South Korea. Selling expenses for the year ended 31 March 2002 increased by US$7,259,000
when compared to that of the previous year. This was mainly due to the increase in the selling expenses
for the South Korea operation of US$10,990,000 and the Singapore operation of approximately
US$2,050,000 respectively, reflecting the expansion of the South Korea and Singapore operations. Number
of retail outlets in South Korea and Singapore increased by 34 and 9 respectively during the year ended
31 March, 2002. The increase in selling expenses in South Korea and Singapore was partly offset by the
decrease in the selling expenses of the Taiwan operation of approximately US$5,645,000.

     Net profit for the year ended 31 March 2002 decreased by approximately US$2,292,000 which was
mainly caused by increase in selling expenses relative to turnover for the year.

      Debtors’ turnover days for the year was 22 days and the amount of trade debtors as at 31 March,
2002 increased by approximately US$3,399,000 when comparing to the balance of trade debtors as at 31
March, 2001. Trade and other receivables amounted to US$17,598,000 as at 31 March 2002, representing
an increase of approximately US$4,876,000 over the balance as at 31 March 2001. This was mainly due
to the increase in the balance of trade and other receivables of the South Korea and Taiwan operations.

      Inventory turnover days for the year was 81 days. When compared to the balance of inventories as
at 31 March 2001, the amount of inventories (net of provision) of approximately US$16,429,000 as at 31
March 2002 had increased by approximately US$3,293,000. This was attributed to the increase in the
amount of inventories of the South Korea operation as at 31 March 2002 as the level of inventories was
increased to cater for the expansion of the operation in South Korea.

    Creditors’ turnover days for the year was 42 days which was comparable to that of the year ended
31 March 2001.

      Current ratio and quick ratio for the year increased to 1.77 and 1.18 respectively, comparing to that
of the year ended 31 March 2001.

                                                  – 63 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


     No dividend was declared by the Hang Ten (BVI) Group for the year ended 31 March 2002.

       On 9 November 2001, shareholders who together held approximately 97.01% of the issued share
capital of ILC entered into an agreement to sell their respective interests in ILC to Hang Ten (BVI) for a
total consideration of approximately US$54.6 million. On 9 November 2001, certain of these shareholders
also entered into a subscription agreement with Hang Ten (BVI) pursuant to which they agreed to
subscribe for and Hang Ten (BVI) agreed to issue a total of 999,999 new shares of US$0.1 each in the
share capital of Hang Ten (BVI) at US$17 per share for a total subscription price of approximately
US$17 million. The acquisition of ILC was financed by the subscription proceeds of US$17 million,
shareholders’ loans of US$20 million and bank loans of US$17.6 million. Upon completion of this
reorganisation on 31 December 2001, Hang Ten (BVI) became the holding company of ILC.

      On 9 November 2001, members of the Kung Family and YGM entered into shareholder ’s loan
agreements with Hang Ten (BVI) pursuant to which an aggregate principal amount of US$20 million was
advanced by them to Hang Ten (BVI), as to US$15 million by the Kung Family collectively and as to
US$5 million by YGM. Pursuant to the terms of the shareholder’s loan agreements, these shareholders’
loans are unsecured and repayable by Hang Ten (BVI) in one lump sum on 8 November 2011 or earlier if
a demand is made after the occurrence of one or more of the following events of default:

     (a)   Hang Ten (BVI) shall fail to repay any principal or any other sum payable on the due date in
           accordance with the provision of the shareholder’s loan agreements;

     (b)   Hang Ten (BVI) shall commit a material breach of any other term of the shareholder’s loan
           agreements and such breach is not remedied within sixty (60) days after the lender has given
           to Hang Ten (BVI) written notice requiring the remedy of such breach; or

     (c)   if any petition (which shall not be discharged within thirty (30) days after it is made) or order
           is made for the winding up, liquidation of Hang Ten (BVI), or for the appointment of a
           liquidator, receiver, trustee or similar official of Hang Ten (BVI) or all or a substantial part of
           its assets.

      On 21 June 2002, each of Asian Wide and YGM entered into an agreement supplemental to its
shareholder’s loan agreement with Hang Ten (BVI). Pursuant to these supplemental agreements, Hang
Ten (BVI) agreed to prepay to Asian Wide and YGM principal amounts of US$2.7 million and US$900,000
owing to them respectively. As at the Latest Practicable Date, aggregate principal amounts of US$12.3
million and US$4.1 million remain owing by Hang Ten (BVI) under the shareholder’s loans granted to it
by members of the Kung Family and YGM respectively.

      The shareholders’ loans will only be repayable in one lump sum on 8 November 2011. As confirmed
by the Directors, the loans are intended to be repaid out of internal resources of the Hang Ten Group. The
business of the Hang Ten (BVI) Group has been profitable with a total profit in excess of US$30 million
during the track record period. The Directors believe that the Hang Ten Group will have sufficient
resources to repay the shareholders’ loans when due.




                                                  – 64 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


      The Kung Family and YGM will provide an undertaking to Hang Ten (BVI) and the Sponsors that
they will not request Hang Ten (BVI) to repay the aforesaid shareholders’ loans until at least 31 March
2004 even if an event of default as set out above occurs, unless with the Sponsors’ prior written approval.
The Sponsors’ approval will only be given if, after an assessment of the then financial situation and
prospect of the Hang Ten Group, the Sponsors can come to a reasonable opinion that the requisite
repayment will not affect the Hang Ten Group’s ability to meet its liabilities that fall due in the normal
course of business within a reasonable period. In addition to the Sponsors’ prior written approval, the
independent non-executive Directors will give an opinion and confirm that early repayment will not
materially and adversely affect the business and operations of the Hang Ten Group following such
repayment.

      In November 2001, Hang Ten (BVI) obtained a banking facility of US$19 million, out of which
about US$17.6 million had been utilized to finance its acquisition of ILC. The bank loan will be repaid
by Hang Ten (BVI) in five installments starting from December 2002 at a floating interest rate, representing
about 4% per annum based on the prevailing prime rate. The Directors presently intend to repay the
principal and interests of the aforesaid bank loans from internally generated funds of the Hang Ten (BVI)
Group. Taking into account the financial resources available to the Hang Ten (BVI) Group, which include
internally generated funds and the present available banking facilities, the Sponsors concur with the
Directors’ view that, after completion of the Proposal, the Hang Ten Group will have sufficient working
capital to meet its present requirements.

      The gearing ratio of the Hang Ten (BVI) Group (percentage of total debts to total assets) increased
from 18.6% in the year ended 31 March 2001 to 57.9% as a result of the completion of the acquisition of ILC.

TAXATION

      For the three years ended 31 March 2002, the Hang Ten (BVI) Group has not carried out any
operation in Hong Kong and accordingly is not subject to profits tax in Hong Kong. Those members of
the Hang Ten (BVI) Group that carry on business in Taiwan, South Korea, Singapore, the Philippines,
US, Hungary, the Netherlands and the Netherlands Antilles are subject to income tax of the respective
countries. Income taxes for companies that operate in these jurisdictions have been provided for based on
the applicable income tax rates of each jurisdiction during the three years ended 31 March 2002.

      The effective tax rate of the Hang Ten (BVI) Group for the year ended 31 March 2001 is lower than
that for the year ended 31 March 2000 as the proportion of income not subject to taxation is higher for
the year ended 31 March 2001. The effective tax rate for the year ended 31 March 2002 is slightly higher
than that for the year ended 31 March 2001 which is mainly attributable to the increase in the proportion
of income derived from the South Korean operation which is subject to a higher income tax rate.

      According to applicable tax rules in Taiwan, a land appreciation tax is charged on the difference
between the land price as per the Public Land Value quoted by Land Department of Taipei City Government
and the original cost of acquisition of the piece of land. Hence, the valuation of the land is not relevant in
determining the potential tax liability. On the other hand, the buildings will be sold at a loss based on the
current valuation, and there is no potential tax liability. No tax liability will crystallise for the Hang Ten



                                                   – 65 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


Group on any disposal of any of its investment properties which are the subject of the valuation by
Chesterton Petty Limited set out in Appendix IV in the context of Rule 11.3 of the Code.

INTENTION REGARDING HANG TEN AND FUTURE PLANS

      The Directors believe that the Asian market for apparel and accessories is large and consider that
the Hang Ten Group’s business strategy of offering distinctive, contemporary and quality merchandise to
a specialised market segment presents the Hang Ten Group with opportunities for future growth. The
Hang Ten Group’s objective is to become a well-known brand for apparel and accessories in the Asian
region, offering a wide range of quality merchandise to different market segments.

     In order to achieve the above business objective and maintain its competitive edge in the domestic
market, the Hang Ten (BVI) Group will continually pursue the existing strategies of the Hang Ten (BVI)
Group and expansion plans that focus primarily on merchandising, marketing and distribution.

      The growing popularity of the Hang Ten (BVI) Group’s product in the Asian market, in particular
the South Korean market, provides the Hang Ten Group with huge room for expansion. The Directors
intend to establish more shops in South Korea in order to take advantage of this potential for growth. The
Directors believe that opening more shops and focusing on the South Korean market will enable the
Hang Ten Group to attract those potential customers in South Korea and in return provide growth to its
business.

      Given that Akai is in compulsory liquidation, that it ceased to carry on business on 23 August 2000
(the date of the winding-up order of the Hong Kong Court), that it has no employees and that no existing
business operation of Akai will be acquired by Hang Ten, the Investors’ intention regarding Akai is not
included in this document.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Executive Directors

      Chan Wing Sun, aged 54, received a Bachelor’s degree from the University of Manchester, United
Kingdom in 1970 and qualified as a Chartered Accountant in 1973. Mr. Chan has been the managing
director of YGM since 1987. Mr. Chan was appointed as a director of Hang Ten on 19 July 2002 and the
Chairman of Hang Ten on 7 August 2002 and is responsible for the strategic planning and overall policy
of the Hang Ten (BVI) Group. He joined the Hang Ten (BVI) Group in 1991.

      Kenneth Hung, aged 35, is the Managing Director of the Hang Ten (BVI) Group and has overall
responsibility for the Hang Ten (BVI) Group’s operation in Taiwan, Korea, Singapore and Philippines.
Mr. Hung was appointed as a director of Hang Ten on 19 July 2002. Mr. Hung graduated from the
University of Minnesota in the US and has over 10 years experience in the apparel retailing industry. He
joined the Hang Ten (BVI) Group in 1992.

      Wang Li Wen, aged 49, is the Chief Financial Officer of the Hang Ten (BVI) Group’s operation in
Taiwan and has overall responsibility in the area of administration, finance, personnel and EDP
development. Ms. Wang was appointed as a director of Hang Ten on 7 August 2002. She graduated from
Tam Kang university in Taiwan with a bachelor degree in economics and has over 25 years of experience
in the apparel retailing industry. She joined the Hang Ten (BVI) Group in 1993.

                                                 – 66 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


       Kao Yu Chu, aged 46, is the Chief Operations Officer of the Hang Ten (BVI) Group’s operation in
Taiwan and has overall responsibility in the area of product development, sales, advertising and marketing.
Ms. Kao was appointed as a director of Hang Ten on 7 August 2002. She started her career in the apparel
retailing industry as a shop manager and worked her way up to her existing position. She has over 25
years of experience in the apparel retailing industry. She joined the Hang Ten (BVI) Group in 1993.

Independent non-executive Directors

      Kwong Chi Keung, aged 48, is qualified as a solicitor in Hong Kong, England, Australia (Victoria)
and Singapore and is a notary public. Mr. Kwong was appointed as an independent non-executive director
of Hang Ten on 25 October 2002. Other than his appointment as an independent non-executive Director
of Hang Ten, Mr. Kwong has no financial or other interest in the business of Hang Ten or its subsidiaries,
and has no previous connection with any connected persons of Hang Ten. Mr. Kwong is a senior partner
of Sit Fung Kwong & Shum and his main areas of practice include intellectual properties (registration,
licensing and enforcement of patent, design, copyright and trademark), injunction proceedings, banking,
public and private corporate transactions, China projects and complex commercial litigation. Mr. Kwong
is the Hong Kong Group President of the Asian Patent Attorneys Association and is member of the
Intellectual Property Committee of the Law Society of Hong Kong.

      So Hon Cheung, Stephen, aged 46, is a partner of the accounting firm T.M. Ho, H.C. So &
Company and is a fellow member of the Hong Kong Society of Accountants, a member of the Canadian
Institute of Chartered Accountants and a member of the Society of Certified Management Accountants of
Canada. Mr. So was appointed as an independent non-executive director of Hang Ten on 25 October
2002. Other than his appointment as an independent non-executive Director of Hang Ten, Mr. So has no
financial or other interest in the business of Hang Ten or its subsidiaries, and has no previous connection
with any connected persons of Hang Ten. He holds a bachelor degree in commerce from the University of
British Columbia, Canada and is a visiting professor of various universities and colleges in Beijing,
Liaoning, Sichuan, Xinjiang, Qinghai and Guangdong in China. He has over 12 years’ experience in
manufacturing, wholesale and trading in the commercial sector and over 10 years’ experience of private
accounting practice in various companies in Hong Kong and Canada.

Senior management

     Kung, Ging Kong, Dennis, aged 61, is the general manager of the Taiwan operations of the Hang
Ten (BVI) Group. He joined the Hang Ten (BVI) Group in 1993. Mr. Kung has over 26 years of
experience in the garment industry. Prior to joining the Hang Ten (BVI) Group, he was the general
manager of East Jean Ltd, Hong Kong, Taiwan Branch, from 1988 to 1993.

      Paul Epner, aged 43, is the president of the licensing operation of the Hang Ten (BVI) Group. Mr.
Epner obtained a Bachelor of Arts degree in political science from the State University of New York and
a Juris Doctor of Law degree from the School of Law of Emory University. He was admitted to the New
York Bar in 1984. He has practised law in the U.S. and has over 12 years of experience in trademark
marketing and licensing. He joined the Hang Ten (BVI) Group in 1996.

      Shivkumar Ramanathan, aged 35, is the President of the Hang Ten (BVI) Group’s overseas retailing
and franchising operation. Prior to this he served as the General Manager of the Hang Ten (BVI) Group’s
                                                  – 67 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


Philippines operation. He graduated from the University of Bombay with a Bachelor degree in Commerce
and is also qualified as a Chartered Financial Analyst. Before joining the Hang Ten (BVI) Group in 1997,
he worked as a financial controller for two well-known companies in Hong Kong for more than 5 years.

       Tan, Yong Huat Danny, aged 43, is the general manager of the Singapore operation of the Hang Ten
(BVI) Group. Mr. Tan has over 20 years working experience in the hotel and catering industry and
retailing industry. He holds a diploma in management accounting and finance and a graduate diploma in
marketing. Prior to joining the Hang Ten (BVI) Group in March 2002, Mr. Tan had worked for three
retailers for about 15 years.

      Daniel Chin, aged 35, is the chief operation officer of the Hang Ten (BVI) Group’s operation in the
Philippines. He has more than 10 years of experience in the field of retail operation. He completed his
college education at Institute of Technology, Sydney, Australia majored in accounting. He joined the
Hang Ten (BVI) Group in 1997.

      Chen Kin-No, Jino, aged 41, is the senior EDP Manager of the Hang Ten (BVI) Group’s operation
in Taiwan responsible for the development and maintenance of the Hang Ten (BVI) Group’s computer
system. He is a university graduate with a bachelor degree in computer science and has more than 11
years of working experience in the computer field. He joined the Hang Ten (BVI) Group in 1993.

      John M. De Moss, aged 44, is the chief financial officer of the licensing operation of the Hang Ten
(BVI) Group. Prior to joining the Hang Ten (BVI) Group in 1996, he has worked for both public and
private companies in various senior positions overseeing financial and accounting matters. He graduated
from the Oregon State University in 1980 with a Bachelor of Science degree.

     Chu, Lan Kun, aged 47, is the chief financial officer of the Singapore operation of the Hang Ten
(BVI) Group. Ms. Chu obtained a diploma in business management from the Hong Kong Baptist College.
She has over 24 years of experience in accounting and finance in Hong Kong and Singapore. She joined
the Hang Ten (BVI) Group in 2000.

      Huang Tsui-Ping, Tracy, aged 34, is the finance manager of the Hang Ten (BVI) Group’s operation
in Taiwan. She joined the Hang Ten (BVI) Group in 1999. Ms. Huang has over 12 years of experience in
accounting and finance. She obtained a bachelor degree of science in accounting from the National
Chung Chi University in Taiwan.

     Tiu, Helen Tong, aged 52, is the financial controller of the Philippines operation. She joined the
Hang Ten (BVI) Group in 1998. Ms. Tiu has over 24 years of experience in finance and administration.
She obtained a bachelor of science degree from the Adamson University in Manila, the Philippines and a
bachelor of science degree and bachelor of arts degree in accounting from the Philippine School of
Business Administration.

     Young Guk Kim, aged 46, is the chief executive officer of the Hang Ten (BVI) Group’s operation in
Korea. He had over 16 years of experience in retail, sales and marketing. He graduated from Seoul
National University with a bachelor degree in landscape architecture. He joined the Hang Ten (BVI)
Group in 2002.

                                                 – 68 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


      Eric Timba, aged 34, is the design director and is responsible for shaping the direction of colour,
fabrication and style of the products of the Hang Ten (BVI) Group. He had obtained the 1998 “Golden
Hanger” award as San Diego’s top apparel designer. Mr. Timba had over 12 years of experience in the
fashion garment industry and he joined the Hang Ten (BVI) Group in 1998.

      J. Christopher Ross, aged 36, is the vice president of the licensing operation. He is responsible for
the development of new licensing ventures. Mr. Ross is a graduate of the University of Maryland, Robert
H. Smith School of Business in the U.S. He joined the Hang Ten (BVI) Group in 1999.

      Lam Wai Ho, Stephen, aged 44, will be appointed as the secretary of Hang Ten upon listing of the
Hang Ten Shares on the Stock Exchange. Mr. Lam obtained a bachelor of economics degree from
Macquarie University, Australia and has over 17 years of experience in auditing, accounting and company
secretarial field. He is an associate member of the Hong Kong Society of Accountants and is a certified
practising accountant of CPA Australia.

      Ira Stuart Outerbridge III, aged 51, is the Bermuda resident secretary of Hang Ten. Mr. Outerbridge
III obtained a bachelor of arts degree from the University of North Carolina, United States of America
and is a fellow of The Institute of Chartered Secretaries and Administrators (FCIS). Mr. Outerbridge III
will resign as secretary of Hang Ten upon listing of the Hang Ten Shares on the Stock Exchange and will
thereafter be appointed as assistant secretary of Hang Ten.

Employees

     As at 31 March 2002, the total number of employees of the Hang Ten (BVI) Group was 1,483.
Breakdown of the employees categorized by activities and geographical location are as follows:

     Activities                                                                                      Total

     Finance, administration and human resources                                                        62
     Information technology                                                                             15
     Sales and marketing                                                                               113
     Merchandising, sourcing and production control                                                     34
     Warehouse                                                                                         106
     Retail shops                                                                                    1,153

     Total                                                                                           1,483


     Location                                                                      Number of employees

     Taiwan                                                                                          1,039
     South Korea                                                                                       111
     Singapore                                                                                         123
     Philippines                                                                                       199
     Others                                                                                             11

     Total                                                                                           1,483

                                                  – 69 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


RELATED PARTY TRANSACTIONS

      During the three years ended 31 March 2002, the Hang Ten (BVI) Group conducted certain
transactions with related parties, details of which are set out in note 30 of section B of the Accountants’
Report as shown in Appendix II to this document. Some of these transactions will be terminated and
therefore will not constitute connected transactions for Hang Ten under the Listing Rules upon the listing
of the Hang Ten Shares on the Stock Exchange.

Hang Ten Korea

      On 1 January 2001, ILC entered into a loan agreement with Hang Ten Korea pursuant to which ILC
agreed to grant a shareholder’s loan in an aggregate principal amount of up to approximately US$2.6
million (equivalent to approximately HK$20.28 million) to Hang Ten Korea by way of instalments. On
31 December 2000, Global Inc., being the other shareholder of Hang Ten Korea, entered into a loan
agreement with Hang Ten Korea pursuant to which Global Inc. agreed to grant a shareholder’s loan in
Korean Won that is equivalent to an aggregate principal amount of up to approximately US$1.11 million
(equivalent to approximately HK$8.67 million) to Hang Ten Korea by way of instalments.

     Pursuant to the terms of the respective loan agreements, each of the shareholder’s loan from ILC
and Global Inc. to Hang Ten Korea is unsecured and interest free. Any subsequent instalment advanced
by ILC and Global Inc. is repayable by Hang Ten Korea in one lump sum on the date falling 366 days
from the date on which such instalment is advanced, unless otherwise agreed by the parties.

      On 11 October 2002, a board meeting of Hang Ten Korea, a company which was originally held as
to 70% by ILC and 30% by Global Inc., was held and approved the issuance of 440,000 new shares in its
share capital to be subscribed for by its shareholders in proportion to their existing shareholdings in
Hang Ten Korea. As Global Inc. has confirmed that it will waive its right to subscribe for its portion of
the new shares, ILC took up the entire portion of the newly issued shares at a cash consideration of
W$4,400 million (or approximately HK$27.8 million) pursuant to a joint venture agreement entered into
between shareholders of Hang Ten Korea dated 23 October 2000. As a result of the said subscription,
Hang Ten Korea is owned as to 92% by ILC and 8% by Global Inc.. The proceeds derived from the
subscription, which was financed by the internal resources of ILC, were used to repay the outstanding
shareholders loans (that had previously been utilized by Hang Ten Korea) of approximately US$1.8
million (or approximately HK$14.5 million) and the remaining balance will be reserved as general
working capital. Given that the shareholders loans have been fully settled, such transaction will not
constitute connected transactions for Hang Ten under the Listing Rules upon the listing of the Hang Ten
Shares on the Stock Exchange.




                                                  – 70 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


CONTINUING CONNECTED TRANSACTIONS

      The Hang Ten (BVI) Group has engaged in certain transactions which will constitute and continue
to constitute, following the listing of the Hang Ten Shares on the Stock Exchange, connected transactions
with respect to Hang Ten under Chapter 14 of the Listing Rules. Details of the transactions are as
follows:

     (a)   Insurance

           In order to obtain a more favourable rate of premium from the insurance company, Michel
           Rene Enterprise Limited (“Michel Rene”), a subsidiary of YGM owned as to approximately
           68% by YGM and as to approximately 32% by Mr. Kenneth Hung (an executive Director)
           and his family members, and the Hang Ten (BVI) Group are currently jointly insured as
           beneficiaries under a general automobile liability insurance policy and a fire insurance policy
           on assets. Based on their respective insured amounts, Michel Rene and the Hang Ten (BVI)
           Group pay their respective insurance premiums, which amount to US$26,000 and US$134,000
           respectively for the year ended 31 March 2002, directly to the insurance company. As the
           Hang Ten (BVI) Group is covered as one of the beneficiaries under these insurance policies,
           it is entitled to make claims and be compensated directly under these insurance policies.

           As such arrangement is entered into on normal commercial terms and in the ordinary and
           usual course of business of Michel Rene and the Hang Ten (BVI) Group, such arrangement
           falls within the category of transactions prescribed under Rules 14.24(5) of the Listing Rules
           and is exempted from disclosure and shareholders’ approval requirements applicable to
           connected transactions under Chapter 14 of the Listing Rules.

     (b)   Printing

           Hong Kong Security Printing Limited, a subsidiary of YGM, will be providing the services of
           printing the share certificates for Hang Ten upon listing of Hang Ten Shares on the Stock
           Exchange. As the consideration receivable by Hong Kong Security Printing Limited from
           Hang Ten under this arrangement is expected not to exceed HK$1,000,000 and will be entered
           into on normal commercial terms, such arrangement falls within Rule 14.24(5) of the Listing
           Rules and are exempted from the disclosure and shareholders’ approval requirements applicable
           to connected transactions under Chapter 14 of the Listing Rules.

     (c)   Leases of store premises

           The Hang Ten (BVI) Group has entered into certain sub-lease agreements with Michel Rene
           relating to the sub-lease arrangement of store premises for retailing purpose. The terms of the
           sub-lease agreements, which were determined based on various factors, including (i) the
           length of the original tenancy agreement; and (ii) the floor area to be occupied by each
           company, were arrived at by the Hang Ten (BVI) Group and Michel Rene after arm’s length
           negotiations. Michel Rene is a subsidiary of YGM owned as to approximately 68% by YGM
           and as to approximately 32% by Mr. Kenneth Hung, an executive Director, and his family
           members.
                                                 – 71 –
            LETTER FROM THE BOARD OF DIRECTORS OF
               HANG TEN GROUP HOLDINGS LIMITED


      Immediately upon Closing but before conversion of any CPS held by the Investors or exercise
      of any Warrants, each of YGM, and Mr. Kenneth Hung and his associates, will be a substantial
      shareholder of Hang Ten and will be connected persons of Hang Ten under the Listing Rules.
      Accordingly, such sub-leases, which will continue following Closing, will constitute continuing
      connected transactions for Hang Ten under Chapter 14 of the Listing Rules.

      For each of the years ended 31 March 2000, 2001, and 2002, the rentals received by Michel
      Rene from the Hang Ten (BVI) Group amounted to US$74,000, US$41,000 and US$30,000
      respectively and the rentals paid by Michel Rene to the Hang Ten (BVI) Group amounted to
      approximately US$296,000, US$289,000 and US$233,000 respectively. These rentals were
      arrived at after arms-length negotiations and with reference to actual rental payments pursuant
      to the original rental agreements. The Directors are of the view that such sub-lease
      arrangements have been entered into on normal commercial terms and are fair and reasonable
      as far as shareholders of Hang Ten, taken as a whole, are concerned.

      As the rental expense and income of the Hang Ten (BVI) Group pursuant to the sub-lease
      arrangement with Michel Rene are expected to exceed HK$1,000,000, but will not exceed
      HK$10,000,000, such sub-lease arrangement will be disclosed in Hang Ten’s next published
      annual report and accounts in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules
      after the listing of the Hang Ten Shares.

(d)   Shareholders’ loans to Hang Ten (BVI)

      On 9 November 2001, members of the Kung Family and YGM entered into shareholder’s
      loan agreements with Hang Ten (BVI) pursuant to which an aggregate principal amount of
      US$20 million was advanced by them to Hang Ten (BVI), as to US$15 million by the Kung
      Family collectively and as to US$5 million by YGM. On 21 June 2002, each of Asian Wide
      and YGM entered into an agreement supplemental to its shareholder ’s loan agreement with
      Hang Ten (BVI). Pursuant to these supplemental agreements, Hang Ten (BVI) agreed to
      prepay to Asian Wide and YGM principal amounts of US$2.7 million and US$900,000 owing
      to them respectively. As at the Latest Practicable Date, aggregate principal amounts of US$12.3
      million and US$4.1 million remain owing by Hang Ten (BVI) under the shareholder’s loans
      granted to it by members of the Kung Family and YGM respectively. These shareholders’
      loans were utilized by Hang Ten (BVI) for the acquisition of an approximately 97.01%
      interest in ILC in December 2001, details of which are set out on pages 47 and 64 of this
      document.

      Immediately upon Closing but before conversion of any CPS issued to the Investors or
      exercise of any Warrants, the Kung Family and YGM will be interested in approximately
      53.87% and 18.45% of the issued ordinary share capital of Hang Ten and will be connected
      persons of Hang Ten under the Listing Rules. Accordingly, the granting of these shareholders’
      loans will constitute connected transactions for Hang Ten under the Listing Rules following
      Closing.




                                            – 72 –
            LETTER FROM THE BOARD OF DIRECTORS OF
               HANG TEN GROUP HOLDINGS LIMITED


      Pursuant to the terms of the shareholder’s loan agreements, these shareholders’ loans are
      unsecured and repayable by Hang Ten (BVI) in one lump sum on 8 November 2011 or earlier
      if an event of default occurs under these agreements. The loans bear interest at the rate of 6%
      per annum payable yearly in arrears unless Hang Ten (BVI) elects to capitalise such interest
      in which event it will form part of the principal amount of the loans and will bear interest at
      the same rate.

      The Directors are of the view that such shareholder’s loan agreements have been entered into
      on normal commercial terms and are fair and reasonable as far as shareholders of Hang Ten,
      taken as a whole, are concerned.

      Since the advances of these shareholder’s loans will constitute the granting of financial
      assistance by connected persons of Hang Ten to the Hang Ten Group following Closing
      which does not involve the provision of security by the Hang Ten Group, they fall within the
      category of transactions prescribed under Rule 14.24(8) of the Listing Rules and are exempt
      from the disclosure and shareholders’ approval requirements applicable to connected
      transactions under Chapter 14 of the Listing Rules.

(e)   Hang Ten Phils., Corp.

      (i)   Sales to Hang Ten Phils., Corp.

            Hang Ten Enterprises Limited (“HTEL”) a wholly-owned subsidiary of ILC which is
            principally engaged in Taiwan retailing and wholesaling and overseas wholesaling,
            supplies apparel and accessories bearing the “Hang Ten” brandname to Hang Ten Phils,
            Corp. (“Hang Ten Phils.”) on an open account basis with credit terms of approximately
            90 days for retailing in the Philippines. For each of the years ended 31 March 2000,
            2001, and 2002, the sales to Hang Ten Phils. by the Hang Ten (BVI) Group amounted
            to approximately US$2,670,000, US$2,318,000 and US$2,575,000 respectively.

            Hang Ten Phils. is a non wholly-owned subsidiary of ILC indirectly held as to 55% by
            ILC and is principally engaged in the retailing of apparel and accessories bearing the
            brandname of “Hang Ten” in the Philippines. As Hang Ten Phils. is the retailing arm of
            the Hang Ten (BVI) Group in the Philippines, the purchase of apparel and accessories
            by Hang Ten Phils. from the Hang Ten (BVI) Group described above for retailing in the
            Philippines is carried out in the ordinary and usual course of business of Hang Ten
            Phils.. The remaining 45% of Hang Ten Phils. is collectively held by Mr. Chua Kun
            Yao, Mr. William T. De Leon, Mr. Johnny Tan and Ms. Nancy C. Lim (collectively
            “Chua and company”) and save for Ms. Nancy C. Lim, each of them is a director of
            Hang Ten Phils.. Accordingly, following Closing, such supplies of apparel and accessories
            will constitute continuing connected transactions for Hang Ten under the Listing Rules.




                                              – 73 –
       LETTER FROM THE BOARD OF DIRECTORS OF
          HANG TEN GROUP HOLDINGS LIMITED


       The Directors are of the view that such transactions have been entered into on normal
       commercial terms and in the ordinary and usual course of business of the HTEL and
       Hang Ten Phils. and are fair and reasonable as far as shareholders of Hang Ten, taken
       as a whole, are concerned.

       The unit prices of such sales between HTEL and Hang Ten Phils. and/or their associates
       (as defined in the Listing Rules) are determined on an arms-length basis, on normal
       commercial terms or, if there are not sufficient comparable transactions to judge whether
       they are on normal commercial terms, on terms no less favourable to Hang Ten than
       terms available to independent third parties, on terms that are fair and reasonable as far
       as the interests of the shareholders of Hang Ten, taken as a whole, are concerned and
       will be entered into on a regular basis and in the ordinary course of business of HTEL.
       Accordingly, these transactions will constitute continuing connected transactions for
       Hang Ten under Rule 14.26 of the Listing Rules following Closing.

(ii)   Sales to and distribution by substantial shareholders

       The Hang Ten (BVI) Group sells products bearing the “Hang Ten” brandname to Chua
       and company, being the other shareholders of Hang Ten Phils., and/or their associates
       (as defined in the Listing Rules) for distribution by them through door-to-door sales
       network in the Philippines. For each of the years ended 31 March 2000, 2001, and
       2002, the sales to Chua and company and/or their associates (as defined in the Listing
       Rules) by the Hang Ten (BVI) Group amounted to approximately US$3,617,000,
       US$4,077,000 and US$1,766,000 respectively.

       Since Chua and company collectively hold 45% of Hang Ten Phils. which will be a non
       wholly-owned subsidiary of Hang Ten following Closing, they will be connected persons
       of Hang Ten and the transactions with Chua and company and/or their associates (as
       defined in the Listing Rules) will constitute connected transactions for Hang Ten
       following Closing.

       The unit prices of such sales between the Hang Ten (BVI) Group and Chua and company
       and/or their associates (as defined in the Listing Rules) are determined on an arms-
       length basis, on normal commercial terms or, if there are not sufficient comparable
       transactions to judge whether they are on normal commercial terms, on terms no less
       favourable to Hang Ten than terms available to independent third parties, on terms that
       are fair and reasonable as far as the interests of the shareholders of Hang Ten, taken as
       a whole, are concerned and will be entered into on a regular basis and in the ordinary
       course of business of the Hang Ten (BVI) Group. Accordingly, these transactions will
       constitute continuing connected transactions for Hang Ten under Rule 14.26 of the
       Listing Rules following Closing.

(iii) Licence to an associate of substantial shareholders

       HTIL Corporation B.V. (“HTIL”), an indirect wholly-owned subsidiary of ILC, is a
       licensor under the license agreement dated 10 June 1998 as supplemented by an
                                       – 74 –
            LETTER FROM THE BOARD OF DIRECTORS OF
               HANG TEN GROUP HOLDINGS LIMITED


            amendment agreement (“Avon Dale License Agreement”). Under this agreement, an
            exclusive license was granted to Avon Dale Garments, Inc. (“Avon Dale”), an associate
            of Chua and company, being the other shareholders of Hang Ten Phils., to use in the
            Philippines the word “Hang Ten” and associated trademarks in the design, manufacture,
            advertising, sale and promotion of certain clothing and personal care products. This
            agreement is for a period from 1 January 1998 to 31 December 2003, unless earlier
            terminated by HTIL by reason of a default or insolvency of the licensee.

            Since Avon Dale is an associate of Chua and company who collectively hold 45% of
            Hang Ten Phils., a non wholly-owned subsidiary of Hang Ten following Closing, Avon
            Dale will be a connected person of Hang Ten and the transactions under the Avon Dale
            License Agreement will constitute connected transactions for Hang Ten following
            Closing.

            Pursuant to the Avon Dale License Agreement, Avon Dale is required to pay to HTIL
            royalties accounted for on a quarterly basis that is equal to the greater of (a) the
            minimum royalties applicable for the relevant years as set out in the agreement and (b)
            6% of the gross price charged to consumers for the licensed items, less any actual
            returns and other allowances. For each of the years ended 31 March 2000, 2001, and
            2002, the royalties payable by Avon Dale to the Hang Ten (BVI) Group amounted to
            approximately US$39,000, US$47,000 and US$75,000 respectively. The Directors are
            of the view that such transactions have been entered into on normal commercial terms
            and in the ordinary and usual course of business of the Hang Ten (BVI) Group and are
            fair and reasonable so far as the shareholders of Hang Ten, taken as a whole, are
            concerned.

            As the total annual royalty fee receivable by HTIL from Avon Dale for any year during
            the term of the license is not expected to exceed HK$1,000,000, the Avon Dale License
            Agreement falls within Rule 14.24(5) of the Listing Rules and are exempted from the
            disclosure and shareholders’ approval requirements applicable to connected transactions
            under Chapter 14 of the Listing Rules.

(f)   Hang Ten Korea Corp.

      (i)   Sourcing and purchases from Hang Ten (BVI) Group

            Pursuant to an agreement dated 31 December 2000, HTEL, a wholly-owned subsidiary
            of ILC, appointed Hang Ten Korea as the exclusive distributor in South Korea for
            products for which ILC Trademark Corporation, a wholly-owned subsidiary of ILC,
            maintains the “Hang Ten” trademarks, except for automobiles, boats, motorcycles, food
            items, beverage items, promotional items, products sold via the world wide web and
            sporting goods. This agreement is for an indefinite period, unless earlier terminated by
            reason of a default, liquidation or bankruptcy of either party or by reason of the
            termination of the joint venture agreement relating to the establishment and operation
            of Hang Ten Korea entered into between ILC and Global Inc.. HTEL is also principally

                                           – 75 –
       LETTER FROM THE BOARD OF DIRECTORS OF
          HANG TEN GROUP HOLDINGS LIMITED


       engaged in the franchising of “Hang Ten” branded products outside Taiwan and, as
       such, the agreement described above is entered into by HTEL in its ordinary and usual
       course of business. In addition to the aforesaid sourcing arrangement, Hang Ten Korea
       also purchases apparel and accessories from Chinaway Trading Co., Limited, a wholly-
       owned subsidiary of ILC. As Chinaway Trading Co., Limited is principally engaged in
       the trading of apparels, the sales of products by Chinaway Trading Co., Limited to
       Hang Ten Korea described above are carried out in the ordinary and usual course of
       business of Chinaway Trading Co., Limited. For each of the years ended 31 March
       2001 and 2002, the amount payable by Hang Ten Korea to the Hang Ten (BVI) Group
       amounted to approximately US$721,000 and US$10,156,000 respectively.

       Hang Ten Korea is a non wholly-owned subsidiary of ILC principally engaged in the
       retailing of apparel and accessories bearing the brandname of “Hang Ten” in South
       Korea. As Hang Ten Korea is the retailing arm of the Hang Ten (BVI) Group in South
       Korea, the distribution of products by Hang Ten Korea bearing the “Hang Ten”
       trademarks and the purchases of apparel and accessories from Chinaway Trading Co.,
       Limited for retailing in South Korea as described above are carried out in the ordinary
       and usual course of business of Hang Ten Korea. Hang Ten Korea is held as to 92% by
       ILC. The remaining 8% of Hang Ten Korea is held by Gobal Inc., an associate of Mr.
       Young Chang Lee, a director of Hang Ten Korea. Accordingly, following Closing, the
       transactions between HTEL and Chinaway Trading Co., Limited respectively and Hang
       Ten Korea described above will constitute connected transactions for Hang Ten under
       the Listing Rules.

       The Directors are of the view that such transactions have been entered into on normal
       commercial terms and in the ordinary and usual course of business of HTEL, Chinaway
       Trading Co. Limited and Hang Ten Korea and are fair and reasonable as far as
       shareholders of Hang Ten, taken as a whole, are concerned.

       Since such transactions will constitute transactions between a wholly-owned subsidiary
       of ILC and a non wholly-owned subsidiary of ILC following Closing and (i) they are
       entered into on normal commercial terms in the ordinary and usual course of business
       of such subsidiaries of ILC; and (ii) no connected person of Hang Ten is a substantial
       shareholder in Hang Ten Korea; such transactions fall within the category of transactions
       prescribed under Rule 14.24(4) of the Listing Rules and are exempted from the disclosure
       and shareholders’ approval requirements applicable to connected transactions under
       Chapter 14 of the Listing Rules.

(ii)   Licence to Hang Ten Korea

       Pursuant to a license agreement dated 1 January 2001 (“Hang Ten Korea License
       Agreement”), HTIL, an indirect wholly-owned subsidiary of ILC, granted to Hang Ten
       Korea an exclusive license to use in South Korea the word “Hang Ten” and associated
       trademarks in the design, manufacturing, advertising, sale and promotion of all products
       for which HTIL maintains trademarks in South Korea (“Hang Ten Korea Licensed

                                       – 76 –
     LETTER FROM THE BOARD OF DIRECTORS OF
        HANG TEN GROUP HOLDINGS LIMITED


     Items”). The Hang Ten Korea License Agreement is for an indefinite period commencing
     as of 1 January 2001, unless earlier terminated by HTIL by reason of a default or
     insolvency of Hang Ten Korea.

     HTIL is a member of the Hang Ten (BVI) Group which principally engages in the
     licensing of “Hang Ten” trademarks. As such, the Hang Ten Korea Licence Agreement
     is entered into by HTIL in its ordinary and usual course of business. Hang Ten Korea is
     a non wholly-owned subsidiary of ILC principally engaged in the retailing of apparel
     and accessories bearing the brandname of “Hang Ten” in South Korea. As Hang Ten
     Korea is the retailing arm of the Hang Ten (BVI) Group in South Korea, the Hang Ten
     Korea Licence Agreement is entered into by Hang Ten Korea in its ordinary and usual
     course of business to facilitate its retailing of products bearing the word “Hang Ten”
     and associated trademarks in South Korea. Hang Ten Korea is held as to 92% by ILC.
     The remaining 8% of Hang Ten Korea is held by Global Inc., an associate of a director
     of Hang Ten Korea. Accordingly, the transaction contemplated under the Hang Ten
     Korea License Agreement will constitute a connected transaction for Hang Ten under
     the Listing Rules following Closing.

     Pursuant to the Hang Ten Korea License Agreement, Hang Ten Korea is required to pay
     to HTIL royalties accounted for on a quarterly basis that is equal to 2.1% of the gross
     retailing selling price to consumers for the Hang Ten Korea Licensed Items, whether
     sold directly by Hang Ten Korea or its franchisee, less any included VAT taxes and
     actual returns. For each of the years ended 31 March, 2001 and 2002, the royalties
     payable by Hang Ten Korea to the Hang Ten (BVI) Group amounted to approximately
     US$49,000 and US$633,000 respectively.

     The Directors are of the view that the transactions under the Hang Ten Korea License
     Agreement have been entered into on normal commercial terms and in the ordinary and
     usual course of business of Hang Ten Korea and HTIL and are fair and reasonable as
     far as shareholders of Hang Ten, taken as a whole, are concerned.

     Since such transactions will constitute transactions between a wholly-owned subsidiary
     of ILC and a non-wholly owned subsidiary of ILC following Closing and (i) they are
     entered into on normal commercial terms in the ordinary and usual course of business
     of such subsidiaries of ILC; and (ii) no connected person of Hang Ten is a substantial
     shareholder in Hang Ten Korea; such transactions fall within the category of transactions
     prescribed under Rule 14.24(4) of the Listing Rules and are exempted from the disclosure
     and shareholders’ approval requirements applicable to connected transactions under
     Chapter 14 of the Listing Rules.

(iii) Sales to and purchases from Global Inc.

     A wholly-owned subsidiary of ILC has been selling apparels bearing the brandname of
     “Hang Ten” to Global Inc. for sales in Global Inc.’s retail outlets and purchasing
     clothing manufactured or sourced by Global Inc. since 2001 in its ordinary course of
     business. For each of the years ended 31 March 2001 and 2002, aggregate sales made
                                     – 77 –
           LETTER FROM THE BOARD OF DIRECTORS OF
              HANG TEN GROUP HOLDINGS LIMITED


           by the Hang Ten ILC Group to Global Inc. amounted to approximately US$248,000 and
           US$332,000 respectively and aggregate purchases made by the Hang Ten (BVI) Group
           from Global Inc. amounted to US$854,000 and US$3,266,000 respectively.

           Given that Global Inc. is an associate of Mr. Young Chang Lee, a director of Hang Ten
           Korea, a 92% owned subsidiary of Hang Ten upon listing of the Hang Ten Shares,
           Global Inc. will be treated as a connected person of Hang Ten under the Listing Rules.
           Accordingly, these transactions will constitute continuing connected transactions for
           Hang Ten under the Listing Rules following Closing.

           The unit prices of such sales and purchases between the Hang Ten (BVI) Group and
           Global Inc. are determined on an arms-length basis, on normal commercial terms or, if
           there are not sufficient comparable transactions to judge whether they are on normal
           commercial terms, on terms no less favourable to Hang Ten than terms available to or
           from (as appropriate) independent third parties, on terms that are fair and reasonable as
           far as the interests of the shareholders of Hang Ten, taken as a whole, are concerned
           and will be entered into on a regular basis and in the ordinary course of business of the
           Hang Ten (BVI) Group. Accordingly, these transactions will constitute continuing
           connected transactions for Hang Ten under Rule 14.26 of the Listing Rules following
           Closing.

           The Hang Ten (BVI) Group is expanding its operations in South Korea. Sales in the
           South Korean market in 2001 and 2002 amounted to US$2,321,000 and US$30,156,000
           respectively. A significant portion of the products sold in South Korea are purchased
           from Global Inc. In 2001, total amount of purchases from Global Inc. amounted to
           approximately US$854,000. In 2002, purchases from Global Inc. amounted to
           approximately US$3,266,000 representing an increase of 282%. Based on the past
           experience of the Hang Ten (BVI) Group and its present intention to expand its Korean
           operations, the Hang Ten (BVI) Group has, for the purposes of the waiver from the
           requirements applicable to connected transactions, applied for a cap amount of purchases
           from Global Inc. of HK$60 million (equivalent to approximately US$7.7 million), an
           increase of about 130% over the purchases from Global Inc. for 2002.

           Sales to Global Inc. increased from US$248,000 in 2001 to US$332,000 in 2002, an
           increase of over 35%. On the basis of the Hang Ten (BVI) Group’s past experience and
           its expanding sales in South Korea, the Hang Ten (BVI) Group has, for the purposes of
           the waiver from the requirements applicable to connected transactions, applied for a
           cap amount for sales to Global Inc. of HK$10,000,000 (equivalent to approximately
           US$1.2 million).

(g)   License to Hang Ten (China)

      Pursuant to a license agreement dated 28 March 2002 (“Hang Ten (China) License Agreement”)
      between ILC and Hang Ten (China) Group Limited (“Hang Ten (China)”), a company which
      is principally engaged in the PRC retailing business, ILC granted an exclusive license to

                                           – 78 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


            Hang Ten (China) to use in the PRC the word “Hang Ten” and associated trade marks in the
            design, manufacturing, advertising, sale and promotion of clothing, footwear, headwear and
            other accessories (“Hang Ten (China) Licensed Items”). The Hang Ten (China) License
            Agreement is for a period of 5 years commencing from 1 April 2002, unless earlier terminated
            by ILC by reason of a default or insolvency of Hang Ten (China).

            ILC is a member of the Hang Ten (BVI) Group. Hang Ten (China) was a wholly-owned
            subsidiary of ILC and was disposed of by ILC to Accurate Sino Developments Limited on 28
            March 2002. Accurate Sino Developments Limited is a holding company in which the Investors
            collectively hold an indirect interest of approximately 97.01%. (Further details relating to
            this disposal are set out in the section headed “Corporate reorganisation” in Appendix VII to
            this document.) Accordingly, the transactions contemplated under the Hang Ten (China) License
            Agreement will constitute connected transactions for Hang Ten under the Listing Rules
            following Closing.

            Pursuant to the Hang Ten (China) License Agreement, Hang Ten (China) is required to pay to
            ILC royalty accounted for on a quarterly basis that is equal to 2.5% of Hang Ten (China)’s
            actual gross retail selling price charged to consumers for Hang Ten (China) Licensed Items,
            whether sold directly by Hang Ten (China) or its franchisees, less any included VAT, taxes,
            commission given to agents or franchisees and actual returns (“Net Sales”). In addition, Hang
            Ten (China) is required to pay to ILC on a quarterly basis as advertising contribution a sum
            equal to 2.5% of Hang Ten (China)’s actual Net Sales. The Directors are of the view that the
            transactions under the Hang Ten (China) Agreement have been entered into on normal
            commercial terms and in the ordinary and usual course of business of the Hang Ten (BVI)
            Group and are fair and reasonable as far as shareholders of Hang Ten, taken as a whole are
            concerned.

            Based on the method of calculation of the royalties and advertising contribution described
            above, the total annual royalty fee and advertising contribution receivable by ILC from Hang
            Ten (China) for any year during the term of the license are expected to exceed HK$1,000,000,
            but will not exceed HK$10,000,000. As such, the transactions under the Hang Ten (China)
            License Agreement will be disclosed in Hang Ten’s next published annual report and accounts
            in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules after the listing of the Hang
            Ten Shares.

WAIVER AND CONDITIONS TO WAIVER

      Under the Listing Rules, the sub-lease arrangements mentioned in paragraph (c) above, the sales to
Hang Ten Phils., Corp. mentioned in paragraph (e)(i) above, the sales to and distribution by the substantial
shareholders of Hang Ten Phils. mentioned in paragraph (e)(ii) above, the sales to and purchases from
Global Inc. mentioned in paragraph (f)(iii) above and the transactions under the Hang Ten (China)
License Agreement mentioned in paragraph (g) above (together referred to as the “Transactions”) would
constitute “connected transactions” upon the listing of the Hang Ten Shares and the transactions mentioned
in paragraphs (c) and (g) will be subject to the disclosure requirements pursuant to Rule 14.25 of the
Listing Rules and the transactions mentioned in paragraphs (e)(i), e(ii) and (f) (iii) will be subject to the
shareholders’ approval requirements pursuant to Rule 14.26 of the Listing Rules.
                                                   – 79 –
                   LETTER FROM THE BOARD OF DIRECTORS OF
                      HANG TEN GROUP HOLDINGS LIMITED


      The Directors have confirmed that the Transactions described above are carried out on normal
commercial terms, determined on an arms’ length basis and in the ordinary course of business of the
Hang Ten (BVI) Group and are fair and reasonable so far as shareholders of Hang Ten are concerned.
These transactions are expected to continue. Based on the documents and information provided by the
Hang Ten (BVI) Group, and the confirmation and representation by the Directors, the Sponsors are of the
view that the Transactions described above have been entered into on normal commercial terms or, if
there are not sufficient comparable transactions to judge whether they are on normal commercial terms,
on terms no less favourable to Hang Ten than terms available to or from (as appropriate) independent
third parties, on terms that are fair and reasonable as far as shareholders of Hang Ten, taken as a whole,
are concerned.

      As the Transactions will constitute continuing connected transactions for Hang Ten following
Closing, the Directors are of the view that the disclosure and any shareholders’ approval requirements
that normally apply to these transactions would be unduly burdensome and impractical for Hang Ten.
Accordingly, an application has been made to the Stock Exchange for a waiver from (a) the disclosure
requirements applicable to connected transactions under Rule 14.25 of the Listing Rules for the transactions
mentioned in paragraphs (c) and (g) above; and (b) the shareholders’ approval requirements for each of
the financial year up to 31 March 2005 applicable to connected transactions under Rule 14.26 of the
Listing Rules for the transactions mentioned in paragraphs (e)(i), (e)(ii) and (f)(iii) above, and will be
granted subject to the following conditions:

     A.     that each of the Transactions shall be:

            (i)    entered into by the Hang Ten Group in the ordinary and usual course of its business;

            (ii)   conducted on normal commercial terms or, if there are not sufficient comparable
                   transactions to judge whether they are on normal commercial terms, on terms no less
                   favourable to Hang Ten than terms available to or from (as appropriate) independent
                   third parties; and

            (iii) in accordance with the relevant agreement governing them on terms that are fair and
                  reasonable and in the interests of the shareholders of Hang Ten as a whole.

     B.     the aggregate amount of the rental expense and income of the Hang Ten (BVI) Group pursuant
            to the sub-lease arrangement with Michel Rene for each financial year of Hang Ten shall not
            exceed HK$10,000,000 (the “Rental Cap Amount”), the aggregate amount of the sales to
            Hang Ten Phils., Corp. for each financial year up to 31 March 2005 shall not exceed
            HK$25,000,000 (the “Hang Ten Phils Sales Cap Amount”), the aggregate amount of the sales
            to and distribution by the substantial shareholders of Hang Ten Phils for each financial year
            of Hang Ten up to 31 March 2005 shall not exceed HK$40,000,000 (the “Phils Sales Cap
            Amount”), the aggregate amount of the purchases from Global Inc. for each financial year up
            to 31 March 2005 of Hang Ten shall not exceed HK$60,000,000 (the “Korea Purchase Cap
            Amount”), the aggregate amount of the sales to Global Inc. for each financial year of Hang
            Ten shall not exceed HK$10,000,000 (“Korea Sales Cap Amount”) and the aggregate amount
            of the royalties and advertising contribution received under the Hang Ten (China) License

                                                  – 80 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


           Agreement for each financial year of Hang Ten shall not exceed HK$10,000,000 (the “License
           Cap Amount”);

     C.    the independent non-executive Directors shall review the Transactions annually and confirm
           in Hang Ten’s next annual report that each of the Transactions was conducted in the manner
           as stated in paragraphs A and B above;

     D.    the auditors of Hang Ten shall review the Transactions annually and confirm in a letter (the
           “Letter”) to the Directors (a copy of which shall be provided to the Listing Division of the
           Stock Exchange) stating whether:

           (i)    each of the Transactions has received the approval of Hang Ten’s Board of Directors;

           (ii)   the Rental Cap Amount, the Hang Ten Phils Sales Cap Amount, the Phils Sales Cap
                  Amount, the Korea Sales Cap Amount, the Korea Purchase Cap Amount and the License
                  Cap Amount have not been exceeded;

           (iii) are in accordance with the pricing policies of Hang Ten if the Transactions involve
                 provision of goods or services by Hang Ten; and

           (iv)   have been entered into in accordance with the relevant agreement governing the
                  Transactions.

                  Where, for whatever reason, the auditors decline to accept the engagement or are
                  unable to provide the Letter, the Directors shall notify the Stock Exchange immediately.

     E.    details of the Transactions in each financial year shall be disclosed as required under Rule
           14.25(1)(A) to (D) of the Listing Rules in the annual report of Hang Ten for that financial
           year together with a statement of the opinion of the independent non-executive Directors
           referred to in paragraph C above; and

     F.    Hang Ten (China) shall provide to the Stock Exchange an undertaking that, for so long as the
           Hang Ten Shares are listed on the Stock Exchange, it will provide the auditors of Hang Ten
           with full access to its records for the purpose of the auditors’ review of the Transactions
           referred to in paragraph D above.

      If any terms of the Transactions as mentioned above are altered or if Hang Ten enters into any new
agreements with any connected persons (within the meaning of the Listing Rules) in the future, Hang Ten
will comply with the provisions of Chapter 14 of the Listing Rules governing connected transactions
unless it applies for and obtains a separate waiver from the Stock Exchange.

      In the event of any future amendments to the Listing Rules imposing more stringent requirements
than those as at the Latest Practicable Date on transactions of the kind to which the Transactions belong,
Hang Ten will take immediate steps to ensure compliance with such requirements within a reasonable
time.

                                                 – 81 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


WAIVER APPLICATION IN ACCORDANCE WITH THE GUIDELINES (THE “GUIDELINES”)
FOR ISSUERS WITH NEGATIVE OR NEGLIGIBLE NET TANGIBLE ASSETS AS SET FORTH
IN THE ANNOUNCEMENTS BY THE STOCK EXCHANGE DATED 3 MAY 2001, 24 AUGUST
2001 AND 9 OCTOBER 2001

Reasons for the application

       As disclosed in the audited combined balance sheet of the Hang Ten Group in Appendix II to this
document, Hang Ten recorded an audited combined net asset value of US$17,853,000 (equivalent to
about HK$139,253,400) as at 31 March 2002, which includes goodwill amounting to US$10,001,000
(equivalent to about HK$78,007,800) and intangible assets amounting to US$19,209,000 (equivalent to
about HK$149,830,200). After excluding intangible assets, Hang Ten recorded audited combined net
liabilities of US$11,357,000 (equivalent to about HK$88,584,600) as at 31 March 2002 which did not
arise from operational losses.

      As illustrated in the pro forma statement of adjusted combined net liabilities of the Hang Ten
Group in Appendix III to this document, and taking account of the effects of the Proposal and certain
adjustments since 31 March 2002, the unaudited adjusted combined net liabilities of the Hang Ten Group
immediately following Closing will be US$7,300,000 (equivalent to about HK$56,940,000).

     Based on this, the modified assets base of the Hang Ten Group amounted to US$31,133,000, being
the gross assets of US$84,011,000 less intangibles of US$29,210,000 and current liabilities of
US$27,725,000 of Hang Ten Group as at 31 March 2002 and after taking into account the adjustment of
US$4,057,000 as stated in the pro forma statement of adjusted combined net liabilities of the Hang Ten
Group in Appendix III to this document.

      The Listing Rules impose certain disclosure and shareholders’ approval requirements in connection
with transactions of a listed issuer. The applicability of these requirements depends on the size of the
proposed transaction which is often assessed under the Listing Rules by reference to the net tangible
assets of the listed issuer. As a consequence of Hang Ten’s negative net tangible assets position following
Closing, virtually every transaction, irrespective of its size, would be subject to prior shareholders’
approval if the relevant provisions of the Listing Rules were to be strictly applied.

      The Directors consider that these requirements would create difficulties for Hang Ten to continue
its day-to-day operations and be impractical and unduly burdensome on the Hang Ten Group following
the Introduction. The Directors also believe that strict adherence to the relevant requirements would
result in significant and disproportionate costs to Hang Ten’s shareholders, as well as taking up valuable
management time which could otherwise be focused on the business operations of the Hang Ten Group.

      In view of the above and in accordance with the Guidelines, application has been made to the Stock
Exchange for a limited waiver from strict compliance with the various provisions of the Listing Rules
that will apply to Hang Ten following the Introduction and details of the application are set out below:

(a)   De-minimis concession

      Application has been made and approved by the Stock Exchange for the grant of a concession to
      Hang Ten (the “De-minimis Concession”) such that, following the Introduction, the “assets test”

                                                  – 82 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


      and the “consideration test” under Rules 14.06, 14.09, 14.12 and 14.20 of the Listing Rules will not
      apply to each transaction carried out in the ordinary course of business of the Hang Ten Group,
      which is entered into on normal commercial terms, and where the consideration or value of the
      transaction does not exceed HK$1,000,000.

(b)   Ver y substantial acquisitions, major transactions, discloseable transactions and share
      transactions

      Application has been made and approved by the Stock Exchange for a modification to the calculation
      of the “assets test” and the “consideration test” as set out in Rules 14.09(1) and (3) of the Listing
      Rules respectively (“Modified Calculation Concession”) for the purposes of classifying notifiable
      transactions (other than connected transactions) of Hang Ten into categories of “very substantial
      acquisitions”, “major transactions”, “discloseable transactions” and “share transactions” (each as
      defined in the Listing Rules).

      The Modified Calculation Concession will apply to modify the “asset test” and the “consideration
      test” in the following manner: (a) the “asset test” will be performed by dividing the gross assets
      less intangibles and current liabilities of the asset to be acquired or disposed of by the gross assets
      less intangibles and current liabilities of the Hang Ten Group; and (b) the “consideration test” will
      be performed by dividing the consideration for the asset to be acquired or disposed of by the gross
      assets less intangibles and current liabilities of the Hang Ten Group, and

      the following percentage ratios arising from the modified tests described above will be used to
      determine the applicable disclosure or approval requirements for Hang Ten:

      (a)   in cases of a ratio of 5% (being approximately US$1,556,650) or above but below 15%
            (being approximately US$4,669,950), the requirements for discloseable transactions will apply
            to Hang Ten;

      (b)   in cases of a ratio of 15% (being approximately US$4,669,950) or above but below 25%
            (being approximately US$7,783,250), the requirements for major transactions will apply to
            Hang Ten in respect of any acquisition;

      (c)   in case of a ratio of 15% (being approximately US$4,669,950) or above, the requirements for
            major transactions will apply to Hang Ten in respect of any disposal;

      (d)   in cases of a ratio of 25% (being approximately US$7,783,250) or above, the requirements
            for very substantial acquisitions will apply to Hang Ten in respect of any acquisition; and

      (e)   for acquisition of assets (including securities but excluding cash) for a consideration that
            includes securities for which listing will be sought, the requirements for share transactions
            will apply to Hang Ten if the ratio is less than 5% (being approximately US$1,556,650).

      The Modified Calculation Concession based on the above ratios will apply only to the “assets test”
      and the “consideration test”, both as modified in the manner described above. The “profit test” and
      the “equity test” set out in Rules 14.09(2) and (4) of the Listing Rules will remain applicable to
      Hang Ten following the Introduction.

                                                   – 83 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


(c)   Connected transactions

      Application has been made and approved by the Stock Exchange for the adoption a modified assets
      base of the Hang Ten Group in substitution for the net tangible assets used in Rules 14.24(5),
      14.25(1) and 14.25(2)(b)(i) of the Listing Rules for the purpose of categorising connected transactions
      of Hang Ten as prescribed under these rules.

      The modification applies such that references to “net tangible assets” under those rules will, in the
      case of Hang Ten following the Introduction, be construed to mean the “gross assets less intangibles
      and current liabilities of the Hang Ten Group” (the “Modified Assets Base”). The Modified Assets
      Base of the Hang Ten Group is equal to approximately US$31,133,000.

      On the basis of the adoption of the Modified Assets Base under those rules, the percentage ratio
      thresholds set out below will apply to Hang Ten to determine the applicable disclosure and/or
      shareholders’ approval requirements for its connected transactions following the Introduction:

      (a)   in respect of Rule 14.24(5) of the Listing Rules, the threshold will be the higher of (i)
            HK$1,000,000 or (ii) 0.01% of the Modified Assets Base (being approximately US$3,113);

      (b)   in respect of Rule 14.25(1) of the Listing Rules, the threshold will be the higher of (i)
            HK$10,000,000 or (ii) 1% of the Modified Assets Base (being approximately US$311,330);
            and

      (c)   in respect of Rule 14.25(2)(b)(i) of the Listing Rules, the threshold will be 5% of the Modified
            Assets Base (being approximately US$1,556,650).

(d)   Major Subsidiary

      Application has been made and approved by the Stock Exchange to apply the Modified Assets Base
      in order to classify a “major subsidiary” of Hang Ten following the Introduction for the purpose of
      determining the applicable disclosure and/or shareholders’ approval requirements imposed on Hang
      Ten under various provisions of the Listing Rules.

      The modification applies such that references to “net tangible assets” in the following rules will, in
      the case of Hang Ten following the Introduction, be replaced by references to the Modified Assets
      Base:

      (a)   paragraph 17(2) of Appendix 7B to the Listing Rules;

      (b)   paragraph 5.1 of Practice Note 13 of the Listing Rules; and

      (c)   paragraph 3(e)(ii) of Practice Note 15 of the Listing Rules.

      The current percentage ratios prescribed under these rules will continue to apply to Hang Ten
      notwithstanding the adoption of the Modified Assets Base in these rules.

                                                   – 84 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


(e)   Practice Note 19 of the Listing Rules

      Application has been made and approved by the Stock Exchange to apply the Modified Assets Base
      in substitution for the “net assets” used in Practice Note 19 of the Listing Rules for the purpose of
      determining the general disclosure obligation of Hang Ten following the Introduction as prescribed
      under that practice note.

      The modification applies such that references to “net assets” in the following paragraphs of Practice
      Note 19 of the Listing Rules will, in the case of Hang Ten following the Introduction, be replaced
      by references to the Modified Assets Base.

      (a)   paragraph 1.3;

      (b)   paragraph 3.2.1;

      (c)   paragraph 3.2.2; and

      (d)   paragraph 3.3.

      On the basis of the adoption of the Modified Assets Base under those paragraphs, the percentage
      ratio thresholds set out below will apply to Hang Ten to determine whether a general disclosure
      obligation will arise for Hang Ten under Practice Note 19 following the Introduction:

      (a)   in respect of paragraph 3.2.1, a ratio of 8%;

      (b)   in respect of paragraph 3.2.2, a ratio of 3%; and

      (c)   in respect of paragraph 3.3, a ratio of 8%.

Conditions to the limited waiver

      The granting of the limited waiver as set out in this section is subject to the following conditions:

      (a)   Details of the De-mmimis Concession, the Modified Calculation Concession and the other
            modifications granted under the limited waiver have been disclosed in this document and, if
            required, will be disclosed in a paid announcement of Hang Ten following the granting of
            such waiver or the despatch of this document. These details will include the relevant value or
            percentage thresholds, as the case may be, the basis for applying for such modifications and
            the period during which Hang Ten is entitled to use the modified sets of tests.

      (b)   The same details will be included in Hang Ten’s next published annual report and accounts.

      (c)   The approved De-minimis Concession, Modified Calculation Concession and the other
            modifications granted under the limited waiver are only valid from the date of approval to the
            publication or the due date for publication of the next annual report of Hang Ten, whichever
            is earlier.
                                                   – 85 –
                            LETTER FROM THE BOARD OF DIRECTORS OF
                               HANG TEN GROUP HOLDINGS LIMITED


SHAREHOLDINGS

      The shareholdings in Akai and Hang Ten before and after completion of the Proposal will be as
follows:

                                                                          Upon Closing                     Upon Closing                        Upon Closing
                                                                      with no CPS issued to                 with all CPS                        with all CPS
                                                                           the Investors               issued to the Investors             issued to the Investors
                                                                             converted                  converted but before                   converted and
                                         Before Closing               or Warrants exercised           exercise of the Warrants            all Warrants exercised
                                Number of                         Number of                          Number of                           Number of
                               Akai Shares                  Hang Ten Shares                    Hang Ten Shares                     Hang Ten Shares
                           (million shares)             %    (million shares)             %     (million shares)               %    (million shares)               %

     THE INVESTORS
      The Kung
        Family
        (Notes 1 &3)
      Asian Wide                        –               –            12,600         46.49%               56,940          58.41%           59,460.00          58.36%
      Kenneth Hung                      –               –               800          2.94%                3,620           3.71%            3,780.00           3.71%
      Dennis Kung                       –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
      Peggy Hung                        –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
      Pamela Hung                       –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%

       YGM (Note 3)                     –               –             5,000         18.45%               22,590          23.18%           23,590.00          23.15%

       Ms. Kao (director
        of Hang Ten)
        (Note 3)                        –               –               200            0.74%                900           0.92%              940.00           0.92%
       Ms. Wang
        (director of
        Hang Ten)
        (Note 3)                        –               –               200            0.74%                900           0.92%              940.00           0.92%

     Sub-total                          –               –            20,000         73.80%               90,380         92.72%            94,380.00         92.64%

     OTHER INVESTORS
      (Notes 2 & 3)
      Best Standand                     –               –             1,993            7.36%              1,993           2.05%            2,085.60           2.06%
      Raytop                            –               –             1,507            5.56%              1,507           1.54%            1,576.40           1.54%

     DESIGNATED PERSON
      (Note 3)                          –               –             1,200            4.43%              1,200           1.23%            1,440.00           1.41%

     AKAI SHAREHOLDERS 2,191                     100.00%                300            1.10%                300           0.31%              300.00           0.29%

     LIQUIDATORS
       (for the benefit
       of the Creditors)                –               –             2,100            7.75%              2,100           2.15%            2,100.00           2.06%

     Sub-total                      2,191        100.00%              7,100         26.20%                7,100          7.28%             7,502.00          7.36%

     Total                          2,191        100.00%             27,100        100.00%               97,480        100.00%           101,882.00        100.00%



                                                                              – 86 –
                      LETTER FROM THE BOARD OF DIRECTORS OF
                         HANG TEN GROUP HOLDINGS LIMITED


                                                             Upon Closing                 Upon Closing                   Upon Closing
                                                         with no CPS issued to        with all CPS issued to         with all CPS issued to
                                                             the Investors           the Investors converted        the Investors converted
                                                               converted                    but before                 and all Warrants
                               Before Closing            or Warrants exercised         exercise of Warrants                 exercised
                       Number of                     Number of                      Number of                       Number of
                     Akai Shares                Hang Ten Shares                Hang Ten Shares                 Hang Ten Shares
                  (million shares)            % (million shares)            % (million shares)               % (million shares)             %

The concert
  group
The Investors
  (Note 3)                    –             –             20,000        73.80%           90,380       92.72%             94,380       92.64%
Other Investors
  (Note 3)                    –             –             3,500         12.92%            3,500        3.59%              3,662        3.60%
Designated
  Person (Note 3)             –             –             1,200         4.43%             1,200        1.23%              1,440        1.41%

Sub-total                     –             –             24,700       91.15%            95,080       97.54%             99,482       97.65%

Akai Shareholders          2,191      100.00%               300          1.10%              300        0.31%                300        0.29%

Liquidators
   (for the benefit
of the Creditors)              –            –              2,100         7.75%            2,100        2.15%              2,100        2.06%

Total                      2,191     100.00%              27,100       100.00%           97,480      100.00%            101,882      100.00%

Note 1: Out of the 14,600 million Hang Ten Shares issued to members of the Kung Family upon Closing but before
        conversion of the CPS held by the Investors or exercise of the Warrants, Mr. Kenneth Hung, Mr. Dennis Kung,
        Ms. Peggy Hung, Ms. Pamela Hung and Asian Wide will be interested in 800 million, 400 million, 400 million,
        400 million and 12,600 million Hang Ten Shares respectively.

Note 2: In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have
        agreed to convert the 269 CPS to be issued to them under the Sale and Purchase Agreement into Hang Ten Shares
        upon Closing but before the commencement of dealing in Hang Ten Shares. Accordingly, there will be 27,100
        million Hang Ten Shares and 7,038 CPS issued and credited as fully paid upon listing of the Hang Ten Shares.

Note 3: The Investors, the Other Investors and the Designated Person are concert parties pursuant to the Code and
        together hold approximately 91.15% of the issued ordinary share capital of Hang Ten upon Closing with no CPS
        issued to the Investors converted or Warrants exercised.




                                                                   – 87 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


LISTING ON THE STOCK EXCHANGE OF, BOARD LOTS OF AND CERTIFICATES FOR,
HANG TEN SHARES

      Application has been made to the Listing Committee of the Stock Exchange for the listing of, and
permission to deal in, the Hang Ten Shares in issue and to be issued as mentioned in this document and
any Hang Ten Shares which may fall to be issued pursuant to the conversion of the CPS and the exercise
of the Warrants and any Options up to 10% of the issued ordinary share capital of Hang Ten upon listing
that may be granted.

      No share or loan capital of Hang Ten is listed or dealt in on any other stock exchange. Hang Ten is
not seeking or proposing to seek listing of or permission to deal in its securities on any other stock
exchange.

      The Stock Exchange has also stated that, following the listing of Hang Ten Shares, any
acquisitions or disposals by Hang Ten will be subject to the provisions of the Listing Rules. Under
the Listing Rules, the Stock Exchange has a discretion to require Hang Ten to issue an announcement
and/or a circular to its shareholders when any acquisition or disposal by Hang Ten is proposed,
irrespective of the size of such acquisition or disposal and, in particular, when such acquisition or
disposal represents a departure from the principal activities of the Hang Ten Group following the
implementation of the Proposal. The Stock Exchange also has the power, pursuant to the Listing
Rules, to aggregate a series of acquisitions or disposals by Hang Ten and any such acquisitions or
disposals may in any event result in Hang Ten being treated as a new applicant for listing.

      Subject to the granting of the listing of, and permission to deal in, the Hang Ten Shares on the
Stock Exchange (as well as compliance with the stock admission requirement of HKSCC), Hang Ten
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the commencement date of dealings in the Hang Ten Shares or such other date as may be
determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any
trading day is required to take place in CCASS on the second trading day thereafter. All activities under
CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from
time to time. All necessary arrangements have been made for the Hang Ten Shares to be admitted into
CCASS.

      Upon the Scheme becoming effective, certificates representing the Akai Shares will cease to have
effect for any purpose and the listing of the Akai Shares on the Stock Exchange will be cancelled.
Certificates representing the appropriate number of Hang Ten Shares will be issued to the Akai Shareholders
on the register of members of Akai at the Final Record Date. Persons entitled to Akai Shares who are not
registered holders thereof should make an application to the Courts as soon as possible to effect a
transfer of the relevant Akai Shares and should ensure that the appropriate form of transfer accompanied
by the relevant certificates or other evidence of title are submitted to the share registrar of Akai in the
manner described in the section headed “Record Date” set out in the Explanatory Statement.

       It is expected that certificates for the Hang Ten Shares will be posted to the holders of Akai Shares
entitled thereto at their own risk on the next day following the Effective Date. Certificates will be posted
to the holders of Akai Shares entitled thereto at their respective registered addresses set out in the

                                                  – 88 –
                 LETTER FROM THE BOARD OF DIRECTORS OF
                    HANG TEN GROUP HOLDINGS LIMITED


register of members of Akai (or, in the case of joint holders, at the address of that joint holder whose
name stands first in the register of members of Akai in respect of the joint holding) at the Final Record
Date.

     The proposed board lot for trading in the Hang Ten Shares on the Stock Exchange is 100,000.

UNDERTAKINGS

      Each member of the Kung Family (being the controlling shareholder of Hang Ten upon Closing but
before conversion of the CPS held by the Investors or exercise of the Warrants) and its shareholders has
undertaken to Hang Ten and the Stock Exchange that each member of the Kung Family will not:

     (a)   for six months from the date on which dealing in the Hang Ten Shares commences on the
           Stock Exchange, dispose of, or procure its associates or nominee holders to dispose of, any
           of the Hang Ten Shares beneficially owned by it immediately after Closing; and

     (b)   in the six months following the expiry of the period referred to in (a) above, dispose of, or
           permit its associates or nominee holders to dispose of, any of the Hang Ten Shares referred to
           in (a) above if, immediately after such disposal, it would cease to be the controlling shareholder
           of Hang Ten (as defined in the Listing Rules).

      Each member of the Kung Family (being the controlling shareholder of Hang Ten upon Closing but
before conversion of the CPS held by the Investors or exercise of the Warrants) and its shareholders has
undertaken to Hang Ten and the Stock Exchange that within 12 months of the date on which dealing in
the Hang Ten Shares first commences on the Stock Exchange, each member of the Kung Family will:

     (a)   if any Hang Ten Shares beneficially owned by it are pledged or charged, immediately inform
           Hang Ten of such pledge or charge and the number of Hang Ten Shares so pledged or
           charged; and

     (b)   on receipt of indications, whether verbal or written, from the pledgee or chargee that any of
           the pledged or charged Hang Ten Shares will be disposed of, immediately inform Hang Ten.

      In compliance with Note 3 to Rule 10.07 of the Listing Rules, Hang Ten will inform the Stock
Exchange as soon as it has been informed of the above matters by each member of the Kung Family and
will disclose such information by way of a press notice as soon as possible.

      Hang Ten has undertaken to the Stock Exchange that it will not, save for (a) implementation of the
Proposal, (b) the grant of options under the Share Option Scheme, (c) the exercise of subscription rights
attached to any Option granted under the Share Option Scheme; (d) the issue of Hang Ten Shares by way
of scrip dividend schemes or similar arrangements in accordance with the Bye-laws of Hang Ten; or (e)
the issue of Hang Ten Shares pursuant to the conversion of the CPS or exercise of the Warrants (i) within
the period of six months from the date of commencement of dealing in the Hang Ten Shares on the Stock
Exchange, issue or agree to issue any shares or securities in Hang Ten or grant or agree to grant any



                                                  – 89 –
                  LETTER FROM THE BOARD OF DIRECTORS OF
                     HANG TEN GROUP HOLDINGS LIMITED


options, warrants or other rights carrying the right to subscribe for, or otherwise convert into, or exchange
for any securities of Hang Ten; and (ii) at any time during the period of 12 months from the date of
commencement of dealing in the Hang Ten Shares on the Stock Exchange, issue or exchange for any
options or rights to subscribe for or otherwise convert into or exchange for the Hang Ten Shares or
securities in Hang Ten so as to result in the Kung Family ceasing to be the controlling shareholder of
Hang Ten (within the meaning of the Listing Rules).

      Hang Ten has undertaken to the Stock Exchange, subject to the Closing, to disclose to the Stock
Exchange any dealings by any connected persons (as defined in the Listing Rules) of Hang Ten from time
to time in the CPS and the Warrants immediately upon Hang Ten becoming aware of such dealings.

      To comply with the requirements pursuant to Paragraph 30 of Appendix 7(b) to the Listing Rules,
the Directors have undertaken that they will procure that Hang Ten proceeds with a consolidation of
Hang Ten Shares in the event that Hang Ten Shares traded at a closing price of HK$0.01 or below for 90
consecutive trading days from the date of listing or such other period as the Stock Exchange may
reasonably consider to be appropriate under Paragraph 30 of Appendix 7(b) of the Listing Rules. The
Investors have also undertaken to the Stock Exchange that each of them will support and approve any
share consolidation that may be required under Paragraph 30 after the listing of the Hang Ten Shares on
the Stock Exchange so as to fulfil the above undertaking given by the Directors.

ARRANGEMENTS FOR ODD LOT TRADING OF THE HANG TEN SHARES

      The proposed board lot for trading in the Hang Ten Shares on the Stock Exchange is 100,000. In
order to alleviate the difficulties arising from the existence of odd lots of the Hang Ten Shares as a result
of the Proposal, Hang Ten has agreed to arrange to match the sales and purchases of odd lots of the Hang
Ten Shares but it should be noted that any such sales and purchases may be transacted at a price less than
the prevailing market price of the Hang Ten Shares. Holders of odd lots of the Hang Ten Shares who wish
to take advantage of this facility should contact Ms. Amy Wu (Telephone: 2532 8227) or Ms. Sandy Yuen
(Telephone: 2532 8226), Kim Eng Securities (Hong Kong) Limited at Room 1901, 19/F, Bank of America
Tower, 12 Harcourt Road, Central, Hong Kong from 9 December 2002 up to and including 8 January
2003.

OTHER INFORMATION

     Your attention is drawn to the “Letter from the joint and several Liquidators of Akai Holdings
Limited (In Compulsory Liquidation)”, the “Letter from Horwath”, the “Explanatory Statement” and the
appendices to this document.




                                                                         Yours faithfully,
                                                                       For and on behalf of
                                                                 Hang Ten Group Holdings Limited
                                                                         Chan Wing Sun
                                                                            Chairman

                                                   – 90 –
               LETTER FROM HORWATH CAPITAL ASIA LIMITED




                                                                                        31 October 2002

To the shareholders of
  Akai Holdings Limited (In Compulsory Liquidation)

Dear Sirs,

                                            PROPOSAL

       We refer to our appointment to advise you as regards the Proposal, which involves, inter alia, the
Scheme, details of which are set out in Akai’s document (the “Document”) to Akai Shareholders dated 31
October 2002 of which this letter forms part. Unless the context requires otherwise, terms used in this
letter shall have the same meaning as those defined in the Document.

      In formulating our advice, we have relied upon the accuracy of the information and representations
contained in the Document. We have assumed that all statements and representations made or referred to
in the Document were true at the time they were made and continue to be true as at the date of the
Document. We have assumed that all statements of belief, opinion and intention made by the Liquidators
and the Directors in the Document have been reasonably made after due enquiry.

      We consider that we have reviewed sufficient information to reach an informed view, to justify our
reliance on the accuracy of the information contained in the Document and to provide a reasonable basis
for our advice. The Liquidators have confirmed to us that in so far as the Akai Group is concerned, no
material facts have been omitted from the information supplied and opinions expressed and we have no
reason to suspect that any material information relating to the Akai Group has been withheld by the
Liquidators or is misleading. We have not, however, conducted an independent in-depth investigation
into the affairs of the Akai Group or the prospects of the industry sector proposed by Hang Ten.

1.   PRINCIPAL FACTORS AND REASONS CONSIDERED

      In considering whether or not the terms of the Proposal are fair and reasonable so far as the
interests of the Akai Shareholders are concerned, we have given particular regard to the following
principal factors and reasons:

     A.      Background of Akai and Appointment of the Liquidators

           As stated in the letter from the Liquidators contained in the Document, (i) on 23 August
     2000, the Hong Kong Court ordered that Akai be wound-up and appointed the Official Receiver as
     provisional liquidator of Akai; (ii) on 24 May 2001, the Liquidators were appointed as the joint and
     several liquidators of Akai by the Hong Kong Court; (iii) on 28 August 2000 and 1 September
     2000, the Bermuda Court appointed Fan Wai Kuen, Joseph, R. Craig Christensen and Damien
     Hodgkinson as joint and several provisional liquidators of Akai; (iv) on 29 September 2000, the



                                                 – 91 –
            LETTER FROM HORWATH CAPITAL ASIA LIMITED


Bermuda Court ordered that Akai be wound up; and (v) on 16 March 2001, the Liquidators were
appointed as the joint and several liquidators of Akai by the Bermuda Court.

      Trading in Akai Shares on the Stock Exchange has been suspended since 23 August 2000 and,
on 10 September 2001, Akai was placed into the third stage of the delisting procedure. On 28
February 2002, Akai submitted the Proposal to the Stock Exchange and requested an extension for
the cancellation of the listing of the Akai Shares. On 8 March 2002, the Stock Exchange gave in-
principle approval to the Proposal and advised Akai that the Listing Committee had approved the
extension for the cancellation of the listing of the Akai Shares up to 17 July 2002, to enable the
Proposal to be progressed. On 12 July 2002, the Stock Exchange advised that the Listing Committee
had approved the extension for the cancellation of the listing of the Akai Shares up to 29 November
2002. On 23 October 2002, the Stock Exchange advised Akai that the Listing Committee had
approved a further extension for the cancellation of the listing of the Akai Shares up to 22 January
2003 to enable Akai to proceed with the Proposal and the new listing application of Hang Ten
under the Proposal.

      The Proposal involves a number of inter-related transactions, including the Scheme. Under
the terms of the Scheme, Akai Shareholders on the Final Record Date will exchange their Akai
Shares for an aggregate of 300,000,000 Hang Ten Shares which will be distributed among the Akai
Shareholders pro rata in accordance with their respective holdings of Akai Shares (subject to
rounding down) held on the Final Record Date. The Liquidators consider that the listing of the
Akai Shares on the Stock Exchange has an intrinsic value that is capable of being realised. The
realisation of value from the listing of a company’s shares on the Stock Exchange is different to
other assets realised in an insolvent winding-up in that shareholders of an insolvent company can
obtain a benefit from their co-operation in the realisation of value from the listed status of a
company’s shares through a scheme of arrangement that facilitates a listing of another company’s
shares by way of introduction.

      It is the opinion of the Liquidators that:

      (a)    it is highly unlikely that Akai Shareholders will receive a distribution in Akai’s winding-
             up;

      (b)    the Stock Exchange will not consider an alternative resumption proposal; and

      (c)    the successful implementation of the Proposal will not affect the rights of Creditors and
             Akai Shareholders to make Claims in the winding-up of Akai.

       The Liquidators are also of the view that the successful implementation of the Proposal is in
the best interests of Akai Shareholders as it represents their only realistic prospect of realising any
value from their Akai Shares. Since the Stock Exchange will not consider an alternative resumption
proposal, the Proposal is the only option currently available to the Akai Shareholders. We consider
that the Proposal is in the interests of Akai Shareholders.




                                              – 92 –
           LETTER FROM HORWATH CAPITAL ASIA LIMITED


B.   Value of Akai to Akai Shareholders

     (a)    As detailed in the explanatory statement contained in the Document, the Liquidators
            took into their custody the limited number of assets, books and records of the Akai
            Group which were identifiable and made available to them following their appointment.
            Due to the inadequate information available to the Liquidators, their investigations of
            the Akai Group have been severely restricted. Consequently, at this stage, it is not
            known whether the proceeds from the realisation of the Akai Group’s assets will provide
            any return to Creditors. At present, there are few tangible assets under the control of
            the Liquidators. A number of legal claims against various parties have been identified
            by the Liquidators. As at the Latest Practicable Date, it is not known whether these
            claims are worth pursuing as there are insufficient funds available to the Liquidators to
            undertake the necessary investigations or to obtain legal advice. Given the lack of
            funds and limited information available to the Liquidators, as at the Latest Practicable
            Date the Liquidators were unable to estimate with any degree of certainty what, if any,
            realisations may be available from the winding-up of Akai. However, if the Proposal is
            successfully implemented, there will be gross realisations of HK$12,000,000 in cash
            and the proceeds of sale of the Creditors’ Share Allocation which will be the first
            material realisations in the winding-up of Akai.

     (b)    As at the Latest Practicable Date, the Liquidators have received proofs of debt with
            claims in aggregate in the amount of HK$9,855,359,252, in respect of the winding-up
            in Hong Kong and HK$8,975,675,776 in respect of the winding-up in Bermuda.
            However, the Liquidators have not yet completed their adjudication of the Claims.

     (c)    The Statement of Affairs of Akai as at 23 August 2000 is set out in Appendix V to the
            Document. As at that date, Akai had estimated total deficiency before the cost of
            liquidation in excess of US$787 million. Given the realisation proceeds estimated by
            the Liquidators as mentioned in paragraph (a) above and the estimated total deficiency
            before the cost of liquidation of Akai as stated in the Statement of Affairs, it would, in
            our opinion, be highly unlikely for the Creditors, even if the Proposal is implemented,
            to receive a complete discharge of their Claims after paying off the costs and expenses
            of the liquidation of Akai, which have been approximately HK$26.9 million as at the
            Latest Practicable Date, excluding those restructuring costs in connection with the
            Proposal. Accordingly, in our opinion, regardless of whether or not the Scheme is
            implemented, it is highly unlikely that Akai Shareholders will receive a dividend in
            Akai’s winding-up.

     (d)    Akai and its subsidiaries have ceased to carry all major businesses on 23 August 2000
            (the date of the winding-up order of the Hong Kong Court). Without injection of new
            profitable business into Akai, there is no viable business that could generate future
            income to restore shareholder value for the Akai Shareholders. In view of the substantial
            total deficiency of Akai of approximately US$787 million as shown in the Statement of
            Affairs, it appears to us that the only shareholder value that Akai could have for the
            Akai Shareholders would be a rescue of its listed status, through a reactivation proposal
            similar to the Proposal to inject new profitable business into Akai by an interested
            rescuer.
                                            – 93 –
           LETTER FROM HORWATH CAPITAL ASIA LIMITED


     (e)    Trading in the Akai Shares on the Stock Exchange has been suspended since 23 August
            2000. In view of the fact that Akai is in liquidation, in our opinion, it is highly
            inconceivable that suspension of trading of the Akai Shares could be uplifted without a
            Proposal that would, among other approvals and consents, meet the relevant regulatory
            requirements. Upon the Scheme becoming effective and subject to the listing of the
            Hang Ten Shares, the Akai Shareholders will become shareholders of Hang Ten and
            will receive the Hang Ten Shares in exchange for the Akai Shares presently held by
            them pursuant to the Scheme. The Hang Ten Shares will be marketable on the Stock
            Exchange. In this respect, we consider the Scheme, which will effectively realise some
            value for the Akai Shareholders, to be in interests of the Akai Shareholders.

C.   The Terms of the Proposal

     The Proposal principally involves the following transactions:

     (a)    The Scheme

            Pursuant to the Scheme, the entire issued share capital of Akai will be transferred to
            Hang Ten. The Akai Shareholders on the Final Record Date will transfer all of their
            Akai Shares to Hang Ten. In consideration of this transfer, Akai Shareholders on the
            Final Record Date will receive in aggregate 300,000,000 Hang Ten Shares, credited as
            fully paid up, to be distributed among Akai Shareholders pro rata in accordance with
            their respective holdings of Akai Shares (subject to rounding down) held on the Final
            Record Date. Subject to the approval of the Stock Exchange, listing of the Akai Shares
            will be withdrawn from the Stock Exchange and the Hang Ten Shares will be listed on
            the Stock Exchange by way of Introduction.

            Based on the Unaudited Pro Forma Statement of Adjusted Combined Net Liabilities of
            the Hang Ten Group as set out in Appendix III to the Document, the pro forma unaudited
            adjusted combined net liabilities of the Hang Ten Group immediately following Closing
            will be approximately US$7.3 million. However, adding back the goodwill and intangible
            assets of the Hang Ten Group, the pro forma unaudited adjusted combined net asset
            value of the Hang Ten Group immediately following Closing will be approximately
            US$21.9 million (equivalent to approximately US cent 0.08 per Hang Ten Share).
            Accordingly, the Hang Ten Shares to be allotted and issued to the Akai Shareholders
            will have an attributable net asset value of approximately US$0.24 million (the
            “Attributable NAV”).

            The issued and paid up capital of Akai as at 23 August 2000 as shown in the Statement
            of Affairs set out in Appendix V to the Document amounted to approximately US$28
            million. On this basis and taking no account of any future changes in the capital value
            of the Hang Ten Shares on the Stock Exchange, the Akai Shareholders would be able to
            recover share value equivalent to approximately 78% of their paid up capital in Akai.

            Given the impoverished financial performance and the substantial net deficiency of the
            Akai Group, we consider that the Scheme is in the interests of the Akai Shareholders
            due to the share value recovery that may be obtained by them.
                                           – 94 –
      LETTER FROM HORWATH CAPITAL ASIA LIMITED


(b)    The Debt Restructuring

       Hang Ten will:

       (i)    pay to Akai cash consideration of HK$12,000,000, financed by the net proceeds
              to be derived from the subscription of new shares in Hang Ten (BVI) by the
              Other Investors; and

       (ii)   issue and allot the Creditors’ Share Allocation to Akai, being 2,100,000,000 Hang
              Ten Shares, credited as fully paid up, and ranking pari passu with all other Hang
              Ten Shares in issue on the Closing Date.

       On the Closing Date, Hang Ten will transfer all of the Akai Shares to the Liquidators
       (or their nominees) for the sum of HK$1.00. As such, the indebtedness of Akai due to
       the Creditors will still remain and be under the control of the Liquidators. The
       indebtedness of Akai will not therefore have any impact on the affairs of Hang Ten.

       Taking into consideration the financial predicament of Akai, we consider that the Debt
       Restructuring and the transfer of the entire issued share capital of Akai to the Liquidators
       (or their nominees) are in interests of the Akai Shareholders as the indebtedness of
       Akai will be detached from the Hang Ten Group.

       In Akai’s winding-up, the Akai Shareholders would receive a distribution only if all the
       Creditors had been paid in full. In view of the significant amount of the net deficit of
       Akai, we consider that it is improbable that the Akai Shareholders will be able to obtain
       any recovery. In the circumstances, we consider that the transfer to Hang Ten of the
       entire issued share capital of Akai by the Akai Shareholders and, immediately thereafter,
       by Hang Ten to the Liquidators (or their nominees) to be fair and reasonable.

(c)    Acquisition of Hang Ten (BVI) by Hang Ten

       On 28 October 2002, Hang Ten entered into the Sale and Purchase Agreement under
       which it will acquire the entire issued share capital of Hang Ten (BVI) from the Investors
       and the Other Investors. The consideration to the Investors will be satisfied by
       21,200,000,000 Hang Ten Shares credited as fully paid (with one Warrant for every five
       Hang Ten Shares) and 7,038 CPS to the Investors. The Warrants will be issued on the
       Closing Date. A total of 4,402,000,000 Hang Ten Shares will be issued on exercise of
       the Warrants, representing approximately 18.03% of the issued ordinary share capital
       of Hang Ten immediately after such Warrants are issued. Out of the 21,200,000,000
       Hang Ten Shares, the Investors will direct Hang Ten to issue and allot 1,200,000,000
       Hang Ten Shares (with associated Warrants) to the Designated Person in consideration
       of consultancy services provided by the Designated Person to the Investors in relation
       to the restructuring of Akai.




                                        – 95 –
LETTER FROM HORWATH CAPITAL ASIA LIMITED


 In order to maintain a sufficient public float for the Hang Ten Shares upon Closing,
 Hang Ten (BVI) will, prior to completion of the Sale and Purchase Agreement, issue
 shares, representing approximately 3.7% of its enlarged issued share capital, to the
 Other Investors, who are not connected with the directors, the chief executives and the
 substantial shareholders of Hang Ten and its subsidiaries and their respective associates
 and each of the Other Investors is a party acting in concert with the Investors. Pursuant
 to the Sale and Purchase Agreement, the Other Investors will transfer their portion of
 the entire equity interests in Hang Ten (BVI) to Hang Ten, and to satisfy the consideration
 to the Other Investors, Hang Ten will issue 269 CPS and 810,000,000 Hang Ten Shares
 (with one Warrant for every 5 Hang Ten Shares so issued) to the Other Investors which
 Hang Ten Shares will represent approximately 3.32% of the issued ordinary share
 capital of Hang Ten on the Closing Date but before any conversion of the CPS or
 exercise of the Warrants.

 In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the
 Other Investors have agreed to convert the 269 CPS into 2,690,000,000 Hang Ten
 Shares upon Closing but before the commencement of dealing in the Hang Ten Shares.
 Accordingly, there will be 3,500 million Hang Ten Shares held by the Other Investors
 upon listing of the Hang Ten Shares, representing approximately 12.92% of the issued
 ordinary share capital of Hang Ten following Closing but before any conversion of the
 CPS issued to the Investors or exercise of the Warrants.

 Completion of the Sale and Purchase Agreement will take place on or before the Closing
 Date.

 Upon Closing with no CPS issued to the Investors converted or Warrants exercised, the
 Investors together with parties acting in concert with them will in aggregate hold
 approximately 91.15% of Hang Ten’s entire issued ordinary share capital. The
 shareholding interests in Hang Ten to be held by the Investors together with parties
 acting in concert with them will be increased to approximately 97.54% upon Closing
 with all CPS issued to the Investors converted but before exercise of the Warrants. The
 shareholding interests in Hang Ten to be held by the Investors together with parties
 acting in concert with them will be further increased to approximately 97.65% upon
 Closing with all CPS issued to the Investors converted and all Warrants exercised. We
 consider that it is fair for the Investors to obtain control and become the largest group
 of shareholders of Hang Ten upon Closing as the Investors, like any other arm’s length
 investors, would sell the entire issued share capital of Hang Ten (BVI) to Hang Ten in
 accordance with the abovementioned terms only if they could obtain a return sufficiently
 worthy as in the form of taking substantial and effective control of Hang Ten.




                                 – 96 –
                LETTER FROM HORWATH CAPITAL ASIA LIMITED


D.       Effects of the Proposal

         (a)          Shareholding

                      The Akai Shareholders will cease to have any shareholding in Akai upon the Scheme
                      becoming effective, but they will become Hang Ten Shareholders upon completion of
                      the Scheme. Their shareholding in Akai before Closing and in Hang Ten upon Closing,
                      conversion of all CPS and exercise of all Warrants will be as follows:

                                                                 Upon Closing                     Upon Closing                        Upon Closing
                                                             with no CPS issued to                 with all CPS                        with all CPS
                                                                  the Investors               issued to the Investors             issued to the Investors
                                                                    converted                  converted but before                   converted and
                                Before Closing               or Warrants exercised           exercise of the Warrants            all Warrants exercised
                       Number of                         Number of                          Number of                           Number of
                      Akai Shares                  Hang Ten Shares                    Hang Ten Shares                     Hang Ten Shares
                  (million shares)             %    (million shares)             %     (million shares)               %    (million shares)               %

THE INVESTORS
 The Kung
   Family
   (Notes 1 &3)
 Asian Wide                    –               –            12,600         46.49%               56,940          58.41%           59,460.00          58.36%
 Mr. Kenneth Hung              –               –               800          2.94%                3,620           3.71%            3,780.00           3.71%
 Mr. Dennis Kung               –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
 Ms. Peggy Hung                –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%
 Ms. Pamela Hung               –               –               400          1.48%                1,810           1.86%            1,890.00           1.86%

  YGM (Note 3)                 –               –             5,000         18.45%               22,590          23.18%           23,590.00          23.15%

  Ms. Kao (director
   of Hang Ten)
   (Note 3)                    –               –               200            0.74%                900           0.92%              940.00           0.92%
  Ms. Wang
   (director of
   Hang Ten)
   (Note 3)                    –               –               200            0.74%                900           0.92%              940.00           0.92%

Sub-total (A)                  –               –            20,000         73.80%               90,380         92.72%            94,380.00         92.64%

OTHER INVESTORS
 (Notes 2 & 3)
 Best Standand                 –               –             1,993            7.36%              1,993           2.05%            2,085.60           2.06%
 Raytop                        –               –             1,507            5.56%              1,507           1.54%            1,576.40           1.54%




                                                                     – 97 –
                LETTER FROM HORWATH CAPITAL ASIA LIMITED


                                                                 Upon Closing                     Upon Closing                        Upon Closing
                                                             with no CPS issued to                 with all CPS                        with all CPS
                                                                  the Investors               issued to the Investors             issued to the Investors
                                                                    converted                  converted but before                   converted and
                                Before Closing               or Warrants exercised           exercise of the Warrants            all Warrants exercised
                       Number of                         Number of                          Number of                           Number of
                      Akai Shares                  Hang Ten Shares                    Hang Ten Shares                     Hang Ten Shares
                  (million shares)             %    (million shares)             %     (million shares)               %    (million shares)               %

DESIGNATED PERSON
   (Note 3)                    –               –             1,200            4.43%              1,200           1.23%            1,440.00           1.41%

Sub-total (B)                  –               –             4,700         17.35%                4,700          4.82%             5,102.00          5.01%

Sub-total (A+B)                –               –            24,700         91.15%               95,080         97.54%            99,482.00         97.65%

AKAI SHAREHOLDERS 2,191                 100.00%                300            1.10%                300           0.31%              300.00           0.29%

LIQUIDATORS
   (for the benefit
   of the Creditors)           –               –             2,100            7.75%              2,100           2.15%            2,100.00           2.06%

Sub-total (C)              2,191        100.00%              2,400          8.85%                2,400          2.46%             2,400.00          2.35%

Total (A+B+C)              2,191        100.00%             27,100        100.00%               97,480        100.00%           101,882.00        100.00%

Note 1: Out of the 14,600 million Hang Ten Shares issued to members of the Kung Family upon Closing but before
        conversion of the CPS held by the Investors or exercise of the Warrants, Mr. Kenneth Hung, Mr. Dennis Kung,
        Ms. Peggy Hung, Ms. Pamela Hung and Asian Wide will be interested in 800 million, 400 million, 400 million,
        400 million and 12,600 million Hang Ten Shares respectively.

Note 2: In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have
        agreed to convert the 269 CPS to be issued to them under the Sale and Purchase Agreement into Hang Ten Shares
        upon Closing but before the commencement of dealing in Hang Ten Shares. Accordingly, there will be 27,100
        million Hang Ten Shares and 7,038 CPS issued and credited as fully paid upon listing of the Hang Ten Shares.

Note 3: The Investors, the Other Investors and the Designated Person are concert parties pursuant to the Code and
        together hold approximately 91.15% of the issued ordinary share capital of Hang Ten upon Closing with no CPS
        issued to the Investors converted or Warrants exercised.




                                                                     – 98 –
      LETTER FROM HORWATH CAPITAL ASIA LIMITED


       The Akai Shareholders currently hold 100% of the issued share capital of Akai.
       Immediately upon Closing with no CPS issued to the Investors converted or Warrants
       exercised, the Akai Shareholders will hold approximately 1.10% of the issued ordinary
       share capital of Hang Ten. Such shareholding will be diluted to approximately 0.31%
       upon Closing with all CPS issued to the Investors converted but before exercise of the
       Warrants and further diluted to approximately 0.29% upon Closing with all CPS issued
       to the Investors converted and all Warrants exercised. The decrease in such shareholding
       is principally due to the issue of the Hang Ten Shares to the Creditors, the Investors,
       the Designated Person and the Other Investors.

       We consider that the degree of shareholding dilution for the Akai Shareholders, although
       significant, is fair and reasonable, bearing in mind that it will be very improbable that
       the Investors and the Creditors would proceed with the Proposal if the above shareholding
       structure cannot be attained. Should the Proposal not proceed, it will be highly unlikely
       for the Akai Shareholders to receive a distribution in Akai’s winding-up.

(b)    Net Assets and Capital Value

       Based on the Statement of Affairs as set out in Appendix V to the Document, the total
       deficiency before the cost of liquidation of Akai was approximately US$787 million as
       at 23 August 2000. As at the Latest Practicable Date the Liquidators were unable to
       estimate with any degree of certainty what, if any, realisations may be available from
       the winding-up of Akai. Under these circumstances, the value of net assets of Akai
       potentially available to the Akai Shareholders without the Proposal is nil.

       Again, should the Proposal not be implemented, the market capitalisation of the Akai
       Shares will most likely be nil.

       On the other hand, based on the pro forma unaudited adjusted combined net asset value
       of the Hang Ten Group of approximately US$21.9 million upon Closing and the Hang
       Ten Shares to be issued to the Akai Shareholders pursuant to the Scheme, the Attributable
       NAV of approximately US$0.24 million would be conferred upon the Akai Shareholders
       as referred to in paragraph 1C(a) above.

(c)    Earnings

       The Akai Group’s major operations ceased in 2000 and no material earnings have been
       recorded since Akai’s liquidation. For the three years ended 31st March 2000, 2001 and
       2002, the Hang Ten Group recorded profits attributable to shareholders of approximately
       US$10.9 million, US$10.9 million and US$8.6 million respectively as set out in Appendix
       II to the Document. Accordingly, it is very likely that the Akai Shareholders who will
       become shareholders of Hang Ten will benefit from the earnings of the Hang Ten
       Group through their shareholding in Hang Ten after the implementation of the Proposal.




                                       – 99 –
         LETTER FROM HORWATH CAPITAL ASIA LIMITED


            Since the Proposal would bring to the Akai Shareholders benefits in terms of the net
            asset value, capital value and earnings, we consider that the Proposal is in the interests
            of the Akai Shareholders.

E.    Business of the Hang Ten Group

      Hang Ten was incorporated in Bermuda on 17 July 2002 and, on completion of the Sale and
Purchase Agreement, will be an investment holding company whose principal asset is its interest in
the entire issued share capital of Hang Ten (BVI). Hang Ten (BVI) was incorporated on 10 September
2001 in the British Virgin Islands and is an investment holding company whose principal asset is its
97.01% equity interest in ILC.

       The Hang Ten (BVI) Group is principally engaged in the business of designing, marketing
and sale of apparel and accessories under the brandname of “Hang Ten” in Asian countries including
Taiwan, South Korea, Singapore, Philippines and Malaysia. The portfolio of the apparel under the
brandname of “Hang Ten” comprises jackets, vests, T-shirts, skirts, pants and jeans as well as other
accessories such as bags, caps, socks, shoes, belts and umbrellas, which are targeted at customers
aged between 15 and 45. The Directors believe that “Hang Ten” is one of the leading brand names
for money-for-value apparel and accessories in the Asian region. The Hang Ten (BVI) Group is the
owner of the trademark “Hang Ten” which is also licensed to independent third parties for distribution
and production of apparel and accessories in over 50 countries, including the US, Europe, Japan,
Australia, South America and South Africa. In addition, Hang Ten (BVI) Group also owns the
trademarks “Lightning Bolt” and “OZZY”. Further details of the Hang Ten (BVI) Group’s intellectual
property rights are set out in the paragraph headed “Intellectual property rights” in the section
headed “Statutory and general information on Hang Ten Group Holdings Limited” in Appendix VII
to this document. As shown in note 12 to the Combined Audited Financial Statements as set out in
Appendix II to the Document, the net book value of the trademarks as at 31 March 2002 was
approximately US$19.2 million. The Hang Ten (BVI) Group operates a retail network of over 300
outlets in the Asian region. The Hang Ten (BVI) Group is also engaged in the wholesaling of
products bearing the brandname “Hang Ten” through a number of authorised local distributors in
Taiwan. The Directors believe that there will be no change in the nature of the business of the Hang
Ten (BVI) Group upon the listing of the Hang Ten Shares.

       As stated in the letter from the board of directors of Hang Ten contained in the Document,
the Directors believe that the Asian market for apparel and accessories is large and consider that
the Hang Ten Group’s business strategy of offering distinctive, contemporary and quality merchandise
to a specialised market segment presents the Hang Ten Group with opportunities for future growth.
The Hang Ten Group’s objective is to become a well-known brand for apparel and accessories in
the Asian region, offering a wide range of quality merchandise to different market segments. The
Directors believe that in order to achieve the above business objective and maintain its competitive
edge in the domestic market, the Hang Ten (BVI) Group will continually pursue the existing
strategies of the Hang Ten (BVI) Group and expansion plans that focus primarily on merchandising,
marketing and distribution. However, Akai Shareholders should note that the future prospects of
the Hang Ten Group are (i) extremely sensitive to factors including but not limited to the economic
environment in the markets in which the Hang Ten Group operates, the overall demand for apparel
and accessories and the future plan of the Hang Ten Group; and (ii) may be affected by unforeseen
events.
                                            – 100 –
               LETTER FROM HORWATH CAPITAL ASIA LIMITED


            Details of the business of the Hang Ten Group are set out in the letter from the board of
     directors of Hang Ten contained in the Document. Your attention is also drawn to the section
     headed “Risk Factors” in the Document which sets out certain risk factors associated with the
     business of the Hang Ten Group. The Akai Shareholders are strongly recommended to read that
     letter and section in detail.

          Further financial information of the Hang Ten Group are set out in Appendices II and III to
     the Document.

      In the absence of a formal and comprehensive future plan of the Hang Ten Group, we are unable to
comment on the future prospect of the Hang Ten Group. However, in view of all of the above, we
consider that the Hang Ten Group has a viable business for the purpose of rescuing Akai and will have
sufficient operating assets to continue its business operations.

2.   RECOMMENDATION

      As stated in the letter from the Liquidators contained in the Document, the Stock Exchange will not
consider an alternative resumption proposal. This means that the Proposal is the only option currently
available to the Akai Shareholders. In view of the financial position of Akai as summarised in the
Statement of Affairs, it is inconceivable that there will be any surplus value left in Akai for the Akai
Shareholders in the event that Akai is wound up. Akai Shareholders who are uncertain of their individual
positions are recommended to consult their personal financial advisers. Having regard to the above
principal factors and reasons, we consider that the terms of the Proposal are fair and reasonable so far as
the Akai Shareholders are concerned and that the Proposal is in the interests of the Akai Shareholders.
Accordingly, we recommend the Akai Shareholders to vote in favour of the resolutions to be proposed at
the Scheme Meeting and the Special General Meeting to approve the Scheme and the Proposal respectively.

                                                                            Yours faithfully,
                                                                          For and on behalf of
                                                                      Horwath Capital Asia Limited
                                                                            Francis K Tung
                                                                           Managing Director




                                                 – 101 –
           EXPLANATORY STATEMENT (IN COMPLIANCE WITH
         SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


1.   INTRODUCTION

     This Explanatory Statement sets out the background to and the effect of transactions contemplated
by the Proposal, including the Scheme, and explains why you should consider voting in favour of the
Scheme at the Scheme Meeting and the Special General Meeting.

2.   BACKGROUND TO AND REASONS FOR THE PROPOSAL

      Akai was originally incorporated in Hong Kong on 23 November 1982 as Aramast (Hong Kong)
Limited. Aramast (Hong Kong) Limited changed its name to Semi-Tech Microelectronics (Far East)
Limited in 1983 and was listed on the Stock Exchange on 30 October 1987. Semi-Tech Microelectronics
(Far East) Limited changed its name to Semi-Tech (Global) Limited in 1990. A redomicile exercise took
place in 1992 pursuant to which a new company, Semi-Tech (Global) Company Limited, was incorporated
in Bermuda and became the successor company to the existing Hong Kong company, Semi-Tech (Global)
Limited. Semi-Tech (Global) Limited, the existing Hong Kong company, is now a subsidiary of Semi-
Tech (Global) Company Limited, the Bermuda company. The principal business of Akai, prior to the
Courts ordering its winding-up, was as an investment vehicle for the Semi-Tech Corporation Limited and
its subsidiaries.

     Appointment of Liquidators

            On 13 January 2000, the Petitioning Creditors filed a winding-up petition in Hong Kong. On
     23 August 2000, the Hong Kong Court ordered that Akai be wound-up and appointed the Official
     Receiver as provisional liquidator pursuant to section 194(1)(a) of the Companies Ordinance pending
     a first meeting of creditors. On 24 May 2001, the Liquidators were appointed as the joint and
     several liquidators of Akai by the Hong Kong Court.

           On 28 August 2000, the Petitioning Creditors filed a winding-up petition in Bermuda. On that
     same day, the Bermuda Court appointed R. Craig Christensen provisional liquidator and, on 1
     September 2000, the Bermudian Court appointed Fan Wai Kuen, Joseph and Damien Hodgkinson,
     together with R. Craig Christensen, as joint and several provisional liquidators of Akai pursuant to
     section 170(2) of the Companies Act pending a first meeting of creditors. On 29 September 2000,
     the Bermuda Court ordered that Akai be wound up. On 16 March 2001, the Liquidators were
     appointed as the joint and several liquidators of Akai by the Bermuda Court.

     Role of Liquidator

           In summary, the role of a liquidator is to collect and realise the assets of a company. The
     proceeds from the realisation of a company’s assets are applied in discharging all of the company’s
     debts and liabilities after paying the costs and expenses of the winding-up. Any balance that
     remains is distributed among the company’s shareholders according to their rights and interests or
     otherwise dealt with as the company’s memorandum of association and bye-laws direct.




                                                – 102 –
     EXPLANATORY STATEMENT (IN COMPLIANCE WITH
   SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


Estimated return to Akai and likely prospects of return to Akai Shareholders

      Following their appointment, the Liquidators took into their custody the limited number of
assets, books and records of the Akai Group which were identifiable and made available to them.
Due to the inadequate information available to the Liquidators, their investigations of the Akai
Group have been severely restricted. Consequently, at this stage, it is not known whether the
proceeds from the realisation of the Akai Group’s assets will provide any return to Creditors.

      At present, there are few tangible assets under the control of the Liquidators. A number of
legal claims against various parties have been identified by the Liquidators. As at the Latest
Practicable Date it is not known whether these claims are worth pursuing as there are insufficient
funds available to the Liquidators to undertake the necessary investigations or to obtain legal
advice.

       Given the lack of funds and limited information available to the Liquidators, as at the Latest
Practicable Date the Liquidators were unable to estimate with any degree of certainty what, if any,
realisations may be available from the winding-up of Akai. However, if the Proposal is successfully
implemented, there will be gross realisations of HK$12,000,000 in cash and the proceeds of sale of
the Creditors’ Share Allocation which will be the first material realisations in the winding-up of
Akai.

De-listing Procedure

      The Stock Exchange placed Akai in the de-listing procedure set out in Practice Note 17 to the
Listing Rules with effect from 23 August 2000 which was the date the Hong Kong Court ordered
Akai to be wound up.

       On 7 September 2001, the Stock Exchange advised Akai that it was in the third stage of the
de-listing procedure and that, unless a resumption proposal was submitted to the Stock Exchange
by no later than 11 March 2002, the listing of the Akai Shares on the Stock Exchange would be
cancelled.

      On 28 February 2002, Akai submitted the Proposal to the Stock Exchange. On 8 March 2002,
the Stock Exchange advised Akai that the Listing Committee had approved the extension of the
cancellation of the listing of the Akai Shares up to 17 July 2002 to enable the Proposal to be
progressed.

      On 12 July 2002, the Stock Exchange advised Akai that the Listing Committee had approved
the extension of the cancellation of the listing of the Akai Shares up to 29 November 2002 to
enable Akai to proceed with the Proposal and the new listing application of Hang Ten under the
Proposal.

      On 23 October 2002, the Stock Exchange advised Akai that the Listing Committee had
approved a further extension for the cancellation of the listing of the Akai Shares up to 22 January
2003 to enable Akai to proceed with the Proposal and the new listing application of Hang Ten
under the Proposal.


                                           – 103 –
     EXPLANATORY STATEMENT (IN COMPLIANCE WITH
   SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


       The extension was granted in respect of the Proposal and not any other resumption proposal.
If the Proposal is not successfully implemented, the Stock Exchange is unlikely to grant a further
extension regardless of whether or not an alternative resumption proposal is made. If this were to
occur, the Akai Shares will be de-listed and the Akai Shares will have no value.

The Restructuring Agreement

      As the Latest Practicable Date, the principal realisable asset of Akai is the listed status of the
Akai Shares. Value can only be realised from this asset as long as the Akai Shares are not de-listed.
The de-listing procedure for a company listed on the Stock Exchange takes place in accordance
with a strict timetable. If a viable resumption proposal is not submitted to the Stock Exchange
within 18 months of suspension of trading, the company will automatically be de-listed. Further,
once the 18 month deadline has been reached, the Stock Exchange will only consider the resumption
proposal which has been submitted and no other.

     On the Liquidators’ appointment, they concluded that it was likely to be in the best interests
of Creditors and Akai Shareholders if a resumption proposal could be submitted to the Stock
Exchange.

      The Liquidators spoke to a number of parties who expressed an interest in facilitating a
resumption proposal. A number of potential investors approached the Liquidators with resumption
proposals between September 2001 and February 2002. The Liquidators formed the view that the
Proposal submitted by the Investors was the resumption proposal which was most likely to be
successfully implemented and provide the highest potential return to Creditors. Accordingly, on 16
April 2002, Akai, the Liquidators and the Investors, among others, executed the Restructuring
Agreement which sets out the economic terms of the Proposal and a framework for the various
steps required to implement the Proposal.

Requirement for Creditors’ Schemes

      The Hong Kong Court has previously ruled that, in so far as shareholders of a listed company
in liquidation are not expected to receive any return in the liquidation, any consideration made
available to the shareholders for the exchange of their shares would be a concession on the part of
the creditors. The Hong Kong Court has held that this is a modification of the legal rights of
creditors as there is an alteration of the statutory order for the application of the assets of the
company in an insolvent winding-up proceeding. It is therefore necessary for the Creditors to
approve the receipt of Hang Ten Shares by the Akai Shareholders under the Scheme. The successful
implementation of the Proposal is conditional upon obtaining the approval of the Creditors of the
Creditors’ Schemes and the subsequent sanction by the Courts of the Creditors’ Schemes.

      The Creditors’ Schemes have been approved unanimously by the Creditors voting and present
at the Creditors’ Scheme Meetings held on 26 September 2002 and on 25 October 2002, the
Bermuda Court made an order sanctioning the Creditors’ Scheme proposed under Section 99 of the
Companies Act.



                                            – 104 –
             EXPLANATORY STATEMENT (IN COMPLIANCE WITH
           SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


3.   THE PROPOSAL

     The Proposal involves:

     (a)    Hang Ten acquiring the entire issued share capital of Hang Ten (BVI) from the Investors and
            the Other Investors in consideration of the Investors’ Securities Allocation and the Other
            Investors’ Securities Allocation respectively, as a result of which the Investors will hold a
            controlling interest in Hang Ten;

     (b)    under the Scheme, Akai Shareholders on the Final Record Date transferring all of their Akai
            Shares to Hang Ten in consideration of which Akai Shareholders will receive in aggregate
            300,000,000 Hang Ten Shares, credited as fully paid up, to be distributed among the Akai
            Shareholders pro rata in accordance with their respective holdings of Akai Shares (subject to
            rounding down) held on the Final Record Date;

     (c)    Hang Ten

            (i)    paying to Akai a cash consideration of HK$12,000,000; and

            (ii)   issuing the Creditors’ Share Allocation to Akai being 2,100,000,000 Hang Ten Shares,
                   credited as fully paid up and ranking pari passu with all other Hang Ten Shares in issue
                   on the Closing Date;

     (d)    listing of the Akai Shares being withdrawn from the Stock Exchange and the Hang Ten
            Shares being listed on the Stock Exchange by way of Introduction; and

     (e)    on the Closing Date, Hang Ten transferring all of the Akai Shares to the Liquidators (or their
            nominees) for the sum of HK$1.00.

     (f)    If there is any surplus available for Akai Shareholders after the discharge of the costs and
            expenses of the winding-up of Akai and the payment in full of the Creditors, such surplus
            will be held on trust by the Scheme Trustee for the Akai Shareholders.

     (g)    The Investors have agreed that Hang Ten will pay costs and expenses incurred by Akai of
            implementing the Proposal including the costs and expenses of the Liquidators and their
            advisers not exceeding HK$6,450,000, being the estimated costs and expenses of implementing
            the Proposal on the basis of quotations received from the relevant professional advisers.
            According to the Liquidators and in accordance with the Restructuring Agreement, of the
            HK$6,450,000 to date, HK$1,250,000 has been paid by the Investors to the Liquidators.
            Although it is likely that the costs incurred to date exceed this amount, the costs and expenses
            incurred by Akai of implementing the Proposal are limited to HK$6,450,000 under the
            Restructuring Agreement. On Closing, amounts paid by Hang Ten in respect of such costs
            will be treated as part of the Scheme Fund. In the event that costs and expenses of implementing
            the Proposal (including those incurred by the Liquidators) exceed HK$6,450,000, the additional
            amount will be borne as an expense in relation to the liquidation of Akai and be payable from
            the proceeds generated therein.
                                                  – 105 –
        EXPLANATORY STATEMENT (IN COMPLIANCE WITH
      SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


Scheme

Under the terms of the Scheme:

(a)    Akai Shareholders on the Final Record Date will transfer all of their Akai Shares to Hang Ten
       free from all Security Interests and other adverse rights and interests together with all rights
       attaching to the Akai Shares as at the Effective Date and in exchange, Akai Shareholders
       whose names appear on Akai’s register of members on the Final Record Date will receive in
       aggregate 300,000,000 Hang Ten Shares, credited as fully paid, to be distributed among the
       Akai Shareholders pro rata in accordance with their respective holdings of Akai Shares
       (subject to rounding down) held on the Final Record Date.

       On the basis of 2,191,302,089 Akai Shares in issue as at 30 November 2000, each Akai
       Shareholder, for every 500 Akai Shares held by that Akai Shareholder at the Final Record
       Date, will receive approximately 68 Hang Ten Shares.

       Fractional entitlements to Hang Ten Shares will be aggregated and transferred to Akai. The
       Hang Ten Shares issued to the Akai Shareholders on the Closing Date will rank pari passu in
       all respects with all other Hang Ten Shares in issue on the Closing Date.

(b)    As from the Effective Date, all certificates representing Akai Shares will cease to have effect
       for any purpose and every Akai Shareholder shall be bound on the request of the Liquidators
       or Hang Ten, to deliver up the certificates for their Akai Shares to the Liquidators or Hang
       Ten.

(c)    If Akai’s winding-up becomes a solvent winding-up then the Scheme Trustee will hold on
       trust for Akai Shareholders any surplus from the realisation of Akai’s assets after paying the
       costs and expenses of the winding-up and the discharging in full the Claims of Creditors.

Conditions Precedent to the Proposal

      The Proposal involves a number of separate transactions which are each subject to their own
conditions. Satisfaction of some of these conditions will be outside the control of the Liquidators,
Akai, Hang Ten and the Investors. Accordingly, there may be circumstances which may either
delay the implementation of the Proposal or cause the Proposal to fail altogether.

       Closing is conditional on each of the following conditions being satisfied (to the extent not
waived or amended) prior to the Long Stop Date. The sanction of the Courts will not be sought for
the Schemes unless the following conditions have been satisfied, or, in the opinion of the Liquidators,
are likely to be satisfied or amended or waived, by the Effective Date. The Liquidators and the
Investors will not waive any of the conditions (including the condition listed in (d) below) the
fulfilment of which is required by the Code, the Listing Rules or other applicable laws in order for
the Scheme to be successfully implemented.

(a)    The passing of all necessary resolutions by the Akai Shareholders (other than (a) the Investors
       or any persons acting in concert with them who are not permitted to vote pursuant to the
       Code and (b) the directors, chief executive and any controlling shareholder of Akai or their

                                            – 106 –
        EXPLANATORY STATEMENT (IN COMPLIANCE WITH
      SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


       respective associates pursuant to Rule 6.12 of the Listing Rules) approving the implementation
       of the Proposal to be proposed at the Special General Meeting.

(b)    The approval of the Creditors’ Schemes by a majority in number representing not less than
       three-fourths in value of Creditors present and voting in person or by proxy at the Creditors’
       Scheme Meetings, the sanction by the Courts of the Creditors’ Schemes and delivery of
       office copies of the orders of the Hong Kong Court and the Bermuda Court to the Registrar
       of Companies in Hong Kong and the Registrar of Companies in Bermuda respectively for
       registration.

(c)    The approval of the Scheme by a majority in number representing not less than three-fourths
       in value of Akai Shareholders at the Voting Record Date present and voting in person or by
       proxy at the Scheme Meeting, the sanction by the Bermuda Court of the Scheme and the
       delivery of an office copy of the order of the Bermuda Court to the Registrar of Companies in
       Bermuda for registration.

(d)    In addition, Rule 2.10 of the Code provides that the Scheme may only be implemented if:

       (i)    the Scheme is approved by at least 75% of the votes attaching to the disinterested Akai
              Shares that are cast either in person or by proxy at the Special General Meeting by way
              of a poll; and

       (ii)   the number of votes cast against the resolution to approve the Scheme at the Special
              General Meeting is not more than 10% of the votes attaching to all disinterested Akai
              Shares.

(e)    Approval by the Listing Committee of the Stock Exchange of the withdrawal of the listing of
       the Akai Shares.

(f)    Approval by the Listing Committee of the Stock Exchange to the granting of the listing of
       and permission to deal in the Hang Ten Shares in issue and to be issued pursuant to the
       Restructuring Documents.

(g)    Appropriate approval from the SFC relating to the Proposal.

(h)    Approval by all relevant authorities for the issue of the Hang Ten Shares pursuant to the
       Proposal.

(i)    Consents and approvals of all relevant government and regulatory authorities and any other
       Persons necessary for the implementation of the Proposal including, without limitation, the
       approval (referred to in (d) above) required under Rule 2.10 of the Code, the written
       confirmation by the Hong Kong Securities Clearing Company Limited that the share capital
       of Hang Ten has been accepted as eligible securities for deposit, clearance and settlement in
       CCASS.

(j)    Duly executed Warrant Instrument.

(k)    The Sale and Purchase Agreement being duly executed, the completion of which is conditional
       only on the issue of the Closing Notice.

                                            – 107 –
     EXPLANATORY STATEMENT (IN COMPLIANCE WITH
   SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


      The conditions listed at (a) to (k) above must be satisfied (to the extent not waived or
amended) prior to Closing in order for the Proposal to be successfully implemented. The Creditors’
Schemes have been approved by the requisite majority in number and value of the Creditors at the
Creditors’ Scheme Meetings held on 26 September 2002 and on 25 October 2002 the Bermuda
Court made an order sanctioning the Creditors’ Scheme proposed under section 99 of the Companies
Act. On 28 October 2002, the Sale and Purchase Agreement has been executed by the parties
thereto. Except as mentioned, as at the Latest Practicable Date, the conditions set out above are
outstanding.

      Assuming that each of the conditions are satisfied or waived, it is anticipated that the Effective
Date for the Scheme and the Creditors’ Schemes will be on or before 4 December 2002 and the
Closing Date for the implementation of the Proposal on 5 December 2002. If any of the conditions
referred to in (a) to (k) above have not been fulfilled by 31 December 2002, the Proposal will lapse
unless a later date is agreed among the parties to the Restructuring Agreement. Akai Shareholders
will be notified by an announcement placed in one English language newspaper and one Chinese
language newspaper circulating in Hong Kong and one newspaper in Bermuda of the Closing Date
or that the Proposal has lapsed.

Effectiveness of the Scheme

    The Scheme will become binding and effective on Akai and the Akai Shareholders under
Bermuda law if the following conditions are satisfied:

      (a)   a majority in number of Akai Shareholders, representing at least three fourths in value
            of Akai Shareholders present and voting in person or by proxy at the Scheme Meeting,
            vote in favour of the Scheme;

      (b)   the majorities required under Rule 2.10 of the Code are satisfied; and

      (c)   the Bermuda Court sanctions the Scheme and an office copy of the order of the Bermuda
            Court sanctioning the Scheme is delivered to the Registrar of Companies in Bermuda
            for registration.

Summary

      The successful implementation of the Proposal will allow Akai Shareholders to receive a
return for their co-operation in realising the value of the listed status of Akai, notwithstanding the
winding-up of Akai through the Scheme. Even if the Proposal is implemented, it is highly unlikely
that Creditors will receive a complete discharge of their Claims. Accordingly, regardless of whether
or not the Scheme is implemented, it is highly unlikely that Akai Shareholders will receive a
dividend in Akai’s winding-up.

      In the highly unlikely event that Akai’s winding-up becomes a solvent winding-up then the
Scheme Trustee will hold on trust for Akai Shareholders any surplus from the realisation of Akai’s
assets after paying the costs and expenses of the winding-up and discharging in full the Claims.

       The implementation of the Proposal is dependent on a majority in number of Akai Shareholders
representing at least three-fourths in value voting in favour of the Scheme at the Scheme Meeting.
If the Proposal is not successfully implemented you will not receive any value for your Akai Shares
under the Scheme. As such, the Proposal represents your only realistic chance of receiving some
value from your status as an Akai Shareholder.

                                            – 108 –
               EXPLANATORY STATEMENT (IN COMPLIANCE WITH
             SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


4.   EFFECTS OF THE PROPOSAL ON THE HANG TEN GROUP
     (a)         Shareholding Structure

                 Set out below is the shareholding structure of Akai at the Latest Practicable Date, the
                 shareholding structure of Hang Ten upon Closing and conversion of 269 CPS issued to the
                 Other Investors into 2,690,000,000 Hang Ten Shares on the Closing Date and after the issue
                 and allotment of further Hang Ten Shares upon full exercise of the Warrants (assuming an
                 exercise price of HK$0.01 per Hang Ten Share) and full conversion of the CPS held by the
                 Investors (assuming a conversion price of HK$0.001 per Hang Ten Share).
                                                                      Upon Closing                    Upon Closing                        Upon Closing
                                                                  with no CPS issued to                with all CPS                        with all CPS
                                                                       the Investors              issued to the Investors             issued to the Investors
                                                                         converted                 converted but before                   converted and
                                     Before Closing               or Warrants exercised          exercise of the Warrants            all Warrants exercised
                            Number of                         Number of                         Number of                           Number of
                           Akai Shares                  Hang Ten Shares                   Hang Ten Shares                     Hang Ten Shares
                       (million shares)             %    (million shares)             %    (million shares)               %    (million shares)               %
     THE INVESTORS
      The Kung
        Family
        (Notes 1 &3)
      Asian Wide                    –               –            12,600         46.49%              56,940          58.41%           59,460.00          58.36%
      Kenneth Hung                  –               –               800          2.94%               3,620           3.71%            3,780.00           3.71%
      Dennis Kung                   –               –               400          1.48%               1,810           1.86%            1,890.00           1.86%
      Peggy Hung                    –               –               400          1.48%               1,810           1.86%            1,890.00           1.86%
      Pamela Hung                   –               –               400          1.48%               1,810           1.86%            1,890.00           1.86%
       YGM (Note 3)                 –               –             5,000         18.45%              22,590          23.18%           23,590.00          23.15%
       Ms. Kao (director
        of Hang Ten)
        (Note 3)                    –               –               200          0.74%                 900           0.92%              940.00           0.92%
       Ms. Wang
        (director of
        Hang Ten)
        (Note 3)                    –               –               200          0.74%                 900           0.92%              940.00           0.92%

     Sub-total                      –               –            20,000         73.80%              90,380         92.72%            94,380.00         92.64%
     OTHER INVESTORS
      (Notes 2 & 3)
      Best Standand                 –               –             1,993          7.36%               1,993           2.05%            2,085.60           2.06%
      Raytop                        –               –             1,507          5.56%               1,507           1.54%            1,576.40           1.54%
     DESIGNATED PERSON
        (Note 3)                    –               –             1,200          4.43%               1,200           1.23%            1,440.00           1.41%
     AKAI SHAREHOLDERS 2,191                 100.00%                300          1.10%                 300           0.31%              300.00           0.29%
     LIQUIDATORS
        (for the benefit
        of the Creditors)           –               –             2,100          7.75%               2,100           2.15%            2,100.00           2.06%

     Sub-total                  2,191        100.00%              7,100         26.20%               7,100          7.28%             7,502.00          7.36%

     Total                      2,191        100.00%             27,100        100.00%              97,480        100.00%           101,882.00        100.00%

                                                                      – 109 –
          EXPLANATORY STATEMENT (IN COMPLIANCE WITH
        SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


                                                             Upon Closing                 Upon Closing                   Upon Closing
                                                         with no CPS issued to        with all CPS issued to         with all CPS issued to
                                                             the Investors           the Investors converted        the Investors converted
                                                               converted                    but before                 and all Warrants
                               Before Closing            or Warrants exercised        exercise of Warrants                  exercised
                       Number of                     Number of                      Number of                       Number of
                     Akai Shares                Hang Ten Shares                Hang Ten Shares                 Hang Ten Shares
                  (million shares)            % (million shares)            % (million shares)               % (million shares)             %

The concert
  group
The Investors
  (Note 3)                    –             –             20,000      73.80%             90,380       92.72%             94,380       92.64%
Other Investors
  (Note 3)                    –             –             3,500       12.92%              3,500        3.59%              3,662        3.60%
Designated
  Person (Note 3)             –             –             1,200        4.43%              1,200        1.23%              1,440        1.41%

Sub-total                     –             –             24,700      91.15%             95,080       97.54%             99,482       97.65%

Akai Shareholders          2,191      100.00%               300        1.10%                300        0.31%                300        0.29%

Liquidators
   (for the benefit
of the Creditors)              –            –              2,100       7.75%              2,100        2.15%              2,100        2.06%

Total                      2,191     100.00%              27,100     100.00%             97,480      100.00%            101,882      100.00%

Note 1: Out of the 14,600 million Hang Ten Shares issued to members of the Kung Family upon Closing but before
        conversion of the CPS held by the Investors or exercise of the Warrants, Mr. Kenneth Hung, Mr. Dennis Kung,
        Ms. Peggy Hung, Ms. Pamela Hung and Asian Wide will be interested in 800 million, 400 million, 400 million,
        400 million and 12,600 million Hang Ten Shares respectively.

Note 2: In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have
        agreed to convert the 269 CPS to be issued to them under the Sale and Purchase Agreement into Hang Ten Shares
        upon Closing but before the commencement of dealing in Hang Ten Shares. Accordingly, there will be 27,100
        million Hang Ten Shares and 7,038 CPS issued and credited as fully paid upon listing of the Hang Ten Shares.

Note 3: The Investors, the Other Investors and the Designated Person are concert parties pursuant to the Code and
        together hold approximately 91.15% of the issued ordinary share capital of Hang Ten upon Closing with no CPS
        issued to the Investors converted or Warrants exercised.

            On the Closing Date the Investors will control approximately 73.80% of the issued ordinary
            share capital of Hang Ten. The Hang Ten Shares to be held by the public will consist of Hang
            Ten Shares issued to the Designated Person, the Other Investors, the Liquidators (for the
            benefit of Creditors) and the Akai Shareholders representing approximately 26.20% of its
            issued ordinary share capital immediately upon Closing but excluding any Hang Ten Shares
            which may be issued on conversion of those CPS issued to the Investors or the exercise of
            the Warrants. It will be a term of the Warrants and the CPS that no holder thereof will be
            entitled to exercise the subscription and conversion rights attaching to the Warrants and the
            CPS respectively if such exercise would result in the public float of the Hang Ten Shares
            falling below the minimum prescribed percentage as required under the Listing Rules.

                                                               – 110 –
        EXPLANATORY STATEMENT (IN COMPLIANCE WITH
      SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


       The Stock Exchange has stated that it will closely monitor trading in the Hang Ten
       Shares if less than 25 per cent. of the Hang Ten Shares are held by the public.

       The Stock Exchange will also closely monitor all future acquisitions or disposals of
       assets by Hang Ten. The Stock Exchange has the discretion to require Hang Ten to issue
       an announcement and/or a circular to its shareholders irrespective of the size of the
       proposed transaction, particularly when a proposed transaction represents a departure
       from the principal activities of the Hang Ten Group. The Stock Exchange also has the
       power to aggregate a series of transactions and any such transaction may result in Hang
       Ten being treated as if it were a new listing applicant. If the Stock Exchange believes
       that:

       1.    a false market exists or may exist in the Hang Ten Shares; or

       2.    there are too few Hang Ten Shares in public hands to maintain an orderly market;

       then it will consider exercising its discretion to suspend dealings in the Hang Ten Shares.

(b)    Indebtedness of the Hang Ten Group

       Borrowings

            At the close of business on 31 August 2002, being the latest practicable date for the
       purpose of this indebtedness statement prior to the printing of this document, the Hang Ten
       Group had outstanding borrowings totalling approximately US$40 million. These borrowings
       comprise unsecured bank overdrafts of US$0.4 million, secured bank loans of approximately
       US$18.9 million, unsecured bank loans of approximately US$3.8 million, unsecured loans
       advanced by the Investors of US$16.4 million and unsecured loans advanced by a minority
       shareholder of a subsidiary of US$0.5 million.

       Guarantees and securities

             As at 31 August 2002, the Hang Ten Group had banking facilities in respect of loans,
       overdrafts and import/export facilities totalling approximately US$41.1 million, of which
       US$18.9 million were secured by pledge of 620,681 shares of ILC, representing 97.01% of
       the issued share capital of ILC, and US$10.5 million were secured by unconditional personal
       guarantees executed by shareholders of Hang Ten (BVI), Mr. Dennis Kung and Ms. Wang Li
       Wen. On 23 August and 26 September 2002, Hang Ten (BVI) obtained an approval-in-
       principle letter from two banks in respect of banking facilities totalling approximately US$6.15
       million for replacing the personal guarantees given by Mr. Dennis Kung and Ms. Wang Li
       Wen with corporate guarantees to be given by member(s) of the Hang Ten Group upon
       listing. On 16 September 2002, Hang Ten Group terminated banking facilities totalling
       approximately of US$4.35 million granted by another two banks which were supported by
       the personal guarantees of Mr. Kung and Ms. Wang and the Directors confirm that the said
       banking facilities have never been used and there will not be any adverse effect on the Hang
       Ten Group after such termination. Accordingly, the banking facilities of the Hang Ten Group
       will not be secured by any unconditional personal guarantees executed by Mr. Dennis Kung
       and Ms. Wang upon listing of the Hang Ten Shares which will be replaced by corporate
       guarantees from member(s) of the Hang Ten Group.

                                            – 111 –
  EXPLANATORY STATEMENT (IN COMPLIANCE WITH
SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


       As at 31 August 2002, the Hang Ten Group did not have any mortgages or charges.

  Contingent liabilities

         As at 31 August 2002, the Hang Ten Group had the following material contingent
  liabilities:

                                                                                          US$
       Outstanding letters of credit for the purchase of goods                       4,728,000
       Tax contingency                                                               1,040,000

                                                                                     5,768,000

  Disclaimer

         Save as aforesaid, at the close of business on 31 August 2002, none of Hang Ten nor
  any member of the Hang Ten (BVI) Group had any outstanding mortgages, charges,
  debentures or other loan capital or bank overdrafts or loans or other similar indebtedness,
  finance lease or hire purchase commitments, liabilities under acceptance or acceptance
  credits, guarantees or other material contingent liabilities.

        The Directors have confirmed, that, save as disclosed on this page, there has been no
  material change in the indebtedness and contingent liabilities of the Hang Ten Group since
  31 August 2002.

         Save as disclosed on page 163 of this document, none of Hang Ten and the companies
  comprising the Hang Ten (BVI) Group had on the Latest Practicable Date any mortgages,
  charges, debentures, loan capital, bank overdrafts, loans debt securities or other similar
  indebtedness, hire purchase commitments, liabilities under acceptances (other than normal
  trade bills) or acceptance credits or any guarantees or other material contingent liabilities.

        Save as disclosed in Appendix V of this document, the Liquidators are not aware of
  any material change in the indebtedness and contingent liabilities of Akai since the last
  audited accounts of Akai.

        The Directors are aware of the requirement of Rule 8.06 of the Listing Rules
  which states that the latest financial period reported on by the reporting accountants
  must not have ended more than six months before the date of the listing document.
  Hang Ten has sought and obtained a waiver fr om strict compliance with such
  requirement from the Stock Exchange such that the accountants’ report only covers
  each of the three years ended 31 March 2002. The Directors confirm that they have
  performed sufficient due diligence on the Hang Ten Group to ensure that, save as
  disclosed herein, up to the date of issue of this document, there has been no material
  adverse change in the financial position of the Hang Ten Group since 31 March 2002,
  and there is no event which would materially affect the information shown in the
  accountants’ report set out in Appendix II to this document.

                                      – 112 –
           EXPLANATORY STATEMENT (IN COMPLIANCE WITH
         SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


5.   INTERESTS OF DIRECTORS

      The powers of Akai’s directors ceased on the commencement of Akai’s winding-up. Pursuant to
section 166A(1)(a) of the Companies Ordinance and section 100(1)(a) of the Companies Act, the
Liquidators have asked each Person who was director of Akai on the commencement of its liquidation
whether he has any material interest in the Scheme or the Creditors’ Schemes, whether as a director of
Akai or an Akai Shareholder or a Creditor, and the effect thereon of the arrangement in so far as it is
different from the effect on the like interests of other Persons.

      The Liquidators have received responses from two of the directors of Akai, Mr. Tadayubi Ito and
Mr. Michael Kan, who have both advised that they have no material interest in the Schemes that is
different from the effect on the like interests of other Persons.

      The remaining directors of Akai have not responded to the Liquidators. However, the Liquidators
are not aware of any material interest that the remaining directors of Akai have or of any effect which
would be different from the effect on the like interests of other Persons.

6.   PROCEDURE AND MISCELLANEOUS MATTERS

     Record Date

          The Voting Record Date is 23 November 2002. Persons who are Akai Shareholders on the
     Voting Record Date are entitled to vote at the Scheme Meeting.

           Akai Shareholders at the Final Record Date will qualify for the benefits of the Scheme. Akai
     Shareholders should be aware that pursuant to section 166 of the Companies Act and section 182 of
     the Companies Ordinance any transfer of shares or the alteration in the status of the shareholders of
     a company made after the commencement of a company’s winding-up, shall, unless the Courts
     order otherwise, be void. Accordingly, any Person wishing to effect a transfer of their Akai Shares
     can only do so with the sanction of the Courts. Following the sanction of the Courts to the transfer
     of such Akai Shares, the Person concerned should ensure that the appropriate forms of transfer
     accompanied by the relevant certificates or other evidence of title are submitted to the Liquidators.

     Registered address outside Hong Kong

            If the registered address of an Akai Shareholder is outside Hong Kong and, in the opinion of
     the Directors and the Liquidators, the allotment and issue of Hang Ten Shares may be prohibited by
     any relevant law or so prohibited except after compliance with conditions or requirements which
     the Directors and the Liquidators regard as unduly onerous, impracticable or uneconomic, subject
     to the Executive’s approval, Hang Ten may allot and issue such Hang Ten Shares to the Liquidators
     or a Person selected by the Liquidators (the “Authorised Allottee”) who shall sell the same for such
     price on market after the commencement of the trading of the Hang Ten Shares on the Stock
     Exchange as they may obtain and pay the net cash proceeds to that Akai Shareholder in full
     satisfaction of his rights under the Scheme immediately after the trade settlement date, except that



                                                – 113 –
     EXPLANATORY STATEMENT (IN COMPLIANCE WITH
   SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


no payment will be made of an amount of less than HK$50. Any such amount will be retained by
the Liquidators for the benefit of Akai’s winding-up.

       The Liquidators and Hang Ten have formed the view, on the advice of Malaysian counsel,
that the issue and allotment of Hang Ten Shares to Akai Shareholders whose registered addresses
are in Malaysia would be prohibited except after compliance with unduly onerous, impracticable or
uneconomic requirements or conditions. Accordingly, Akai Shareholders whose registered addresses
are in Malaysia on the Final Record Date will not be entitled to be issued or allotted Hang Ten
Shares but will be entitled to receive net cash proceeds in accordance with the paragraph above.

     For Akai Shareholders with registered addresses in Malaysia, it should be noted that the
Authorised Allottee neither holds the Hang Ten Shares nor the net cash proceeds (i) on any trust
(whether actual, constructive, implied, resulting or otherwise) or (ii) for and on behalf of, the Akai
Shareholders with registered addresses in Malaysia.

      Akai Shareholders should note that the Hang Ten Shares and any documents in relation
thereto to be issued under the Scheme will not be registered or filed in any jurisdiction. Akai
Shareholders should inform themselves about any laws and regulations in overseas jurisdictions
applicable to them or their shareholdings and ensure that such laws and regulations are complied
with and that they obtain any permissions or consents required to be obtained by them. Akai
Shareholders are strongly recommended to consult their professional advisers as to any overseas
securities law implications of the Scheme which may be applicable to them or their shareholdings.
None of Hang Ten, Akai, the Liquidators or their respective directors or any other parties involved
in the Proposal accept any responsibility for any consequential liabilities in respect of overseas
securities laws incurred on the part of Akai Shareholders arising from the implementation of the
Scheme.

      This document will be distributed to two Akai shareholders with registered addresses in
Spain and the Hang Ten Shares will be issued to those shareholders under the Scheme. However,
the Hang Ten Shares are not offered in Spain by means of a public offer as defined and construed
by Spanish law nor have they been notified to or registered by the Comisión Nacional del Mercado
de Valores. The Directors and the Liquidators acknowledge that the Hang Ten Shares may not be
offered or sold in Spain by means of a public offer as defined and construed by Spanish law but
may be offered or sold in Spain in compliance with the requirements of Law 24/1988, of 28 July
(as amended by Law 37/1998, of 16 November), on the Spanish Securities Market and the Royal
Decree 291/1992, of 27 March (as amended by Royal Decree 2590/1998 of 7 December), on issues
and public offers for the sale of securities.

Termination of the Scheme

     The Scheme will terminate on the earlier of the date of dissolution of Akai or the date on
which payments from the Scheme Fund to Akai Shareholders have been completed.




                                            – 114 –
     EXPLANATORY STATEMENT (IN COMPLIANCE WITH
   SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


Costs of the Proposal and of the Scheme

      The Investors have agreed that Hang Ten will pay the fees, costs and expenses incurred by
Akai in respect of implementing the Proposal (including the Scheme) and any stamp duty in respect
of the Akai Shareholders receiving Hang Ten Shares up to a maximum amount of HK$6,450,000.

Action to be Taken

     The following meetings of Akai Shareholders have been convened in connection with the
implementation of the Proposal.

     (a)    The Scheme Meeting

          The Scheme Meeting has been convened at the direction of the Bermuda Court for the
     purposes of considering and, if thought fit, approving (with or without modification) the
     Scheme. The formal notice of the Scheme Meeting is set out on pages 366 and 367 of this
     document.

     (b)    Special General Meeting

          The Special General Meeting has been convened for the purpose of considering and, if
     thought fit, passing the resolutions approving the implementation of the Proposal, and the
     Scheme for the purpose of Rule 6.12 of the Listing Rules.

     The formal notice of the Special General Meeting is set out on page 368 of this document.

     The Scheme Meeting will be held at 10:00 a.m. on 25 November 2002 at Plaza I-III, Lower
Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wan Chai, Hong Kong. The Special General
Meeting will be held immediately following the Scheme Meeting.

     Enclosed with this document are:

     (i)    a yellow form of proxy for use at the Scheme Meeting; and

     (ii)   a blue form of proxy for use at the Special General Meeting.

      Whether or not you intend to attend the relevant meetings in person, please complete and
return the forms of proxy as soon as possible and, in any event, not less than 48 hours before the
time appointed for the relevant meetings. Completed forms of proxy should be returned to the
principal place of business of Akai at 7th Floor, Allied Kajima Building, 138 Gloucester Road,
Wanchai, Hong Kong. Proxy forms for the relevant meeting may be handed to the Chairman of the
meeting.

      Completion and return of forms of proxy will not preclude you from attending the relevant
meetings and voting in person should you so wish. In that event your form of proxy will be deemed
to have been revoked in respect of any meeting which you attend.
                                          – 115 –
           EXPLANATORY STATEMENT (IN COMPLIANCE WITH
         SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


7.   WITHDRAWAL OF LISTING OF AKAI SHARES FROM THE STOCK EXCHANGE

     Listing of Akai Shares on the Stock Exchange will be withdrawn at close of business on the
Business Day following the Closing Date.

     Existing Certificates

            Under the Scheme, every certificate for Akai Shares validly subsisting at the Final Record
     Date will, on the Effective Date, cease to be valid for any purpose and every holder of such
     certificate will be bound at the request of Hang Ten or the Liquidators to deliver up the same to
     Akai for cancellation.

     Existing Mandates

           Under the Scheme, all mandates and other instructions in force at the opening of business on
     the Effective Date in relation to the payment of dividends on or other matters relating to the Akai
     Shares in issue at the Final Record Date shall, unless and until revoked, be deemed as from the
     Effective Date to be valid and subsisting mandates and instructions to Hang Ten in relation to the
     payment of dividends on or the corresponding matters relating to Hang Ten Shares to be allotted
     and issued under the Scheme. Akai will be obliged to deliver such mandates and instructions to
     Hang Ten.

8.   LISTING OF HANG TEN SHARES ON THE STOCK EXCHANGE

     An application has been made on behalf of Hang Ten to the Listing Committee of the Stock
Exchange for the listing of and permission to deal in the Hang Ten Shares in issue and to be issued under
the Restructuring Documents and any Hang Ten Shares which may fall to be issued on conversion of the
CPS and exercise of the Warrants and Options.

      No share or loan capital of Hang Ten is listed or dealt in on any other stock exchange. Hang Ten is
not seeking or proposing to seek a listing of or permission to deal in the Hang Ten Shares on any other
stock exchange.

      Upon Closing but prior to the conversion of any CPS issued to the Investors or exercise of any
Warrants, the Investors will hold approximately 73.80 per cent. of the issued ordinary share capital of
Hang Ten and the remaining 26.20 per cent. of its issued ordinary share capital will be held by the public.
It will be a term of the Warrants and the CPS that no holder thereof will be entitled to exercise the
subscription and conversion rights attaching to the Warrants and the CPS respectively if such exercise
would result in the public float of the Hang Ten Shares falling below the minimum prescribed percentage
as required under the Listing Rules. Accordingly, there will be sufficient public float for the Hang Ten
Shares following Closing in compliance with Rule 8 of the Listing Rules.

      The Stock Exchange requires that, in the event that less than twenty five (25) per cent. of the
issued share capital of Hang Ten is in public hands following the Closing, it will closely monitor trading
in the Hang Ten Shares. If the Stock Exchange believes that a false market exists or may exist, it may
exercise its discretion to suspend dealings in the Hang Ten Shares.
                                                 – 116 –
           EXPLANATORY STATEMENT (IN COMPLIANCE WITH
         SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


      The Stock Exchange requires that, following the listing of the Hang Ten Shares, any acquisitions or
disposals of assets by Hang Ten will be subject to the provisions of the Listing Rules. Under the Listing
Rules, the Stock Exchange has a discretion to require Hang Ten to issue an announcement and/or a
circular to its shareholders when any acquisition or disposal by Hang Ten is proposed, irrespective of the
size of such acquisition or disposal and, in particular, when such acquisition or disposal represents a
departure from the principal activities of the Hang Ten Group following the implementation of the
Proposal. The Stock Exchange also has the power, pursuant to the Listing Rules, to aggregate a series of
acquisitions or disposals by Hang Ten and any such acquisitions or disposals may in any event result in
Hang Ten being treated as a new applicant for listing.

      Subject to the granting of the listing of and permission to deal in the Hang Ten Shares on the Stock
Exchange as well as compliance with the stock admission requirements of HKSCC, the Hang Ten Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with
effect from the commencement date of dealings in the Hang Ten Shares on the Stock Exchange or such
other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange
on any trading day is required to take place in CCASS on the second trading day thereafter. All activities
under CCASS are subject to the General Rules of CCASS and CCASS operational procedures in effect
from time to time.

     Board lots and certificates for Hang Ten Shares

            On the Effective Date, certificates representing the Akai Shares will cease to have effect and
     the listing of the Akai Shares on the Stock Exchange will be withdrawn. Certificates representing
     the appropriate number of Hang Ten Shares, in registered form, will be despatched to the Akai
     Shareholders at the Final Record Date on the Closing Date. Persons entitled to Akai Shares who are
     not registered holders thereof should make an application to the applicable Courts as soon as
     possible to effect a transfer of the Akai Shares and should ensure that the appropriate form of
     transfer accompanied by the relevant certificates or other evidence of title are submitted to the
     share registrar of Akai following the Courts’ sanction to such transfer as referred to in the section
     headed “Record Date” above.

           On the assumption that the Scheme becomes effective on 4 December 2002, it is expected
     that certificates for the Hang Ten Shares will be posted to Akai Shareholders at their own risk on
     5 December 2002. Certificates for the Hang Ten Shares will be posted to Akai Shareholders at their
     registered addresses (or, in the case of joint holders, at the address of that joint holder whose name
     stands first in the register of members of Akai in respect of the joint holding) on the Final Record
     Date.

           The proposed board lot for trading in the Hang Ten Shares on the Stock Exchange is 100,000.




                                                 – 117 –
           EXPLANATORY STATEMENT (IN COMPLIANCE WITH
         SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


      Arrangements for odd lot trading

             In order to alleviate difficulties in trading in odd lots of Hang Ten Shares arising from the
      share exchange under the Scheme, Hang Ten has appointed Kim Eng Securities (Hong Kong)
      Limited to match the sale and purchase of odd lots of Hang Ten Shares during the period from the
      first day of dealing of the Hang Ten Shares on the Stock Exchange, which is currently expected to
      be 9 December 2002, to 8 January 2003 (both days inclusive). Holders of the Hang Ten Shares in
      odd lots who wish to take advantage of this facility either to dispose of their odd lots or to top up
      their odd lots to a board lot of 100,000 Hang Ten Shares may through their brokers contact Kim
      Eng Securities (Hong Kong) Limited. During this period holders of Hang Ten Shares in odd lots
      should note that the matching of the sale and purchase of odd lots of the Hang Ten Shares is not
      guaranteed.

             Akai Shareholders are advised to consult their professional advisers if they are in any doubt
      as to the facility described above.

9.    TAXATION AND STAMP DUTY

      Akai Shareholders having a registered address or being resident outside of Hong Kong may be
subject to overseas taxation or deemed profits or capital gains arising from the exchange of the Akai
Shares for the Hang Ten Shares. Akai Shareholders, whether in Hong Kong or in other jurisdictions, are
recommended to consult their own professional advisers if they are in any doubt as to the tax implications
of the Scheme and, in particular, whether the receipt of the Hang Ten Shares for their Akai Shares would
render such holders liable to taxation in Hong Kong or in other jurisdictions. It is emphasised that the
taxation implications of the Scheme are personal matters of Akai Shareholders themselves and none of
Hang Ten, its Directors and officers, the Liquidators or any of the other parties involved in the Proposal
accept any responsibility for any taxation effect on or the liabilities of the Akai Shareholders.

     Any stamp duty in respect of the Akai Shareholders receiving Hang Ten Shares will be payable by
Hang Ten as part of the costs as described in the section headed “Costs of the Proposal and of the
Scheme” in this Explanatory Statement.

10.   CHAIRMAN OF THE SCHEME MEETING

     At the direction of the Bermuda Court, Cosimo Borrelli of RSM Corporate, or, failing him Nicholas
Timothy Cornforth Hill being one of the Liquidators, or failing both of them Fan Wai Kuen, Joseph, also
being one of the Liquidators, has been appointed to act as Chairman of the Scheme Meeting.

11.   CAPACITY OF THE LIQUIDATORS

      The involvement of the Liquidators in the Scheme is solely for the purpose of receiving and
enforcing the obligations and undertakings made by Akai pursuant to, inter alia, the Scheme and the
Restructuring Documents. None of the Liquidators and their advisers nor any of their representatives,
partners, staff or agents shall incur any personal liability under the terms of the Scheme, the Restructuring
Documents or otherwise.

                                                  – 118 –
              EXPLANATORY STATEMENT (IN COMPLIANCE WITH
            SECTION 100 OF THE COMPANIES ACT 1981 OF BERMUDA)


12.   ADDITIONAL INFORMATION

      Your attention is drawn to the appendices to this document.

13.   DOCUMENTS AVAILABLE FOR INSPECTION

      Copies of the following documents will be available for inspection at the office of Preston Gates
Ellis at 10th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong during normal business
hours on Business Days from the date of this document up to and including the day before the first day of
dealings in the Hang Ten Shares on the Stock Exchange or, if earlier, the day when Akai declares that the
Proposal has lapsed:

      (a)    the Memorandum of Association and Bye-laws of Hang Ten and Akai;

      (b)    the Accountants’ Report on Hang Ten set out in Appendix II and the related statement of
             adjustments;

      (c)    the audited financial statements as have been prepared for each of the companies comprising
             the Hang Ten Group for each of the three years ended 31 March 2002;

      (d)    the audited financial statements of Akai for the year ended 31 January 1999;

      (e)    the letter of advice from Horwath;

      (f)    the material contracts referred to in Appendix VII including the Restructuring Agreement;

      (g)    the written consents referred to in Appendix VII;

      (h)    the rules of the Share Option Scheme;

      (i)    the letter, summary of values and valuation certificate prepared by Chesterton Petty Limited
             in connection with the valuation of Hang Ten Group’s property interests;

      (j)    the letter of advice from Conyers Dill & Pearman as referred to in Appendix VI;

      (k)    the undertakings from members of the Kung Family and its shareholders as referred to in the
             section headed “Undertakings” in the letter from the board of directors of Hang Ten Group
             Holdings Limited; and

      (l)    the service contracts as referred to under the paragraph headed “Particulars of service contracts”
             in Appendix VII.




                                                   – 119 –
APPENDIX I            SUMMARY OF THE TERMS OF THE WARRANTS AND CPS


PRINCIPAL TERMS OF THE WARRANTS

     The Warrants will be issued in registered form and constituted under the Warrant Instrument to be
executed by Hang Ten by way of deed poll on completion of the Sale and Purchase Agreement. The
Warrants will be issued, subject to and having the benefit of, at least the following principal terms and
conditions:

     (a)   subject to paragraph (b) below, the Warrants will entitle its holders to subscribe in aggregate
           up to HK$44,020,000 for Hang Ten Shares at an initial subscription price of HK$0.01 each
           (subject to adjustments to take account of, among other things, alterations to the share capital
           of Hang Ten);

     (b)   a holder of the Warrants may not exercise the subscription rights attached to his Warrants if
           such exercise would result in the number of Hang Ten Shares which are in the hands of the
           public falling below 25% or the relevant prescribed minimum percentage for Hang Ten as
           required by the Stock Exchange from time to time;

     (c)   subject as described in paragraph (b) above, the Warrants are exercisable in whole or in part
           at any time during the three year period following the date of issue of the Warrants;

     (d)   all Hang Ten Shares that are issued on an exercise of the Warrants will rank pari passu with
           the Hang Ten Shares then in issue;

     (e)   the Warrants will be transferable in integral multiples of HK$1,000;

     (f)   in the event that a notice is given by Hang Ten to its shareholders to convene a shareholders’
           meeting for the purposes of considering and, if thought fit, approving a resolution to voluntarily
           wind up Hang Ten, Hang Ten shall forthwith give notice thereof to each holder of the
           Warrants and thereupon, every holder of the Warrants shall be entitled by irrevocable surrender
           of his Warrant certificate(s) to Hang Ten (such surrender to occur not later than two business
           days prior to the proposed shareholders’ meeting referred to above) together with the duly
           completed subscription form(s) and payment of the subscription price or the relevant portion
           thereof, to exercise the subscription rights represented by such Warrant and Hang Ten shall,
           as soon as possible and, in any event, no later than the day immediately prior to the date of
           the proposed shareholders’ meeting, allot to the holder of the Warrants, such number of Hang
           Ten Shares which fall to be issued pursuant to the exercise of the subscription rights represented
           by such Warrant. Hang Ten shall give notice to the holder of the Warrants of the passing of
           such resolution within seven days after the passing thereof. Thereafter, subject to the terms
           and conditions set out in the Warrant Instrument, all Warrants which have not been exercised
           by the date falling two business days prior to the proposed shareholders’ meeting referred to
           above, will lapse;

     (g)   a holder of the Warrants will not be entitled to participate in any distributions or offers of
           further securities made by Hang Ten by reason only of it being a holder of the Warrants;




                                                 – 120 –
APPENDIX I            SUMMARY OF THE TERMS OF THE WARRANTS AND CPS


     (h)   a holder of the Warrants will not be entitled to attend or vote at any general meetings of Hang
           Ten by reason only of it being a holder of the Warrants; and

     (i)   no application will be made for the listing of or permission to deal in the Warrants on the
           Stock Exchange or any other stock exchange.

PRINCIPAL TERMS OF THE CPS

      The CPS will confer on its holders the rights and privileges and be subject to the restrictions set
out in the bye-laws of Hang Ten. The principal rights and restrictions attaching to the CPS are summarised
below.

     (a)   the CPS will confer upon its holder the right to receive, in priority to the holders of any other
           class of shares in the capital of Hang Ten, a fixed cumulative cash dividend payable on the
           principal amount outstanding under the CPS at the rate of 1% per annum;

     (b)   unless previously converted and subject as permitted under paragraph (d) below, a holder of
           the CPS may convert all or any part of the principal amount of the CPS into Hang Ten Shares
           at a conversion price of HK$0.001 each (subject to adjustments) at any time commencing on
           the Business Day after the date of issue of the CPS and all principal amount of the CPS that
           remains outstanding on the fifth anniversary of the date of issue of the CPS will be so
           converted mandatorily, unless such conversion is restricted as described in paragraph (d)
           below in which case the mandatory conversion date will automatically be extended for a
           successive periods of 2 years until such conversion is not so restricted;

     (c)   a holder of the CPS may not exercise the conversion rights attached to his CPS if such
           exercise would result in the number of Hang Ten Shares, which are in the hands of the public,
           falling below 25% or the relevant prescribed minimum percentage for Hang Ten as required
           by the Stock Exchange from time to time;

     (d)   on a return of capital on a winding-up or otherwise, the CPS will rank in priority to any other
           class of shares in the capital of Hang Ten provided that the assets of Hang Ten available for
           distribution to its members will be applied first towards arrears or accruals of the fixed
           dividend payable on the CPS before repaying the capital paid up on any CPS or any other
           class of shares in the capital of Hang Ten;

     (e)   all Hang Ten Shares to be issued on conversion of the CPS will be issued free from all
           claims, charges, lien, encumbrances and equities and be identical and will rank pari passu in
           all respects with the Hang Ten Shares then in issue;

     (f)   a holder of the CPS will not be entitled to attend or vote at any general meetings of Hang Ten
           by reason only of it being a holder of the CPS, except at a general meeting of the holders of
           the CPS held to vary or abrogate the rights of the holders of CPS;




                                                 – 121 –
APPENDIX I         SUMMARY OF THE TERMS OF THE WARRANTS AND CPS


   (g)   no application will be made for the listing of or permission to deal in any of the CPS on the
         Stock Exchange or any other stock exchange; and

   (h)   the CPS may be assigned or transferred with the prior approval from the Stock Exchange, if
         so required.




                                             – 122 –
APPENDIX II                                                           ACCOUNTANTS’ REPORT


      The following is the full text of a report, prepared for the purpose of incorporation in this document,
received from the independent reporting accountants of Hang Ten Group Holdings Limited, KPMG,
Certified Public Accountants, Hong Kong. As described in the section headed “Documents available for
Inspection” in Appendix VII, a copy of the accountants’ report is available for inspection.




                                                                           8th Floor
                                                                           Prince’s Building
                                                                           10 Chater Road
                                                                           Central
                                                                           Hong Kong

The Directors
Hang Ten Group Holdings Limited
Kim Eng Capital (Hong Kong) Limited
Asian Capital (Corporate Finance) Limited

                                                                           31 October 2002

Dear Sirs,

       We set out below our report on the financial information relating to “Hang Ten Group Holdings
Limited” (“Hang Ten”) and the companies (collectively the “Subsidiaries”) to be acquired pursuant to the
sale and purchase agreement dated 28 October 2002 (“Sale and Purchase Agreement”) as described more
fully in the paragraph headed “Acquisition of Hang Ten (BVI) by Hang Ten” in the section headed
“Summary of the Proposal” (the “Proposal”) of the document dated 31 October 2002 (the “Document”)
issued in connection with the proposal for Akai Holdings Limited (in compulsory liquidation) (“Akai”)
by way of a shareholders’ scheme of arrangement and withdrawal of the listing of the shares of Akai and
the listing of the ordinary shares of Hang Ten on The Stock Exchange of Hong Kong Limited by way of
introduction. The financial information includes the summaries of the combined income statements and
cash flow statements of Hang Ten and its Subsidiaries (“Hang Ten Group”) for each of the three years
ended 31 March 2002 (the “relevant period”), and of the combined balance sheets of the Hang Ten Group
as at 31 March 2000, 2001 and 2002 (the “Financial Information”) which have been prepared by the
directors of Hang Ten on the basis set out in section A of this report for inclusion in the Document. Terms
used herein have the same meaning ascribed to them in the “Definitions” section of the Document unless
otherwise stated.

       Hang Ten was incorporated in Bermuda on 17 July 2002 as an exempted company with limited
liability under the Companies Amendment Act 2001 of Bermuda. On completion of the Sale and Purchase
Agreement, Hang Ten will become the holding company of the Subsidiaries set out in Section A of this
report.

      We have acted as auditors of the companies comprising the Hang Ten Group for the relevant period
(or since their respective dates of incorporation where this is a shorter period), except for ILC Trademark
Corporation, ILC (Cyprus) Limited, ILC (Hungary) Limited, HTIL Holdings Corporation N.V., HTIL
Corporation, B.V., International Licensing (California) Corp, Hang Ten (Phils) Holdings Corporation and

                                                  – 123 –
APPENDIX II                                                           ACCOUNTANTS’ REPORT


Chinaway Trading Co., Ltd. No audited financial statements have been prepared for these companies as
there are no statutory audit requirements in the respective countries in which they are incorporated. As a
basis for forming an opinion on the Financial Information of the Hang Ten Group for the purpose of this
report, we have carried out appropriate audit procedures in respect of the management accounts of these
companies for the relevant period (or since their respective dates of incorporation where this is a shorter
period). The management accounts of these companies have been restated by the directors of Hang Ten to
conform with accounting principles generally accepted in Hong Kong for the purpose of the preparation
of the Financial Information.

      No audited financial statements have been prepared by Hang Ten since its incorporation as it has
not carried on any business save for the proposed transactions relating to the Proposal. We have, however,
reviewed all significant transactions of Hang Ten from its date of incorporation to 31 October 2002 for
the purpose of this report.

      For the purpose of this report, we have examined the audited financial statements or, where
appropriate, unaudited management accounts of the respective companies comprising the Hang Ten Group
for the relevant period or since their respective dates of incorporation where this is a shorter period and
we have carried out such additional procedures as we consider necessary in accordance with the Auditing
Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Society of Accountants.
We have not audited any financial statements of the companies comprising the Hang Ten Group in
respect of any period subsequent to 31 March 2002.

      The Financial Information as set out in this report has been prepared by the directors of Hang Ten
based on the audited financial statements or, where appropriate, unaudited management accounts of Hang
Ten Group and of its Subsidiaries, on the basis set out in Section A of this report, after making such
adjustments as are appropriate.

      The directors of the respective companies of the Hang Ten Group are responsible for the preparation
of the respective audited financial statements or where audited financial statements are not prepared,
management accounts, which give a true and fair view. The directors of Hang Ten are responsible for the
preparation of the Financial Information which give a true and fair view. In preparing the audited
financial statements, management accounts and Financial Information which give a true and fair view, it
is fundamental that appropriate accounting policies are selected and applied consistently, that judgements
and estimates are made which are prudent and reasonable that the reasons for any significant departure
from applicable accounting standards are stated.

     It is our responsibility to form an independent opinion on the Financial Information.

       In our opinion, the Financial Information set out below together with the notes thereto, for the
purpose of this report and on the basis of presentation set out in Section A of this report, gives a true and
fair view of the combined state of the Hang Ten Group’s affairs as at 31 March 2000, 2001 and 2002 and
of its combined results and cash flows for each of the three years ended 31 March 2002.




                                                  – 124 –
APPENDIX II                                                         ACCOUNTANTS’ REPORT


A.   BASIS OF PRESENTATION

     Histor y of corporate reorganisations

     As described in the paragraph headed “History and development of the Hang Ten (BVI) Group” in
     the section headed “Letter from the Board of Directors of Hang Ten Group Holdings Limited” of
     the Document, ILC International Corporation (“ILC”) was established in 1994 and acted as a
     holding company of its then existing subsidiaries until the completion of a corporate reorganisation
     on 31 December 2001 as described below.

     On 9 November 2001, certain shareholders who together held 97.01% of the issued share capital of
     ILC entered into an agreement to sell their respective interests in ILC to Hang Ten International
     Holdings Limited (“Hang Ten (BVI)”) for a total consideration of approximately US$54.6 million.
     On 9 November 2001, these shareholders also entered into a subscription agreement with Hang Ten
     (BVI) pursuant to which they agreed to subscribe for and Hang Ten (BVI) agreed to issue a total of
     999,999 new shares of US$0.1 each in the share capital of Hang Ten (BVI) at US$17 per share for
     a total subscription price of approximately US$17 million. The acquisition of ILC was financed by
     the subscription proceeds of US$17 million, shareholders’ loans of US$20 million and bank loans
     of US$17.6 million. Upon completion of this reorganisation on 31 December 2001, Hang Ten
     (BVI) became the holding company of ILC.

     On 28 March 2002, ILC disposed of the entire issued share capital of Hang Ten (China) Group
     Limited (“Hang Ten China”), a company incorporated in British Virgin Islands (“BVI”), to Accurate
     Sino Developments Limited, for a cash consideration of US$20,000 as part of the corporate
     reorganisation in preparation of the listing of the shares of Hang Ten on The Stock Exchange of
     Hong Kong Limited. Accurate Sino Developments Limited is a company in which the then existing
     shareholders of Hang Ten (BVI) collectively hold an indirect interest of 97.01%. As a result of this
     disposal, Hang Ten China ceased to be a subsidiary of ILC on 28 March 2002.

     Presentation of Financial Information

     The summaries of the Hang Ten Group’s combined income statements and cash flow statements for
     each of the two years ended 31 March 2001 include the results and cash flows of ILC and its
     subsidiaries as if Hang Ten had been the holding company of these companies throughout this
     period or since the respective dates of their incorporation, where this is a shorter period. The Hang
     Ten Group’s combined balance sheets as at 31 March 2000 and 2001 have been prepared to present
     the state of affairs of ILC and its subsidiaries as if Hang Ten had been the holding company of
     these companies as at the respective dates.

     The summaries of the Hang Ten Group’s combined income statement and cash flow statement for
     the year ended 31 March 2002 include the results and cash flows of Hang Ten (BVI) and its
     subsidiaries as if Hang Ten had been the holding company of these companies throughout this
     period or since the respective dates of their incorporation, where this is a shorter period.




                                                – 125 –
APPENDIX II                                                                   ACCOUNTANTS’ REPORT


   The combined balance sheet of the Hang Ten Group as at 31 March 2002 has been prepared to
   present the state of affairs of Hang Ten (BVI) and its subsidiaries as if Hang Ten had been the
   holding company of these companies as at this date. The excess of the cost of acquisition of ILC by
   Hang Ten (BVI) over the fair value of the identifiable assets and liabilities acquired are accounted
   for as goodwill in the combined balance sheet as at 31 March 2002.

   The Financial Information excludes the results and cash flows of Hang Ten China for the relevant
   period and its net assets as at 31 March 2000 and 2001 as if the disposal of Hang Ten China had
   been completed on 1 April 1999.

   All significant intercompany transactions and balances have been eliminated on combination.

   On completion of the Sale and Purchase Agreement, the following companies will become direct or
   indirect subsidiaries of Hang Ten:

                                                                Issued and      Percentage of equity
                              Place of          Date of          fully paid     interest attributable        Principal
   Name                 incorporation     incorporation       share capital   to the Hang Ten Group          activities
                                                                              Direct              Indirect

   Hang Ten              British Virgin    10 September          US$100,000   100%                      –    Investment holding
     International              Islands            2001
     Holdings                  (“BVI”)
     Limited

   ILC                            BVI      12 September          US$639,830       –                  97%     Investment holding
     International                                 1994
     Corporation

   Hang Ten                       BVI       2 November            US$50,000       –                  97%     Investment holding
     Enterprises                                  1994
     Limited

   Chinaway Trading               BVI       5 April 2001          US$50,000       –                  97%     Trading of apparels
     Co., Ltd.

   Yangtze Apparel             Taiwan       9 November      NT$100,000,000        –                  97%     Retail and wholesale
     Taiwan                                       1991                                                         of apparels
     Enterprise
     Limited

   Hang Ten (Phils)               BVI      10 May 1996            US$50,000       –                  97%     Investment holding
     Holdings
     Corporation




                                                       – 126 –
APPENDIX II                                                                          ACCOUNTANTS’ REPORT


                                                                      Issued and       Percentage of equity
                                  Place of           Date of           fully paid      interest attributable        Principal
   Name                     incorporation      incorporation        share capital    to the Hang Ten Group          activities
                                                                                     Direct              Indirect

   Hang Ten Phils.,             Philippines      15 July 1996      PHP50,000,000         –                53.4%     Retail and
     Corp                                                                                                             wholesale of
                                                                                                                      apparels

   Hang Ten                      Singapore      29 September        SGD1,000,000         –                  97%     Retail and
     Enterprises                                        1999                                                          wholesale of
     (Pte) Ltd.                                                                                                       apparels

   Hang Ten                          Korea       6 December     KRW6,000,000,000         –                89.3%     Retail and
     Korea                                             2000                                                           wholesale of
     Corp. (Note)                                                                                                     apparels

   Hang Ten                       Malaysia       27 July 2002          RM500,000         –                  97%     Retail and wholesale
     Enterprises (M)                                                                                                  of apparels
     Sdn Bhd

   ILC Trademark                      BVI         1 December            US$50,000        –                  97%     Trademark
     Corporation                                        1999                                                          ownership
                                                                                                                      and licensing

   ILC (Cyprus) Limited             Cyprus       8 May 1997                Cypriot       –                  97%     Investment holding
                                                                      pounds 1,000

   ILC (Hungary) Limited          Hungary       12 May 1997             US$6,400         –                  97%     Trademark licensing



   HTIL Holdings               Netherlands      21 December             US$6,000         –                  97%     Investment holding
     Corporation N.V.              Antilles            1992

   HTIL                    The Netherlands       10 July 1992          NLG40,000         –                  97%     Trademark licensing
     Corporation,
     B.V.

   International             United States    10 January 1996           US$10,000        –                  97%     Trademark
      Licensing                of America                                                                             licensing and
      (California)                                                                                                    management
      Corp

   Note: As at 31 March 2002, the issued and fully paid share capital of Hang Ten Korea Corp. was KRW1,600 million and
         the percentage of equity interest attributable to the Hang Ten Group was 67.9%. In October 2002, ILC agreed to
         subscribe for 440,000 new shares in Hang Ten Korea Corp. for a cash consideration of KRW4,400 million (equivalent
         to US$3.6 million). Following the subscription, Hang Ten Group’s effective equity interest in Hang Ten Korea
         Corp. is increased from 67.9% as at 31 March 2002 to 89.3%.

                                                            – 127 –
APPENDIX II                                                    ACCOUNTANTS’ REPORT


B.   COMBINED AUDITED FINANCIAL STATEMENTS

     Combined income statements

     The following is a summary of the combined income statements of the Hang Ten Group for the
     relevant period, after making such adjustments as are appropriate and on the basis set out in
     Section A of this report:

                                                                      Year ended 31 March
                                                              2000             2001          2002
                                              Note         US$’000          US$’000       US$’000

     Turnover                                   2          145,119          145,946       159,346
     Cost of sales                                         (74,483)         (73,216)      (80,300)

                                                             70,636          72,730        79,046
     Other revenue                              3             2,426           2,929         2,834
     Other net income/(loss)                    3               738              55          (227)
     Selling expenses                                       (52,890)        (55,373)      (62,632)
     Administrative expenses                                 (6,256)         (5,784)       (5,574)
     Other operating expenses                                (1,371)         (1,757)       (1,716)

     Profit from operations                                 13,283           12,800        11,731
     Finance costs                            4(a)             (14)            (287)       (1,025)

     Profit from ordinary activities
       before taxation                         4            13,269           12,513        10,706
     Taxation                                 5(a)          (1,796)          (1,192)       (1,126)

     Profit from ordinary activities
       after taxation                                        11,473          11,321          9,580
     Minority interests                                        (540)           (469)        (1,020)

     Profit attributable to shareholders                    10,933           10,852         8,560


     Dividends attributable to the year:        8
     Interim dividend declared during
        the year                                                  –           1,504              –
     Final dividend proposed after
        balance sheet date                                    7,021               –              –
     Special dividend                                             –          26,534              –

                                                              7,021          28,038              –


     Basic earnings per share                   9        0.040 cent       0.040 cent    0.032 cent



                                             – 128 –
APPENDIX II                                                   ACCOUNTANTS’ REPORT


   Combined statement of recognised gains and losses

   The following is a summary of the combined statement of recognised gains and losses of the Hang
   Ten Group for the relevant period, after making such adjustments as are appropriate and on the
   basis set out in Section A of this report:

                                                                     Year ended 31 March
                                                             2000             2001          2002
                                             Note         US$’000          US$’000       US$’000

   Net profit for the year                                  10,933          10,852          8,560
   Exchange differences on translation
     of the financial statements
     of foreign entities                      24             1,569           (1,422)         (192)

   Total recognised gains and losses                        12,502           9,430          8,368




                                            – 129 –
APPENDIX II                                                    ACCOUNTANTS’ REPORT


   Combined balance sheets

   The following is a summary of the combined balance sheets of the Hang Ten Group as at 31 March
   2000, 2001 and 2002, after making such adjustments as are appropriate and on the basis set out in
   Section A of this report:

                                                                        At 31 March
                                                              2000            2001            2002
                                              Note         US$’000        US$’000          US$’000

   Non-current assets
   Fixed assets                                10             5,851           5,672           5,324
   Goodwill                                    11                 –               –          10,001
   Intangible assets                           12            22,062          20,395          19,209
   Long-term receivable                                           –             244               –
   Employee benefits                           19                 –              14              82
   Deferred taxation                           21               449             207             230


                                                             28,362          26,532          34,846

   Current assets
   Investments                                 13            13,385               –           5,429
   Inventories                                 14            12,546          13,136          16,429
   Trade and other receivables                 15            11,428          12,722          17,598
   Amounts due from related companies          20                14               –           1,656
   Cash and cash equivalents                   16            10,523          14,862           8,053

                                                             47,896          40,720          49,165

   Current liabilities
   Bank loans                                  17                 –          12,150          13,058
   Trade and other payables                    18             9,963          13,321          12,954
   Amounts due to related companies            20               969           1,012             644
   Taxation                                   5(b)            1,097           1,016           1,069

                                                             12,029          27,499          27,725

   Net current assets                                        35,867          13,221          21,440


   Total assets less current liabilities
     carried forward                                         64,229          39,753          56,286




                                            – 130 –
APPENDIX II                                                ACCOUNTANTS’ REPORT


                                                                  At 31 March
                                                           2000         2001       2002
                                               Note     US$’000     US$’000     US$’000

   Total assets less current liabilities brought
     forward                                             64,229      39,753      56,286

   Non-current liabilities
   Bank loans                                      17        –            –      15,086
   Employee benefits                               19      107            –           –
   Other loans                                     22        –          331      20,497

                                                           107          331      35,583

   Minority interests                                     2,195       1,880       2,850


   NET ASSETS                                            61,927      37,542      17,853


   CAPITAL AND RESERVES
   Share capital                                   23       638         640         100
   Reserves                                        24    61,289      36,902      17,753


                                                         61,927      37,542      17,853




                                              – 131 –
APPENDIX II                                                  ACCOUNTANTS’ REPORT


   Combined cash flow statements

   The following is a summary of the combined cash flow statements of the Hang Ten Group for the
   relevant period, after making such adjustments as are appropriate and on the basis set out in
   Section A of this report:

                                                                    Year ended 31 March
                                                            2000             2001          2002
                                                Note     US$’000          US$’000       US$’000

   Net cash inflow/(outflow) from
     operating activities                       25(a)     18,452           30,287         (1,173)


   Returns on investments and
      servicing of finance
   Interest received                                         573              478           339
   Interest paid                                               –             (253)         (697)
   Dividends paid                                              –          (35,059)            –

   Net cash inflow/(outflow)
     from returns on investments
     and servicing of finance                                573          (34,834)         (358)


   Taxation
   Taiwan income tax                                        (566)            (932)         (666)
   Income tax in other countries                             (12)            (117)         (449)

                                                            (578)           (1,049)       (1,115)

   Investing activities
   Payment for purchase of fixed assets                    (2,472)          (3,496)      (3,167)
   Payment for purchase of trademarks                     (14,031)               –            –
   Proceeds from sales of trademarks                        2,200              464            –
   Acquisition of subsidiary                    25(b)           –                –      (54,619)

   Net cash outflow from investing activities             (14,303)          (3,032)     (57,786)


   Net cash inflow/(outflow)
     before financing carried forward                       4,144           (8,628)     (60,432)




                                           – 132 –
APPENDIX II                                          ACCOUNTANTS’ REPORT


                                                          Year ended 31 March
                                                     2000          2001          2002
                                         Note     US$’000       US$’000       US$’000

   Net cash inflow/(outflow) before
     financing brought forward                      4,144        (8,628)      (60,432)

   Financing activities
   New bank loans                        25(c)          –             –        18,858
   New shareholders’ loans               25(c)          –             –        20,000
   Issue of new shares                   25(c)          –           192        17,000
   Loans from minority shareholder                      –           331           166
   Capital contribution from minority
      shareholder                                       –           404             –

   Net cash inflow from financing
     activities                                         –           927        56,024


   Increase/(decrease) in cash
     and cash equivalents                           4,144        (7,701)       (4,408)

   Effect of foreign exchange rates                    55          (110)          463

   Cash and cash equivalents
     brought forward                                6,324        10,523         2,712


   Cash and cash equivalents
     carried forward                               10,523         2,712        (1,233)


   Analysis of the balances of
     cash and cash equivalents

   Cash at bank and in hand                        10,523        14,862         8,053
   Bank loans and overdrafts payable
     within three months from the
     date of the advance                                –       (12,150)       (9,286)

                                                   10,523         2,712        (1,233)




                                        – 133 –
APPENDIX II                                                                     ACCOUNTANTS’ REPORT


   Notes to the Financial Information

   1.   Significant accounting policies

        (a)   Statement of compliance

               The Financial Information has been prepared in accordance with the accounting policies set out below.
               These accounting policies would be acceptable under accounting principles generally accepted in Hong
               Kong. The information conforms with the disclosure requirements of the Rules governing the Listing of
               securities on the Main Board of The Stock Exchange of Hong Kong Limited (“Stock Exchange”) as applicable
               to Accountants’ Reports included in Listing Documents.

        (b)   Basis of preparation of the Financial Information

               The measurement basis used in the preparation of the Financial Information is historical cost modified by
               the marking to market of certain investments in securities as explained in the accounting policies set out
               below.

        (c)   Goodwill

               Positive goodwill arising on acquisition of a subsidiary represents the excess of the cost of the acquisition
               over the fair value of the identifiable assets and liabilities acquired. Positive goodwill is stated in the
               combined balance sheets at cost less any accumulated amortisation and any impairment losses. Positive
               goodwill is amortised to the combined income statements on a straight-line basis over its estimated useful
               life.

               On disposal of a subsidiary during the period, any attributable amount of purchased goodwill not previously
               amortised through the combined income statements is included in the calculation of the profit or loss on
               disposal.

        (d)   Investments in securities

               The Hang Ten Group’s investments in securities are stated in the combined balance sheets at fair value.
               Changes in fair value are recognised in the combined income statements as they arise. Securities are
               presented as trading securities when they were acquired principally for the purpose of generating a profit
               from short term fluctuations in price or dealer’s margin.

               Profit or losses on disposal of investments in securities are determined as the difference between the
               estimated net disposal proceeds and the carrying amount of the investments and are accounted for in the
               combined income statements as they arise.

        (e)   Fixed assets

               (i)     Fixed assets are carried in the combined balance sheets at cost less accumulated depreciation and
                       impairment losses.

               (ii)    Subsequent expenditure relating to a fixed asset that has already been recognised is added to the
                       carrying amount of the asset when it is probable that future economic benefits, in excess of the
                       originally assessed standard of performance of the existing asset, will flow to the Hang Ten Group.
                       All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

               (iii)   Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference
                       between the estimated net disposal proceeds and the carrying amount of the asset and are recognised
                       in the combined income statements on the date of retirement or disposal.

        (f)   Intangible assets (other than goodwill)

               (i)     Intangible assets that are acquired by the Hang Ten Group are stated in the combined balance sheets
                       at cost less accumulated amortisation and impairment losses. Expenditure on internally generated
                       goodwill and brands is recognised as an expense in the period in which it is incurred.




                                                       – 134 –
APPENDIX II                                                                 ACCOUNTANTS’ REPORT

            (ii)    Subsequent expenditure on an intangible asset after its purchase or its completion is recognised as an
                    expense when it is incurred unless it is probable that this expenditure will enable the asset to
                    generate future economic benefits in excess of its originally assessed standard of performance and
                    this expenditure can be measured and attributed to the asset reliably. If these conditions are met, the
                    subsequent expenditure is added to the cost of the intangible asset.

      (g)   Operating lease charges

            Where the Hang Ten Group has the use of assets under operating leases, payments made under the leases are
            charged to the combined income statements in equal instalments over the accounting periods covered by the
            lease term, except where an alternative basis is more representative of the pattern of benefits to be derived
            from the leased asset. Lease incentives received are recognised in the combined income statements as an
            integral part of the aggregate net lease payments made. Contingent rentals are charged to the combined
            income statements in the accounting period in which they are incurred.

      (h)   Amortisation and depreciation

            (i)     No depreciation is provided on freehold land.

            (ii)    Depreciation is calculated to write off the cost of fixed assets over their estimated useful lives as
                    follows:

                    –      buildings are depreciated on a straight line basis over their estimated useful lives, being 55
                           years from the date of completion.

                    –      other fixed assets are depreciated on a straight-line basis over their estimated useful lives at
                           the following rates:

                           Furniture, fixtures and other fixed assets                    2 to 10 years
                           Motor vehicles                                                5 years

            (iii)   Intangible assets (other than goodwill)

                    Amortisation of intangible assets is charged to the combined income statements on a straight-line
                    basis over the assets’ estimated useful lives as follows:

                           Trademarks                                                    20 years

            (iv)    Positive goodwill

                    Amortisation of positive goodwill is charged to the combined income statements on a straight-line
                    basis over its estimated useful life of 20 years.

      (i)   Impairment of assets

            Internal and external sources of information are reviewed at each balance sheet date to identify indications
            that the following assets may be impaired or an impairment loss previously recognised no longer exists or
            may have decreased:

            –       fixed assets;

            –       intangible assets; and

            –       positive goodwill

            If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets that are not
            yet available for use, or are amortised over more than 20 years from the date when the asset is available for
            use or goodwill that is amortised over 20 years from initial recognition, the recoverable amount is estimated
            at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its
            cash-generating unit exceeds its recoverable amount.




                                                   – 135 –
APPENDIX II                                                                 ACCOUNTANTS’ REPORT

            (i)    Calculation of recoverable amount

                   The recoverable amount of an asset is the greater of its net selling price and value in use. In
                   assessing value in use, the estimated future cash flows are discounted to their present value using a
                   pre-tax discount rate that reflects current market assessments of time value of money and the risks
                   specific to the asset. Where there are assets that do not generate cash inflows largely independent of
                   those from other assets, the recoverable amount is determined for the smallest group of assets that
                   generates cash inflows independently (i.e. a cash-generating unit).

            (ii)   Reversals of impairment losses

                   In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in
                   the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is
                   reversed only if the loss was caused by a specific external event of an exceptional nature that is not
                   expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect
                   of that specific event.

                   A reversal of impairment losses is limited to the asset’s carrying amount that would have been
                   determined had no impairment loss been recognised in prior years. Reversals of impairment losses
                   are credited to the combined income statements in the year in which the reversals are recognised.

      (j)   Inventories

            Inventories are carried at the lower of cost and net realisable value.

            Cost is calculated using the weighted average formula and comprises all costs of purchase, costs of conversion
            and other costs incurred in bringing the inventories to their present location and condition.

            Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs
            of completion and the estimated costs necessary to make the sale.

            When inventories are sold, the carrying amount of those inventories is recognised as an expense in the
            period in which the related revenue is recognised. The amount of any write-down of inventories to net
            realisable value and all losses of inventories are recognised as an expense in the period the write-down or
            loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net
            realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the
            period in which the reversal occurs.

      (k)   Cash equivalents

            Cash equivalents are short-term, highly liquid investments which are readily convertible into known amounts
            of cash without notice and which were within three months of maturity when acquired. For the purpose of
            the combined cash flow statements, cash equivalents would also include bank overdrafts and advances from
            bank repayable within three months from the date of the advance.

      (l)   Deferred taxation

            Deferred taxation is provided using the liability method in respect of the taxation effect arising from all
            material timing differences between the accounting and tax treatment of income and expenditure, which are
            expected with reasonable probability to crystallise in the foreseeable future.

            Future deferred tax benefits are not recognised unless their realisation is assured beyond reasonable doubt.

      (m)   Provisions and contingent liabilities

            Provisions are recognised for liabilities of uncertain timing or amount when the Hang Ten Group has a legal
            or constructive obligation arising as a result of a past event, it is probable that an outflow of economic
            benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value
            of money is material, provisions are stated at the present value of the expenditures expected to settle the
            obligation.




                                                    – 136 –
APPENDIX II                                                                  ACCOUNTANTS’ REPORT

            Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
            estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of
            economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence
            or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the
            probability of outflow of economic benefits is remote.

      (n)   Revenue recognition

            Provided it is probable that the economic benefits will flow to the Hang Ten Group and the revenue and
            costs, if applicable, can be measured reliably, revenue is recognised in the combined income statements as
            follows:

            (i)     Sale of goods

                    Revenue is recognised when goods are delivered to the customers which is taken to be the point in
                    time when the customer has accepted the goods and the related risks and rewards of ownership.
                    Revenue excludes value added or other sales taxes and is after deduction of any trade discounts.

            (ii)    Royalty income

                    Royalty income is recognised in accordance with the substance of the relevant agreements.

            (iii)   Dividends

                    –      Dividend income from unlisted investments is recognised when the shareholder’s right to
                           receive payment is established.

                    –      Dividend income from listed investments is recognised when the share price of the investment
                           goes ex-dividend.

            (iv)    Interest income

                    Interest income from bank deposits is accrued on a time-apportioned basis by reference to the
                    principal outstanding and the rate applicable.

      (o)   Translation of foreign currencies

            Foreign currency transactions during the relevant period are translated into United States dollars at the
            exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies
            are translated into United States dollars at the exchange rates ruling at the balance sheet date. Exchange
            gains and losses are dealt with in the combined income statements.

            The results and balance sheet items of subsidiaries denominated in foreign currencies are translated into
            United States dollars at average exchange rates during the period and the exchange rates ruling at the
            balance sheet date respectively. Exchange differences arising on combination of these subsidiaries are dealt
            with as a movement in reserves.

            Foreign exchange forward contracts undertaken for hedging purposes are accounted for on an equivalent
            basis to the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the
            same basis as that arising from the related assets, liabilities or positions.

      (p)   Retirement costs

            The Hang Ten Group’s Taiwan subsidiaries participate in a central pension scheme providing benefits to all
            employees in accordance with the Labour Standards Law (as amended) in Taiwan. The Hang Ten Group has
            an obligation to ensure that there are sufficient funds in the scheme to pay the benefits earned. The Hang
            Ten Group currently contributes at 2% of the total salaries as determined and approved by the relevant
            government authorities. The contributions are placed with the Central Trust of China, a government institution.

            The Hang Ten Group’s net obligation in respect of the pension scheme is calculated by estimating the
            amount of future benefit that employees have earned in return for their service in the current and prior
            periods; that benefit is discounted to determine the present value, and the fair value of any plan assets is
            deducted. The calculation is performed by a qualified actuary using the projected unit credit method. An
            actuarial valuation as at 31 March 2002 was carried out by Dr. Lin (        ), who is a Fellow of Actuarial
            Institute of Republic of China (                           ).

                                                   – 137 –
APPENDIX II                                                                  ACCOUNTANTS’ REPORT

            When the benefits of a scheme are improved, the portion of the increased benefit relating to past service by
            employees is recognised as an expense in the combined income statements on a straight-line basis over the
            average period until the benefits become vested. To the extent that the benefits vest immediately, the
            expense is recognised immediately in the combined income statements.

            In calculating the Hang Ten Group’s obligation in respect of a scheme, to the extent that any cumulative
            unrecognised actuarial gain or loss exceeds 10% of the greater of the present value of the pension scheme
            obligation and the fair value of plan assets, that portion is recognised in the combined income statements
            over the expected average remaining working lives of the employees participating in the scheme. Otherwise,
            the actuarial gain or loss is not recognised.

            Where the calculation results in a benefit to the Hang Ten Group, the recognised asset is limited to the net
            total of any unrecognised actuarial losses and past service costs and the present value of any future refunds
            from the scheme or reductions in future contributions to the scheme.

            For other non-Taiwan subsidiaries, contributions to the defined contribution pension schemes are recognised
            as an expense in the combined income statements as incurred.

      (q)   Borrowing costs

            Borrowing costs are expensed in the combined income statements in the period in which they are incurred.

      (r)   Related parties

            For the purposes of this report, parties are considered to be related to the Hang Ten Group if the Hang Ten
            Group has the ability, directly or indirectly, to control the party or exercise significant influence over the
            party in making financial and operating decisions, or vice versa, or where the Hang Ten Group and the party
            are subject to common control or common significant influence. Related parties may be individuals or other
            entities.

      (s)   Segment reporting

            A segment is a distinguishable component of the Hang Ten Group that is engaged either in providing
            products or services (business segment), or in providing products or services within a particular economic
            environment (geographical segment), which is subject to risks and rewards that are different from those of
            other segments.

            In accordance with the Hang Ten Group’s internal financial reporting, the Hang Ten Group has chosen
            geographical segment information as the primary reporting format and business segment information as the
            secondary reporting format.

            Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as
            well as those that can be allocated on a reasonable basis to that segment. For example, segment assets may
            include inventories, trade receivables and other fixed assets. Segment revenue, expenses, assets, and liabilities
            are determined before intra-group balances and intra-group transactions are eliminated as part of the
            combination process, except to the extent that such intra-group balances and transactions are between group
            enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to
            other external parties.

            Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both
            tangible and intangible) that are expected to be used for more than one period.

            Unallocated items mainly comprise financial and corporate assets, interest-bearing loans, borrowings,
            corporate and financing expenses and minority interests.




                                                   – 138 –
APPENDIX II                                                                      ACCOUNTANTS’ REPORT

   2.   Turnover

        The principal activities of the Hang Ten Group are designing, marketing and sale of apparel and accessories under
        the brand name of “Hang Ten”.

        Turnover represents the sales value of goods supplied to customers and royalty income. The amount of each
        significant category of revenue recognised in turnover during the relevant period is as follows:

                                                                                                  Year ended 31 March
                                                                                           2000            2001          2002
                                                                                        US$’000         US$’000       US$’000

        Sales of apparels                                                               140,182         141,704       155,469
        Royalty income                                                                    4,937           4,242         3,877

                                                                                        145,119         145,946       159,346

   3.   Other revenue and net income/(loss)

                                                                                                  Year ended 31 March
                                                                                           2000            2001          2002
                                                                                        US$’000         US$’000       US$’000

        Other revenue
        Rental income                                                                      375              715           679
        Bank interest income                                                               573              478           339
        Claims receivable from suppliers                                                   653              359           472
        Others                                                                             825            1,377         1,344

                                                                                          2,426           2,929         2,834

        Other net income/(loss)
        Net loss on disposal of fixed assets                                              (169)           (117)         (292)
        Net exchange gain/(loss)                                                            577           (163)            62
        Net realised and unrealised gains on listed funds
          carried at fair value                                                             364             259             –
        Others                                                                             (34)              76             3

                                                                                           738              55          (227)

   4.   Profit from ordinary activities before taxation

        Profit from ordinary activities before taxation is arrived at after charging:

        (a)    Finance costs

                                                                                                  Year ended 31 March
                                                                                           2000            2001          2002
                                                                                        US$’000         US$’000       US$’000

               Interest on bank advances and other borrowings
                  wholly repayable within five years (Note)                                  –              253          697
               Interest on shareholders’ loans (Note)                                        –                –          300
               Other borrowing costs                                                        14               34           28

                                                                                            14              287         1,025

               Note:        As described in Section A of this report, the acquisition of ILC by Hang Ten (BVI) was partly
                            financed by bank loans and shareholders’ loans of US$17.6 million and US$20 million respectively
                            and the acquisition was completed on 31 December 2001. Accordingly, finance costs for the year
                            ended 31 March 2002 include interest payable on these loans for the period from 1 January 2002
                            to 31 March 2002. If the acquisition of ILC had been completed on 1 April 1999 and the loans
                            had been in existence throughout the relevant period, finance costs for each of the three years
                            ended 31 March 2002 would have increased by approximately US$1.9 million, US$1.9 million,
                            and US$1.4 million respectively on the assumption that the prevailing interest rates during the
                            period from 1 January 2002 to 31 March 2002 are also applicable to the prior periods.

                                                       – 139 –
APPENDIX II                                                                ACCOUNTANTS’ REPORT

        (b)   Other items

                                                                                          Year ended 31 March
                                                                                  2000             2001          2002
                                                                               US$’000          US$’000       US$’000

              Cost of inventories                                                74,483          73,216          80,300
              Staff costs
                – Salaries and staff benefits                                    18,955          19,015          18,977
                – Retirement costs (Taiwan)                                         153             160             174
                – Retirement costs (other countries)                                  –              67              37
              Auditors’ remuneration                                                132             139             149
              Amortisation of positive goodwill                                       –               –             120
              Amortisation of trademarks                                            711           1,203           1,186
              Depreciation                                                        2,062           2,816           2,838
              Operating lease charges (including retail shops
                and department store counters)                                   23,000          26,065          25,669
              Commission to franchisees                                           1,320           2,041           8,544
              Provision for inventories                                           1,860             794           1,471
              Provision for bad debts                                               200             100             100


   5.   Taxation

        (a)   Taxation in the combined income statements represent:

                                                                                          Year ended 31 March
                                                                                  2000             2001          2002
                                                                               US$’000          US$’000       US$’000

              Current income tax
                – Hong Kong profits tax                                               –               –               –
                – Taiwan income tax                                               1,314             751              25
                – Income tax in other countries                                     202             217           1,143

                                                                                  1,516             968           1,168

              Deferred taxation
                – Taiwan                                                            225             190             (48)
                – other countries                                                    55              34               6

                                                                                    280             224             (42)

                                                                                  1,796           1,192           1,126


              No Hong Kong profits tax has been provided as the Hang Ten Group had no assessable profits in Hong Kong
              for each of the three years ended 31 March 2002.

              The Taiwan income tax for each of the three years ended 31 March 2002 represents the income tax charged
              at a rate of 25% on the taxable income of the Taiwan subsidiaries. Taxation for non-Taiwan subsidiaries is
              similarly charged at the appropriate current rates of taxation ruling in the relevant countries.

        (b)   Taxation in the combined balance sheets represent:

                                                                                             At 31 March
                                                                                  2000            2001            2002
                                                                               US$’000         US$’000         US$’000

              Income tax payable
                – Taiwan                                                            907             726              85
                – other countries                                                   190             290             984

                                                                                  1,097           1,016           1,069



                                                    – 140 –
APPENDIX II                                                                ACCOUNTANTS’ REPORT

   6.   Directors’ remuneration

        Details of directors’ remuneration are as follows:

                                                                                           Year ended 31 March
                                                                                   2000             2001          2002
                                                                                US$’000          US$’000       US$’000

        Fees                                                                          –                –              –
        Salaries and other emoluments                                               220              220            285
        Discretionary bonuses                                                        99              120             76
        Retirement scheme contributions                                               2                2              3

                                                                                    321              342            364


        Number of directors                                                            4               4              4


        The remuneration of the directors is within the following bands:

                                                                                           Year ended 31 March
                                                                                  2000              2001         2002
                                                                                Number           Number        Number

        Nil – US$ 128,205
          (equivalent to HK$1,000,000)                                                 2               2              2

        US$128,206 – US$192,308
         (equivalent to HK$1,000,001
          – HK$1,500,000)                                                              2               2              2

                                                                                       4               4              4


        Save as disclosed above, no directors’ remuneration has been paid or is payable by the Hang Ten Group during the
        relevant period. There was no arrangement under which a director waived or agreed to waive any remuneration
        during the relevant period.

   7.   Individuals with highest emoluments

        The five highest paid individuals of the Hang Ten Group during the relevant period include two directors of Hang
        Ten whose remuneration are disclosed in note 6 above. The aggregate of the emoluments in respect of the other
        three individuals are as follows:

                                                                                           Year ended 31 March
                                                                                   2000             2001          2002
                                                                                US$’000          US$’000       US$’000

        Salaries and emoluments                                                   1,287            1,347          1,336
        Discretionary bonuses                                                        41               67             93
        Retirement scheme contributions                                               –                –              –

                                                                                   1,328           1,414          1,429




                                                      – 141 –
APPENDIX II                                                                    ACCOUNTANTS’ REPORT

        The emoluments of the three individuals with the highest emoluments are within the following bands:

                                                                                                Year ended 31 March
                                                                                      2000               2001         2002
                                                                                    Number            Number        Number

        Nil – US$ 128,205
          (equivalent to HK$1,000,000)                                                      1               1                –
        US$128,206 – US$192,308
          (equivalent to HK$1,000,001 – HK$1,500,000)                                       2               2                3

                                                                                            3               3                3


        During the relevant period, no emoluments were paid by the Hang Ten Group to the directors or any of the five
        highest paid individuals as an inducement, to join or upon joining the Hang Ten Group or as compensation for loss
        of office.

   8.   Dividends

        (a)    No dividends have been paid or declared by Hang Ten since its incorporation. Details of dividends paid by
               ILC to its then shareholders during each of the three years ended 31 March 2002 are set out in note 8(b) and
               (c) below.

        (b)    Dividends attributable to the year

                                                                                                Year ended 31 March
                                                                                       2000              2001          2002
                                                                                    US$’000           US$’000       US$’000

               Interim dividend declared and paid                                          –            1,504                –
               Final dividend proposed after the balance sheet date                    7,021                –                –
               Special dividend                                                            –           26,534                –

                                                                                       7,021           28,038                –


               The final dividend proposed after the balance sheet date has not been recognised as a liability at the balance
               sheet date during the relevant period.

        (c)    Dividend attributable to the previous financial year, approved and paid during the current year.

                                                                                                Year ended 31 March
                                                                                       2000              2001          2002
                                                                                    US$’000           US$’000       US$’000

               Final dividend in respect of the
                 previous financial year, approved
                 and paid during the current year                                           –           7,021                –


   9.   Basic earnings per share

        The calculation of basic earnings per share for the relevant period is based on the profit attributable to shareholders
        for each of the three years ended 31 March 2002 and the 27,100 million shares in issue upon completion of the
        Proposal, as described in the paragraph headed “Shareholding Structure of Hang Ten” in the section headed
        “Summary of the Proposal” of the Document, as if the shares had been in issue since 1 April 1999.




                                                       – 142 –
APPENDIX II                                                  ACCOUNTANTS’ REPORT

   10.   Fixed assets

                                                                             Furniture,
                                                                               fixtures
                                    Land and       Motor      Leasehold      and other
                                    buildings     vehicles improvements    fixed assets     Total
                                     US$’000      US$’000       US$’000        US$’000    US$’000

         Cost

         At 1 April 1999                 950          379         9,768          1,888     12,985
         Exchange adjustments             84           25         1,124            224      1,457
         Additions                         –           35         2,336            101      2,472
         Disposals                         –          (18)       (3,883)           (43)    (3,944)

         At 31 March 2000               1,034         421         9,345          2,170     12,970


         Accumulated depreciation

         At 1 April 1999                 125          139         6,715            840      7,819
         Exchange adjustments             12           30           807            164      1,013
         Charge for the year              18           67         1,615            362      2,062
         Written back on disposal          –          (14)       (3,743)           (18)    (3,775)

         At 31 March 2000                155          222         5,394          1,348      7,119


         Net book value
         At 31 March 2000                879          199         3,951            822      5,851


                                                                             Furniture,
                                                                               fixtures
                                    Land and       Motor      Leasehold      and other
                                    buildings     vehicles improvements    fixed assets     Total
                                     US$’000      US$’000       US$’000        US$’000    US$’000

         Cost

         At 1 April 2000                1,034         421         9,345          2,170     12,970
         Exchange adjustments            (214)        (27)         (592)          (244)    (1,077)
         Additions                        158          41         2,729            568      3,496
         Disposals                        (18)        (35)       (2,740)          (261)    (3,054)

         At 31 March 2001                960          400         8,742          2,233     12,335


         Accumulated depreciation

         At 1 April 2000                 155          222         5,394          1,348      7,119
         Exchange adjustments            (21)         (15)         (184)          (115)      (335)
         Charge for the year               5           25         2,441            345      2,816
         Written back on disposal          –          (30)       (2,676)          (231)    (2,937)

         At 31 March 2001                139          202         4,975          1,347      6,663


         Net book value

         At 31 March 2001                821          198         3,767            886      5,672




                                        – 143 –
APPENDIX II                                                                       ACCOUNTANTS’ REPORT

                                                                                                     Furniture,
                                                                                                        fixtures
                                                   Land and            Motor      Leasehold           and other
                                                   buildings          vehicles improvements         fixed assets          Total
                                                    US$’000           US$’000       US$’000             US$’000         US$’000

         Cost

         At 1 April 2001                                  960              400            8,742            2,233          12,335
         Exchange adjustments                             (60)             (22)            (968)             (84)         (1,134)
         Additions                                          –               46            2,511              610           3,167
         Disposals                                          –               (9)          (3,218)             (28)         (3,255)

         At 31 March 2002                                 900              415            7,067            2,731          1 1,113

         Accumulated depreciation

         At 1 April 2001                                  139              202            4,975            1,347            6,663
         Exchange adjustments                              (9)             (12)            (668)             (60)            (749)
         Charge for the year                                4               49            2,385              400            2,838
         Written back on disposal                           –               (9)          (2,941)             (13)          (2,963)

         At 31 March 2002                                 134              230            3,751            1,674            5,789

         Net book value

         At 31 March 2002                                 766              185            3,316            1,057            5,324

         (a)     All land and buildings are located in Taiwan. The land is freehold.

         (b)     Land and buildings of the Hang Ten Group were revalued at NT$10,200,000 (equivalent to US$297,000) as
                 at 31 August 2002 by an independent firm of valuers, Chesterton Petty Limited on an open market value
                 basis. Such valuation gives rise to a revaluation deficit of US$470,000 based on net book value of the
                 relevant assets at that date. Details of the valuation are set out in the valuation certificate in appendix IV to
                 the Document.

   11.   Goodwill

                                                                                                               Positive goodwill
                                                                                                                        US$’000

         Cost:

         At 1 April 1999, 2000 and 2001                                                                                        –
         Addition arising on acquisition of subsidiary                                                                    10,121

         At 31 March 2002                                                                                                 10,121

         Accumulated amortisation:

         At 1 April 1999, 2000 and 2001                                                                                         –
         Amortisation for the year ended 31 March 2002                                                                        120

         At 31 March 2002                                                                                                     120

         Carrying amount:

         At 31 March 2002                                                                                                 10,001

         At 31 March 2001 and 2000                                                                                              –

         Positive goodwill represents the excess of Hang Ten (BVI)’s share of the fair value of the identifiable assets and
         liabilities of ILC acquired over the cost of acquisition and is recognised as expense on a straight-line basis over 20
         years. The amortisation of positive goodwill for the year is included in “other operating expenses” in the combined
         income statements.

                                                         – 144 –
APPENDIX II                                                                      ACCOUNTANTS’ REPORT

   12.   Intangible assets - trademarks

                                                                                        2000             2001          2002
                                                                                     US$’000          US$’000       US$’000

         Cost
         At 1 April                                                                    13,000           24,323       23,715
         Additions                                                                     14,031                –            –
         Disposals                                                                     (2,708)            (608)           –

         At 31 March                                                                   24,323           23,715       23,715


         Accumulated amortisation
         At 1 April                                                                      2,058           2,261        3,320
         Charge for the year                                                               711           1,203        1,186
         Written back on disposal                                                         (508)           (144)           –

         At 31 March                                                                     2,261           3,320        4,506


         Net book value

         At 31 March                                                                   22,062           20,395       19,209


         The amortisation of trademarks for the year is included in “other operating expenses” in the combined income
         statements.

   13.   Investments

                                                                                                    At 31 March
                                                                                        2000             2001          2002
                                                                                     US$’000          US$’000       US$’000

         Trading securities (at market value)
         Listed funds in Taiwan                                                        13,385                   –     5,429


   14.   Inventories

                                                                                                    At 31 March
                                                                                        2000             2001          2002
                                                                                     US$’000          US$’000       US$’000

         Work in progress                                                                 122               76            –
         Finished goods                                                                14,081           12,671       17,704
         Goods in transit                                                                 203            1,183          196

                                                                                       14,406           13,930       17,900
         Less: provision                                                               (1,860)            (794)      (1,471)

                                                                                       12,546           13,136       16,429


         Included in the above are inventories stated, net of provisions, at net realisable value as follows:

                                                                                                    At 31 March
                                                                                        2000             2001          2002
                                                                                     US$’000          US$’000       US$’000

         Inventories stated at net realisable value                                      2,182           1,730        2,010




                                                        – 145 –
APPENDIX II                                                                        ACCOUNTANTS’ REPORT

   15.   Trade and other receivables

                                                                                              At 31 March
                                                                                       2000        2001           2002
                                                                                    US$’000     US$’000        US$’000

         Trade debtors (net of provisions)                                            4,407       6,040           9,439
         Deposits, prepayments and other receivables                                  7,021       6,682           8,159

                                                                                     11,428      12,722          17,598


         The ageing analysis of trade debtors (net of provisions) is as follows:

                                                                                              At 31 March
                                                                                       2000        2001           2002
                                                                                    US$’000     US$’000        US$’000

         Current                                                                      3,848       4,096           5,894
         1 to 3 months overdue                                                          331       1,520           2,824
         More than 3 months but less than 6 months overdue                              228         424             210
         More than 6 months but less than 1 year overdue                                  –           –             109
         More than 1 year but less than 2 years overdue                                   –           –             402

                                                                                      4,407       6,040           9,439


         Debts arising from wholesales of goods and royalty income are due within one to two months from the date of
         billing. Debtors with long overdue balances are requested to settle all outstanding balances before any further
         credit is granted.

   16.   Cash and cash equivalents

                                                                                              At 31 March
                                                                                       2000        2001           2002
                                                                                    US$’000     US$’000        US$’000

         Cash at bank and in hand                                                    10,523      14,862           8,053




                                                       – 146 –
APPENDIX II                                                                    ACCOUNTANTS’ REPORT

   17.   Bank loans

                                                                                              At 31 March
                                                                                      2000         2001            2002
                                                                                   US$’000      US$’000         US$’000

         Bank loans and overdrafts
           – secured                                                                     –             –          18,858
           – unsecured                                                                   –        12,150           9,286

                                                                                         –        12,150          28,144


         The bank loans were repayable as follows:

                                                                                              At 31 March
                                                                                      2000         2001            2002
                                                                                   US$’000      US$’000         US$’000

         Within 1 year or on demand                                                      –        12,150          13,058

         After 1 year but within 2 years                                                 –              –          7,543
         After 2 years but within 5 years                                                –              –          7,543

                                                                                         –              –         15,086


                                                                                         –        12,150          28,144


         At 31 March 2002, a banking facility of US$19,000,000 is secured by the shares of ILC and the amount utilised at
         that date was US$18,858,000. Details of guarantees provided by certain shareholders of Hang Ten (BVI) in respect
         of the Hang Ten Group’s banking facilities are set out in note 29.

         The secured bank loans as at 31 March 2002 include a loan of US$17.6 million borrowed by Hang Ten (BVI) to
         finance its acquisition of ILC as described in Section A of this report.

   18.   Trade and other payables

                                                                                              At 31 March
                                                                                      2000         2001            2002
                                                                                   US$’000      US$’000         US$’000

         Trade creditors                                                             4,772         7,760           6,881
         Bills payable                                                                 420         1,347           2,468
         Accrued charges                                                             2,694         2,986           2,045
         Deposits received                                                             452           480             662
         Others                                                                      1,625           748             898

                                                                                     9,963        13,321          12,954


         Credit terms obtained by the Hang Ten Group range from 30 to 45 days.

         The ageing of trade creditors and bills payable is analysed as follows:

                                                                                              At 31 March
                                                                                      2000         2001            2002
                                                                                   US$’000      US$’000         US$’000

         Outstanding balances aged:
         Within 1 month or on demand                                                 4,950         6,769           8,370
         Between 1 month and 3 months                                                  211         2,316             710
         Between 4 months and 6 months                                                  31            22             269

                                                                                     5,192         9,107           9,349

                                                       – 147 –
APPENDIX II                                                                    ACCOUNTANTS’ REPORT

   19.   Employee benefits

                                                                                                  At 31 March
                                                                                      2000             2001          2002
                                                                                   US$’000          US$’000       US$’000

         Present value of funded obligations                                            223              422           660
         Fair value of plan assets                                                      (52)            (327)         (563)

         Present value of net obligations                                               171               95            97

         Unrecognised transitional liabilities                                          (64)             (57)          (52)
         Unrecognised actuarial losses                                                    –              (52)         (127)

         Recognised liabilities/(assets) for
           defined benefit obligations                                                  107              (14)          (82)


         Movements in the net liabilities/(assets) recognised in the combined balance sheets are as follows:

                                                                                               Year ended 31 March
                                                                                      2000              2001          2002
                                                                                   US$’000           US$’000       US$’000

         Net liabilities/(assets) as at 1 April                                           –              107           (14)
         Contributions received                                                         (49)            (278)         (244)
         Expenses recognised in the combined income statements                          153              160           174
         Exchange adjustments                                                             3               (3)            2

         Net liabilities/(assets) as at 31 March                                        107              (14)          (82)


         Expenses recognised in the combined income statements are as follows:

                                                                                               Year ended 31 March
                                                                                      2000              2001          2002
                                                                                   US$’000           US$’000       US$’000

         Current service costs                                                          146              156          172
         Interest on obligations                                                          4               14           24
         Expected return on plan assets                                                   –              (12)         (25)
         Amortisation of actuarial losses and transitional liabilities                    3                2            3

                                                                                        153              160          174


         The expenses are recognised in the following line items in the combined income statements:

                                                                                               Year ended 31 March
                                                                                      2000              2001          2002
                                                                                   US$’000           US$’000       US$’000

         Distribution expenses                                                          150              147          162
         Administrative expenses                                                          3               13           12

                                                                                        153              160          174


         Actual return on plan assets                                                      –              10            16




                                                         – 148 –
APPENDIX II                                                                   ACCOUNTANTS’ REPORT

         Principal actuarial assumptions at the balance sheet dates (expressed as weighted averages) are as follows:

                                                                                                 At 31 March
                                                                                      2000            2001            2002
                                                                                   US$’000         US$’000         US$’000

         Discount rate                                                                6.5%             6.0%            4.5%
         Expected return on plan assets                                               6.5%             6.0%            4.5%
         Future salary increases                                                      5.0%             5.0%            3.0%

   20.   Amounts due from/(to) related companies

                                                                                                 At 31 March
                                                                                      2000            2001            2002
                                                                                   US$’000         US$’000         US$’000

         Amount due from Michel Rene Enterprises Limited                                 14                –               2
         Amount due from Avon Dale Garments, Inc./Chua and company                        –                –               4
         Amount due from Hang Ten China                                                   –                –           1,650

                                                                                         14                –           1,656

         Amount due to Asian Wide Services Limited                                      744             748             618
         Amount due to Global Inc.                                                        –             246              26
         Amount due to Avon Dale Garments, Inc./Chua and company                        225              18               –

                                                                                        969           1,012             644

         The above balances are unsecured, interest free and repayable on demand. Details of related party transactions are
         summarised in note 30. Subsequent to 31 March 2002, Hang Ten China has repaid the outstanding balance due to
         the Hang Ten Group in full.

   21.   Deferred taxation

         (a)    Movements on deferred taxation are analysed as follows:

                                                                                                 At 31 March
                                                                                      2000            2001            2002
                                                                                   US$’000         US$’000         US$’000

                At 1 April                                                              702             449             207
                Ef fect of exchange rate changes                                         27             (18)            (19)
                T ransfer (to)/from combined income statements (note 5(a))             (280)           (224)             42

                At 31 March                                                             449             207             230

         (b)    Major components of deferred taxation of the Hang Ten Group provided for are set out below:

                                                                                                 At 31 March
                                                                                      2000            2001            2002
                                                                                   US$’000         US$’000         US$’000

                General provisions                                                      349             177             203
                Others                                                                  100              30              27

                                                                                        449             207             230

         (c)    Major components of the deferred tax assets of the Hang Ten Group not recognised are:

                                                                                                 At 31 March
                                                                                      2000            2001            2002
                                                                                   US$’000         US$’000         US$’000

                Future benefit of tax losses                                            453             488             911

                The above deferred tax assets have not been recognised as the realisation of these assets in the foreseeable
                future is uncertain.


                                                      – 149 –
APPENDIX II                                                                    ACCOUNTANTS’ REPORT

   22.   Other loans
                                                                                                  At 31 March
                                                                                       2000            2001             2002
                                                                                    US$’000         US$’000          US$’000

         Loans from shareholders                                                           –               –           20,000
         Loans from minority shareholder of subsidiary                                     –             331              497

                                                                                           –             331           20,497


         The loans from shareholders were borrowed by Hang Ten (BVI) to finance the acquisition of ILC. The loans are
         unsecured and interest bearing at an annual rate of 6%. Subsequent to 31 March 2002, Hang Ten Group repaid a
         total amount of US$3.6 million to the shareholders. The remaining balance of US$16.4 million is due for repayment
         in the year 2011 or earlier if an event of default occurs under the terms of the loan agreements.

         The loans from the minority shareholder of a subsidiary are unsecured, interest free and will not be repayable
         within the next 12 months.

   23.   Share capital

         For the purposes of this report, the share capital as at 31 March 2000 and 2001 represents the nominal value of the
         share capital of ILC which was the holding company as at the respective dates. The share capital as at 31 March
         2002 represents the share capital of Hang Ten (BVI) which was the holding company as at 31 March 2002.

   24.   Reserves
                                                                   Capital        Exchange         Retained
                                                                   surplus          reserve          profits           Total
                                                                   US$’000         US$’000         US$’000           US$’000

         At 1 April 1999                                             18,016           (4,694)         35,465           48,787
         Exchange differences on translation
           of financial statements
           of foreign entities                                             –           1,569               –            1,569
         Profit for the year                                               –               –          10,933           10,933

         At 31 March 2000                                            18,016           (3,125)         46,398           61,289


         At 1 April 2000                                             18,016           (3,125)         46,398           61,289
         Exchange differences on translation
            of financial statements
            of foreign entities                                           –           (1,422)              –           (1,422)
         Issue of shares                                                190                –               –              190
         Profit for the year                                              –                –          10,852           10,852
         Dividends                                                        –                –         (34,007)         (34,007)

         At 31 March 2001                                            18,206           (4,547)         23,243           36,902


         At 1 April 2001                                             18,206           (4,547)         23,243           36,902
         Profit for the year                                              –                –           8,560            8,560
         Exchange differences on
            translation of financial
            statements of foreign entities                                –             (192)              –             (192)
         Reversal on corporate reorganisation (note (d))            (18,206)           4,798         (31,009)         (44,417)
         Issue of shares                                             16,900                –               –           16,900

         At 31 March 2002                                            16,900               59             794           17,753


         (a)    Distributable reserves

                Hang Ten was incorporated on 17 July 2002 and has not carried out any business since the date of its
                incorporation save for the proposed transactions relating to the Proposal. Accordingly, there were no reserves
                available for distribution to shareholders as at the date of this report.


                                                      – 150 –
APPENDIX II                                                                   ACCOUNTANTS’ REPORT

         (b)   Capital surplus

               Capital surplus represents the excess of the consideration received over the nominal value of the shares
               issued.

         (c)   The exchange reserve has been set up and will be dealt with in accordance with the accounting policy
               adopted for foreign currency translation.

         (d)   As described in section A of this report, Hang Ten (BVI) became the holding company on 31 December
               2001 pursuant to a corporate reor ganisation. Accordingly, all reserves up to the date of acquisition have
               been treated as pre-acquisition reserves.

   25.   Notes to the combined cash flow statements

         (a)   Reconciliation of profit from operations to net cash inflow/(outflow) from operating activities

                                                                                               Year ended 31 March
                                                                                     2000               2001          2002
                                                                                  US$’000            US$’000       US$’000

               Profit from operations                                               13,283            12,800           11,731
               Interest income                                                        (573)             (478)            (339)
               Depreciation                                                          2,062             2,816            2,838
               Amortisation of trademarks and goodwill                                 711             1,203            1,306
               Net loss on disposal of fixed assets                                    169               117              292
               Net realised and unrealised gains on listed
                  funds carried at fair value                                          (364)            (259)               –
               (Increase)/decrease in long-term receivable                                –             (244)             244
               Decrease/(increase) in inventories                                     3,748             (590)          (3,293)
               (Increase)/decrease in listed funds                                   (5,151)          13,644           (5,429)
               Decrease/(increase) in trade and
                  other receivables                                                  3,546            (1,294)          (4,876)
               (Increase)/decrease in amounts due
                  from related companies                                                (12)              14           (1,656)
               (Decrease)/increase in trade and other
                  payables                                                             (852)           3,358             (367)
               Increase/(decrease) in amounts due
                  to related companies                                                 526                43             (368)
               Increase/(decrease) in employee benefits                                107              (121)             (68)
               Foreign exchange                                                      1,252              (722)          (1,188)

               Net cash inflow/(outflow) from operating activities                  18,452            30,287           (1,173)

         (b)   This represents the consideration paid by Hang Ten (BVI) for the acquisition of 97.01% of the issued share
               capital in ILC as described in section A of this report.

         (c)   Analysis of changes in financing:

                                                                                                                Shareholders’
                                                        Share capital Capital surplus           Bank loans              loans
                                                            US$’000          US$’000              US$’000            US$’000

               At 1 April 1999 and at 31 March 2000               638            18,016                  –                  –

               At 1 April 2000                                    638            18,016                  –                  –
               Cash flows from financing                            2               190                  –                  –

               At 31 March 2001                                   640            18,206                  –                  –

               At 1 April 2001                                    640            18,206                  –                  –
               Reversal on corporate reorganisation
                 (note 24 (d))                                   (640 )         (18,206)                  –                 –
               Cash flows from financing                          100            16,900              18,858            20,000

               At 31 March 2002                                   100            16,900              18,858            20,000



                                                      – 151 –
APPENDIX II                                                                    ACCOUNTANTS’ REPORT

   26.   Net assets of Hang Ten

         On the basis of presentation as set out in section A of this report, the net assets of Hang Ten at 31 March 2002
         would have been US$17,853,000 and were represented by its investments in subsidiaries.

   27.   Operating lease commitments

         The total future lease payments under operating leases are payable as follows:

                                                                                                 At 31 March
                                                                                      2000            2001             2002
                                                                                   US$’000         US$’000          US$’000

         Within one year                                                             16,614          15,098           15,129
         After 1 year but within 5 years                                             32,538          26,443           23,072
         After 5 years                                                                  568               –                –

                                                                                     49,720          41,541           38,201


         The Hang Ten Group leases a number of properties under operating leases. The leases typically run for an initial
         period of two to six years, with an option to renew the lease when all terms are renegotiated. The monthly rentals
         of the leases are either fixed or contingent based on an agreed percentage of the turnover of the respective months.
         For the purpose of the above disclosure, contingent rentals are based on the minimum rental payments stipulated in
         the lease agreements.

   28.   Contingent liabilities

         (a)    Letters of credit

                As at 31 March 2000, 2001 and 2002, outstanding letters of credit of Hang Ten Group for the purchase of
                goods amounted to US$1,848,000, US$3,116,000 and US$4,409,000 respectively.

         (b)    Tax contingency

                In 1997, ILC, a subsidiary of the Hang Ten Group, entered into a two-year service agreement with the
                Taiwan branch of another subsidiary, Hang Ten Enterprises Limited (the “Branch”). Pursuant to the agreement,
                ILC provided decoration design service to retail stores operated by the Branch as well as sales promotion
                support service to the Branch. The service fees amounted to US$3,200,000 for each of the two years ended
                31 March 1998 and 1999. In accordance with the Income Tax Law (the “Law”) of the Republic of China, the
                service fees are subject to 20% withholding tax. However, the withholding tax rate may be reduced to 3.75%
                under Article 25 of the Law subject to approval of the Taiwan Tax Authority. As at 31 March 2002, the
                application filed by ILC with the Tax Authority for a reduction of the withholding tax rate to 3.75% had not
                yet been approved. If the application is not successful, ILC will be liable to pay an additional withholding
                tax of approximately US$1,040,000. No provision for this amount has been made as the directors of Hang
                Ten consider it highly likely that the Taiwan Tax Authority will approve the application, on the basis of the
                success of similar applications previously made by ILC.

         (c)    Forward exchange contracts

                The Hang Ten Group entered into forward exchange contracts for hedging purposes in the ordinary course
                of business. The contracted notional amounts of the forward exchange contracts outstanding at 31 March
                2000, 2001 and 2002 were US$Nil, US$6,790,000 and US$Nil respectively. The maturity of the forward
                exchange contracts was within 3 months from the date of the contracts.




                                                      – 152 –
APPENDIX II                                                                      ACCOUNTANTS’ REPORT

   29.   Pledge of assets

         During the relevant period, the Hang Ten Group’s banking facilities were secured/guaranteed as follows:

         (i)     Pledge of 620,681 shares of ILC with effect from December 2001;

         (ii)    Unconditional personal guarantees executed by shareholders of Hang Ten (BVI), Mr. Dennis Kung and Ms.
                 Wang Li Wen for banking facilities totalling US$10.5 million; and

         (iii)   Corporate guarantees issued by a shareholder of Hang Ten (BVI), YGM Trading Limited for US$12 million
                 and NT$234 million which were released subsequent to the acquisition of ILC by Hang Ten (BVI).

                 Subsequent to 31 March 2002, the banking facilities secured by the personal guarantees of Mr. Dennis Kung
                 and Ms. Wang Li Wen in the total amount of US$4.35 million have been terminated by Hang Ten Group. In
                 addition, the Hang Ten Group has obtained an approval-in-principle letter from each of the other two banks
                 in respect of banking facilities in the total amount of US$6.15 million for replacing the personal guarantees
                 given by Mr. Dennis Kung and Ms. Wang Li Wen with corporate guarantees to be given by member(s) of
                 Hang Ten Group upon listing of the shares of Hang Ten on the Stock Exchange.

   30.   Related party transactions

         During the relevant period, the Hang Ten Group had the following material transactions with related parties:

                                                                                                 Year ended 31 March
                                                                                         2000             2001          2002
                                                                       Note           US$’000          US$’000       US$’000

                 –   Consultancy fees                                   (b)(i)           1,029           1,075             995
                 –   Rental income                                     (b)(ii)             296             289             233
                 –   Rental expenses                                  (b)(iii)              74              58             133
                 –   Purchases of goods                               (b)(iv)              106           1,001           3,274
                 –   Sales of goods                                    (b)(v)            3,617           4,325           2,098
                 –   Royalty income                                   (b)(vi)               39              47              75
                 –   Guarantees given by shareholders                 (b)(vii)          30,182          29,627          10,500
                 –   Proceeds from disposal of subsidiary             (b)(xii)               –               –              20

         (a)     Names of related parties and relationship

                 Name                                            Relationship

                 Dennis Kung                                     A shareholder of Hang Ten (BVI).

                 Wang Li Wen                                     A shareholder of Hang Ten (BVI) and director of Hang Ten.

                 Kao Yu Chu                                      A shareholder of Hang Ten (BVI) and director of Hang Ten.

                 Asian Wide Services Limited (“AWSL”)            A company owned by Kenneth Hung, Hung Cheng Sui Tsen,
                                                                 Peggy Hung and Pamela Hung

                 YGM Trading Limited (“YGM”)                     A shareholder of Hang Ten (BVI).

                 Michel Rene Enterprises Limited                 A subsidiary of YGM.
                  (“Michel Rene”)

                 Global Inc.                                     A minority shareholder of Hang Ten Korea Corp.,
                                                                   a subsidiary of Hang Ten.

                 Chua and company                                A minority shareholder of Hang Ten Phils.,
                   (“Chua & co”)                                   Corp, a subsidiary of Hang Ten.

                 Avon Dale Garments Inc                          An associate of Chua & co.
                   (“Avon Dale”)

                 Hang Ten China (Group) Limited                  A former indirect subsidiary of Hang Ten (BVI) and now
                   (“Hang Ten China”)                              an entity 97% owned by the Kung Family, YGM,
                                                                   Wang Li Wen and Kao Yu Chu.

         (b)     Material transactions with related parties

                 During the relevant period, details of material transactions with related parties are as follows:

                 (i)      Consultancy fees

                          During the relevant period, there existed a consultancy agreement between ILC and AWSL. Pursuant
                          to the agreement, AWSL is entitled to 5% of the consolidated profit before tax of ILC as well as a
                          monthly consultancy fee of US$24,000, US$27,000 and US$31,000 during each of the three years

                                                        – 153 –
APPENDIX II                                                              ACCOUNTANTS’ REPORT

                  ended 31 March 2000, 2001 and 2002 respectively. The consultancy fees for each of the three years
                  ended 31 March 2000, 2001 and 2002 amounted to a total of US$1,029,000, US$1,075,000 and
                  US$995,000 respectively. As at 31 March 2000, 2001 and 2002, balances due to AWSL amounted to
                  US$744,000, US$748,000 and US$618,000 respectively.

          (ii)    Rental income

                  During the relevant period, ILC leased retail stores and equipment to Michel Rene. The total rental
                  income for each of the three years ended 31 March 2000, 2001 and 2002 amounted to US$296,000,
                  US$289,000 and US$233,000 respectively.

          (iii)   Rental expenses

                  During the relevant period, ILC leased retail stores from Michel Rene. Total rental expenses for each
                  of the three years ended 31 March 2000, 2001 and 2002 amounted to US$74,000, US$41,000 and
                  US$30,000 respectively.

                  In addition, Hang Ten Enterprises Limited, a subsidiary of Hang Ten, leased warehouse and office
                  premises from Global Inc.. Total rental expenses for each of the three years ended 31 March 2000,
                  2001 and 2002 amounted to US$Nil, US$17,000 and US$103,000 respectively.

          (iv)    Purchases of goods

                  During the relevant period, Hang Ten Enterprises Limited purchased goods from Michel Rene which
                  amounted to US$106,000, US$147,000 and US$8,000 for each of the three years ended 31 March
                  2000, 2001 and 2002 respectively.

                  Another subsidiary of Hang Ten, Hang Ten Korea Corp., also purchased goods from Global Inc.
                  which amounted to US$ Nil, US$854,000 and US$3,266,000 for each of the three years ended 31
                  March 2000, 2001 and 2002 respectively.

          (v)     Sales of goods

                  During the relevant period, Hang Ten Korea Corp. sold goods to Global Inc. which amounted to
                  US$Nil, US$248,000 and US$332,000 for each of the three years ended 31 March 2000, 2001 and
                  2002 respectively.

                  In addition, Hang Ten Phils Corp., a subsidiary of Hang Ten, sold goods to Chua & co which
                  amounted to US$3,617,000, US$4,077,000 and US$1,766,000 for each of the three years ended 31
                  March 2000, 2001 and 2002 respectively.

          (vi)    Royalty income

                  During the relevant period, HTIL Corporation, B.V., a subsidiary of Hang Ten, received royalty
                  income from Avon Dale for the use of the brand name “Hang Ten” in the Philippines. Royalty is
                  charged by HTIL Corporation, B.V., in accordance with the related agreement. Total royalty income
                  for each of the three years ended 31 March 2000, 2001 and 2002 amounted to US$39,000, US$47,000
                  and US$75,000 respectively.

          (vii)   Guarantees

                  During the relevant period, Mr. Dennis Kung and Ms. Wang Li Wen have jointly given guarantees to
                  certain banks to secure banking facilities granted to the Hang Ten Group totalling US$10.5 million.

                  Subsequent to 31 March 2002, the banking facilities secured by the personal guarantees of Mr.
                  Dennis Kung and Ms. Wang Li Wen in the total amount of US$4.35 million have been terminated by
                  Hang Ten Group. In addition, the Hang Ten Group has obtained an approval-in-principle letter from
                  each of the other two banks in respect of banking facilities in the total amount of US$6.15 million
                  for replacing the personal guarantees given by Mr. Dennis Kung and Ms. Wang Li Wen with corporate
                  guarantees to be given by member(s) of Hang Ten Group upon listing of the shares of Hang Ten on
                  the Stock Exchange.

                  In addition, YGM has given corporate guarantees in the amounts of US$12 million and NT$234
                  million (equivalent to approximately US$7 million) to a bank to secure banking facilities granted to
                  the Hang Ten Group. The guarantees given by YGM were released by the bank following the
                  acquisition of ILC by Hang Ten (BVI).


                                                 – 154 –
APPENDIX II                                                                     ACCOUNTANTS’ REPORT

                (viii)   Balance with Michel Rene

                         As at 31 March 2000, 2001 and 2002, the net balance due from Michel Rene arising from transactions
                         set out in (ii), (iii) and (iv) above amounted to US$14,000, US$Nil and US$2,000 respectively.
                         Details of the terms of the outstanding balances are stated in note 20.

                (ix)     Balances with Global Inc.

                         As at 31 March 2000, 2001 and 2002, the balance due to Global Inc. arising from transactions set out
                         in (iii) (iv), and (v) above amounted to US$Nil, US$246,000 and US$26,000 respectively. Details of
                         the terms of outstanding balances are set out in note 20.

                         Global Inc. also advanced loans to Hang Ten Korea Corp. As at 31 March 2000, 2001 and 2002, the
                         outstanding loan balance amounted to US$Nil, US$331,000 and US$497,000 respectively and was
                         included under other loans in the combined balance sheets. The terms of the loans are set out in note
                         22.

                (x)      Balances with Chua & co and Avon Dale

                         As at 31 March 2000, 2001 and 2002, the net balance due from/(to) Chua & co and Avon Dale
                         arising from transactions set out in (v) and (vi) above amounted to (US$225,000), (US$18,000) and
                         US$4,000 respectively. Details of the terms of outstanding balances are set out in note 20.

                (xi)     Balance with Hang Ten China

                         ILC has advanced loans to Hang Ten China. As at 31 March 2000, 2001, 2002, the outstanding loan
                         balance amounted to US$Nil, US$Nil and US$1,650,000, respectively. The terms of the loans are set
                         out in note 20. Subsequent to 31 March 2002, the outstanding loan balance was repaid in full by
                         Hang Ten China.

                (xii)    Disposal of subsidiary

                         On 28 March 2002, ILC disposed of the entire issue share capital of Hang Ten China to Accurate
                         Sino Developments Limited for a cash consideration of US$20,000, based on the original cost of
                         investment made by ILC. YGM, Asian Wide, Wang Li Wen and Kao Yu Chu collectively hold an
                         indirect interest of approximately 97% in Accurate Sino Developments Limited.

                Items (ii) to (vi) above will be continued after the listing of the shares of Hang Ten on the Stock Exchange,
                except for rental of warehouse and office premises from Global Inc. and purchases of goods from Michel
                Rene as included under items (iii) and (iv) respectively which will not be continued.

                Item (i) will not be continued after the listing of the shares of Hang Ten on the Stock Exchange.

                The directors of Hang Ten are of the opinion that the above related party transactions (i) to (vi) were
                conducted on normal commercial terms and in the ordinary course of business.

   31.   Segment reporting

         Segment information is presented in respect of the Hang Ten Group’s geographical and business segments. Information
         related to geographical segments based on the location of customers is chosen as the primary reporting format
         because this is more relevant to the Hang Ten Group in making operating and financial decisions.

         Geographical segments by the location of customers and by the location of assets

         The Hang Ten Group’s business is managed on a worldwide basis, but participate in two principal economic
         environments. Taiwan and Korea are the major markets for the Hang Ten Group’s business.

         When presenting information on the basis of geographical segments, segment information is based on the geographical
         location of customers unless otherwise stated. Segment assets and capital expenditure are not further analysed by
         the geographical location of the assets, as the Hang Ten Group’s assets are located in the same geographical areas
         as its customers.




                                                        – 155 –
APPENDIX II                                                               ACCOUNTANTS’ REPORT

      (i)   An analysis of the Hang Ten Group’s revenue and results by geographical segments is as follows:

                                                                                       Inter-
                                                                                     segment
                                       Taiwan Philippines    Singapor e     Korea elimination Unallocated       Total
                                      US$’000   US$’000        US$’000    US$’000    US$’000     US$’000      US$’000

            Year ended
            31 Mar ch 2000
            Revenue from
               external customers      134,483       4,780         919          –           –       4,937     145,119
            Inter-segment revenue        6,619           –           –          –      (6,619)          –           –

            Total revenue             141,102        4,780         919          –      (6,619)      4,937     145,119


            Segment result              11,191        620         (154)         –        (115)      1,741      13,283
            Finance costs                                                                                          (14)
            Taxation                                                                                           (1,796 )
            Minority interests                                                                                   (540)

            Profit attributable to
              shareholders                                                                                     10,933


            Depreciation and
              amortisation for
              the year                   2,330        310           62          –                      71       2,773


            Year ended
            31 Mar ch 2001
            Revenue from
               external customers      131,315       4,196       3,872      2,321           –       4,242     145,946
            Inter-segment revenue        7,869           –           –          –      (7,918)         49           –

            Total revenue             139,184        4,196       3,872      2,321      (7,918)      4,291     145,946


            Segment result              10,368        244         (169)       177         (77)      2,257      12,800
            Finance costs                                                                                        (287)
            Taxation                                                                                           (1,192 )
            Minority interests                                                                                   (469)

            Profit attributable to
              shareholders                                                                                     10,852


            Depreciation and
              amortisation for
              the year                   3,428        256          214         28                      93       4,019




                                                 – 156 –
APPENDIX II                                                                 ACCOUNTANTS’ REPORT

                                                                                         Inter-
                                                                                       segment
                                         Taiwan Philippines    Singapor e     Korea elimination Unallocated        Total
                                        US$’000   US$’000        US$’000    US$’000    US$’000     US$’000       US$’000

             Year ended
             31 Mar ch 2002

             Revenue from
                external customers       112,260       4,582       8,471      30,156           –       3,877     159,346
             Inter-segment revenue        20,795           –           –           –     (21,428)        633           –

             Total revenue              133,055        4,582       8,471      30,156     (21,428)      4,510     159,346


             Segment result                6,601        321         (293)      2,849        (594)      2,847      11,731
             Finance costs                                                                                        (1,025)
             Taxation                                                                                              (1,126 )
             Minority interests                                                                                    (1,020 )

             Profit attributable to
               shareholders                                                                                        8,560


             Depreciation and
               amortisation for
               the year                    2,969        227          379         337                     232       4,144


      (ii)   An analysis of the Hang Ten Group’s assets and liabilities by geographical segments is as follow:

                                                                                         Inter-
                                                                                       segment
                                         Taiwan Philippines    Singapor e     Korea elimination Unallocated        Total
                                        US$’000   US$’000        US$’000    US$’000    US$’000     US$’000       US$’000

             At 31 Mar ch 2000
             Segment assets               73,811       2,710       1,165           –     (25,823)     24,395      76,258

             Segment liabilities           9,939       3,066         745           –     (25,657)     26,238      14,331

             At 31 Mar ch 2001
             Segment assets              62,591        2,565       1,679       3,759     (26,598)     23,256      67,252

             Segment liabilities         13,999        1,755       1,455       2,043     (26,355)     36,813      29,710

             At 31 Mar ch 2002
             Segment assets              67,608        1,874       2,530       8,478     (30,066)     33,587      84,011

             Segment liabilities         15,033         831        2,544       3,894     (29,229)     73,085      66,158




                                                   – 157 –
APPENDIX II                                                                 ACCOUNTANTS’ REPORT

      (iii)   Segmental capital expenditure

              Capital expenditure for the year:

                                                                                           Year ended 31 March
                                                                                   2000             2001          2002
                                                                                US$’000          US$’000       US$’000

              Taiwan                                                               1,881             2,671       1,886
              Korea                                                                    –               203         392
              The Philippines                                                        101               147         252
              Singapore                                                              467               290         562
              Unallocated                                                         14,054               185          75

                                                                                  16,503             3,496       3,167


              Business segments

              The Hang Ten Group comprises the following main business segments:

              *       Sales of apparels – Retail and wholesale of branded apparels and accessories

              *       Royalty income – Licensing “Hang Ten” brand to worldwide licensees

                                                                                           Year ended 31 March
                                                                                   2000             2001          2002
                                                                                US$’000          US$’000       US$’000

              Revenue from customers:
                Sales of apparels                                                140,182         141,704       155,469
                Royalty income                                                     4,937           4,242         3,877

              Total                                                              145,119         145,946       159,346


                                                                                              At 31 March
                                                                                   2000            2001          2002
                                                                                US$’000         US$’000       US$’000

              Segment assets:
                Sales of apparels                                                 51,863             43,996     50,424
                Royalty income                                                     1,884              2,654      3,994
                Unallocated (including trademarks)                                22,511             20,602     29,593

              Total                                                               76,258             67,252     84,011


                                                                                           Year ended 31 March
                                                                                   2000             2001          2002
                                                                                US$’000          US$’000       US$’000

              Segment capital expenditure:
                Sales of apparels                                                  2,449              3,311      3,092
                Royalty income                                                    14,054                185         75

              Total                                                               16,503             3,496       3,167




                                                     – 158 –
APPENDIX II                                                          ACCOUNTANTS’ REPORT


C.   DIRECTORS’ REMUNERATION

      Save as disclosed in the above, no remuneration has been paid or is payable in respect of the
relevant period by Hang Ten or any of its Subsidiaries to the directors of Hang Ten. Under the arrangements
currently in force, the estimated aggregate amount of directors’ fees and other emoluments payable to the
directors of Hang Ten for the year ending 31 March 2003 will be approximately US$470,000, including
any benefits in kind and retirement scheme contributions but excluding management bonuses.

D.   SUBSEQUENT EVENTS

     The following events took place subsequent to 31 March 2002:

     On 27 July 2002, ILC established a wholly owned subsidiary, Hang Ten Enterprises (M) Sdn Bhd
which is engaged in the retail and wholesale of apparels in Malaysia.

     In October 2002, ILC agreed to subscribe for 440,000 new shares in Hang Ten Korea Corp. for a
cash consideration of KRW 4,400 million (equivalent to US$3.6 million). Following the subscription,
Hang Ten Group’s effective equity interest in Hang Ten Korea Corp. is increased from 67.9% as at 31
March 2002 to 89.3%.

      On 28 October 2002, Hang Ten (BVI) and certain new investors entered into agreements for the
subscription of a total of 38,218 new shares of US$0.1 each in Hang Ten (BVI), representing approximately
3.7% of Hang Ten (BVI)’s enlarged issued share capital, for a total consideration of HK$35 million
(equivalent to US$4,487,000).

      On 28 October 2002, Hang Ten entered into the Sale and Purchase Agreement pursuant to which it
will acquire the entire issued share capital of Hang Ten (BVI). To satisfy the consideration for the
acquisition, Hang Ten will issue 22,010 million shares of HK$0.001 each (with one warrant for every
five shares) and 7,307 convertible preference shares of HK$10,000 each to the existing shareholders and
new investors of Hang Ten (BVI). In order to maintain sufficient public float upon the listing of Hang
Ten’s shares on the Stock Exchange, the new investors of Hang Ten (BVI) have agreed to convert the 269
convertible preference shares to be allotted to them into 2,690 million ordinary shares of Hang Ten
immediately upon the successful implementation of the Proposal and before the commencement of dealing
in the shares of Hang Ten on the Stock Exchange. Further details of this acquisition are set out in the
paragraph headed “Acquisition of Hang Ten (BVI) by Hang Ten” in the section headed “Summary of the
Proposal” of the Document. A summary of the terms of the warrants and convertible preference shares is
included in Appendix I to the Document. In addition, pursuant to the restructuring proposal of Akai,
details of which are set out in the section headed “Summary of the Proposal” of the Document, it is
proposed, inter-alia, that:

     –     The shareholders of Akai will transfer all of their shares in Akai (“Akai Shares”) to Hang Ten
           in return for 300 million Hang Ten shares of HK$0.001 each credited as fully paid up;

     –     Hang Ten will pay HK$12 million (equivalent to US$1,538,000) to the liquidators of Akai
           (the “Liquidators”) for the benefit of Akai’s creditors (the “Creditors”) and issue 2,100 million
           Hang Ten shares of HK$0.001 each credited as fully paid to the Liquidators to be held for the
           benefit of the Creditors;
                                                 – 159 –
APPENDIX II                                                       ACCOUNTANTS’ REPORT


     –    On the successful implementation of the Proposal, Hang Ten will transfer all of the Akai
          Shares to the Liquidators to be held on trust for the Creditors for the sum of HK$1; and

     –    Listing of the Akai Shares will be withdrawn and the shares of Hang Ten will be listed on the
          Stock Exchange by way of introduction.

     The conditions precedent to the Proposal are set out in the section headed “Summary of the
Proposal” of the Document.

E.   SUBSEQUENT FINANCIAL STATEMENTS

     No audited financial statements have been prepared for Hang Ten or any of its Subsidiaries in
respect of any period subsequent to 31 March 2002.



                                                                           Yours faithfully
                                                                               KPMG
                                                                    Certified Public Accountants

Hong Kong, 31 October 2002




                                              – 160 –
APPENDIX III                              PRO FORMA FINANCIAL INFORMATION
                                    ABOUT HANG TEN GROUP HOLDINGS LIMITED


SHARE CAPITAL

      The authorised and issued share capital of Hang Ten as at the Latest Practicable Date were as
follows:

     Authorised:                                                                                        HK$

            10,000,000     shares of HK$0.01 each                                                   100,000

     Issued as nil-paid

            10,000,000     shares of HK$0.01 each                                                          0

      The authorised and issued share capital of Hang Ten upon Closing, but before any conversion or
exercise of the CPS or Warrants, will be as follows:

     Authorised:                                                                                        HK$

       250,000,000,000     Hang Ten Shares                                                      250,000,000
                 7,307     CPS                                                                   73,070,000

     Issued and fully paid or credited as fully paid:

        24,410,000,000     Hang Ten Shares (Note)                                                24,410,000
                 7,307     CPS (Note)                                                            73,070,000

     The authorised and issued share capital of Hang Ten upon Closing and assuming full conversion
and exercise of the CPS and Warrants, will be as follows:

     Authorised:                                                                                        HK$

       250,000,000,000     Hang Ten Shares                                                      250,000,000
                 7,307     CPS                                                                   73,070,000

     Issued and fully paid or credited as fully paid:

        24,410,000,000     Hang Ten Shares upon Closing but before
                             conversion or exercise of the CPS or Warrants (Note)                24,410,000
        73,070,000,000     Hang Ten Shares to be issued on full conversion
                             of the CPS (based on a conversion price of
                             HK$0.001 per Hang Ten Share) (Note)                                 73,070,000
         4,402,000,000     Hang Ten Shares to be issued on full exercise
                             of the Warrants (based on an exercise price of
                             HK$0.01 per Hang Ten Share)                                          4,402,000

       101,882,000,000     Hang Ten Shares in issue upon full conversion
                             of the CPS and full exercise of the Warrants                       101,882,000

      All Hang Ten Shares issued and to be issued under the Proposal and on conversion of the CPS and
exercise of the Warrants will rank pari passu in all respects with each other, including in particular, as to
dividends, voting rights and return of capital.



                                                  – 161 –
APPENDIX III                                            PRO FORMA FINANCIAL INFORMATION
                                                  ABOUT HANG TEN GROUP HOLDINGS LIMITED

     Note: In order to maintain sufficient public float upon the listing of the Hang Ten Shares, the Other Investors have agreed
           to convert the 269 CPS to be issued to them under the Sale and Purchase Agreement into Hang Ten Shares upon
           Closing but before the commencement of dealing in Hang Ten Shares. Accordingly, there will be 27,100 million
           Hang Ten Shares and 7,038 CPS issued and credited as fully paid upon listing of the Hang Ten Shares.

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NET LIABILITIES OF
THE HANG TEN GROUP

     The following is a statement of the adjusted combined net liabilities of the Hang Ten Group
immediately following Closing. It is based on the audited combined net assets of the Hang Ten (BVI)
Group as at 31 March 2002 adjusted to exclude intangible assets and to reflect the effect of the Proposal
and certain adjustments since 31 March 2002:

                                                                                                                                            US$’000

     Audited combined net assets of the Hang Ten Group
       as at 31 March 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              17,853

     Less: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (10,001)
           Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (19,209)

     Audited combined net liabilities of the Hang Ten Group
       as at 31 March 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (11,357)

     Add: Proceed to be derived from the subscription of the equity interest
            in Hang Ten by the Other Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               4,487

               Unaudited combined net profit of the Hang Ten Group for the five months ended
                 31 August 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              3,561

                                                                                                                                               (3,309)

     Less: Cash consideration of HK$12 million payable
             to the Liquidators (for the benefit of the Creditors) . . . . . . . . . . . . . . . . . . .                                       (1,538)
           Deficit on revaluation of land and buildings attributable
             to Hang Ten Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       (453)
           Estimated expenses relating to the listing of the Hang Ten Group . . . . . . . . .                                                  (2,000)

     Unaudited adjusted combined net liabilities
       of the Hang Ten Group immediately following Closing . . . . . . . . . . . . . . . . . . . . .                                           (7,300)

     Unaudited adjusted combined net liability value
       per Hang Ten Share

        (i)      based on 27,100 million Hang Ten Shares
                   in issue upon Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          US cent (0.03)

        (ii)     based on 97,480 million Hang Ten Shares in issue upon Closing
                   with all CPS issued to the Investors converted at HK$0.001
                   but no Warrants exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US cent (0.007)

        (iii) based on 101,882 million Hang Ten Shares in issue upon Closing
                with all CPS issued to the Investors converted at HK$0.001 and
                Warrants exercised at a subscription price of HK$0.01 . . . . . . . . . . . . . . . US cent (0.002)

                                                                       – 162 –
APPENDIX III                             PRO FORMA FINANCIAL INFORMATION
                                   ABOUT HANG TEN GROUP HOLDINGS LIMITED


INDEBTEDNESS

Borrowings

     At the close of business on 31 August 2002, being the latest practicable date for the purpose of this
indebtedness statement prior to the printing of this document, the Hang Ten Group had outstanding
borrowings totalling approximately US$40.0 million. These borrowings comprise unsecured bank overdrafts
of US$0.4 million, secured bank loans of approximately US$18.9 million, unsecured bank loans of
approximately US$3.8 million, unsecured loans advanced by the Investors of US$16.4 million and
unsecured loans advanced by a minority shareholder of a subsidiary of US$0.5 million.

Guarantees and securities

       As at 31 August 2002, the Hang Ten Group had banking facilities in respect of loans, overdrafts
and import/export facilities totalling approximately US$41.1 million, of which US$18.9 million were
secured by pledge of 620,681 shares of ILC, representing 97.01% of the issued share capital of ILC, and
US$10.5 million were secured by unconditional personal guarantees executed by shareholders of Hang
Ten (BVI), Mr. Dennis Kung and Ms. Wang. On 23 August and 26 September 2002, Hang Ten (BVI)
obtained an approval-in-principle letter from two banks in respect of banking facilities totalling
approximately US$6.15 million for replacing the personal guarantees given by Mr. Dennis Kung and Ms.
Wang with corporate guarantees to be given by member(s) of the Hang Ten Group upon listing. On 16
September 2002, Hang Ten Group terminated banking facilities totalling approximately US$4.35 million
granted by another two banks which were supported by the personal guarantees of Mr. Dennis Kung and
Ms. Wang and the Directors confirm that the said banking facilities have never been used and there will
not be any adverse effect on the Hang Ten Group after such termination. Accordingly, the banking
facilities of the Hang Ten Group will not be secured by any unconditional personal guarantees executed
by Mr. Dennis Kung and Ms. Wang upon listing of the Hang Ten Shares which will be replaced by
corporate guarantees from member(s) of the Hang Ten Group.

     As at 31 August 2002, the Hang Ten Group did not have any mortgages or charges.

Contingent liabilities

     As at 31 August 2002, the Hang Ten Group had the following material contingent liabilities:

                                                                                                    US$
     Outstanding letters of credit for the purchase of goods                                   4,728,000
     Tax contingency                                                                           1,040,000

                                                                                               5,768,000




                                                 – 163 –
APPENDIX III                             PRO FORMA FINANCIAL INFORMATION
                                   ABOUT HANG TEN GROUP HOLDINGS LIMITED


Disclaimer

      Save as aforesaid and apart from any intra-group liabilities, at the close of business on 31 August
2002, none of Hang Ten nor any member of the Hang Ten Group had any outstanding mortgages,
charges, debentures or other loan capital, bank overdrafts or loans or other similar indebtedness, finance
lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills) or
acceptance credits, guarantees or other material contingent liabilities.

     The Directors have confirmed, that, save as disclosed on this page, there has been no material
change in the indebtedness and contingent liabilities of the Hang Ten Group since 31 August 2002.

Disclosure under practice Note 19 to the Listing Rules

      The Directors have confirmed that as at 31 August 2002, they were not aware of any circumstances
which would give rise to a disclosure requirement under Practice Note 19 of the Listing Rules. A waiver
application in accordance with the guidelines for issuers with negative or negligible net tangible assets as
set forth in the announcements by the Stock Exchange dated 3 May 2001, 24 August 2001 and 9 October
2001 has been submitted to the Stock Exchange. Details of the waiver are set out in the letter from the
board of directors of Hang Ten Group Holdings Limited.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Net current assets

      As at 31 August 2002, being the latest practicable date for the purpose of this statement, the Hang
Ten Group had net current assets of approximately US$18.9 million. Current assets of the Hang Ten
Group comprised cash and bank balances of approximately US$7.7 million, accounts receivable of
approximately US$8.6 million, inventories of approximately US$20.1 million and prepayments, deposits
and other receivables of approximately US$9.2 million. Current liabilities of the Hang Ten Group comprised
bank borrowings of approximately US$11.8 million, accounts payable and accrued liabilities of
approximately US$12.3 million, other payables of approximately US$1.9 million, and tax payable of
approximately US$0.7 million.

Borrowings and banking facilities

     The Hang Ten Group generally finances its operations with internally generated cashflow and
banking facilities provided by its bankers in Hong Kong and Taiwan secured by pledge of ILC shares and
personal guarantees given by certain shareholders of Hang Ten (BVI).

     As at 31 August 2002, the Hang Ten Group had aggregate banking facilities of approximately
US$41.1 million, out of which approximately US$23.1 million, representing approximately 56% of the
aggregate banking facilities available to the Hang Ten Group, had been utilised.

     Among the bank borrowings of US$23.1 million, approximately US$11.8 million taken out by the
Hang Ten Group are repayable within one year.


                                                  – 164 –
APPENDIX III                             PRO FORMA FINANCIAL INFORMATION
                                   ABOUT HANG TEN GROUP HOLDINGS LIMITED


     The Hang Ten Group’s bank borrowings are made in Korean Won, United States dollars and New
Taiwan dollars. All of the bank borrowings are at interest rate of approximately 4% per annum. As at 31
August 2002, the Hang Ten Group did not have outstanding hedging instruments.

     For the three years ended 31 March 2002 and for the five months ended 31 August 2002, the Hang
Ten Group’s gearing ratios, represented by the interest-bearing borrowings as a percentage of the Hang
Ten Group’s total assets, amounted to approximately nil%, 18%, 57% and 49% respectively.

Dividend

      For each of the years ended 31 March 2000 and 2001, the Hang Ten (BVI) Group declared dividends
in the amounts of approximately US$7,021,000 and US$28,038,000 respectively, representing
approximately 64.2% and 258.4% of the profit attributable to shareholders for the respective periods. No
dividends was declared and paid for the year ended 31 March 2002. The payment of these dividends was
financed by internal resources and bank borrowings of the Hang Ten (BVI) Group.

      Potential investors should note that the above dividend payments should not be used as a reference
for Hang Ten’s dividend policy.

     Payment of any future dividends will be financed from the internal resources of the Hang Ten
Group.

Rule 8.06 of the Listing Rules

      The Directors are aware of the requirement of Rule 8.06 of the Listing Rules which states that
the latest financial period reported on by the reporting accountants must not have ended more than
six months before the date of the listing document. Hang Ten has sought and obtained a waiver
from strict compliance with such requirement from the Stock Exchange such that the accountants’
report only covers each of the three years ended 31 March 2002. The Directors confirm that they
have performed suf ficient due diligence on the Hang Ten Group to ensure that, save as disclosed
herein, up to the date of issue of this document, there has been no material adverse change in the
financial position of the Hang Ten Group since 31 March 2002, and there is no event which would
materially affect the information shown in the accountants’ report set out in Appendix II to this
document.

WORKING CAPITAL

      Taking into account the financial resources available to the Hang Ten Group including internally
generated funds and the present available banking facilities, the Directors are of the opinion that, after
completion of the Proposal, the Hang Ten Group will have sufficient working capital to meet its present
requirements.

NO MATERIAL CHANGE

     Save for the financial information set out in this appendix, the Directors confirm that since 31
March 2002, there has been no material change in the financial or trading position or prospects of the
Hang Ten Group.

                                                 – 165 –
APPENDIX IV                                                              VALUATION REPORT


      The following is the text of a letter with a summary of valuations received from Chesterton Petty
Limited, an independent property valuer, prepared for the purpose of inclusion in this document in
connection with its valuations as at 31 August 2002 of the properties of the Hang Ten (BVI) Group. The
letter and summary of valuations are available for inspection as referred to in the sections headed
“Document available for Inspection” in Appendix VII of this document.




                                                                International Property Consultants

                                                                16th Floor
                                                                CITIC Tower
                                                                1 Tim Mei Avenue
                                                                Central
                                                                Hong Kong

                                                                31 October 2002

The Directors
Hang Ten Group Holdings Limited
International Commercial Building
8th Floor, No. 23, Sec. 1
Chang An E. Road
Taipei
Taiwan

Dear Sirs,

      In accordance with your instructions for us to value various interests in properties in Taiwan, the
Philippines, Korea, Singapore, the United States of America and Malaysia held by Hang Ten Group
Holdings Limited (the “Company”) or its subsidiaries (hereinafter together known as the “Group”), we
confirm that we have carried out inspections, made relevant enquiries and searches and obtained such
further information as we consider necessary for the purpose of providing you with our opinion of the
open market values of these property interests as at 31 August 2002.

      Our valuation is our opinion of the open market value which we would define as intended to mean
“the best price at which the sale of an interest in a property would have been completed unconditionally
for cash consideration on the date of valuation assuming:

     (a)     a willing seller;




                                                – 166 –
APPENDIX IV                                                                 VALUATION REPORT


     (b)    that, prior to the date of valuation, there had been a reasonable period (having regard to the
            nature of the property and the state of the market) for the proper marketing of the interest, for
            the agreement of price and terms and for the completion of the sale;

     (c)    that the state of the market, level of values and other circumstances were, on any earlier
            assumed date of exchange of contracts, the same as on the date of valuation; and

     (d)    that no account is taken of any additional bid by a prospective purchaser with a special
            interest; and

     (e)    that both parties to the transaction had acted knowledgeably, prudently and without
            compulsion”.

      Our valuation has been made on the assumption that the owners sell the property interests on the
open market without the benefit of any deferred term contracts, leasebacks, joint ventures, management
agreements or any similar arrangements which would serve to increase the values of the property interests.
In addition, no account has been taken of any option or right of pre-emption concerning or affecting the
sale of the property interests and no forced sale situation in any manner is assumed in our valuation.

      In valuing the property in Group A, which is held by the Group under freehold for occupation in
Taiwan, we have made reference to sales evidence as available on the market assuming vacant possession
of the property would be readily available upon completion of a sale.

      The interests in the properties in Groups B, C, D, E and F, which are leased by the Group in
Taiwan, Singapore, Korea, the United States of America and Malaysia respectively, have no commercial
value mainly due to the short term nature of the tenancies, the prohibitions against assignment contained
in the tenancy agreements or the lack of substantial profit rent.

      The interests in the properties in Groups G, H, I, and J which are leased by the Group and sub-
leased to third parties in Taiwan, Korea, the United States of America and the Philippines respectively,
have no commercial value mainly due to the short term nature of the tenancies, the prohibitions against
assignment contained in the tenancy agreements or the lack of substantial profit rent.

      We have been provided with copies of extracts of title documents relating to the property interests.
However, we have not inspected the original documents to verify any amendments which may not appear
on the copies of the extracts of title documents handed to us. We have relied to a considerable extent on
information given by the Group. We have no reason to doubt the truth and accuracy of the information
provided to us by the Group. We were also advised that no material facts have been omitted from the
information so supplied. We consider we have been provided with sufficient information to reach an
informed view.

      We have relied to a very considerable extent on information given by you and have accepted advice
given to us on such matters as the property interests to be valued, planning approvals or statutory notices,
easements, tenure, ownership, lettings, occupancy, site and floor areas, attributable interests and all other
relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on
information contained in the documents provided to us and are therefore only approximations. We have
not at this stage verified the correctness of such areas so provided.
                                                  – 167 –
APPENDIX IV                                                                             VALUATION REPORT


      We have inspected the exterior of all the properties valued and, where possible, we have also
inspected the interior of the properties. No structural survey has been made but, in the course of our
inspection, we did not notice any serious defects. We are not, however, able to report that whether or not
the properties are free from rot, infestation or any other structural defects.

     No allowance has been made in our valuation for any charge, mortgage or amount owing on any
property interests nor for any expense or taxation which may be incurred in effecting a sale. Unless
otherwise stated, it is assumed that all property interests are free from encumbrances, restrictions and
outgoings of an onerous nature which could affect their values.

      We enclose herewith our valuation certificate and a summary of valuation.



                                                                              Yours faithfully
                                                                            For and on behalf of
                                                                          Chesterton Petty Limited
                                                                             Charles C K Chan
                                                                     MSc FRICS FHKIS MCIArb RPS(GP)
                                                                             Executive Director

Note: Mr. Charles C K Chan, Chartered Estate Surveyor, MSc FRICS, FHKIS, MCIArb, RPS(GP), has been a qualified valuer
      with Chesterton Petty Limited since June 1987 and has about 17 years’ experience in the valuation of properties in Hong
      Kong. Mr. Charles C K Chan also has more than 2 years’ experience in the valuation of properties in Taiwan, the
      Philippines, Korea, Singapore, the United States of America and Malaysia.




                                                          – 168 –
APPENDIX IV                                                                                     VALUATION REPORT


                                                VALUATION CERTIFICATE

Group A – Property owned by the Group in Taiwan

                                                                                                              Open market value
                                                                                                              in existing state
   Pr operty                    Description and tenure                         Particulars of occupancy       as at 31 August 2002

A1. No. 136, Sec. 5,            The property comprises a commercial            The property is occupied by    NT$10,200,000
    Minsheng E. Road,           unit on the Ground Floor of an                 the Group as a store.          (approximately
    Sungshan District,          8-storey condominium building                                                 US$297,000)
    Taipei,                     completed in 1979.
    Taiwan                                                                                                    97.01% interest
                                The floor area of the property is                                             attributable to the
                                approximately 56.39 sq m.                                                     Group:
                                                                                                              NT$9,895,020
                                The property is held freehold.                                                (approximately
                                                                                                              US$288,120)

   Note:   The owner of the property is Yangtze Apparel Taiwan Enterprise Limited (                    ), in which the Group has a 97.01%
           interest.




                                                                 – 169 –
APPENDIX IV                                                                                                     VALUATION REPORT


                                                        SUMMARY OF VALUATION

Group B – Properties leased by the Group in Taiwan

                                                                                                                                                      Capital value
                                                                                                       Open market value            Interest         attributable to
                                                  Floor Area                                         in existing state as at    attributable       the Group as at
Our Ref   Property                                    (sq m)   User    Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B1        Shop counter on 11th Floor,                  46.28   Shop    6 mths from 01.04.02          No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Taipei Station),                        at 23.5% to 27%
          No. 66, Section 1,                                           of gross turnover pm
          Jungshiau West Road,                                         to be renewed for 6 mths
          Taipei, Taiwan                                               at 24% to 27% of gross
                                                                       turnover pm

B2        Shop counter on 5th Floor,                  111.74   Shop    9 mths & 15 days from         No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Hsienyi),                               15.06.02 at 24% to 27%
          No. 11, Sungshou Road, Shinyi Chiu,                          of gross turnover pm
          Taipei, Taiwan

B3        Shop counter on Basement 1,                  81.00   Shop    9 mths & 16 days from         No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Hsienyi II),                            15.12.01 at 24% to 27%
          No. 12, Sunggau Road, Shinyi Chiu,                           of gross turnover pm
          Taipei, Taiwan                                               to be renewed for 6 mths
                                                                       at 24% to 27% of
                                                                       gross turnover pm

B4        Shop counter on 8th Floor,                   32.40   Shop    6 mths from 01.04.02          No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Manjing West),                          at 22% to 25%
          No. 12, Nanjing West Road,                                   of gross turnover pm.
          Taipei, Taiwan                                               The property with an
                                                                       enlarged area of 35.37 sq m
                                                                       will be renewed for 1 yr
                                                                       at 22% to 25% of
                                                                       gross turnover pm

B5        Shop counter on 6th Floor,                   33.06   Shop    1 yr from 01.10.01            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Taoyuan),                               at 22% to 25%
          No. 189, Dayou Road, Taoyuan City,                           of gross turnover pm
          Taoyuan, Taiwan

B6        Shop counter on 5th Floor,                   43.64   Shop    1 yr from 01.10.01            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Hsinchu),                               at 22% to 25%
          No. 190, Section 2, Junghua Road,                            of gross turnover pm
          Hsinchu, Taiwan

B7        Shop counter on 12th Floor,                  69.43   Shop    1 yr from 01.10.01            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Taichung),                              at 25% of gross
          No. 111, Section 2, Taijunggang Road,                        turnover pm
          Shituen Chiu, Taichung, Taiwan                               to be renewed for 1 yr
                                                                       at 25% of gross
                                                                       turnover pm

B8        Shop counter on 5th Floor,                  108.44   Shop    1 yr & 4 mths from            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Tainan),                                01.06.02 at 22% to 25%
          No. 588, Section 1, Shimen Road,                             of gross turnover pm
          Jung Chiu, Tainan, Taiwan

B9        Shop counter on Basement 1,                  66.12   Shop    1 yr from 01.10.01            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Kaohsiung),                             at 22% to 25%
          No. 213, Sanduo 3rd Road,                                    of gross turnover pm
          Kaohsiung, Taiwan


                                                                      – 170 –
APPENDIX IV                                                                                             VALUATION REPORT

                                                                                                                                              Capital value
                                                                                               Open market value            Interest         attributable to
                                            Floor Area                                       in existing state as at    attributable       the Group as at
Our Ref   Property                              (sq m)   User    Particulars of tenancy            31 August 2002      to the Group         31 August 2002

B10       Shop counter on 6th Floor,             26.45   Shop    11 mths & 15 days           No commercial value            97.01%     No commercial value
          Pacific Sogo (Taipei),                                 from 16.09.01 at 28%
          No. 45, Section 4,                                     of gross turnover pm
          Jungshiau East Road,                                   to be renewed for 1 yr
          Taipei, Taiwan                                         at 28% of gross
                                                                 turnover pm

B11       Shop counter on 4th Floor,             47.94   Shop    1 yr from 16.09.01          No commercial value            97.01%     No commercial value
          Pacific Sogo (Shuanghe),                               at 23% of gross
          No. 238, Section 1,                                    turnover pm. 47.61 sq m
          Jungshan Road,                                         of the property will
          Yunghe City,                                           be renewed for 1 yr
          Taipei, Taiwan                                         at 23% of gross
                                                                 turnover pm

B12       Shop counter on 6th Floor,             38.02   Shop    1 yr from 16.09.01          No commercial value            97.01%     No commercial value
          Pacific Sogo (Jungli),                                 at 23% of gross
          No. 357, Yuanhua Road,                                 turnover pm. 16.53 sq m
          Jungli City, Taoyuan, Taiwan                           of the property will
                                                                 be renewed for 1 yr
                                                                 at 23% of gross
                                                                 turnover pm

B13       Shop counter on 8th Floor,             39.67   Shop    1 yr from 16.09.01          No commercial value            97.01%     No commercial value
          Pacific Sogo (Hsinchu),                                at 23% of gross
          No. 2, Mintzu Road,                                    turnover pm. The property
          Hsinchu, Taiwan                                        with an enlarged area
                                                                 of 59.51 sq m will
                                                                 be renewed for 1 yr
                                                                 at 23% of gross
                                                                 turnover pm

B14       Shop counter on 6th Floor,             59.51   Shop    1 yr from 16.3.02           No commercial value            97.01%     No commercial value
          Pacific Sogo (Fengyuan),                               at 21% of gross
          No. 2, Fushing Road,                                   turnover pm
          Fengyuan City, Taichung,
          Taiwan

B15       Shop counter on 9th Floor,            158.69   Shop    6 mths from 01.04.02        No commercial value            97.01%     No commercial value
          Pacific Sogo (Kuangsan),                               at 23% of gross
          No. 299, Section 1,                                    turnover pm
          Taijunggang Road,
          Bei Chiu, Taichung,
          Taiwan

B16       Shop counter on 9th Floor,             28.43   Shop    6 mths & 15 days from       No commercial value            97.01%     No commercial value
          Pacific Sogo (Kaohsiung),                              01.03.02 at 23% to 28.5%
          No. 217, Sanduo 3rd Road,                              of gross turnover pm. The
          Kaohsiung, Taiwan                                      property with an enlarged
                                                                 area of 46.28 sq m will
                                                                 to be renewed for 5 mths
                                                                 & 15 days at 23% to 28.5%
                                                                 of gross turnover pm

B17       Shop counter on 4th Floor,             44.66   Shop    1 yr from 16.09.01          No commercial value            97.01%     No commercial value
          Pacific Sogo (Pingtung) No. 72,                        at 22.5% of gross
          Jungjeng Road, Pingtung City,                          turnover pm
          Pingtung, Taiwan                                       to be renewed for 1 yr
                                                                 at 22.5% of gross
                                                                 turnover pm

                                                                – 171 –
APPENDIX IV                                                                                                      VALUATION REPORT

                                                                                                                                                       Capital value
                                                                                                        Open market value            Interest         attributable to
                                                     Floor Area                                       in existing state as at    attributable       the Group as at
Our Ref   Property                                       (sq m)   User    Particulars of tenancy            31 August 2002      to the Group         31 August 2002

B18       Shop counter on 3rd Floor,                      59.51   Shop    1 yr from 01.04.02          No commercial value            97.01%     No commercial value
          Far Eastern (Bauching) No. 27,                                  at 21.5% of gross
          Bauching Road, Taipei,                                          turnover pm excl
          Taiwan                                                          of service charges

B19       Shop counter on 3rd Floor,                      46.95   Shop    1 yr from 01.04.02          No commercial value            97.01%     No commercial value
          Far Eastern (Taoyuan) No. 60,                                   at 21.5% of gross
          Jungjeng Road, Taoyuan City,                                    turnover pm excl
          Taoyuan, Taiwan                                                 of service charges

B20       Shop counter on 3rd Floor,                      82.65   Shop    1 yr from 01.04.02          No commercial value            97.01%     No commercial value
          Far Eastern (Jungli), No. 120,                                  at 21.5% of gross
          Section 1, Jungyang West Road,                                  turnover pm excl
          Jungli City, Taoyuan, Taiwan                                    of service charges

B21       Shop counter on 6th Floor,                      57.86   Shop    10 mths from 01.06.02       No commercial value            97.01%     No commercial value
          Far Eastern (Chenkung),                                         at 21.5% of gross
          No. 210, Chianfeng Road,                                        turnover pm excl
          Tainan, Taiwan                                                  of service charges

B22       Shop counter on 6th Floor,                      68.76   Shop    1 yr from 01.04.02          No commercial value            97.01%     No commercial value
          Far Eastern (Kaohsiung),                                        at 21.5% of gross
          No. 6, Jianguo 3rd Road,                                        turnover pm excl
          Kaohsiung, Taiwan                                               of service charges

B23       Shop counter on Basement 1,                     24.46   Shop    1 yr from 01.09.01          No commercial value            97.01%     No commercial value
          Dayeh Takashimaya, No. 55,                                      at 22.5% of gross
          Section 2, Jungcheng Road,                                      turnover pm. The property
          Shrlin Chiu, Taipei, Taiwan                                     with an enlarged area
                                                                          of 49.92 sq m will
                                                                          be renewed for 27 days
                                                                          at 22.5% of gross
                                                                          turnover pm

B24       Shop counter No. 016 on 10th Floor,            158.36   Shop    2 yrs from 23.11.01         No commercial value            97.01%     No commercial value
          Core Pacific City, No. 138,                                     at 21% of gross
          Section 4, Bade Road,                                           turnover pm excl
          Taipei, Taiwan                                                  of service charges

B25       Shop counter on 5th Floor,                      57.19   Shop    1 yr & 4 mths from          No commercial value            97.01%     No commercial value
          Taoyuan Tonlin, No. 61,                                         01.06.01 at 23%
          Jungjeng Road,                                                  of gross turnover pm
          Taoyuan City,                                                   excl of service charges
          Taoyuan, Taiwan

B26       Shop counter on 7th Floor,                      57.86   Shop    1 yr from 01.04.02          No commercial value            97.01%     No commercial value
          Yaoyuan Rebar, No. 19,                                          at 21% of gross
          Jungjeng Road, Taoyuan City,                                    turnover pm
          Taoyuan, Taiwan

B27       Shop counter on 9th Floor of Building A,       100.50   Shop    1yr 5 mths & 4 days         No commercial value            97.01%     No commercial value
          Chung Yo, No. 161, Section 3,                                   from 28.07.01 at 24%
          Sanmin Road, Taichung, Taiwan                                   of gross turnover pm

B28       Shop counter on Basement 1,                     56.20   Shop    1yr from 01.01.02 at 15%    No commercial value            97.01%     No commercial value
          Save & Safe (Da Li Store), No. 710,                             of gross turnover pm excl
          Section 2, Kuo Kuang Road,                                      of service charges
          Dali City, Taichung, Taiwan




                                                                         – 172 –
APPENDIX IV                                                                                                  VALUATION REPORT

                                                                                                                                                   Capital value
                                                                                                    Open market value            Interest         attributable to
                                               Floor Area                                         in existing state as at    attributable       the Group as at
Our Ref   Property                                 (sq m)   User    Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B29       Shop counter on 2nd Floor,               120.34   Shop    1yr from 01.01.02 at 15%      No commercial value            97.01%     No commercial value
          Save & Safe (Beituen Store),                              of gross turnover pm excl
          No. 370, Beituen Road,                                    of service charges
          Taichung, Taiwan

B30       Shop counter on 6th Floor,               157.04   Shop    1yr from 01.04.02 at 20%      No commercial value            97.01%     No commercial value
          Reba Idee (Chueiyang Store),                              of gross turnover pm
          No. 726, Chueiyang Road,
          Chiai, Taiwan

B31       Shop counter No. D-06,                   184.14   Shop    To be leased for 2 yrs        No commercial value            97.01%     No commercial value
          D-07 and D-08 on 2nd Floor,                               from date of operation
          The Taiwan Sugar Shopping                                 at 18% of gross turnover
          Center, Tainan, Taiwan                                    pm excl of service charges

B32       Shop counter on 5th Floor,                33.06   Shop    6 mths from 01.04.02 at 22% No commercial value              97.01%     No commercial value
          Hanshin, No. 266-1,                                       of gross turnover pm excl
          Chenggung 1st Road,                                       of service charges
          Kaohsiung, Taiwan

B33       Shop counter on 7th Floor,                76.04   Shop    6 mths from                   No commercial value            97.01%     No commercial value
          Presidend, No. 218,                                       01.04.02 at 21% to 23%
          Heping 1st Road,                                          of gross turnover pm
          Kaohsiung, Taiwan

B34       Shop cuonter on 7th Floor,                29.75   Shop    6 mths from 01.04.02          No commercial value            97.01%     No commercial value
          Ta Lie Esetan, No. 59,                                    at 21% to 30% of
          Wufu 3rd Road, Kaohsiung, Taiwan                          gross turnover pm

B35       Shop counter on Basement 1,              157.04   Shop    1 yr & 4 days from            No commercial value            97.01%     No commercial value
          Great World, No. 427,                                     27.09.01 at 19% of
          Mintzu 1st Road,                                          gross turnover pm
          Kaohsiung, Taiwan                                         to be renewed for 1 yr
                                                                    at 19% of gross
                                                                    turnover pm

B36       1st Floor, No. 123 Boai Street,           45.49   Shop    2 yrs from 01.08.02           No commercial value            97.01%     No commercial value
          Shulin City, Taipei,                                      at NT$320,000 pm excl
          Taiwan                                                    of service charges

B37       Portion of Ground Floor,                 219.85   Shop    3 years from 01.07.02         No commercial value            97.01%     No commercial value
          Nos. 209 and 211,                                         at NT$600,000 pm excl
          Wufu 2nd Road,                                            of service charges
          Kaohsiung, Taiwan

B38       Ground Floor,                            125.62   Shop    2 yrs from 04.04.02           No commercial value            97.01%     No commercial value
          No. 580 Sungshan Road,                                    at NT$55,000 pm excl
          Taipei, Taiwan                                            of service charges

B39       Ground Floor to 2nd Floor,               195.05   Shop    6 yrs from on 16.04.98        No commercial value            97.01%     No commercial value
          No. 120 Guanchian West Road,                              at NT$315,000 pm from
          Banchiau City, Taipei, Taiwan                             5th yr and 367,500 pm
                                                                    from 6th yr; the rent being
                                                                    excl of service charges

B40       Ground Floor and Basement,                93.89   Shop    4 yrs from 01.04.02           No commercial value            97.01%     No commercial value
          No. 42, Section 4, Chenggung Road,                        at NT$270,000 pm excl
          Neihu Chiu, Taipei, Taiwan                                of service charges




                                                                   – 173 –
APPENDIX IV                                                                                                       VALUATION REPORT

                                                                                                                                                        Capital value
                                                                                                         Open market value            Interest         attributable to
                                                   Floor Area                                          in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)    User     Particulars of tenancy             31 August 2002      to the Group         31 August 2002

B41       Ground Floor, No. 303 Sungjiang Road,        150.75    Shop     4 yrs from 06.05.01          No commercial value            97.01%     No commercial value
          Taipei, Taiwan                                                  at NT$250,000 pm from
                                                                          1st yr to 2nd yr and
                                                                          NT$275,000 pm
                                                                          from 3rd yr to 4th yr;
                                                                          the rent being excl
                                                                          of service charges

B42       Ground Floor to 2nd Floor,                   251.91    Shop     2 yrs from 01.06.01 at       No commercial value            97.01%     No commercial value
          No. 3 Chungching Road, Banchiau City,                           NT$48,000 pm excl
          Taipei, Taiwan                                                  of service charges

B43       The whole of                                 212.17    Shop     5 yrs from 01.09.01          No commercial value            97.01%     No commercial value
          Nos. 7 and 9, Wenchang Street,                                  at NT$750,000 pm excl
          Hsinchu, Taiwan                                                 of service charges

B44       Ground Floor,                                157.03    Shop     6 yrs from 01.06.00 at     No commercial value              97.01%     No commercial value
          No.26, Section 3, Jungshan North Road,                          NT$480,000 pm from 2nd yr,
          Taipei, Taiwan                                                  to be increased by 4% pa
                                                                          from 3rd yr to 5th yr excl
                                                                          of service charges

B45       Left Portion of Ground Floor,                106.78    Shop     3 yrs from 10.06.00          No commercial value            97.01%     No commercial value
          No.76 Sungjiang Road,                                           at NT$74,000 pm from
          Taipei, Taiwan                                                  3rd yr excl of service
                                                                          charges

B46       Ground Floor and 1st Floor,                  132.24    Shop     4 yrs from 21.06.99 at       No commercial value            97.01%     No commercial value
          No. 308 Shintai Road,                                           NT$233,333 pm excl
          Shinjuang City, Tapei, Taiwan                                   of service charges

B47       Western Portion of Ground Floor,             380.85   Office    3 yrs from 24.8.00           No commercial value            97.01%     No commercial value
          No. 1 Section 4, Kuo Chang Building,                            at NT$633,600 pm
          Nanjing East Road,                                              from 1st yr to 2nd yr
          Taipei, Taiwan                                                  to be increased by 5%
                                                                          from 3yr; the rent being
                                                                          excl of service charges

B48       Ground Floor to 3rd Floor,                    72.73    Shop     4 yrs from 01.10.99 at       No commercial value            97.01%     No commercial value
          No. 186, Section 1, Shiyuan Road,                               NT$280,000 pm excl
          and the whole of 1st Floor,                                     of service charges
          No. 5, Lane 115, Sanshuei Street,
          Wanhua Chiu Taipei, Taiwan

B49       Ground Floor,                                 42.97    Shop     3 yrs from 21.09.99 at       No commercial value            97.01%     No commercial value
          No. 69, Section 3, Beishin Road,                                NT$160,000 pm
          Shindian City, Taipei, Taiwan                                   from 3rd yr excl
                                                                          of service charges

B50       Ground Floor and Basement,                   140.83    Shop     4 yrs from 12.10.99 at       No commercial value            97.01%     No commercial value
          No. 110 Dunghu Road, Neihu Chiu,                                NT$200,000 pm
          Taipei, Taiwan                                                  from 3rd yr to 4th yr excl
                                                                          of service charges




                                                                         – 174 –
APPENDIX IV                                                                                                             VALUATION REPORT

                                                                                                                                                              Capital value
                                                                                                               Open market value            Interest         attributable to
                                                   Floor Area                                                in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)         User     Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B51       The whole of No. 14,                         208.27         Shop     6 yrs from 05.09.00 at     No commercial value               97.01%     No commercial value
          Land and Steel Building Structure,                                   NT$430,000 pm
          Swei Road, No. 578, Section Fuo Kao,                                 from 2nd yr to 3rd yr and
          Shinjuang City, Taiwan                                               NT$500,000 pm from 4th yr,
                                                                               to be increased by 6%
                                                                               from 5th yr to 6th yr;
                                                                               the rent being excl
                                                                               of service charges

B52       1st to 3rd Floors,                           287.62         Shop     4 yrs from 14.12.00           No commercial value            97.01%     No commercial value
          No. 5, Jengyi North Road,                                            at NT$133,200 pm from
          Sanchung City, Taipei, Taiwan                                        2nd yr and NT$148,000 pm
                                                                               from 3rd yr and to be
                                                                               increased by 6% on 4th yr;
                                                                               the rent being excl
                                                                               of service charges

B53       Ground Floor to 3rd Floor,                   290.93         Shop     4 yrs from 14.12.00           No commercial value            97.01%     No commercial value
          No. 7, Jengyi North Road,                                            at NT$226,800 pm
          Sanchung City, Taipei, Taiwan                                        from 2nd yr and
                                                                               NT$254,400 pm
                                                                               from 3rd yr to 4th yr

B54       Ground Floor and Basement,                    82.65         Shop     2 yrs from 21.12.00           No commercial value            97.01%     No commercial value
          No. 35, Jungjeng Road,                                               at NT$340,000 pm
          Taoyuan City, Taoyuan, Taiwan                                        from 2nd yr excl
                                                                               of service charges

B55       Ground Floor and 1st Floor,                  159.34         Shop     5 yrs from 16.10.99           No commercial value            97.01%     No commercial value
          No. 92, Section 1, Jungyang West Road,                               at NT$260,000 pm
          Jungli City, Taoyuan, Taiwan                                         from 3rd yr to 4th yr
                                                                               and NT$310,000 pm
                                                                               from 5th yr; the rent being
                                                                               excl of service charges

B56       Ground Floor and 1st Floor,                  142.52         Shop     2 yrs from 06.12.00           No commercial value            97.01%     No commercial value
          Nos. 35 and 37, Dungchian Street,                                    at NT$145,000 pm
          Hsinchu, Taiwan                                                      from 2nd yr excl
                                                                               of service charges

B57       Basement 1, No. 10, Lane 609,                281.43     Showroom     3 yrs from 16.02.00           No commercial value            97.01%     No commercial value
          Section 5, Chungshin Road,                            / Warehouse    at NT$286,037 pm
          Sanchung City,                                                       from 3rd yr excl
          Taipei, Taiwan                                                       of service charges

B58       Ground Floor and Basement,                    75.37         Shop     4 yrs from 15.04.02           No commercial value            97.01%     No commercial value
          No. 89, Section 2, Shipai Road,                                      at NT$190,000 pm excl
          Taipei, Taiwan                                                       of service charges

B59       The whole of No. 81, Boai Road,              276.38         Shop     3 yrs from 21.12.00           No commercial value            97.01%     No commercial value
          Taipei, Taiwan                                                       at NT$900,000 pm
                                                                               2nd yr; the rent to be
                                                                               increased by 3 %
                                                                               from 3rd yr excl
                                                                               of service charges

B60       The whole of                                 158.68         Shop     3 yrs from 21.02.00           No commercial value            97.01%     No commercial value
          No. 34, Section 4, Luosfu Road,                                      at NT$350,000 pm
          Taipei, Taiwan                                                       excl of service charges



                                                                              – 175 –
APPENDIX IV                                                                                              VALUATION REPORT

                                                                                                                                               Capital value
                                                                                                Open market value            Interest         attributable to
                                              Floor Area                                      in existing state as at    attributable       the Group as at
Our Ref   Property                                (sq m)   User    Particulars of tenancy           31 August 2002      to the Group         31 August 2002

B61       Ground Floor and Basement,               221.5   Shop    2 yrs from 01.05.02         No commercial value           97.01%     No commercial value
          No. 222, Section 2, Shiyi Road,                          at NT$533,000 pm excl
          Taipei, Taiwan                                           of service charges

B62       Ground Floor and 1st Floor,             110.08   Shop    3 yrs from on 01.03.01      No commercial value           97.01%     No commercial value
          No. 174, Funghe Road and                                 at NT$380,000 pm from
          Ground Floor and 1st Floor,                              2nd yr to 3rd yr excl
          No. 243, Julin Road, Yunghe City,                        of service charges
          Taipei, Taiwan

B63       Portion of Ground Floor,                231.42   Shop    4 yrs from 07.10.00         No commercial value           97.01%     No commercial value
          Nos. 39-43, Emei Street,                                 at NT$1,425,600 pm
          Taipei, Taiwan                                           from 2nd yr, NT$1,597,200
                                                                   pm from 3rd yr and
                                                                   NT$1,756,920 pm from 4th yr

B64       Ground Floor,                            42.97   Shop    3 yrs from 16.05.02         No commercial value           97.01%     No commercial value
          No. 222, Rener Road,                                     at NT$180,000 pm
          Keelung, Taiwan                                          excl of service
                                                                   charges

B65       Ground Floor,                           129.36   Shop    3 yrs from 03.04.02         No commercial value           97.01%     No commercial value
          Nos. 83, 85 and 87, Section 2,                           at NT$110,000 pm excl
          Jinan Road, Taipei, Taiwan                               of service charges

B66       Ground Floor and 1st Floor,              78.02   Shop    3 yrs from 15.05.01         No commercial value           97.01%     No commercial value
          No. 106, Section 2, Beishin Road,                        at NT$150,000 pm
          Shindian City, Taipei, Taiwan                            excl of service charges

B67       Ground Floor, No. 62,                    66.12   Shop    1 yr from 01.06.02          No commercial value           97.01%     No commercial value
          Section 5, Nanjing East Road,                            at NT$150,000 pm excl
          Taipei, Taiwan                                           of service charges

B68       Ground Floor and Basement,               112.4   Shop    5 yrs from 15.06.01 at      No commercial value           97.01%     No commercial value
          No. 120, Asian Road, Keelung,                            NT$360,000 pm to be
          Taiwan                                                   increased by 5% every
                                                                   2 yrs from 2nd yr
                                                                   to 5th yr excl
                                                                   of service charges

B69       Ground Floor to 2nd Floor,              212.91   Shop    4 yrs from 25.07.01 at      No commercial value           97.01%     No commercial value
          No. 77, Tunghua Street,                                  NT$550,000 pm from
          Taipei, Taiwan                                           1st yr to 2nd yr and
                                                                   NT$577,500 pm
                                                                   from 3rd yr to 4th yr;
                                                                   the rent being excl
                                                                   of service charges

B70       Ground Floor, No. 164,                  105.79   Shop    1 yr from 20.08.02          No commercial value           97.01%     No commercial value
          Rauhe Street, Taipei,                                    at NT$160,000 pm
          Taiwan                                                   excl of service charges




                                                                  – 176 –
APPENDIX IV                                                                                                     VALUATION REPORT

                                                                                                                                                      Capital value
                                                                                                       Open market value            Interest         attributable to
                                               Floor Area                                            in existing state as at    attributable       the Group as at
Our Ref   Property                                 (sq m)        User     Particulars of tenancy           31 August 2002      to the Group         31 August 2002

B71       Ground Floor and 1st Floor,              276.67        Shop     2 yrs from 16.08.01        No commercial value            97.01%     No commercial value
          Bu Pu Tou Building,                                             at NT$460,000 pm
          No. 41, Yingjuan Road,                                          from 1st yr and
          Danshuei Jen, Taipei,                                           at 470,000 pm
          Taiwan                                                          from 2nd yr to be
                                                                          renewed for further
                                                                          1 yr at NT$470,000;
                                                                          the rent being excl
                                                                          of service charges

B72       Ground Floor, No. 312,                    66.12        Shop     2 yrs from 08.03.01        No commercial value            97.01%     No commercial value
          Jungjeng Road, Taipei,                                          at NT$133,333 pm
          Taiwan                                                          excl of service charges

B73       Ground Floor, No. 130,                    95.87        Shop     2 yrs from 01.04.01        No commercial value            97.01%     No commercial value
          Section 3, Minchiuan East Road,                                 at NT$158,760 pm excl
          Taipei, Taiwan                                                  of service charges

B74       Pontion of No. 115                       401.34        Shop     1 yr from 16.07.02         No commercial value            97.01%     No commercial value
          Jungjeng Road,                                                  at NT$600,000 pm
          Taipei, Taiwan                                                  excl of service charges

B75       Ground Floor to 3rd Floor                290.93        Shop     6 yrs from 12.09.97        No commercial value            97.01%     No commercial value
          inculding balcony, No. 80,                                      at NT$450,000 pm
          Jungjeng Road, Taoyuan City,                                    from 5th yr excl
          Taoyuan, Taiwan                                                 of service charges

B76       Advertisment signboard,                    N/A advertisement    5 yrs from 01.01.98        No commercial value            97.01%     No commercial value
          1-3, 2nd Floor, No. 1,                            signboard     at NT$22,222 pm excl
          Fushing North Road,                                             of service charges
          Taipei, Taiwan

B77       Ground Floor and Portion of              110.08        Shop     5 yrs from 12.03.98        No commercial value            97.01%     No commercial value
          2nd Floor, No. 111,                                             at NT$400,000 pm
          Jungjeng Roadm Taoyuan City,                                    from 4th yr excl
          Taoyuan, Taiwan                                                 of service charges

B78       Ground Floor, No. 206, Section 4,        119.35        Shop     6 yrs from 01.03.98        No commercial value            97.01%     No commercial value
          Jungshiau East Road, Taipei,                                    at NT$935,870 pm and
          Taiwan                                                          to be renewed for 2 yrs
                                                                          at NT$982,663;
                                                                          the rent being excl
                                                                          of service charges

B79       1st Floor, No. 206-1,                    119.32        Shop    6 yrs from 01.04.98         No commercial value            97.01%     No commercial value
          Section 4, Jung Shiau                                          at NT$108,695 pm
          East Road, Taipei,                                             from 1st yr to 2nd yr and
          Taiwan                                                         to be increased by 5%
                                                                         from 3rd yr excl
                                                                         of service charges

B80       Ground Floor, No. 10-1,                   60.00        Shop     2 yrs from 01.06.03        No commercial value            97.01%     No commercial value
          Dadung Road, Shrlin Chiu,                                       at NT$330,000 pm excl
          Taipei, Taiwan                                                  of service charges

B81       Ground Floor, No. 58, Yunung Road,        92.56        Shop     3 yrs from 16.09.01        No commercial value            97.01%     No commercial value
          Banchiau City, Taipei, Taiwan                                   at NT$140,000 pm excl
                                                                          of service charges




                                                                         – 177 –
APPENDIX IV                                                                                                        VALUATION REPORT

                                                                                                                                                         Capital value
                                                                                                          Open market value            Interest         attributable to
                                                   Floor Area                                           in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)        User     Particulars of tenancy          31 August 2002      to the Group         31 August 2002

B82       Ground Floor and 1st Floor,                  318.92        Shop     4 yrs from 20.03.99       No commercial value            97.01%     No commercial value
          No. 134, Shintai Road,                                              at NT$350,000 pm
          Shinjuang City, Taipei,                                             from 3rd yr excl
          Taiwan                                                              of service charges

B83       Ground Floor and portion of 1st Floor,        90.09        Shop     2 yrs from 01.11.00       No commercial value            97.01%     No commercial value
          No. 15-8, Dadung Road, Shrlin Chiu,                                 at NT$440,000 pm
          Taipei, Taiwan                                                      excl of service charges

B84       Ground Floor, No. 15-13,                      66.95        Shop     2 yrs from 01.11.00       No commercial value            97.01%     No commercial value
          Dadung Road, Shrlin Chiu,                                           at NT$440,000 pm
          Taipei, Taiwan                                                      excl of service charges

B85       The whole of No. 148, Section 4,             153.39        Shop     5 yrs from 16.10.98       No commercial value            97.01%     No commercial value
          Luosfu Road, Taipei, Taiwan                                         at NT$400,000 pm
                                                                              from 4th yr and at
                                                                              NT$488, 250 pm
                                                                              from 5th yr;
                                                                              the rent being excl
                                                                              of service charges

B86       Ground Floor, No. 178,                        64.46        Shop     5 yrs from 01.03.99       No commercial value            97.01%     No commercial value
          Yumin Road, Tucheng City,                                           at NT$110,000 pm
          Taipei, Taiwan                                                      from 4th yr and at
                                                                              NT$127,339 pm
                                                                              from 5th yr;
                                                                              the rent being excl
                                                                              of service charges

B87       External Walls on 1st Floor,                   N/A advertisement    4 yrs from 01.05.99       No commercial value            97.01%     No commercial value
          No. 176 Yumin Road,                                   signboard     at NT$12,155 pm
          Tucheng City, Taipei,                                               from 4th yr
          Taiwan

B88       Ground Floor and 1st Floor,                   74.38        Shop     5 yrs from 22.08.99       No commercial value            97.01%     No commercial value
          No. 50, Jungjeng Road,                                              at NT$250,000 pm
          Hsinchu, Taiwan                                                     from 3rd yr and
                                                                              at NT$280,900 pm
                                                                              from 5th yr;
                                                                              the rent being excl
                                                                              of service charges

B89       Ground Floor, No. 132-3,                      74.71        Shop     2 yrs from 01.09.01       No commercial value            97.01%     No commercial value
          Guangming Road, Beitou Chiu,                                        at NT$135,000 pm
          Taipei, Taiwan                                                      excl of service charges

B90       Ground Floor, No. 98, Section 3,              69.09        Shop     2 yrs from 16.06.01       No commercial value            97.01%     No commercial value
          Shinglung Road, and No. 155,                                        at NT$162,750 pm
          the pontion of Section Shiuan,                                      from 2nd yr excl
          No. 934 of Construction                                             of service charges
          Wenshan Chiu, Taipei, Taiwan


B91       No. 8, Guangfu Road, Bade City,              214.89        Shop     3 yrs from 08.11.99       No commercial value            97.01%     No commercial value
          Taoyuan, Taiwan                                                     at NT$45,000 pm excl
                                                                              of service charges

B92       Ground Floor, No. 237, Section 2,             68.76        Shop     6 yrs from 01.09.00       No commercial value            97.01%     No commercial value
          Jungshan Road, Banchiau City,                                       at NT$180,000 pm
          1st Floor, No. 34, Lane 6, Chenggung Road,                          excl of service charges
          Jungli City, Taoyuan,
          Taipei, Taiwan
                                                                             – 178 –
APPENDIX IV                                                                                                       VALUATION REPORT

                                                                                                                                                        Capital value
                                                                                                         Open market value            Interest         attributable to
                                                   Floor Area                                          in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)       User     Particulars of tenancy          31 August 2002      to the Group         31 August 2002

B93       Ground Floor, No. 156 Jungjeng Road,          86.94       Shop     3 yrs from 24.11.00       No commercial value            97.01%     No commercial value
          Jungli City, Taoyuan, Taiwan                                       at NT$240,000 pm
                                                                             excl of service charges

B94       Ground to 2nd Floors, No. 67,                147.11       Shop     4 yrs from 16.04.01       No commercial value            97.01%     No commercial value
          Fushou Street, Shinjuang City,                                     at NT$240,000 pm
          Taipei, Taiwan                                                     excl of service charges

B95       Suites L310 & L310-1, Metro Walk,            113.72       Shop     3 yrs from 01.04.01 at    No commercial value            97.01%     No commercial value
          No. 543, Section 2, Jungyuan City,                                 NT$130,720 pm
          Taoyuan, Taiwan                                                    or 15% of gross
                                                                             turnover; to be
                                                                             increased 5% pa excl
                                                                             of service charges

B96       Ground Floor of No. 91 and                    58.51       Shop     6 yrs from 01.10.01       No commercial value            97.01%     No commercial value
          rear portion of Basement of                                        at NT$170,000 pm
          No. 93, Shda Road, Taipei,                                         excl of service charges
          Taiwan

B97       The whole of No. 42,                          42.97       Shop     4 yrs from 16.11.01       No commercial value            97.01%     No commercial value
          Jungjeng Road, Hsinchu,                                            at NT$500,000 pm
          Taiwan                                                             excl of service charges

B98       Ground Floor, Jingwang Market,               278.03       Shop     6 yrs from 01.03.02       No commercial value            97.01%     No commercial value
          No. 10, Lane 188,                                                  at NT$400,000 pm
          Minan West Road, Shinjuang City,                                   from 1st yr to 2nd yr,
          Taipei, Taiwan                                                     at NT$425,000 pm
                                                                             from 3rd yr to 4th yr
                                                                             and at NT$450,000 pm
                                                                             from 5th yr to 6th yr;
                                                                             the rent being excl
                                                                             of service charges

B99       Zone A on 8th Floor,                         191.58      Office    3 yrs from 01.10.99       No commercial value            97.01%     No commercial value
          International Commercial Building,                                 at NT$81,133 pm
          No. 23, Section 1, Changan East Road,                              excl of service charges
          Taipei, Taiwan

B100      10th Floor, No.105 Boai Street,              110.75   Warehouse    2 yrs from 01.08.01       No commercial value            97.01%     No commercial value
          Shulin City, Taipei, Taiwan                                        at NT$12,000 pm
                                                                             excl of service charges

B101      Units B to L on 8th Floor, No. 23,          1665.47      Office    3 yrs from 01.10.99       No commercial value            97.01%     No commercial value
          Section 1, Changan East Road,                                      at NT$680,089 pm
          Taipei, Taiwan                                                     excl of service charges

B102      1st Floor of RC Factory and                3,636.83   Warehouse    5 yrs from 08.10.01       No commercial value            97.01%     No commercial value
          the whole of steel building structure,                             at NT$920,000 pm
          No. 129, Jungshing North Road,                                     excl of service charges
          Sanchung City, Taipei, Taiwan

B103      Basement and Ground Floor,                    78.02       Shop     3 yrs from 01.05.01       No commercial value            97.01%     No commercial value
          No. 8, Fengjia Road,                                               at NT$264,444 pm
          Taichung, Taiwan                                                   to be increased by
                                                                             5% pa ; the rent being
                                                                             excl of service charges




                                                                            – 179 –
APPENDIX IV                                                                                                          VALUATION REPORT

                                                                                                                                                           Capital value
                                                                                                            Open market value            Interest         attributable to
                                                    Floor Area                                            in existing state as at    attributable       the Group as at
Our Ref   Property                                      (sq m)     User     Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B104      Ground Floor and 1st Floor,                    217.5     Shop     3 yrs from 21.05.02           No commercial value            97.01%     No commercial value
          No. 33, Jungjeng Road,                                            at NT$360,000 pm
          Fengyuan City, Taichung,                                          excl of service charges
          Taiwan

B105      Ground Floor to 2nd Floor,                    131.90     Shop/    3 yrs from 01.10.01           No commercial value            97.01%     No commercial value
          No. 28, Taiping Road,                                  Carpark    at NT$115,000 pm
          Taichung, Taiwan                                                   excl of service charges

B106      Ground Floor to 2nd Floor,                    183.49     Shop     3 yrs from 01.10.01           No commercial value            97.01%     No commercial value
          No. 28-1, Taiping Road,                                           at NT$115,000 pm
          Taichung, Taiwan                                                  excl of service charges

B107      Basement and Ground Floor,                     41.99     Shop     3 yrs from 28.10.99           No commercial value            97.01%     No commercial value
          No. 29, Jungjeng Road,                                            at NT$130,000 pm
          Taichung, Taiwan                                                  excl of service charges

B108      Ground Floor and 1st Floor,                    81.33     Shop     1 yr from 08.07.02            No commercial value            97.01%     No commercial value
          No. 7, Jungjeng Road,                                             at NT$200,000 pm
          Taichung, Taiwan                                                  excl of service charges

B109      Two buildings at Nos. 106 and 108,            119.02     Shop     4 yrs from 01.10.99           No commercial value            97.01%     No commercial value
          Minsheng S. Road, Douliou City,                                   at NT$170,000 pm
          Yunlin, Taiwan                                                    to be increased by
                                                                            NT$5,000 pa;
                                                                            the rent being excl
                                                                            of service charges

B110      Basement 1, Ground Floor and 1st Floor,       172.57     Shop     3 yrs from 04.06.01           No commercial value            97.01%     No commercial value
          No. 51-5 Yimin Road, Beigang Jen,                                 at NT$230,000 pm
          Yunlin, Taiwan                                                    from 2nd yr;
                                                                            the rent being excl
                                                                            of service charges

B111      Ground Floor to 4th Floor,                    311.43     Shop     5 yrs from 01.08.01           No commercial value            97.01%     No commercial value
          No. 57, Dungning Road,                                            at NT$190,000 pm
          Tainan, Taiwan                                                    excl of service charges

B112      The whole of No. 142, Section 4,               78.35     Shop     4 yrs from 01.09.01           No commercial value            97.01%     No commercial value
          Shimen Road, Tainan, Taiwan                                       at NT$122,222 pm
                                                                            excl of service charges

B113      Nos. 327 and 329, Jungjeag Road,              110.42     Shop     1 yr from 19.12.01            No commercial value            97.01%     No commercial value
          Tainan, Taiwan                                                    at NT$170,000 pm
                                                                            excl of service charges

B114      Ground Floor, 1st Floor and 2nd Floor,        267.79     Shop     4 yrs from 01.01.02           No commercial value            97.01%     No commercial value
          No. 384, Jungshan Road, Chiai, Taiwan                             at NT$265,000 pm
                                                                            excl of service charges

B115      No. 80, Shingjung Road, Madou Jen,            123.98     Shop     3 yrs from 16.01.02           No commercial value            97.01%     No commercial value
          Tainan, Taiwan                                                    at NT$61,000 pm
                                                                            excl of service charges

B116      Portion on Ground Floor,                      505.82     Shop     3 yrs from 01.07.02           No commercial value            97.01%     No commercial value
          1st Floor and 2nd Floor                                           at NT$400,000 pm &
          No. 220-1, Jungjeng Road,                                         NT$420,000 pm
          Tainan, Taiwan                                                    from 3rd yr; the rent being
                                                                            excl of service charges



                                                                           – 180 –
APPENDIX IV                                                                                                  VALUATION REPORT

                                                                                                                                                   Capital value
                                                                                                    Open market value            Interest         attributable to
                                                   Floor Area                                     in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)   User    Particulars of tenancy          31 August 2002      to the Group         31 August 2002

B117      Shop Counters on Ground Floor and            155.38   Shop    4 yrs from 01.09.01       No commercial value            97.01%     No commercial value
          1st Floor, Nos. 265, 267, 269 and 271,                        at 5% of gross turnover
          Jungjeng Road, Tainan, Taiwan                                 and not less than
                                                                        NT$540,000 pm excl
                                                                        of service charges

B118      Ground Floor, No. 51, Yanping Road,          105.79   Shop    2 yrs from 01.11.01       No commercial value            97.01%     No commercial value
          Shinying City, Tainan, Taiwwan                                at NT$100,000 pm
                                                                        excl of service charges

B119      1st Floor, No. 64, Section 2,                130.75   Shop    3 yrs from 01.09.01       No commercial value            97.01%     No commercial value
          Mintzu Road, Tainan,                                          at NT$130,000 pm
          Taiwan                                                        excl of service charges

B120      The whole of No. 89,                         182.49   Shop    5 yrs from 16.06.00       No commercial value            97.01%     No commercial value
          Tzuoyingda Road,                                              at NT$120,000 pm
          Kaohsiung, Taiwan                                             from 3rd yr,
                                                                        NT$125,000 pm
                                                                        from 4th yr &
                                                                        NT$130,000 pm from
                                                                        5th yr; the rent being
                                                                        excl of service charges

B121      The whole of No. 91,                         182.49   Shop    5 yrs from 16.06.00       No commercial value            97.01%     No commercial value
          Tzuoyingda Road,                                              at NT$120,000 pm
          Kaohsiung, Taiwan                                             from 3rd yr,
                                                                        NT$125,000 pm
                                                                        from 4th yr &
                                                                        NT$130,000 pm from
                                                                        5th yr; the rent being
                                                                        excl of service charges

B122      The whole of No. 11,                         128.93   Shop    5 yrs from 01.08.00       No commercial value            97.01%     No commercial value
          Jianguo 3rd Road,                                             at NT$780,000 pm from
          Kaohsiung, Taiwan                                             2nd yr; the rent being
                                                                        excl of service charges

B123      The whole of No. 209,                         74.39   Shop    3 yrs from 06.08.00       No commercial value            97.01%     No commercial value
          Sanduo 3rd Road,                                              at NT$120,000 pm
          Kaohsiung, Taiwan                                             excl of service charges

B124      Ground Floor, No. 358,                        66.12   Shop    3 yrs from 10.09.00       No commercial value            97.01%     No commercial value
          Wanjung Street, Kaohsiung,                                    at NT$77,777 pm
          Taiwan                                                        excl of service charges

B125      Basement, Ground Floor and 1st Floor,        204.97   Shop    1 yr from 26.10.01        No commercial value            97.01%     No commercial value
          No. 113, Dayung Road, Kaohsiung,                              at NT$120,000 pm
          Taiwan                                                        excl of service charges

B126      Ground Floor to 2nd Floor,                   399.70   Shop    3 yrs from 16.11.99       No commercial value            97.01%     No commercial value
          No. 96, Section 3, Sanmin Road                                at NT$450,000 pm
          Taichung, Taiwan                                              excl of service charges

B127      Basement, Ground Floor,                      290.93   Shop    2 yrs from 01.07.01       No commercial value            97.01%     No commercial value
          1st Floor and 2nd Floor,                                      at NT$120,000 pm
          No. 102, Jiguang Street,                                      excl of service charges
          Taichung, Taiwan




                                                                       – 181 –
APPENDIX IV                                                                                                   VALUATION REPORT

                                                                                                                                                    Capital value
                                                                                                     Open market value            Interest         attributable to
                                                  Floor Area                                       in existing state as at    attributable       the Group as at
Our Ref   Property                                    (sq m)   User    Particulars of tenancy            31 August 2002      to the Group         31 August 2002

B128      Basement, Ground Floor and 1st Floor,       331.26   Shop    5 yrs & 11 mths             No commercial value            97.01%     No commercial value
          No. 428, Fushing Road, Taichung,                             from 01.08.01 at
          Taiwan                                                       NT$450,000 pm &
                                                                       NT$475,000 pm from
                                                                       35th mths; the rent being
                                                                       excl of service charges

B129      No. 9, Datung Road, Douliou City,            72.73   Shop    2 yrs from 26.07.02         No commercial value            97.01%     No commercial value
          Yunlin, Taiwan                                               at NT$90,000 pm
                                                                       excl of service charges

B130      No. 146, Junghua Road,                      100.50   Shop    5 yrs from 01.10.01         No commercial value            97.01%     No commercial value
          Changhua City, Changhua,                                     at NT$230,000 pm &
          Taiwan                                                       NT$250,000 pm from
                                                                       3rd yr; the rent being
                                                                       excl of service charges

B131      Shop Counters on Ground Floor and           221.60   Shop    4 yrs 1 mth & 25 days       No commercial value            97.01%     No commercial value
          1st Floor, No. 111, Section 2,                               from 16.04.02 at
          Gungyi Road, Taichung, Taiwan                                NT$570,000 pm,
                                                                       NT$600,000 pm
                                                                       from 3rd yr &
                                                                       NT$617,000 pm
                                                                       from 4th yr

B132      Shop Counters on 1st Floor, No. 111,        303.79   Shop    4 yrs 1 mth & 25 days       No commercial value            97.01%     No commercial value
          Section 2, Gungyi Road, Taichung,                            from 16.04.02 at
          Taiwan                                                       NT$570,000 pm,
                                                                       NT$600,000 pm
                                                                       from 3rd yr &
                                                                       NT$617,000 pm
                                                                       from 4th yr

B133      The whole of No. 281-1, Section 1,          126.29   Shop    5 yrs from 10.01.00         No commercial value            97.01%     No commercial value
          Taijunggang Road, Taichung,                                  at NT$280,000 pm
          Taiwan                                                        from 3rd yr;
                                                                       the rent being excl
                                                                       of service charges

B134      No. 75-1, Section 2, Jungshan Road,         122.32   Shop    2 yrs from 15.12.00         No commercial value            97.01%     No commercial value
          Tantz Shiang, Taichung, Taiwan                               at NT$150,000 pm

B135      Two buildings at Nos. 240 and               283.72   Shop    5 yrs from 25.06.02         No commercial value            97.01%     No commercial value
          242 Section 2, Taiping Road,                                 at NT$80,000 pm &
          Tsautuen Jen, Nantou,                                        NT$84,000 pm from 4th yr;
          Taiwan                                                       the rent being excl
                                                                       of service charges

B136      No. 324, Guangming Street,                   76.92   Shop    3 yrs from 01.08.02         No commercial value            97.01%     No commercial value
          Yuanlin Jen, Changhua,                                       at NT$30,000 pm
          Taiwan                                                       excl of service charges

B137      The whole of No. 689,                        95.87   Shop    3 yrs from 10.01.00         No commercial value            97.01%     No commercial value
          Wujia 2nd Road,                                              at NT$95,000 pm
          Fengshan City,                                               from 3rd yr;
          Kaohsiung,                                                   the rent being excl
          Taiwan                                                       of service charges




                                                                      – 182 –
APPENDIX IV                                                                                                            VALUATION REPORT

                                                                                                                                                             Capital value
                                                                                                              Open market value            Interest         attributable to
                                                  Floor Area                                                in existing state as at    attributable       the Group as at
Our Ref   Property                                    (sq m)         User     Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B138      The whole of No. 245,                        65.79         Shop     3 yrs from 22.06.02           No commercial value            97.01%     No commercial value
          Tzuoyingda Road,                                                    at NT$111,111 pm
          Kaohsiung, Taiwan                                                   excl of service charges

B139      Ground Floor, No. 72-1,                     155.38         Shop     3 yrs from 02.04.02           No commercial value            97.01%     No commercial value
          Dayung Road, Kaohsiung,                                             at NT$300,000 pm
          Taiwan                                                              excl of service charges

B140      Unit B on Ground Floor,                     482.51         Shop     3 yrs from 01.10.00           No commercial value            97.01%     No commercial value
          No. 146, Junghua 3rd Road,                                          at NT$306,495 pm
          Kaohsiung, Taiwan                                                   to be increased by
                                                                              5% pa; the rent being
                                                                              excl of service charges

B141      Portions of Ground Floor and                185.14        Shop/     5 yrs from 01.02.98           No commercial value            97.01%     No commercial value
          1st Floor, Nos. 319, 321 and                         Residential    at NT$325,500 pm
          323 Minsheng Road,                                                  from the 4th yr;
          Pingtung City,                                                      the rent being excl
          Pingtung, Taiwan                                                    of service charges

B142      Ground Floor, No. 156,                       47.61         Shop     3 yrs from 01.06.00           No commercial value            97.01%     No commercial value
          Jungjeng 2nd Road,                                                  at NT$270,000 pm
          Kaohsiung, Taiwan                                                   excl of service charges

B143      Shop counter on 3rd Floor,                   34.71         Shop     6 mths from 01.03.02          No commercial value            97.01%     No commercial value
          Dayeh Takashimaya, No. 55,                                          at 24.5% to 28.5%
          Section 2, Jungcheng Road,                                          of gross turnover pm
          Shrlin Chiu, Taipei, Taiwan                                         excl of service charges

B144      Shop counters 007 and 008                    64.14         Shop     2 yrs from 23.11.01           No commercial value            97.01%     No commercial value
          on Basement 2, Core Pacific City,                                   at 21% of gross
          No. 138, Section 4, Bade Road,                                      turnover pm excl
          Taipei, Taiwan                                                      of service charges

B145      Shop counter on 11th Floor,                  26.45         Shop     1 yr & 6 mths from            No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Taipei Station),                               01.04.01 at 24% to 28%
          No. 66, Section 1,                                                  of gross turnover pm.
          be Jungshiau West Road,                                             renewed for 6 mths at 24%
          Taipei, Taiwan                                                      to 28% of gross turnover
                                                                              pm excl of service charges

B146      Shop counter on 5th Floor,                   52.90         Shop     1 yr & 4 mths from            No commercial value            97.01%     No commercial value
          Taoyuan Tonlin, No. 61,                                             01.06.01 at 24%
          Jungjeng Road, Taoyuan City,                                        of gross turnover pm
          Taoyuan, Taiwan                                                     excl of service charges

B147      Shop counter on 5th Floor,                   33.06         Shop     6 mths from 16.03.02          No commercial value            97.01%     No commercial value
          Jungli Sogo, No. 357,                                               at 21% to 26% of gross
          Wenhua Road, Jungli City,                                           turnover pm excl
          Taoyuan, Taiwan                                                     of service charges

B148      Shop counter on 7th Floor,                   59.18         Shop     1 yr from 16.09.01 at 24%     No commercial value            97.01%     No commercial value
          Taichung Sogo, No. 2,                                               of gross turnover pm.
          Mintzu Road, Hsinchu,                                               The property with an
          Taiwan                                                              enlarged area of 63.61 sqm
                                                                              will be renewed for 1 yr at
                                                                              24% of gross turnover pm
                                                                              excl of service charges




                                                                             – 183 –
APPENDIX IV                                                                                                   VALUATION REPORT

                                                                                                                                                    Capital value
                                                                                                     Open market value            Interest         attributable to
                                                 Floor Area                                        in existing state as at    attributable       the Group as at
Our Ref   Property                                   (sq m)   User    Particulars of tenancy             31 August 2002      to the Group         31 August 2002

B149      Shop counter on 9th Floor,                  45.62   Shop    6 mths from 01.04.02         No commercial value            97.01%     No commercial value
          Kuangsan Sogo, No. 299,                                     at 25% of gross
          Section 1, Taijunggang Road,                                turnover pm excl
          Taichung, Taiwan                                            of service charges

B150      Shop counter on 7th Floor,                  47.61   Shop    6 mths from 01.04.02         No commercial value            97.01%     No commercial value
          Presidenk, No. 218 Heping 1st Road,                         at 21% to 26% of gross
          Lingya Chiu, Kaohsiung, Taiwan                              turnover pm excl
                                                                      of service charges

B151      Shop counter on Basement 1,                 24.46   Shop    1 yr from 01.10.01           No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi,                                        at 24% of gross
          No. 213 Sanduo 3rd Road,                                    turnover pm excl
          Lingya Chiu, Kaohsiung,                                     of service charges
          Taiwan

B152      Shop counter on 1st Floor, Cannes,          47.94   Shop    1 yr from 21.05.02           No commercial value            97.01%     No commercial value
          No. 161 Shchiuan 1st Road,                                  at 20% of gross revenue pm
          Sanmin Chiu, Kaohsiung,
          Taiwan

B153      Shop counter on 5th Floor,                  33.06   Shop    9 mths & 17 days             No commercial value            97.01%     No commercial value
          Shinkong Mitsukoshi (Hsienyi),                              from 15.06.02 at 27%
          No. 11, Sungshou Road,                                      of gross sales pm excl
          Shinyi Chiu, Taipei,                                        of service charges
          Taiwan

B154      Portion of 2nd Floor, Minsheng II,          92.57   Shop    4 yrs from 01.01.00          No commercial value            97.01%     No commercial value
          No. 122, Section 5,                                         at NT$70,000 pm from
          Minsheng East Road,                                         2nd yr and to be
          Taipei, Taiwan                                              increased by 5% pa
                                                                      from 3rd yr; the
                                                                      rent being excl
                                                                      of service charges

B155      Ground Floor and 1st Floor,                184.87   Shop    4 yrs from 21.03.00          No commercial value            97.01%     No commercial value
          No. 207 Julin Road, Yunghe City,                            at NT$185,000 pm
          Taipei, Taiwan                                              from 3rd yr and
                                                                      NT$195,000 pm from
                                                                      4th yr; the rent being
                                                                      excl of service charges

B156      Ground Floor, No. 92, Section 2,            49.92   Shop    4 yrs from 09.04.00          No commercial value            97.01%     No commercial value
          Wuchang Street, Taipei, Taiwan                              at NT$300,000 pm
                                                                      from 3rd and 4th yr;
                                                                      the rent being excl
                                                                      of service charges

B157      The Whole of No. 172, Jungjeng Road,        56.86   Shop    3 yrs from 16.05.00          No commercial value            97.01%     No commercial value
          Tainan, Taiwan                                              at NT$145,000 pm
                                                                      from 3rd yr
                                                                      excl of service charges




                                                                     – 184 –
APPENDIX IV                                                                                                    VALUATION REPORT

                                                                                                                                                     Capital value
                                                                                                      Open market value            Interest         attributable to
                                                   Floor Area                                       in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)   User    Particulars of tenancy            31 August 2002      to the Group         31 August 2002

B158      Portion of Ground Floor                       72.07   Shop    6 yrs from 03.09.00        No commercial value             97.01%     No commercial value
          (Shop front to mechanical room),                              at NT$240,000 pm
          No. 72 Jungjeng Road, Hsinchu,                                from 1st and 2nd yr,
          Taiwan                                                        NT$150,000 pm from 3rd yr,
                                                                        NT$252,000 pm from
                                                                        4th yr and NT$264,600 pm
                                                                        from 5th and 6th yr;
                                                                        the rent being excl
                                                                        of service charges

B159      Basement and Ground Floor,                   115.71   Shop    6 yrs & 1 mth               No commercial value            97.01%     No commercial value
          No. 27 Dunghu Road,                                           from 01.03.01 at
          Neihu Chiu, Taipei,                                           NT$180,000 pm
          Taiwan                                                        excl of service charges

B160      Ground Floor, No. 20 Fushing Road,            81.99   Shop    4 yrs from 01.03.01         No commercial value            97.01%     No commercial value
          Fengyuan City, Taichung, Taiwan                               at NT$190,000 pm
                                                                        excl of service charges

B161      Basement and Ground Floor, No. 54,            81.00   Shop    3 yrs from 08.05.01         No commercial value            97.01%     No commercial value
          Section 4, Chenggung Road, Neihu,                             at NT$240,00 pm
          Taipei, Taiwan                                                from 2nd yr and
                                                                        NT$250,000 pm
                                                                        from 3rd yr; the
                                                                        rent being excl
                                                                        of service charges

B162      Shop L306-2 on 3rd Floor, Metro Walk,         85.36   Shop    3 yrs from 01.04.01         No commercial value            97.01%     No commercial value
          No. 543, Section 2, Jungyuan Road,                            at NT$105,862 pm or
          Jungli City, Taoyuan, Taiwan                                  17% of the gross
                                                                        turnover pm and to be
                                                                        increased by 5% pa,
                                                                        whichever is the greater;
                                                                        the rent being excl
                                                                        of service charges

B163      Ground Floor and 1st Floor, No. 281-3,       116.37   Shop    4 yrs from 08.06.01         No commercial value            97.01%     No commercial value
          Section 1, Taijunggang Road, Taichung,                        at NT$190,000 pm
          Taiwan                                                        from 2nd, 3rd
                                                                        and 4th yr;
                                                                        the rent
                                                                        being excl of
                                                                        service charges

B164      Ground Floor and 1st Floor,                   97.53   Shop    4 yrs from 05.06.01         No commercial value            97.01%     No commercial value
          No. 178, Jungjeng Road,                                       at NT$133,333 pm from
          Shindian City, Taipei,                                        1st and 2nd yr and
          Taiwan                                                        NT$144,444 pm from
                                                                        3rd and 4th yr; the rent
                                                                        being excl of
                                                                        service charges

B165      Ground Floor, No. 244, Section 3,             78.35   Shop    3 yrs from 01.04.02         No commercial value            97.01%     No commercial value
          Jungshiau East Road, Taipei,                                  at NT$120,000 pm
          Taiwan                                                        excl of service charges




                                                                       – 185 –
APPENDIX IV                                                                                                   VALUATION REPORT

                                                                                                                                                    Capital value
                                                                                                     Open market value            Interest         attributable to
                                                Floor Area                                         in existing state as at    attributable       the Group as at
Our Ref   Property                                  (sq m)   User    Particulars of tenancy              31 August 2002      to the Group         31 August 2002

B166      Ground Floor, No. 19-3,                    74.71   Shop    3 yrs & 15 days               No commercial value            97.01%     No commercial value
          Tunghua Street,                                            from 01.06.02
          Taipei, Taiwan                                             at NT$210,000 pm partly
                                                                     excl of service charges

B167      1st Floor, No. 148 Junghua Road,          149.44   Shop    4 yrs from 21.06.02           No commercial value            97.01%     No commercial value
          Changhua City, Changhua, Taiwan                            at NT$150,000 pm
                                                                     excl of service charges



Group C – Properties leased by the Group in Singapore

                                                                                                                                                    Capital value
                                                                                                     Open market value            Interest         attributable to
                                                Floor Area                                         in existing state as at    attributable       the Group as at
Our Ref   Property                                  (sq m)   User    Particulars of tenancy              31 August 2002      to the Group         31 August 2002

C1        Unit #01-14, People’s Park Complex,        37.16   Shop    3 yrs from 15.11.99           No commercial value            97.01%     No commercial value
          1 Park Road, Singapore 059108                              at S$10,000 pm from
                                                                     3rd yr incl
                                                                     of service charges
                                                                     but excl of GST

C2        Unit #01-28, 3 Simei Street 6,             61.97   Shop    3 yrs from 26.11.99           No commercial value            97.01%     No commercial value
          Eastpoint Mall, Singapore                                  at S$9,671.50 from
          528833                                                     3rd yr excl of
                                                                     service charges

C3        Units #03-12/13/14, 3rd Floor,            108.00   Shop    3 yrs from 24.11.99           No commercial value            97.01%     No commercial value
          Wisma Atria, 435 Orchard Road,                             at S$20,925.18 pm
          Singapore 238877                                           from 3rd yr or 18%
                                                                     of gross sales turnover pm,
                                                                     whichever is the greater;
                                                                     the rent being excl of
                                                                     service charges and GST

C4        Unit #02-30 Plaza Singapura,              108.00   Shop    3 yrs from 03.12.99            No commercial value           97.01%     No commercial value
          68 Orchard Road,                                           at S$17,437.68 pm
          Singapore 238839                                           from 3rd yr or 15% of the
                                                                     gross sales pm for a turnover
                                                                     period less basic rent for the
                                                                     same turnover period;
                                                                     the rent being excl of
                                                                     service charges and GST




                                                                    – 186 –
APPENDIX IV                                                                                                             VALUATION REPORT

                                                                                                                                                              Capital value
                                                                                                               Open market value            Interest         attributable to
                                                   Floor Area                                                in existing state as at    attributable       the Group as at
Our Ref   Property                                     (sq m)         User     Particulars of tenancy              31 August 2002      to the Group         31 August 2002

C5        Units #01-20/23, Lucky Plaza,                 61.97         Shop     Both 3 yrs from 01.01.00         No commercial value         97.01%     No commercial value
          304 Orchard Road,                                                    respectively at S$16,000
          Singapore 288863                                                     pm and at S$17,677.82 pm;
                                                                               the rent for shop 20 being
                                                                               incl of service charges
                                                                               while that of shop 23
                                                                               being excl and
                                                                               both to be renewed for
                                                                               3 yrs from 01.01.03 respectively
                                                                               at S$17,600 pm and at
                                                                               S$17,677.82 pm; the rent
                                                                               for shop 20 being incl
                                                                               of service charges but excl
                                                                               of GST while that of shop
                                                                               23 being excl of service
                                                                               charges and GST

C6        Block 709, 8 Ang Mo Kio Avenue               120.77        Shop/     3 yrs from 01.12.99            No commercial value           97.01%     No commercial value
          #01-2605, Singapore 560709                            Residential    at S$21,000 pm
                                                                               incl of service charges but
                                                                               excl of GST

C7        Unit #02-20, Centrepoint,                     99.00         Shop     3 yrs from 01.02.00            No commercial value           97.01%     No commercial value
          176 Orchard Road, Singapore                                          at S$18,000 pm
                                                                               excl of service
                                                                               charges and GST

C8        Units #01-13/14, IMM Building,               121.33         Shop     2 yrs from 01.11.00            No commercial value           97.01%     No commercial value
          2 Jurong East Street 21,                                             at S$24,552.80 pm
          Singapore 609601                                                     to be renewed for
                                                                               2 yrs at S$24,552.80 pm
                                                                               excl of service charges
                                                                               and GST

C9        Block 178 Toa Payoh Central                   115.2         Shop     3 yrs from 01.11.00            No commercial value           97.01%     No commercial value
          #01-214, Singapore 310178                                            at S$17,500 pm
                                                                               incl of service
                                                                               charges but excl of GST

C10       Unit #02-06 and Part of Second Storey,       102.94         Shop     3 yrs from 01.03.01            No commercial value           97.01%     No commercial value
          Block 205, Heartland Mall,                                           at S$14,404 pm
          21 Hougang Street, #01-133/135 and                                   excl of service
          #03-00, Singapore 530205                                             charges and GST

C11       Units #01-17A/B, Great World City,            75.62         Shop     3 yrs from 18.6.01             No commercial value           97.01%     No commercial value
          1 Kim Seng Promenade,                                                at S$11,233.2 pm
          Singapore 237994                                                     excl of service
                                                                               charges and GST

C12       Block 442, 3 Clementi Avenue                 134.71        Shop/     3 yrs from 01.09.01            No commercial value           97.01%     No commercial value
          #01-91, Singapore 120442                              Residential    at S$26,800 pm
                                                                               excl of service
                                                                               charges and GST




                                                                              – 187 –
APPENDIX IV                                                                                                          VALUATION REPORT

                                                                                                                                                           Capital value
                                                                                                            Open market value            Interest         attributable to
                                                  Floor Area                                              in existing state as at    attributable       the Group as at
Our Ref   Property                                    (sq m)         User     Particulars of tenancy            31 August 2002      to the Group         31 August 2002

C13       Block 208, New Upper Changi                 134.71        Shop/     3 yrs from 15.09.01         No commercial value            97.01%     No commercial value
          Road #01-687, Singapore 460208                       Residential    at S$26,800 pm
                                                                              excl of service
                                                                              charges and GST

C14       Units #03-46/47, Thomson Plaza,             111.48         Shop     3 yrs from 12.10.01         No commercial value            97.01%     No commercial value
          301 Upper Thomson Road,                                             at S$17,760 pm
          Singapore 574408                                                    excl of service
                                                                              charges and GST

C15       Part of Unit #01-510, Block 190,             92.90         Shop     3 yrs from 29.10.01         No commercial value            97.01%     No commercial value
          Toa Payoh Centre 6,                                                 at S$30,000 pm
          Singapore 310190                                                    incl of service
                                                                              charges but excl of GST

C16       Units #01-01/02, Tampines Mall,              45.99         Shop     3 yrs from 01.12.01         No commercial value            97.01%     No commercial value
          4 Tampines Central 5,                                               at S$13,368.98 pm + 1%
          Singapore 529510                                                    of the gross sales pm;
                                                                              the rent being excl of
                                                                              service charges and GST

C17       Units #01-34/35, Turf City,                 135.17         Shop     2 yrs 7 mths & 25 days      No commercial value            97.01%     No commercial value
          200 Turf Club Road,                                                 from 01.01.02 at
          Singapore 287994                                                    S$23,832 pm incl
                                                                              of service charges
                                                                              but excl of GST

C18       Unit #B1-03, Lot 1 Shoppers’ Mall,           51.00         Shop     3 yrs from 02.02.02         No commercial value            97.01%     No commercial value
          21 Chua Chu Kang Avenue 4,                                          at S$11,968.2 pm
          Singapore 689812                                                    excl of service charges
                                                                              and GST

C19       Unit #02-43, 14 Scotts Road,                150.97         Shop     2 yrs from 18.04.02         No commercial value            97.01%     No commercial value
          Far East Plaza, Singapore 228213                                    at S$27,625 pm
                                                                              excl of service
                                                                              charges and GST

C20       Units #02-104 to 108, Marina Square,        207.00         Shop     3 yrs from 01.06.02         No commercial value            97.01%     No commercial value
          6 Raffles Boulevard, Singapore 039594                               at S$21,389.31 pm or 12%
                                                                              of the gross sales pm,
                                                                              whichever is the greater;
                                                                              the rent being excl of
                                                                              service charges and GST

C21       Unit #B1-30, CityLink Mall,                  73.02         Shop     3 yrs from 01.06.02         No commercial value            97.01%     No commercial value
          1 Raffles Link, Singapore 039393                                    at S$10,414.50 pm or 14%
                                                                              of the net turnover pm,
                                                                              whichever is the greater;
                                                                              the rent being excl of
                                                                              service charges

C22       Units #01-09/10, The Majestic,               58.25         Shop     3 yrs from around           No commercial value            97.01%     No commercial value
          80 Eu Tong Sen Street,                                              the end of 2002 at
          Singapore 059810                                                    S$17,244.40 pm
                                                                              excl of service
                                                                              charges and GST




                                                                             – 188 –
APPENDIX IV                                                                                                            VALUATION REPORT

                                                                                                                                                             Capital value
                                                                                                              Open market value            Interest         attributable to
                                                    Floor Area                                              in existing state as at    attributable       the Group as at
Our Ref   Property                                      (sq m)         User     Particulars of tenancy            31 August 2002      to the Group         31 August 2002

C23       Units #01-43/44, Compass Point,               105.67         Shop     3 yrs from 01.08.02         No commercial value            97.01%     No commercial value
          1 Sengkang Square, Singapore 545078                                   at S$36,160 pm
                                                                                excl of service
                                                                                charges and GST

C24       Unit #01-03/04, Metro Department Store,        46.45         Shop     1 yr 4 mths & 15 days       No commercial value            97.01%     No commercial value
          Century Square, 2 Tampines Central 5,                                 from 17.05.02 at S$10,000
          Singapore 529509                                                      pm or 25% to 30% of gross
                                                                                sales pm, whichever is
                                                                                the greater

C25       Unit #02-30, Metro Department Store,           46.45         Shop     10 mths & 15 days           No commercial value            97.01%     No commercial value
          Causeway Point, 1 Woodland Square,                                    from 17.05.02 at S$9,000
          Singapore 738099                                                      pm or 25% to 30% of gross
                                                                                sales pm, whichever is
                                                                                the greater

C26       Unit #02-02, Lam Leong Building,              362.32       Office     3 yrs from 15.10.99 at      No commercial value            97.01%     No commercial value
          61 Lorong 17 Geylang,                                                 S$5,066.10 pm
          Singapore 388574                                                      excl of service charges

C27       Unit #02-02, AIS Industrial Building,         990.99      Office/     3 yrs from 07.02.02         No commercial value            97.01%     No commercial value
          103 Kallang Avenue, Singapore 339504                   warehouse      at S$8,000.25 pm
                                                                                excl of service charges
                                                                                and GST

C28       Unit #06-01A, Lam Leong Building,              92.90   Warehouse/     1 yr 5 mths & 15 days       No commercial value            97.01%     No commercial value
          61 Lorong 17 Geylang,                                  showroom/      from 01.05.01 at
          Singapore 388574                                            office    S$1,400 pm
                                                                                incl of service
                                                                                charges but excl of GST

C29       Unit #01-12, Hougang Festival Market,          41.99         Shop     3 yrs from 01.11.02         No commercial value            97.01%     No commercial value
          1 Hougang Street 91, Singapore 538692                                 at S$8,136 pm
                                                                                incl of service charges
                                                                                but excl of GST

C30       Units #01-45/46, 1 Maritime Square,            82.97         Shop     3 yrs from the end of       No commercial value            97.01%     No commercial value
          World Trade Centre, Singapore 099253                                  yr 2001 at S$21,434.47 pm
                                                                                incl of service
                                                                                charges but excl of GST

C31       Unit #01-16, 3 Simei Street 6,                 81.01         Shop     3 yrs & 17 days from        No commercial value            97.01%     No commercial value
          Eastpoint Mall, Singapore 528833                                      15.12.02 at S$12,644 pm
                                                                                incl of service
                                                                                charges but excl of GST




                                                                               – 189 –
APPENDIX IV                                                                                                    VALUATION REPORT


Group D – Properties leased by the Group in Korea

                                                                                                                                                     Capital value
                                                                                                      Open market value            Interest         attributable to
                                               Floor Area                                           in existing state as at    attributable       the Group as at
Our Ref    Property                                (sq m)        User     Particulars of tenancy          31 August 2002      to the Group         31 August 2002

D1         60-15, Kasan-Dong, Kumchon-ku,        2,432.43   Warehouse/    2 yrs from 12.04.02       No commercial value            67.91%     No commercial value
           Seoul, Korea                                         Office    at W27,740,000 pm
                                                                          sharing mgt expense &
                                                                          taxes

D2         60-69, Kasan-Dong, Kumchon-ku,        1,266.20   Warehouse     3 yrs from 01.01 at       No commercial value            67.91%     No commercial value
           Seoul, Korea                                                   W8,740,000 pm sharing
                                                                          mgt expense & taxes

D3         459-21, Kasan-Dong, Kumchon-ku,         946.65   Warehouse     1 yr from 31.10.01 at     No commercial value            67.91%     No commercial value
           Seoul, Korea                                                   W6,555,000 pm sharing
                                                                          mgt expense & taxes

D4         256-7, Bujyun-2Dong, Busanjin-ku,       149.94   Warehouse     2 yrs from 25.11.01 at    No commercial value            67.91%     No commercial value
           Busan, Korea                                                   W1,200,000 pm plus tax
                                                                          on value added separate
                                                                          way burden


Note:     As at the Latest Practicable Date, the interest attributable to the Group in the property interests in Korea has been
          changed to 89.25%.

Group E – Property leased by the Group in The United States of America

                                                                                                                                                     Capital value
                                                                                                      Open market value            Interest         attributable to
                                               Floor Area                                           in existing state as at    attributable       the Group as at
Our Ref    Property                                (sq m)        User     Particulars of tenancy          31 August 2002      to the Group         31 August 2002

E1         Suite 250 on 2nd Floor,                 527.96       Office    5 yrs and 1 mth from      No commercial value            97.01%     No commercial value
           Poway Heights Corporate Plaza,                                 01.02.01 at US$8,525 pm
           13025 Danielson Street, Poway,                                 excl of service charges
           CA 92064, USA




                                                                         – 190 –
APPENDIX IV                                                                                                                      VALUATION REPORT


Group F – Properties leased by the Group in Malaysia

                                                                                                                                                                            Capital value
                                                                                                                       Open market value                  Interest         attributable to
                                                     Floor Area                                                      in existing state as at          attributable       the Group as at
Our Ref     Property                                     (sq m)         User        Particulars of tenancy                 31 August 2002            to the Group         31 August 2002

F1          No. 5, Jalan PJS, 11/18,                     278.71       Office/       1 yr from 01.08.02 at              No commercial value                 97.01%     No commercial value
            Bandar Sunway, 46150                                   Showroom         RM2,800 pm excl of
            Petaling Jaya, Selangor Darul                                           service charges
            Ehsan, Malaysia


F2          G036, Ground Floor, Sg Wang                   57.69          Shop       2 yrs & 2 mths from                No commercial value                 97.01%     No commercial value
            Plaza 55100, Kuala Lumpar,                                              01.08.02 at RM16,000 pm,
            Malaysia                                                                RM18,000 pm from 15th mth &
                                                                                    RM20,000 pm from 27th mth;
                                                                                    the rent being excl of service
                                                                                    charges



Group G – Properties leased by the Group and sub-leased to third parties in Taiwan

                                                                                                                                                                                  Capital
                                             Floor                                                                           Open market value              Interest   value attributable
Our                                           Area            Particulars of              Particulars of                        in existing state       attributable        to the Group
Ref   Pr operty                             (sq m)     User   Head tenancy                Sub-tenancy                      as at 31 August 2002        to the Group as at 31 August 2002


G1    Ground Floor and 1st Floor,           194.39    Shop    4 yrs from 25.07.99         Portion of the property           No commercial value              97.01%   No commercial value
      No. 293, Section 3,                                     at NT$750,000 pm            is sub-leased for 3 yrs
      Luosfu Road, Taipei, Taiwan                             from 1st yr to 3rd yr       from 25.12.99 at
                                                              and NT$826,875 from         NT$300,000 pm excl
                                                              4th yr: the rent being      of service charges
                                                              excl of service charges

G2    Ground Floor, No. 55,                  75.40    Shop    2 yrs from 15.12.01         3 yrs from 22.06.00               No commercial value              97.01%   No commercial value
      Tianmu West Road,                                       at NT$250,000 pm excl       at NT$278,250 pm
      Taipei, Taiwan                                          of service charges          from 2nd yr excl
                                                                                          of service charges

G3    Ground Floor, No. 92,                 102.48    Shop    6 yrs from 22.04.97         Portion of the property       No commercial value                  97.01%   No commercial value
      Section 1, Nanjing East Road,                           at NT$805,000 pm            is sub-leased for 6 yrs
      Taipei, Taiwan                                          from 4th yr                 from 22.04.97 at
                                                                                          NT$271,954 pm from
                                                                                          6th yr excl of service
                                                                                          charges. Portion of the
                                                                                          property is sub-leased to
                                                                                          another third party for 3 yrs
                                                                                          from 25.05.00 at NT$220,000
                                                                                          pm and to be increased by 5%
                                                                                          from 3rd yr; the rent being
                                                                                          excl of service charges

G4    Ground Floor, No. 3,                  104.46    Shop    5 yrs from 01.01.98         Portion of the property is           No commercial value           97.01%   No commercial value
      Fushing North Road,                                     at NT$900,000 pm            sub-leased for 5 yrs from
      Taipei, Taiwan                                          from 5th yr excl of         01.01.98 at NT$249,673 pm
                                                              service charges             from 5th yr excl of service charges.
                                                                                          Portion of the property is
                                                                                          sub-leased to another third
                                                                                          party for 2 yrs & 2 mths
                                                                                          from 01.11 at NT$304,500
                                                                                          pm excl of service charges




                                                                                – 191 –
APPENDIX IV                                                                                                                   VALUATION REPORT

                                                                                                                                                                             Capital
                                           Floor                                                                          Open market value            Interest   value attributable
Our                                         Area               Particulars of            Particulars of                      in existing state    attributable         to the Group
Ref   Pr operty                           (sq m)       User    Head tenancy              Sub-tenancy                    as at 31 August 2002     to the Group as at 31 August 2002


G5    1st and 2nd Floors of               101.82     Storage   6 yrs from 01.05.99       Portion of the property is      No commercial value          97.01%    No commercial value
      Nos. 98-1 and 98-2 and                                   at NT$650,000 pm          sub-leased for 3 yrs from
      3rd Floor of No. 98-2,                                   excl of service charges   01.04.02 at NT$350,000
      Kuenming Street,                                                                   pm excl of service charges
      Taipei, Taiwan

G6    Ground Floor and 1st Floor,         492.85       Shop    3 yrs from 21.05.02 at    Portion of the property is      No commercial value          97.01%    No commercial value
      No. 34, Jungjeng Road,                                   NT$360,000 pm excl        sub-leased for 5 yrs from
      Fengyuan City, Taichung, Taiwan                          of service charges        10.05.00 at NT$132,300 pm
                                                                                         to be increased by 5% pa from
                                                                                         2nd yr & 4th yr; the rent being
                                                                                         excl of service charges

G7    Nos. I6, I7, I17 & I18 in Area I,   215.12 Exhibition/   3 yrs from 06.10.00 at    Portion of the property is        No commercial value        97.01%    No commercial value
      Basement 1, No. 10, Lane 609,               Warehouse    NT$260,091 pm from        sub-leased, together with
      Section 5, Chungshin Road,                               2nd yr and to be          portions of Nos. I8, I9, I19, I20
      Sanchung City, Taipei, Taiwan                            increased by 5%           & I21 in Area I, Basement 1
                                                               pa from 3rd yr;           within the same building, for
                                                               the rent being excl of    3 yrs & 5 days from 01.10.00
                                                               service charges           at a minimum rent of 5% of
                                                                                         NT$3,800,000 gross sales
                                                                                         pm and to be increased
                                                                                         by 5% from 3rd yr excl
                                                                                         of service charges

G8    Nos. I8, I9, I19, I20 & I21         239.78 Exhibition/   3 yrs from 06.10.00       Portion of the property          No commercial value         97.01%    No commercial value
      in Area I, Basement 1, No. 10,             Warehouse     at NT$289,909 pm          is sub-leased, together with
      Lane 609, Section 5,                                     from 2nd yr and to be     portions of Nos. I6, I7, I17 &
      Chungshin Road, Sanchung City,                           increased by 5% pa        I18 in Area I, Basement 1 within
      Taipei, Taiwan                                           from 3rd yr; the rent     the same building, for 3 yrs &
                                                               being excl of service     5 days from 01.10.00 at a
                                                               charges                   minimum rent of 5% of
                                                                                         NT$3,800,000 gross sales
                                                                                         pm and to be increased by 5%
                                                                                         from 3rd yr excl of service
                                                                                         charges

G9    Ground Floor and 1st Floor,         485.98       Shop    5 yrs from 01.08.01      4 yrs 6 mths & 15 days from      No commercial value          97.01%    No commercial value
      No. 97, Wenhua Road,                                     at NT$150,000 pm         17.01.02 at NT$150,000 pm
      Chiai, Taiwan                                            from 1st and 2nd yr and excl of service charges
                                                               NT$157,500 pm from
                                                               3rd and 4th yr; the rent
                                                               being excl of service
                                                               charges

Group H – Properties leased by the Group and sub-leased to third parties in Korea

                                                                                                                                                                            Capital
                                           Floor                                                                          Open market value           Interest   value attributable
Our                                         Area               Particulars of            Particulars of                      in existing state    attributable        to the Group
Ref   Pr operty                           (sq m)       User    Head tenancy              Sub-tenancy                    as at 31 August 2002     to the Group as at 31 August 2002

H1    37-6, Daehyun-Dong,                  39.99       Shop    2 yrs from 20.06.01       2 yrs from 20.06.01 at       No commercial value             67.91%    No commercial value
      Seodaemoon-ku, Seoul, Korea                              at W1,500,000 pm          W1,500,000 pm sharing
                                                               sharing mgt expense       mgt expense & repair expense
                                                               & repair expense

H2    55-17, Myung-2ga, Jung-ku,          156.61       Shop    2 yrs from 25.6.01        2 yrs from 25.6.01              No commercial value          67.91%    No commercial value
      Seoul, Korea                                             at W10,000,000 pm         at W10,000,000 pm


                                                                                 – 192 –
APPENDIX IV                                                                                                                   VALUATION REPORT

                                                                                                                                                                            Capital
                                              Floor                                                                       Open market value           Interest   value attributable
Our                                            Area             Particulars of            Particulars of                     in existing state    attributable        to the Group
Ref     Pr operty                            (sq m)      User   Head tenancy              Sub-tenancy                   as at 31 August 2002     to the Group as at 31 August 2002

H3      54-31, Myung-2ga,                     59.98 Warehouse   1 yrs from 20.09.01       1 yrs from 20.09.01            No commercial value          67.91%    No commercial value
        Jung-ku, Seoul,                                         at W1,000,000 pm          at W1,000,000 pm
        Korea                                                   excl of mgt expense       excl of mgt expense

H4      27-19, Daehyun-Dong,                  49.59 Warehouse   2 yrs from 25.09.01       2 yrs from 25.09.01            No commercial value          67.91%    No commercial value
        Seodaemoon-ku,                                          at W600,000 excl          at W600,000 excl
        Seoul, Korea                                            of mgt expense            of mgt expense

Note:      As at the Latest Practicable Date, the interest attributable to the Group in the property interests in Korea has been
           changed to 89.25%.

Group J - Properties leased by the Group and sub-leased to third parties in the Philippines
                                                                                                                                                                            Capital
                                              Floor                                                                       Open market value           Interest   value attributable
Our                                            Area             Particulars of            Particulars of                     in existing state    attributable        to the Group
Ref     Pr operty                            (sq m)      User   Head tenancy              Sub-tenancy                   as at 31 August 2002     to the Group as at 31 August 2002

J1      Building 11,                         598.00 Warehouse   2 yrs from 01.02.02       2 yrs from 01.02.02            No commercial value          53.35%    No commercial value
        76 Anaconda Compound,                                   at P61,504.30 pm excl     at P61,504.30 pm excl
        F Mariano Ave, De La Paz,                               of service charges        of service charges and VAT
        Metro Manila, The Philippines                           and VAT

J2      Building 10,                         598.00 Warehouse   2 yrs from 01.02.02       2 yrs from 01.02.02 at         No commercial value          53.35%    No commercial value
        76 Anaconda Compound,                                   at P61,504.30 pm          P61,504.30 pm
        F Mariano Ave, De La Paz,                               excl of service charges    excl of service charges
        Metro Manila, The Philippines                           and VAT                   and VAT

J3      Stall No.225 on 2nd Floor,            44.50      Shop   1 yr from 01.01.02        1 yr from 01.01.02             No commercial value          53.35%    No commercial value
        Alabang Town Center,                                    at P18,912.50 pm          at P18,912.50 pm
        Muntinlupa City, The Philippines                        + 3% of gross sales       + 3% of gross sales
                                                                excl of service charges   excl of service charges

J4      Space 17 on Ground Floor,             46.00      Shop   1 yr from 01.10.01        1 yr from 01.10.01             No commercial value          53.35%    No commercial value
        Ali Mall II, Araneta Center,                            at a basic rent of        at a basic rent of
        Quezon City, The Philippines                            P50,025.00 pm + 3% of     P50,025.00 pm + 3% of
                                                                gross sales excl of       gross sales excl of
                                                                service charges           service charges

J5      Boutique on Ground Floor,             47.28      Shop   2 yr from 01.06.02 at     2 yr from 01.06.02             No commercial value          53.35%    No commercial value
        L1-13, NE Pacific Mall,                                 a discounted basic rent   at a discounted basic
        The Philippines                                         of 27,138.25 pm + 3%      rent of 27,138.25 pm +
                                                                of gross sales &          3% of gross sales
                                                                P30,720.18 pm + 3%        & 30,720.18 pm + 3%
                                                                of gross sales            of gross sales from
                                                                from 2nd yr; the          2nd yr; the rent being
                                                                rent being excl of        excl of service
                                                                service charges and VAT   charges and VAT

J6      Units Nos. 16-19 and 26-29,           90.17      Shop   3 yr from 01.10.99        3 yr from 01.10.99 at          No commercial value          53.35%    No commercial value
        Ground Floor,                                           at 105,068.79 pm excl     105,068.79 pm excl
        Ever Gotesco Manila Plaza,                              of service charges        of service charges
        C.M. Recto Avenue, Manila,
        The Philippines

J7      Space No. A6 on 2nd Floor,            81.00      Shop   2 yr from 01.07.01        2 yr from 01.07.01 at           No commercial value         53.35%    No commercial value
        New Farmers Plaza, The Philippines                      at a basic rent of        a basic rent of P67,735.00 pm +
                                                                P67,735.00 pm + 3% of     3% of sales & P74,510 pm +
                                                                sales & P74,510 pm +      3% of Sales from 2nd yr;
                                                                3% of Sales from          the rent being excl of
                                                                2nd yr; the rent being    service charges
                                                                excl of service charges

                                                                                  – 193 –
APPENDIX IV                                                                                                                   VALUATION REPORT

                                                                                                                                                                             Capital
                                            Floor                                                                          Open market value           Interest   value attributable
Our                                          Area          Particulars of                 Particulars of                      in existing state    attributable        to the Group
Ref   Pr operty                            (sq m)   User   Head tenancy                   Sub-tenancy                    as at 31 August 2002     to the Group as at 31 August 2002

J8    Space No.1060B on 1st Level,          85.86   Shop   2 yrs from 01.05.02            2 yrs from 01.05.02 at a         No commercial value         53.35%    No commercial value
      Festival Supermall,                                  at a basic rent of             basic rent of P63,107.10 pm
      Filinvest Corporate City, Alabang,                   P63,107.10 pm + 3% of          + 3% of gross sales & P69,460.74
      Muntinlupa City, The Philippines                     gross sales & P69,460.74       pm + 3% of gross sales from
                                                           pm + 3% of gross sales         2nd yr; the rent being
                                                           from 2nd yrs; the rent being   excl of service charges
                                                           excl of service charges

J9    Upper Ground Level,                  100.04   Shop   3 yrs from 20.01.01            3 yrs from 20.01.01 at a      No commercial value            53.35%    No commercial value
      Gaisano Mall of Davao,                               at a basic rent of             basic rent of P61,649.50
      JP Laurel Ave, Bajada Poblacion,                     P61,649.50 pm from             pm from 2nd yr & P67,814.45
      Davao City, The Philippines                          2nd yr & P67,814.45            pm from 3rd yr; the rent
                                                           pm from 3rd yr; the rent       being excl of service charges
                                                           being excl of service          and VAT
                                                           charges and VAT

J10   Units L2-0010 on 2nd Floor,           55.20   Shop   1 yr from 01.11.01 at          1 yr from 01.11.01 at a        No commercial value           53.35%    No commercial value
      Isetann Cinerama,                                    a discounted basic rent        discounted basic rent of
      C.M. Recto Manila City,                              of P36,136.13 pm or            P36,136.13 pm or 3% of
      The Philippines                                      3% of gross sales,             gross sales, whichever is
                                                           whichever is higher +          higher + 3% of gross sales,
                                                           3% of gross sales, the         the rent being excl of
                                                           rent being excl of             service charges and VAT
                                                           service charges and VAT

J11   L1-12 on Ground Level,                68.89   Shop   2 yrs from 01.07.01 at         2 yrs from 01.07.01 at a       No commercial value           53.35%    No commercial value
      Legazpi Pacific Mall,                                a discounted basic rent        discounted basic rent of
      Landco Business Park along                           of P31,000.50 pm + 3%          P31,000.50 pm + 3% of
      Imperial Street, Legazpi,                            of gross sales &               gross sales & P34,100.55 pm
      Albay, The Philippines                               P34,100.55 pm + 3% of          + 3% of gross sales from 2nd
                                                           gross sales from 2nd            yr; the rent being excl of
                                                           yr; the rent being excl        service charges and VAT
                                                           of service charges
                                                           and VAT

J12   Stall No.19, Ground Floor,            33.01   Shop   1 yr from 01.03.02 at          1 yr from 01.03.02 at a        No commercial value           53.35%    No commercial value
      Makati Supermarket Building,                         a discounted basic rent        discounted basic rent of
      Ayala Center, The Philippines                        of P32,479.20 pm + 3%          P32,479.20 pm + 3% of
                                                           of gross sales ; the rent      gross sales ; the rent
                                                           being excl of service          being excl of service
                                                           charges and VAT                charges and VAT

J13   16 & 17 Level 2,                     129.40   Shop   2 yrs from 01.08.01 at         2 yrs from 01.08.01 at a       No commercial value           53.35%    No commercial value
      Robinsons Place Ermita,                              a discounted basic rent        discounted basic rent of
      Adriatico St, Ermits Mnnils,                         of P111,284.00 pm +            P111,284.00 pm + 3% of
      The Philippines                                      3% of actual sales and         actual sales and P125,518.00
                                                           P125,518.00 pm + 3%            pm + 3% of actual sales from
                                                           of actual sales from           2nd yr; the rent being excl
                                                           2nd yr; the rent being         of service charges and VAT
                                                           excl of service charges
                                                           and VAT




                                                                               – 194 –
APPENDIX IV                                                                                                         VALUATION REPORT

                                                                                                                                                                   Capital
                                       Floor                                                                     Open market value           Interest   value attributable
Our                                     Area          Particulars of             Particulars of                     in existing state    attributable        to the Group
Ref   Pr operty                       (sq m)   User   Head tenancy               Sub-tenancy                   as at 31 August 2002     to the Group as at 31 August 2002

J14   Level 2 (L2-121),                59.40   Shop   2 yrs from 01.09.01 at     2 yrs from 01.09.01 at a      No commercial value           53.35%    No commercial value
      Robinsons Place Iloilo,                         a discounted basic rent    discounted basic rent of
      The Philippines                                 of P25,245.00 pm + 3%      P25,245.00 pm + 3% of
                                                      of gross sales and         gross sales and P29,106.00
                                                      P29,106.00 pm + 3%         pm + 3% of gross sales
                                                      of gross sales from 2nd    from 2nd yr; the rent being
                                                      yr; the rent being excl    excl of service charges
                                                      of service charges         and VAT
                                                      and VAT

J15   Level 2,                         93.59   Shop   2 yrs from 01.09.01 at     2 yrs from 01.09.01 at        No commercial value           53.35%    No commercial value
      Robinsons Place – Novaliches,                   a discounted basic rent    a discounted basic rent
      The Philippines                                 of P28,077.00 pm + 3%      of P28,077.00 pm + 3% of
                                                      of gross sales and         gross sales and P30,884.70
                                                      P30,884.70 pm + 3%         pm + 3% of gross sales from
                                                      of gross sales from 2nd    2nd yr; the rent being excl
                                                      yr; the rent being excl    of service charges and VAT
                                                      of service charges
                                                      and VAT

J16   Robinsons Starmills,            200.10   Shop   2 yrs from 16.02.02 at     2 yrs from 16.02.02 at        No commercial value           53.35%    No commercial value
      Pampangs, The Philippines                       a discounted basic rent    a discounted basic rent of
                                                      of P80,040.00 pm + 3%      P80,040.00 pm + 3% of
                                                      of gross sales and         gross sales and P92,046.00 pm
                                                      P92,046.00 pm + 3% of      + 3% of gross sales from
                                                      gross sales from 2nd yr;   2nd yr; the rent being excl
                                                      the rent being excl of     of service charges and VAT
                                                      service charges and VAT

J17   Level 3 - 114 ,                  87.26   Shop   2 yrs from 01.11.01        2 yrs from 01.11.01 at a      No commercial value           53.35%    No commercial value
      116 Robinsons Place,                            at a discounted basic      discounted basic rent of
      Pasig, Marcos Highway,                          rent of P57,591.00 pm      P57,591.00 pm + 3% of
      Pasig City, The Philippines                     + 3% of gross sales and    gross sales and P63,350.10
                                                      P63,350.10 pm + 3% of      pm + 3% of gross sales from
                                                      gross sales from 2nd yr;   2nd yr; the rent being excl
                                                      the rent being excl of     of service charges and VAT
                                                      service charges and VAT

J18   AX127,                           76.12   Shop   2 yrs from 01.05.01        2 yrs from 01.05.01           No commercial value           53.35%    No commercial value
      SM City North Edsa,                             at a basic rent            at a basic rent
      The Philippines                                 of P70,411.00              of P70,411.00
                                                      pm + 3%                    pm + 3%
                                                      of gross sales             of gross sales
                                                      and P74,217 pm             and P74,217.00 pm
                                                      + 3% of                    + 3% of
                                                      gross sales from           gross sales from
                                                      2nd yr; the rent           2nd yr; the rent
                                                      being excl                 being excl
                                                      of service charges         of service charges
                                                      and VAT                    and VAT

J19   B149, SM City Cebu,             100.32   Shop   2 yrs from 01.02.01        2 yrs from 01.02.01 at        No commercial value           53.35%    No commercial value
      The Philippines                                 at a basic rent of         a basic rent of P67,716.00
                                                      P67,716.00 pm + 3%         pm + 3% of gross sales and
                                                      of gross sales and         P70,224.00 pm + 3% of
                                                      P70,224.00 pm + 3%         gross sales from 2nd yr;
                                                      of gross sales from        the rent being excl of
                                                      2nd yr; the rent being     service charges and VAT
                                                      excl of service charges
                                                      and VAT

                                                                        – 195 –
APPENDIX IV                                                                                                             VALUATION REPORT

                                                                                                                                                                       Capital
                                         Floor                                                                       Open market value           Interest   value attributable
Our                                       Area          Particulars of             Particulars of                       in existing state    attributable        to the Group
Ref   Pr operty                         (sq m)   User   Head tenancy               Sub-tenancy                     as at 31 August 2002     to the Group as at 31 August 2002

J20   SMCP 208 a & b,                    79.51   Shop   2 yrs from 01.05.01 at     2 yrs from 01.05.01 at          No commercial value           53.35%    No commercial value
      SM Centerpoint,                                   a basic rent of            a basic rent of P57,644.75
      The Philippines                                   P57,644.75 pm + 3%         pm + 3% of gross sales and
                                                        of gross sales and         P59,632.50 pm + 3% of
                                                        P59,632.50 pm + 3%         gross sales from 2nd yr;
                                                        of gross sales from        the rent being excl of
                                                        2nd yr; the rent being     service charges
                                                        excl of service charges

J21   SMCF 138,                          76.46   Shop   2 yrs from 01.11.01        2 yrs from 01.11.01 at          No commercial value           53.35%    No commercial value
      SM City Fairview,                                 at a basic rent of         a basic rent of P49,699.00
      The Philippines                                   P49,699.00 pm + 3%         pm + 3% of gross sales and
                                                        of gross sales and         P51,610.50 pm + 3% of gross
                                                        P51,610.50 pm + 3% of      sales from 2nd yr; the rent
                                                        gross sales from 2nd yr;   being excl of service charges
                                                        the rent being excl of     and VAT
                                                        service charges and VAT

J22   141, SM City Davao,                54.32   Shop   2 yrs 2 months and 15      2 yrs 2 months and 15 days    No commercial value             53.35%    No commercial value
      The Philippines                                   days from 01.11.01 at a    from 01.11.01 at a basic rent
                                                        basic rent of P32,592.00   of P32,592.00 pm + 3% of
                                                        pm + 3% of gross sales     gross sales and P35,851.20 pm
                                                        and P35,851.20 pm + 3%      + 3% of gross sales from 2nd
                                                        of gross sales from 2nd    yr; the rent being excl of
                                                        yr; the rent being excl    service charges & VAT
                                                        of service charges & VAT

J23   1033, SM City Iloilo,             78.586   Shop   2 yrs from 01.08.01 at     2 yrs from 01.08.01 at a        No commercial value           53.35%    No commercial value
      The Philippines                                   a basic rent of            basic rent of P49,116.25
                                                        P49,116.25 pm + 3%         pm + 3% of gross sales and
                                                        of gross sales and         P51,080.90 pm + 3% of gross
                                                        P51,080.90 pm + 3%         sales from 2nd yr; the rent
                                                        of gross sales from        being excl of service charges
                                                        2nd yr; the rent being
                                                        excl of service charges

J24   SMCM 330,                          96.88   Shop   2 yrs from 01.08.01        2 yrs from 01.08.01 at a basic No commercial value            53.35%    No commercial value
      SM City Manila, The Philippines                   at a basic rent of         rent of P53,284.00 pm + 3%
                                                        P53,284.00 pm + 3%         of gross sales and P58,612.40
                                                        of gross sales and         pm + 3% of gross sales from
                                                        P58,612.40 pm + 3%         2nd yr; the rent being excl
                                                        of gross sales from        of service charges
                                                        2nd yr; the rent being
                                                        excl of service charges

J25   SMMG 157a,                         74.86   Shop   2 yrs from 01.02.02        2 yrs from 01.02.02 at a        No commercial value           53.35%    No commercial value
      SM Megamall, The Philippines                      at a basic rent of         basic rent of P71,117.00 pm
                                                        P71,117.00 pm + 3%         + 3% of gross sales; the
                                                        of gross sales; the rent   rent being excl of
                                                        being excl of service      service charges and VAT
                                                        charges and VAT

J26   SMC-PP 130,                        54.49   Shop   1 yr 11 months and         1 yr 11 months and 21 days      No commercial value           53.35%    No commercial value
      SM City Pampanga,                                 21 days from 10.11.00      from 10.11.00 at a basic rent
      The Philippines                                   at a basic rent of         of P32,966.45 pm + 3% of
                                                        P32,966.45 pm + 3% of      gross sales from 2nd yr;
                                                        gross sales from 2nd yr;   the rent being excl
                                                        the rent being excl of     of service charges
                                                        service charges




                                                                           – 196 –
APPENDIX IV                                                                                                           VALUATION REPORT

                                                                                                                                                                     Capital
                                         Floor                                                                     Open market value           Interest   value attributable
Our                                       Area          Particulars of             Particulars of                     in existing state    attributable        to the Group
Ref   Pr operty                         (sq m)   User   Head tenancy               Sub-tenancy                   as at 31 August 2002     to the Group as at 31 August 2002

J27   SMS 1229,                          62.72   Shop   2 yrs from 01.11.01        2 yrs from 01.11.01 at        No commercial value           53.35%    No commercial value
      SM Southmall, The Philippines                     at a basic rent of         a basic rent of P40,768.00
                                                        P40,768.00 pm + 3% of      pm + 3% of gross sales and
                                                        gross sales and            P42,336.00 pm + 3% of
                                                        P42,336.00 pm + 3% of      gross sales from 2nd yr;
                                                        gross sales from 2nd yr;   the rent being excl of
                                                        the rent being excl of     service charges
                                                        service charges

J28   L2-28 2nd Sta,                     74.25   Shop   1 yr from 01.01.02         1 yr from 01.01.02 at         No commercial value           53.35%    No commercial value
      Lucia East Grand Mall,                            at a basic rent of         a basic rent of P53,905.50
      The Philippines                                   P53,905.50 pm + 3%         pm + 3% of gross sales;
                                                        of gross sales; the rent   the rent being excl of
                                                        being excl of service      service charges and VAT
                                                        charges and VAT

J29   Stall Nos. B18, B19 and B20        68.38   Shop   3 yrs from 01.07.00        3 yrs from 01.07.00 at         No commercial value          53.35%    No commercial value
      on Ground Floor,                                  at P30,771.00 pm to        P30,771.00 pm to be increased
      Gaisano Fiesta Mall, Tabunok,                     be increased by 10% pa;    by 10% pa; the rent being excl
      The Philippines                                   the rent being excl of     of service charges and VAT
                                                        service charges and VAT

J30   B-140, LowerMall,                 129.29   Shop   2 yrs from 14.04.01        2 yrs from 14.04.01 at a      No commercial value           53.35%    No commercial value
      Tutuban Centre, The Philippines                   at a discounted basic      discounted basic rent of
                                                        rent of P119,630.74 pm     P119,630.74 pm + 3%
                                                        + 3% of gross sales from   of gross sales from 2nd yr;
                                                        2nd yr; the rent being     the rent being excl of
                                                        excl of service charges    service charges




                                                                           – 197 –
APPENDIX V                        INFORMATION ON AKAI HOLDINGS LIMITED
                         (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


     Akai was formerly known as Semi-Tech (Global) Company Limited, changing its name to Akai
Holdings Limited on 5 August 1999.

1.   SHARE CAPITAL

     The authorised and issued share capital of Akai as at 31 January 1999 was as follows:

     Authorised                                                                                      US$

      30,000,000,000 Akai Shares                                                             384,600,000


     Issued and fully paid-up

       1,932,302,000 Akai Shares                                                              24,700,000


      All the existing issued Akai Shares rank pari passu in all respects with each other, including in
particular, as to dividends, voting rights and return of capital.

      The number of issued and fully paid shares as at 31 January 1999 as set out in note 21 to the last
audited financial year of Akai was 1,932,302,000 with issued share capital of US$24.7 million (equivalent
of HK$192,660,000). The number of issued Akai Shares as per the shareholders list as at 30 November
2000, were 2,191,302,089. For the reason set out in the paragraph headed “Material changes” of this
appendix, the Liquidators have no information regarding the respective entries between 1 February, 1999
to the Latest Practicable Date.

      Save for certain outstanding options to subscribe for 43.6 million Akai Shares, as disclosed in note
21 to the financial statements of Akai as set out in Appendix V of this document, the Liquidators are not
aware of any options, warrants and conversion rights affecting Akai Shares.




                                                 – 198 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


2.   FINANCIAL SUMMARY

      The table set out below summarises the consolidated results of the Akai Group derived from its
audited consolidated financial statements for the preceding three financial years ended 31 January 1999.

                                                                                 US$m            US$m           US$m
                                                                                  1999            1998           1997

     TURNOVER                                                           $         832.7     $   1,441.5    $   1,448.3


     PROFIT / (LOSS) BEFORE                                                        (70.1)         56.2           64.7
       SHARE OF RESULTS OF
       ASSOCIATED COMPANIES

     Share of results of associated companies
       Operating profits less losses                                                (4.8)         14.6             4.0
       Exceptional items                                                           (21.6)            –               –

     PROFIT / (LOSS)
       BEFORE TAXATION                                                             (96.5)         70.8           68.7

     Taxation                                                                       (1.2)         (13.0)          (6.7)

     PROFIT / (LOSS)
       BEFORE MINORITY INTERESTS                                                   (97.7)         57.8           62.0

     Minority interests                                                             25.9          (21.0)         (17.2)

     NET PROFIT / (LOSS) ATTRIBUTABLE TO
      SHAREHOLDERS                                                                 (71.8)         36.8           44.8


     Earnings / (Loss) per share Basic                                   $         (0.04)   $     0.02     $     0.03


     Dividend per share
       Interim dividend                                                              Nil    $     0.02     $     0.03
       Proposed final dividend                                                       Nil           Nil     $     0.05
       Special dividend                                                              Nil           Nil     $     0.03

     Notes:

     1.       no dividend was declared in the year ended 31 January 1999.

     2.       for further details on dividend, please refer to page 204 of the document.




                                                            – 199 –
APPENDIX V                       INFORMATION ON AKAI HOLDINGS LIMITED
                        (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


      The latest audited financial statements of the Akai Group were for the 12 month period from 1
February 1998 to 31 January 1999 and contained in the 1999 annual report of Akai. Unaudited results
statements for the 12 month period from 1 February 1999 to 31 January 2000 were announced on 13 July
2000. Details of the unaudited results for the 12 months period from 1 February 1999 to 31 January 2000
were reproduced as follows:

Unaudited results for the 12 month period from 1 February 1999 to 31 January 2000

                                                             (Unaudited)           (Audited)
                                                             12-month              12 month
                                                             Period                Period
                                                             from 1/2/1999         from 1/2/1998
                                                             to 31/1/2000          to 31/1/1999
                                                             (US$’ million)        (US$’ million)

Turnover
  – Continuing                                           :   285.1                 832.7
  – Discontinued                                         :   –                     –
Operating Profit/(Loss)
  – Continuing                                           :   (1,820.0)             (70.1)
  – Discontinued                                         :   –                     –
Total Operating Profit/(Loss)                            :   (1,820.0)             (70.1)
Share of Profit/(Loss) of
  Associated Companies                                   :   (44.8)                (26.4)
Share of Profit/(Loss) of
  Jointly Controlled Entities                            :   –                     –
Profit/(Loss) after Tax & MI                             :   (1,728.7)             (71.8)
% Change over Last Period                                :   N/A
EPS/(LPS) – Basic                                        :   (US$0.83)             (US$0.04)
            – Diluted                                    :   N/A                   N/A
Extraordinary (ETD) Gain/(Loss)                          :   –                     –
Profit/(Loss) after ETD Items                            :   (1,728.7)             (71.8)
2nd Interim Dividend per Share                           :   Nil                   Nil (FIN DIV)
(Specify if with other options)                          :   N/A                   N/A
B/C Dates for 2nd Interim Dividend                       :   N/A
Payable Date                                             :   N/A
B/C Dates for (–) General Meeting                        :   N/A
Other Distribution for Current Period                    :   N/A
B/C Dates for Other Distribution                         :   N/A




                                               – 200 –
APPENDIX V                         INFORMATION ON AKAI HOLDINGS LIMITED
                          (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


Notes to the unaudited results for the 12 month period from 1 February 1999 to 31 January 2000:

(1)   Exceptional items

                                                                   12 months period       year ended
                                                                    ended 31-Jan-00        31-Jan-99
                                                                       US$’ million      US$’ million

      Reorganisation and relocation expenses                                      –                9.2
      Provision for receivable from an associated company                         –               25.6
      Gain on disposal of unlisted investments                                    –               (3.2)
      Impairment in values of properties                                       16.0                  –
      Write down of the values of brand names                                 361.1                  –
      Provision for non core investments                                       91.4               26.2
      Write off of deferred products development costs and
        preliminary expenses                                                   25.0                  –
      Write off of unamortised goodwill arising on consolidation              153.1                  –
      Provision for corporate guarantee in favour
        of associated companies                                               293.7                  –
      Provision for corporate guarantee in favour
        of subsidiaries under liquidation or in receivership
        or disposed subsidiaries                                               56.3                5.5
      Provision for litigation and claims                                     436.9                  –
      Loss on disposal of Toyo                                                 19.8                  –
      Provision for doubtful debts                                            324.4               15.6
      Provision for obsolete stocks                                            27.7                  –
      Gain on deemed disposal of a subsidiary                                (165.3)                 –

                                                                            1,640.1               78.9


(2)   Change in financial year end date

      The financial year end date of the Company has been changed form 31 January to 31 March
      commencing in the financial year 2000.




                                                – 201 –
APPENDIX V                       INFORMATION ON AKAI HOLDINGS LIMITED
                        (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


3.   MATERIAL CHANGE

      The Liquidators are unable to prepare a statement showing all the material changes in the financial
position of Akai subsequent to its last published audited accounts for the year ended 31 January 1999 for
the following reasons:

     1.    The Petition for the winding-up of Akai in Hong Kong filed on 13 January 2000 was vigorously
           contested by Toyo Holdings Limited (“Toyo”) and The Grande Group Ltd. (“Grande”) which
           resulted in an eight month delay from filing of the Petition to the commencement of the
           winding-up of Akai. On 28 August 2000, a Petition to wind-up Akai in Bermuda was filed
           and a winding-up Order was made in Bermuda on 29 September 2000.

     2.    A Management Agreement was signed on 12 November 1999 which transferred all authority
           to manage the businesses and assets of Akai to Grande. Grande and the former directors of
           Akai have not co-operated with the Liquidators in their investigations of Akai.

     3.    The Akai Group was large and complex. The last audited accounts recorded a turnover of
           approximately US$830 million and total assets of over US$2,300 million. However, on their
           appointment, the Liquidators discovered that Akai had no offices, no employees, no business
           or readily realisable assets and very limited books and records.

     4.    Limited information has been made available to the Liquidators which is insufficient to
           establish the current assets of Akai or their movements since its last published and audited
           accounts for the year ended 31 January 1999.

           Much effort has been devoted to recovering a sufficient number of Akai’s books and records.
           Although Grande delivered 54 boxes of books and records to the Liquidators on 1 September
           2000 upon their appointment as joint and several Liquidators of Akai in Bermuda, these
           boxes contained little relevant accounting or transactional records. The Liquidators found
           such a small number of boxes unusual and insufficient for an operation with reported turnover
           of over US$830 million and declared total assets of over US$2,300 million in its last audited
           accounts.

           Following an interview with Mr. Kin Yuen Samuel of Grande, who was seconded to Akai
           following the establishment of the Management Agreement dated 12 November 1999, in June
           2001 and August 2001, Grande delivered a further 513 boxes were delivered to the Liquidators.
           Mr. Yuen has not provided any further information since despite many requests.

           In March 2002, an additional 3,600 boxes of Akai’s books and records were located in a
           warehouse in PRC, which had been sent there in late 1999 or early 2000. However, these are
           unhelpful as the majority consist of shipping documents from the late 1980’s, sale and purchase
           orders from 1990, import declaration reports and export declarations. In summary, they are of
           little benefit to the Liquidators of Akai.

           In August 2002, the Liquidators discovered that a further 80 boxes which were in possession
           of Grande were in Singapore. However, the Liquidators have not been able to retrieve these


                                                – 202 –
APPENDIX V                        INFORMATION ON AKAI HOLDINGS LIMITED
                         (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


            boxes, and Grande, again, will not cooperate. Interestingly, the 80 boxes were shipped from
            Akai’s offices to Singapore within 18 days of the appointment of the Liquidators.

            As a result of the above, in order to identify of the assets of Akai and, in particular, since 31
            January 1999, the Liquidators have been forced to reconstruct the books and records of Akai,
            including receipts and payments, trial balances, general ledgers and statutory records. However,
            in light of the volume and complexity of the transactions and the limited books, records and
            assistance available to the Liquidators, the reconstruction work to date is only at a preliminary
            stage and has produced no results that can be relied upon with any degree of certainty.

     5.     The Statement of Affairs (“SOA”) prepared by Mr. James Ting as at 23 August 2000 is very
            general in places vague, and, in view of the Liquidators’ investigations being incomplete,
            unreliable. The SOA is set out in Appendix V of the document.

      A brief summary of events of Akai since its last audited accounts (as at 31 January 1999) is as
follows:

     1.     All authority to manage the business of Akai was transferred to Grande pursuant to the
            Management Agreement signed on 12 November 1999.

     2.     The Hong Kong Court ordered that Akai be wound-up on 23 August 2000. The Liquidators
            were appointed by the Hong Kong Court on 24 May 2001.

     3.     The Bermuda Court ordered that Akai be wound-up on 29 September 2000. The Liquidators
            were appointed by the Bermuda Court on 16 March 2001.

      In conclusion, as Grande and former directors of Akai have not been co-operative and limited
resources have and continue to be available to the Liquidators, the investigations into the collapse of
Akai Group have been severely restricted. There are significant parts of Akai’s history for which no
reliable information can be obtained. Until the investigations are completed, the Liquidators do not have
sufficient information to identify or describe the material changes required by the Code in relation to the
financial position or trading prospect of Akai since the last published audited accounts. And, in light of
the reasons set out above, it is unlikely that these investigations will be completed within the next 8 to 12
months. Accordingly, any report prepared in relation to Akai’s material changes (if it is indeed even
possible to prepare one) would be incomplete, meaningless and potentially misleading.

       The Liquidators appreciate that under normal circumstances, Akai shareholders should be given
information as to the state of affairs since its last audited accounts to enable them to reach informed
decisions on the Proposal. However, Akai is in the third stage of the de-listing procedure and Akai shares
will be delisted if the Proposal is not successfully implemented on or before 22 January 2003. No other
rescue proposal will be able to assist Akai in relation to the missing information. The Liquidators believe
it is highly unlikely that Akai Shareholders will receive a distribution in Akai’s winding-up without the
successful conclusion of the Proposal. As such, the Liquidators are of the view that the required statement
of material changes is irrelevant and will not assist the Akai Shareholders in reaching any informed
decision on the Proposal.


                                                  – 203 –
APPENDIX V                          INFORMATION ON AKAI HOLDINGS LIMITED
                           (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


4.   INDEBTEDNESS

     As at 26 September 2002, the Liquidators had received proofs of debt containing claims of
HK$8,975,675,776 in Bermuda and HK$9,855,359,252 in Hong Kong. The Liquidators have accepted
Claims of HK$2,688,723,553 in Bermuda and HK$2,604,552,129 in Hong Kong. However, the Liquidators
have not yet completed their adjudication of the claims received.

5.   MATERIAL LITIGATION

      On 10 November 2000, Akai issued proceedings against two of its subsidiaries, Ferendo Limited
and Coliyield Company Limited, to recover proceeds in the amount of HK$7,112,406.21 of sales of 3
residential properties in Hong Kong held by them on trust for Akai. On 1 March 2001, Tremendous
Springs Limited was joined in these proceedings as a second defendant and has made claims in relation
to the proceeds of these properties. As at the Latest Practicable Date, the proceedings had came to a
standstill due to the lack of funds of Akai to progress the proceedings .

6.   MATERIAL CONTRACTS

      No material contract has been entered into since the date two years before the commencement of
the Proposal except for the Restructuring Agreement.

7.   DIVIDEND

     The following information was extracted from the audited financial statements of Akai for the year
ended 31 January 1998.

                                                                                    Group
                                                                                1998             1997
                                                                         US$’ million     US$’ million

     Interim dividend paid at HK$0.15 ($0.02) per share on
        409 million shares (1997 – HK$0.23 ($0.03) per share
        on 373 million shares)                                                     7.8               11.1
     Proposed final dividend at HK$Nil
        (1997 – HK$0.40 ($0.05) per share on 394 million shares)                    –                20.2
     Special dividend at HK$Nil
        (1997 – HK$0.20 ($0.03) per share on 394 million shares)                    –                10.0

                                                                                   7.8               41.3


      The dividends per share for both years are calculated before the adjustment for the bonus issue of 3
for 1 share in December 1997.

     Note: no dividend was declared in the year ended 31 January 1999.



                                                       – 204 –
APPENDIX V                        INFORMATION ON AKAI HOLDINGS LIMITED
                         (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


      The following is the text of the auditors’ report on the financial statements of the Akai Group
for the period from 1 February 1998 to 31 January 1999 extracted from the Akai’s 1999 annual
report. References to page numbers are to the page numbers of such financial statements presented
in Akai’s 1999 annual report. Akai was formerly known as Semi-Tech (Global) Company Limited,
changing its name to Akai Holdings Limited on 5 August 1999.

ERNST & YOUNG

To the members
Semi-Tech (Global) Company Limited
(Incorporated in Bermuda with limited liability)

      We have audited the financial statements on pages 21 to 56 which have been prepared in accordance
with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

      The Company’s directors are responsible for the preparation of financial statements which give a
true and fair view. In preparing financial statements which give a true and fair view it is fundamental that
appropriate accounting policies are selected and applied consistently. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our opinion to you.

BASIS OF OPINION

      We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong
Kong Society of Accountants. An audit includes an examination, on a test basis, of evidence relevant to
the amounts and disclosures in the financial statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Company’s and the Group’s circumstances,
consistently applied and adequately disclosed.

      We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to
whether the financial statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements. We believe
that our audit provides a reasonable basis for our opinion.

OPINION

      In our opinion the financial statements give a true and fair view, in all material respects, of the
state of affairs of the Company and of the Group as at 31 January 1999 and of the loss and cash flows of
the Group for the year then ended and have been properly prepared in accordance with the disclosure
requirements of the Hong Kong Companies Ordinance.

Ernst & Young
Certified Public Accountants

Hong Kong
26 June 1999


                                                   – 205 –
APPENDIX V                         INFORMATION ON AKAI HOLDINGS LIMITED
                          (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


      The following is the audited consolidated results of Akai for the year ended 31 January 1999
together with the relevant notes as extracted from the 1999’s annual report of Akai.

CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 January 1999
(in millions of United States dollars, except per share dollars)

                                                                          1999               1998
                                                                         US$m               US$m

     TURNOVER                                                        $    832.7        $   1,441.5

     OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS                       $       8.8       $      27.3

     Exceptional items                                                    (78.9)              28.9

     PROFIT/(LOSS) BEFORE SHARE OF RESULTS
       OF ASSOCIATED COMPANIES                                             (70.1)             56.2

     Share of results of associated companies
       Operating profits less losses                                       (4.8)              14.6
       Exceptional items                                                  (21.6)                 –

     PROFIT/(LOSS) BEFORE TAXATION                                        (96.5)              70.8

     Taxation                                                               (1.2)            (13.0)

     PROFIT/(LOSS) BEFORE MINORITY INTERESTS                              (97.7)              57.8

     Minority interests                                                    25.9              (21.0)

     NET PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS                       (71.8)              36.8

     Retained profits at beginning of year                                512.5             483.5

     RETAINED PROFITS AVAILABLE FOR DISTRIBUTION                          440.7             520.3

     Dividends                                                                –               (7.8)

     RETAINED PROFITS AT END OF YEAR                                 $    440.7        $    512.5

     EARNINGS/(LOSS) PER SHARE
       Basic                                                         $    (0.04)       $      0.02

        Diluted                                                      $     N/A         $      0.02

     Profits are retained in the Group as follows:
       Company and subsidiaries                                      $    480.1        $    525.1
       Associated companies                                               (39.4)            (12.6)

                                                                     $    440.7        $    512.5


See accompanying notes
                                                 – 206 –
APPENDIX V                      INFORMATION ON AKAI HOLDINGS LIMITED
                       (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


CONSOLIDATED BALANCE SHEET
31 January 1999
(in millions of United States dollars)

                                                                    1999           1998
                                                                   US$m           US$m

     FIXED ASSETS$                                            $     499.8    $      525.5
     INTERESTS IN ASSOCIATED COMPANIES                              136.8           115.0
     OTHER LONG TERM ASSETS                                         796.0           815.5
     CURRENT ASSETS                                                 892.2         1,334.7
     CURRENT LIABILITIES                                           (828.9)       (1,169.0)
     NET CURRENT ASSETS                                              63.3           165.7

     TOTAL ASSETS LESS CURRENT LIABILITIES                        1,495.9        1,621.7
     LONG TERM LIABILITIES                                         (215.6)        (236.2)
     DEFERRED INCOME                                                (19.0)         (14.0)
     MINORITY INTERESTS                                            (211.5)        (258.6)

                                                              $   1,049.8    $   1,112.9
     CAPITAL AND RESERVES
     Share capital                                            $     24.7     $     212.8
     Reserves                                                      584.4           387.6
     Retained profits                                              440.7           512.5

                                                              $   1,049.8    $   1,112.9




                     James Henry Ting              Chuck Cheuk Hung Tam
                         Director                         Director

     See accompanying notes




                                         – 207 –
APPENDIX V                     INFORMATION ON AKAI HOLDINGS LIMITED
                      (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 January 1999

                                                              1999          1998
                                                             US$m          US$m

   NET CASH INFLOW FROM
    OPERATING ACTIVITIES                                 $    19.3     $    78.6

   RETURNS ON INVESTMENTS
      AND SERVICING OF FINANCE
   Interest received                                           17.3         16.3
   Interest paid                                              (32.4)       (49.4)
   Interest element of finance lease payments                  (1.5)        (0.6)
   Dividends received from unlisted investments                 0.7          0.1
   Dividends received from associated companies                   –          6.7
   Dividends paid to shareholders                                 –        (13.5)

   Dividends paid to minority shareholders                     (1.0)        (0.4)

   Net cash outflow from returns on
     investments and servicing of finance                     (16.9)       (40.8)

   TAXATION

   Hong Kong profits tax paid                                     –         (0.4)
   Overseas taxes paid                                         (0.6)        (3.6)

   TAXES PAID                                                  (0.6)        (7.6)

   INVESTING ACTIVITIES
   Purchases of fixed assets                                  (30.9)       (92.2)
   Purchases of unlisted investments                          (10.0)        (2.5)
   Purchases of other assets                                  (12.8)       (29.3)
   Acquisition of a subsidiary                                (38.3)           –
   Investment in an associated company                        (38.8)           –
   Additions to deferred development costs                    (23.8)           –
   Proceeds from the sale of listed investments                 2.6            –
   Proceeds from the sale of unlisted investments               3.2            –
   Proceeds from the sale of fixed assets                      16.3         63.1
   Proceeds from the sale of subsidiaries                         –        198.0
   Proceeds from the sale of shares in associated
     companies                                                    –        112.1
   Disposal of subsidiaries                                    (5.4)            –
   Decrease/(increase) in short term bank deposits
     with maturity over three months                           (2.7)        51.5

   Net cash inflow/(outflow) from investing activities       (140.6)       300.7

   NET CASH INFLOW/(OUTFLOW) BEFORE
    FINANCING ACTIVITIES                                 $   (144.2)   $   330.9

   See accompanying notes
                                             – 208 –
APPENDIX V                     INFORMATION ON AKAI HOLDINGS LIMITED
                      (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 January 1999 continued

                                                                1999          1998
                                                               US$m          US$m

    NET CASH INFLOW/ (OUTFLOW) BEFORE
     FINANCING ACTIVITIES                                  $   (144.2)   $   330.9

    FINANCING ACTIVITIES
    Issue of ordinary share capital for cash                     5.5           22.5
    Share placement expenses                                    (0.3)             –
    Repurchases of shares                                          –           (5.7)
    Issue of long term bonds by a subsidiary                       –          160.5
    Redemption of bonds of a subsidiary                            –         (146.0)
    Capital element of finance lease payment                    (4.3)          (4.5)
    New long term loans                                         30.6           48.2
    Issue of unsecured convertible debentures by
       a subsidiary                                               7.0             –
    Repayment of long term bank loans                          (113.9)       (131.1)
    Repayment of short term borrowings with
       maturity over three months                               (13.0)        (67.4)

    Net cash outflow from financing activities                  (88.4)       (123.5)

    INCREASE/ (DECREASE) IN CASH AND
      CASH EQUIVALENTS                                         (232.6)       (207.4)

    Cash and cash equivalents at beginning of year             254.2           46.9

    Effect of foreign exchange rate changes                      (9.1)         (0.1)

    CASH AND CASH EQUIVALENTS
     AT END OF YEAR                                        $    12.5     $   254.2

    ANALYSIS OF BALANCES OF CASH AND
     CASH EQUIVALENTS

    Cash and bank balances and other liquid funds          $    262.0    $    429.9
    Banks loans and overdrafts                                 (424.3)       (362.9)

                                                               (162.3)        67.0

    Less: short term bank deposits with maturity
      over three months                                         (16.6)        (13.9)

    Add: short term borrowings with maturity
      over three months                                        191.4         201.1

                                                           $    12.5     $   254.2

    See accompanying notes
                                                 – 209 –
APPENDIX V                    INFORMATION ON AKAI HOLDINGS LIMITED
                     (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


BALANCE SHEET
31 January 1999

                                                                 1999           1998
                                                                US$m           US$m

    FIXED ASSETS                                           $      7.3     $      8.0
    INTERESTS IN SUBSIDIARIES                                   778.1          787.1
    OTHER LONG TERM ASSETS                                        4.6           79.6


    CURRENT ASSETS                                              271.7           333.6
    CURRENT LIABILITIES                                         (47.6)         (137.6)

    NET CURRENT ASSETS                                          224.1          196.0


    TOTAL ASSETS LESS CURRENT LIABILITIES                      1,041.1        1,070.7
    DEFERRED INCOME                                              (13.3)         (13.3)

                                                           $   1,000.8    $   1,057.4


    CAPITAL AND RESERVES
    Share capital                                          $     24.7     $    212.8
    Reserves                                                    626.7          433.4
    Retained profits                                            394.4          411.2

                                                           $   1,000.8    $   1,057.4




                   James Henry Ting             Chuck Cheuk Hung Tam
                       Director                        Director

    See accompanying notes




                                      – 210 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of accounting
     These financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong
     and the disclosure requirements of the Hong Kong Companies Ordinance.

     Basis of consolidation
     The consolidated financial statements include the financial statements of the Company and all its subsidiaries for the year
     ended 31 January 1999, except for the companies comprising the former Nokia colour television business. It is neither
     practical to change their accounting and group reporting date to 31 January nor possible to produce separate audited
     financial statements drawn up to 31 January 1999 for purposes of consolidation without adversely affecting the timely
     release of the Group’s financial statements. Appropriate adjustments that are material relating to the intervening period, if
     any, have been made to the consolidated financial statements of the Group in order to ensure that a true and fair view has
     been presented. The results of subsidiaries acquired or disposed of during the year are included in the consolidated
     financial statements from or to their respective dates of acquisition or disposal. All significant intercompany transactions
     and balances have been eliminated on consolidation.

     Revenue recognition
     Revenue is recognised when it is probable that the economic benefits will flow to the Group and when revenue can be
     measured reliably. On the sale of goods, revenue is recognised when the significant risks and rewards of ownership have
     been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually
     associated with ownership, nor effective control over the goods sold. Interest income is recognised on a time proportion
     basis taking into account the principal outstanding and the effective interest rate applicable, and dividend income is
     recognised when the shareholders’ rights to receive payment is established.

     Goodwill and capital reserve
     Goodwill arising on consolidation of subsidiaries and on acquisition of associated companies represents the excess of the
     purchase consideration paid for subsidiaries/associates, including related costs, over the fair value ascribed to the net
     underlying assets acquired at the dates of acquisition and is amortised on the straight-line basis over a period of 40 years.

     Capital reserve on consolidation represents the excess of the purchase consideration for the acquired subsidiaries or
     associated companies over the fair values ascribed to such subsidiaries or associated companies’ net underlying assets at
     the date of acquisition.

     Subsidiaries
     A subsidiary is a company in which the Company, directly or indirectly, controls more than half of its voting power on
     issued share capital or controls the composition of its board of directors.

     Shares in subsidiaries in the Company’s balance sheet are stated at cost less provisions for permanent diminutions in
     values where appropriate.

     Associated companies
     An associated company is a company, not being a subsidiary, in which the Group has a long term interest of greater than
     20% of the equity voting rights and over whose financial and operating policy decisions the Group is in a position to
     exercise significant influence.

     The Group’s share of the post-acquisition results of associated companies is included in the consolidated profit and loss
     account. The Group’s investments in associated companies are stated in the consolidated balance sheet at the Group’s
     share of net assets.

     Discount on acquisition of associated companies represents the excess fair value ascribed to the underlying net assets
     acquired over the purchase consideration paid for the associated companies and is credited to capital reserve in the year of
     acquisition.

     Related parties
     Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise
     significant influence over the other party in making financial and operating decisions. Parties are also considered to be
     related if they are subject to common control or common significant influence.




                                                             – 211 –
APPENDIX V                          INFORMATION ON AKAI HOLDINGS LIMITED
                           (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   Fixed assets and depr eciation

   Fixed assets are stated at cost less accumulated depreciation.

   The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working
   condition and location for its intended use. Expenditure incurred after the fixed assets have been put into operation, such
   as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In
   situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic
   benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of the
   fixed asset.

   Depreciation is provided using either the straight-line or reducing balance method to write off the cost of each asset over
   its estimated useful life. The principal annual rates used for this purpose are as follows:

   Leasehold land and buildings      :        2% to 20%

   Machinery and equipment           :        5% to 50%

   Other fixed assets                :        5% to 50%

   No depreciation is provided for freehold land.

   The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference
   between the sales proceeds and the carrying amount of the relevant asset.

   Inventories
   Inventories are stated at the lower of cost, on the first-in, first-out or weighted average basis, and net realisable value.

   The cost of finished goods and work in progress includes direct materials, direct labour and an appropriate proportion of
   manufacturing overheads based on normal levels of activity. Net realisable values are based on estimated selling prices
   less any further costs expected to be incurred to completion and disposal.

   Investments
   Investments held on a long term basis are stated at cost less provisions for any permanent diminutions in values.

   Trademarks and patents
   Trademarks and patents are stated at cost less provisions for any permanent diminutions in values.

   Deferr ed development cost
   Expenditure incurred on projects in developing new products in capitalised and deferred only when the projects are clearly
   defined, the expenditure is separately identifiable and there is a reasonable certainty that the projects are technically
   feasible and the products have commercial value. Product development expenditure which does not meet these criteria and
   research expenditure are expensed when incurred.

   Deferred development costs are amortised, using the straight-line basis, over the expected useful life of the products,
   commencing in the year when the products are put into commercial production.

   Deferred taxation
   Deferred taxation is provided under the liability method for all significant timing differences in the recognition of revenue
   and expenses for tax and for financial reporting purposes, except where it is considered to be probable that the tax effects
   of such deferrals will continue in the foreseeable future. A deferred tax asset is not recognised unless its realisation is
   assured beyond reasonable doubt.

   No provision has been made for taxes which would arise on the remittance to Hong Kong of retained profits of overseas
   companies as it is not anticipated that these amounts will be remitted in the near future.

   Foreign currencies
   Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction dates. Monetary
   assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of
   exchange ruling at that date. Exchange differences are dealt with in the profit and loss account.

   On consolidation, the financial statements of overseas subsidiaries, associated companies and branches are translated at
   the applicable market rates of exchange ruling at the balance sheet date. The resulting translation differences are included
   in the currency translation reserve.

                                                          – 212 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

     Leased assets
     Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are
     accounted for as finance leases. At the Inception of a finance lease, the cost of the leased asset is capitalised at the present
     value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect
     the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and depreciated over
     the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to
     the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

     Operating leases
     Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted
     for as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on the
     straight-line basis over the lease terms.

     Pension schemes
     The Group’s pension schemes relate principally to its subsidiaries’ operations located in Japan and Finland. The principal
     pension schemes operated are defined benefit plans under which retirement benefits are based on the retiring employees’
     compensation and years of service and determined in accordance with the local practice and regulations. On consolidation,
     all pension liabilities existing on the date of acquisition of the above-mentioned subsidiaries have been accounted for
     based on actuarial reports using the entry age normal method, prepared by independent Japanese actuary, Mitsubishi Trust
     and Banking Corp., Actuary Section; and Finnish actuary, IImarinen and Varma.

     Post-acquisition pension costs are accounted for on a cash basis. As at 31 January 1999, the Group has no unprovided
     pension liabilities (1998: $Nil).

     Cash and cash equivalents and other liquid funds
     For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, amounts payable on demand
     from banks and financial institutions and other liquid funds, less advances from banks and financial institutions repayable
     within three months from the date of the advance. Other liquid funds represent short term liquid investments which are
     convertible into known amounts of cash and which were within three months of maturity when acquired.

2.   RELATED PARTY TRANSACTIONS

     The Group has adopted the provisions of paragraph 28 of Statements of Standard Accounting Practice No. 20 (“SSAP 20”),
     “Related Party Disclosures; which provides an exemption from the requirement to present comparative information for
     prior periods when SSAP 20 is first adopted and such information is not available.

     (a)    The Group had the following material transactions with related parties during the year:

                                                                                                             Notes             1999

            Sales to subsidiaries of STC                                                                          1           $ 34.9

            Sales to related companies                                                                            2             36.3

            Sales to associated companies                                                                         3              2.9

            Purchases from related companies                                                                      4             17.3

            Purchases from associated companies                                                                   5              1.1

            Interest income from an associated company                                                            6              2.3

            Interest income from STC                                                                              7              1.1

            Guarantee fee income from a subsidiary of STC                                                         8              1.0

            Dividend income from a subsidiary of STC                                                              9              5.6

            (1)     Sales to The Singer Company N.V. and its subsidiaries (the “Singer group”), which are subsidiaries of STC,
                    are made according to published prices and conditions similar to those offered to other customers of the
                    Group. The balances due from and to the Singer group amounted to $53.3 and $12.2, respectively, as at 31
                    January 1999. The trading balances are unsecured, bear interest at the local prevailing rates to the extent
                    they were outstanding beyond the normal trade terms and have no fixed terms of repayment.


                                                            – 213 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

            (2)      Sales to Makonka Electric Sdn. Bhd. and its group companies (the “Makonka group”), which are long term
                     investments of the Group, are made according to published prices and conditions similar to those offered to
                     other customers of the Group.

            (3)      Sales to Sansui Electric Co. Ltd. and its subsidiaries (the “Sansui group”) and Tomei International (Holdings)
                     Ltd. and its subsidiaries (the “Tomei group”) are made according to published prices and conditions similar
                     to those offered to other customers of the Group. The balances due from the Sansui group amounted to $7.5
                     as at 31 January 1999. The balances due from and to the Tomei group amounted to $1.0 and $5.2, respectively,
                     as at 31 January 1999. The balance due to the Tomei group represents a deposit received from the Tomei
                     group to procure certain sales which were cancelled subsequent to 31 January 1999 and $4.9 was refunded
                     accordingly. The balances due are unsecured, interest-free and have no fixed terms of repayment.

            (4)      Purchases from the Makonka group are made according to published prices and conditions similar to those
                     offered to other customers of the Makonka group.

            (5)      Purchases from the Sansui group are made according to the published prices and conditions similar to those
                     offered to other customers of the Sansui group.

            (6)      The interest income was derived from loans made to the Sansui group. The loans are unsecured, bear
                     interest at rates ranging from 6% per annum to 8.5% per annum and have no fixed repayment terms. The
                     principal of the loans amounted to $43.3, against which a provision of $25.6 was made as at 31 January
                     1999.

            (7)      The interest income was derived from loans made to STC. The loans are unsecured, bear interest at 8.5% per
                     annum and have no fixed repayment terms. The principal of the loans amounted to $14.8 a$ at 31 January
                     1999.

            (8)      The guarantee fee income was derived from corporate guarantees executed by the Group in favour of banks
                     for banking facilities granted to G. M. Pfaff AG (“Pfaff”), a subsidiary of the Singer group, during the year.
                     The Group received guarantee fee income based on 1% per annum of the total corporate guarantees executed
                     by the Group for the period from 1 February 1998 to 31 October 1998 and 3% per annum since 1 November
                     1998. The total banking facilities granted to Pfaff that were guaranteed by the Group in the form of
                     corporate guarantees amounted to $14.7 as at 11 January 1999.

            (9)      Dividend income was derived from the $75.0 Singer convertible preferred stocks which carry a cumulative
                     dividend’ rate of 7.5% per annum.

                     (a)    The Group executed corporate guarantees to the extent of $66.8 for banking facilities jointly used by
                            the Sansui group and a subsidiary as at 31 January 1999 at nil consideration.

                     (b)    As at 31 January 1999, approximately 331 million ordinary shares of Tomei International (Holdings)
                            Ltd. (“Tomei”) held by the Sansui group were pledged to secure a loan of $12.0 granted by a bank to
                            the Group.

3.   TURNOVER AND REVENUE

                                                                                                                    Group
                                                                                                             1999            1998

     Total turnover – sales of goods                                                                    $   832.7        $ 1,441.5
     Interest income                                                                                         18.4             17.6
     Dividend income                                                                                          6.3              0.1

     Total revenue                                                                                      $   857.4        $ 1,459.2


     Turnover represents the net invoiced value of goods sold after allowances for returns and trade discounts but excludes
     intra-group transactions.




                                                            – 214 –
APPENDIX V                           INFORMATION ON AKAI HOLDINGS LIMITED
                            (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

4.   OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS

     Operating profit before exceptional items is determined:

                                                                                       Group
                                                                               1999            1998

     After charging:
     Cost of inventories sold                                              $   691.1       $ 1,105.6

     Depreciation:
       Own assets                                                               35.9            43.3

     Under finance leases                                                        0.4             0.5
     Loss/(gain) on disposal of fixed assets                                    10.4            (0.8)
     Loss on disposal of long term listed investment                             0.1               –
     Amortisation of deferred development costs                                  2.9               –
     Amortisation of goodwill                                                    4.0             4.0
     Pension expense                                                             2.4             5.0
     Operating lease rentals:
       Land and buildings                                                        3.2            13.9
       Others                                                                    2.5             2.2

     Interest expense on:
        Bank loans and overdrafts wholly repayable within five years            32.8            46.7
        Bank loans and overdrafts not wholly repayable within five years         0.5             0.6
        Finance leases                                                           1.8             0.9
        Others                                                                   1.5             6.5
     Auditors’ remuneration                                                      2.0             3.0

     After crediting:
     Interest income                                                            18.4            17.6
     Exchange gains, net                                                         4.2             5.7
     Dividend income                                                             6.3             0.1




                                                         – 215 –
APPENDIX V                           INFORMATION ON AKAI HOLDINGS LIMITED
                            (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

5.   EXCEPTIONAL ITEMS

                                                                                  Group
                                                                         1999             1998

     The company and subsidiaries:
       Gain on disposal of associated companies                      $       –        $    37.9
       Loss on disposal of subsidiaries                                      –             (4.3)
       Loss on dilution of interest in an associated company                 –             (5.8)
       Gain on redemption of convertible bonds of a subsidiary               –             22.0
       Provision for one-off product warranty expenses                       –             (4.3)
       Reorganisation and relocation expenses                             (9.2)           (12.7)
       Accounts receivable written off                                   (15.6)            (3.9)
       Provision for receivable from an associated company               (25.6)               –
       Provision for diminution in value of an unlisted investment       (26.2)               –

       Gain on disposal of unlisted investments                            3.2                –
       Provision for guarantees issued to
         disposed subsidiaries                                            (5.5)               –

                                                                         (78.9)           28.9


     Associated companies:
       Loss arising from business restructuring                           (1.1)            (0.1)
       Write-off of deferred development costs and deficit on
         revaluation of investment properties                             (0.5)            (0.3)
       Provision for diminutions in values of listed investments          (2.2)            (0.1)
       Provision for diminutions in values of unlisted investments        (0.1)            (0.4)
       Gain on disposal of long term listed investments                      –              0.9
       Provision for diminution in value of an investment in an
         associated company                                              (17.7)               –

                                                                         (21.6)               –


6.   DIRECTORS’ REMUNERATION

                                                                                  Group
                                                                         1999             1998

     Fees                                                            $     0.1        $     0.1
     Other emoluments                                                      2.3              2.3

                                                                     $     2.4        $     2.4




                                                         – 216 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

7.   TAXATION

                                                                                                                       Group
                                                                                                               1999            1998

     Subsidiaries    – Hong Kong                                                                          $     0.3        $     2.8
                     – Overseas                                                                                 4.0              7.8
                     – Overprovision in prior year                                                             (3.5)               –

                                                                                                                0.8             10.6
     Associated companies      – Hong Kong                                                                      0.4              0.7
                               – Overseas                                                                         –              2.1

                                                                                                                1.2             13.4
     Deferred taxation – Overseas                                                                                 –             (0.4)

     Taxation charge for the year                                                                         $     1.2        $    13.0


     The provision for Hong Kong profits tax has been calculated by applying the applicable tax rate of 16% (1998:16.5%) to
     the estimated assessable profits which, in the opinion of the directors, were earned in or derived from Hong Kong during
     the year. Provision for overseas profits taxes attributable to the operations of foreign subsidiaries is based on their
     respective assessable profits for the year calculated at applicable tax rates based on existing legislation, interpretations and
     practices in relation thereto.

     Movements in the deferred tax liabilities of the Group during the year are as follows:

                                                                                                               1999            1998

     At beginning of year                                                                                 $     0.2        $     0.6
     Written back form profit and loss account                                                                    –             (0.4)
     At balance sheet date                                                                                $     0.2        $     0.2

     The deferred tax liabilities of the Group relate primarily to accelerated depreciation allowances. There were no significant
     unprovided deferred tax liabilities at the balance sheet date.

     The Company did not have any significant unprovided/unrecognised deferred tax liabilities/assets at the balance sheet
     date.

8.   NET PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS

     The net loss for the year of the Company dealt with in the consolidated profit and loss account amounted to $61.8 (1998:
     profit $10.4).

9.   DIVIDENDS

                                                                                                                       Group
                                                                                                               1999            1998

     Interim dividend paid at HK$Nil
        (1998: HK$0.15 ($0.02) per
        share on 409 million shares)                                                                      $       –        $     7.8

                                                                                                          $       –        $     7.8


     The directors do not recommend the payment of a final dividend for the year (1998: HK$Nil).




                                                            – 217 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

10.   EARNINGS/(LOSS) PER SHARE

      The calculation of basic loss per share is based on the net loss attributable to shareholders for the year of $71.8 (1998:
      profit of $36.8) and the weighted average number of 1,876.8 million shares in issue during the year. The weighted average
      number of 1,759.8 million shares for 1998 has been adjusted to reflect the bonus issue of 1 for 10 shares which occurred
      during the year ended 31 January 1999.

      As the exercise prices of the outstanding share options and warrants of the Company, including those which lapsed during
      the year, were greater than the average market price of the Company’s shares during the year, no diluted loss per share has
      been calculated for the year ended 31 January 1999.

      The diluted earnings per share of 1998 has been re-stated in accordance with the revised Hong Kong Statements of
      Standard Accounting Practice No.5 “Earnings per share” issued during the year. Diluted earnings per share for 1998 is
      calculated based on the net profit attributable to shareholders of $36.8 and 1,762.6 million shares, which represents the
      weighted average number of 1,759.8 million shares in issue during the year, plus the weighted average number of 2.8
      million shares deemed to be issued for no consideration if all dilutive outstanding warrants and options of the Company
      had been exercised at the beginning of that year.

      The outstanding warrants, options and convertible debentures issued by the subsidiaries and associated companies of the
      Company have no dilutive effect on the basic loss per share for 1999 and the basic earnings per share for 1998.

11.   FIXED ASSETS

      The Group

                                                                                     Machinery             Other
                                                                      Land and             and              fixed
                                                                      Buildings      equipment             assets          Total

      Cost:
        At beginning of year                                          $   410.9        $   176.6       $    44.0       $   631.5
        Additions                                                           0.8             34.3             4.8            39.9
        Disposal of subsidiaries                                           (2.3)            (3.1)           (0.2)           (5.6)
        Disposals                                                          (9.3)           (17.2)           (2.1)          (28.6)
        Exchange adjustments                                                1.4              1.4             0.1             2.9

      At 31 January 1999                                                  401.5            192.0            46.6           640.1

      Accumulated depreciation:
        At beginning of year                                                20.9            65.2            19.9           106.0
        Provided during the year                                             3.5            27.6             5.2            36.3
        Disposal of subsidiaries                                            (0.3)           (0.5)           (0.2)           (1.0)
          Disposals                                                         (0.1)           (1.5)           (0.3)           (1.9)

        Exchange adjustments                                                 0.4             0.5               –             0.9

        At 31 January 1999                                                  24.4            91.3            24.6           140.3

      Net book value:
        At 31 January 1999                                            $   377.1        $   100.7       $      22       $   499.8


        At 31 January 1998                                            $   390.0        $   111.4       $    24.1       $   525.5


      Net book value of assets held under finance leases:
        At 31 January 1999                                            $      4.1       $     6.2       $     1.8       $    12.1

        At 31 January 1998                                            $      4.0       $    12.5       $     1.8       $    18.3




                                                            – 218 –
APPENDIX V                           INFORMATION ON AKAI HOLDINGS LIMITED
                            (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   The Group’s land and buildings comprise, at cost:

                                                                                                     1999           1998

   Medium lease land and buildings
     in Hong Kong                                                                               $    20.5      $    19.7
   Long lease land and buildings
     in Hong Kong                                                                                    15.4      $    15.4
   Medium lease land and buildings
     outside Hong Kong                                                                               39.3           45.7
   Long lease land and buildings
     outside Hong Kong                                                                               10.0           10.0
   Freehold land and buildings
     outside Hong Kong                                                                              316.3          320.1

                                                                                                $   401.5      $   410.9


   The Company

                                                                               Leasehold            Other
                                                                                land and             fixed
                                                                                buildings           assets         Total

   Cost:
     At beginning of year                                                       $     3.9       $     6.9      $    10.8
     Additions                                                                          –             0.5            0.5

     At 31 January 1999                                                               3.9             7.4           11.3

   Accumulated depreciation:
     At beginning of year                                                             0.2             2.6            2.8
     Provided during the year                                                         0.1             1.1            1.2

     At 31 January 1999                                                               0.3             3.7            4.0

   Net book value:
     At 31 January 1999                                                         $     3.6       $     3.7      $     7.3


     At 31 January 1998                                                         $     3.7       $     4.3      $     8.0


   The Company’s leasehold land and buildings are held on long leases outside Hong Kong.

   The other fixed assets of the Group and the Company comprise leasehold improvements, furniture, fixtures, other office
   equipment and motor vehicles.




                                                       – 219 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

12.   INTERESTS IN SUBSIDIARIES

      Company

                                                                                                             1999             1998

      Shares, at cost:
        Listed overseas                                                                                 $   501.3        $   439.0
        Unlisted                                                                                            187.9            165.4

                                                                                                            689.2            604.4
      Due from subsidiaries                                                                                 287.1            345.7

                                                                                                             976.3            950.1
      Due to subsidiaries                                                                                   (198.2)          (163.0)

                                                                                                        $   778.1        $   787.1


      Market value of listed shares                                                                     $   172.3        $   203.6


      The balances with subsidiaries are unsecured, bear interest at the local prevailing rates to the extent they were outstanding
      beyond the normal trade terms and have no fixed terms of repayment. Particulars of the principal subsidiaries are set out in
      note 28 to the financial statements.

13.   INTERESTS IN ASSOCIATED COMPANIES

                                                                                    Group                             Company
                                                                            1999             1998            1999           1998

      Share of net tangible assets                                     $     69.2       $    59.4       $        –       $        –

      Share of intangible assets,
        excluding goodwill                                                   84.1            72.1                –                –

      Discount on acquisition                                               (16.5)          (16.5)               –                –

                                                                       $   136.8        $   1 15.0      $        –       $        –


      Market value of listed shares                                    $     48.3       $    85.1       $        –       $        –




                                                            – 220 –
APPENDIX V                          INFORMATION ON AKAI HOLDINGS LIMITED
                           (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   Particulars of the principal associated companies are as follows:

                                       Place of
                                  incorporation           Issued         Class of         Proportion
                                           and             share          share-              held                        Nature of
   Name                              operations          capital         holding      directly     indirectly              business

   ST Credit                         Bermuda       US$12,000           Ordinary         50%                –                Money
     Company                                                                                                               lending
     Limited

   Sansui Electric                      Japan      Yen 59,296          Ordinary             –      29.67%             Manufacture
     Co., Ltd.                                        million                                                                   and
                                                                                                                       distribution
                                                                                                                      of audio and
                                                                                                                             visual
                                                                                                                          products

   MicroMain                   British Virgin       US$1,724           Ordinary         50%                –           Investment
    Systems Ltd.                      Islands                                                                             holding

   Tomei                             Bermuda           HK$21           Ordinary             –      35.30%             Manufacture
     International                                     million                                                         and trading
     (Holdings) Ltd.                                                                                                    of electric
     (now known as                                                                                                       products
     “Toyo Holdings
     Limited”)

   The above table lists the associated companies of the Company as at 31 January 1999 which, in the opinion of the
   directors, either principally affected the results for the year, or formed a substantial portion of the net assets of the Group.
   To give details of other associated companies would, in the opinion of the directors, result in particulars of excessive
   length.

   Part of the Group’s interests in Tomei are held through Sansui Electric Co., Ltd. (“Sansui”). The Group had indemnified
   Sansui against any loss on disposal of its investment in Tomei and Sansui had agreed to sell its interests in Tomei to the
   Group if it exercised such an indemnity. The indemnity was not renewed subsequent to the balance sheet date.

   The Group’s interests in Sansui are held through Akai Electric Co., Ltd. (“Akai”). The Group has indemnified Akai against
   any loss on disposal of its investment in Sansui.

   The Group’s share of aggregate losses retained by the associated companies for the year amounted to $26.8 (1998: $17.1).




                                                          – 221 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

14.   OTHER LONG TERM ASSETS

                                                                                   Group                          Company
                                                                          1999             1998            1999         1998

      Investments, at cost:
        Listed overseas                                               $     0.6        $     3.3      $       –       $       –

      Unlisted                                                            114.8            167.6              –               –

                                                                          1 15.4           170.9              –               –

      Other assets                                                        519.1            498.4            4.6            79.6

      Deferred development costs:
        Cost:
          At beginning of year                                                –                –              –               –
          Additions                                                        23.8                –              –               –

           At 31 January                                                   23.8                –              –               –

      Amortisation:
       At beginning of year                                                   –                –              –               –
       Provided during the year                                             2.9                –              –               –

        At 31 January                                                       2.9                –              –               –

      Net book value                                                       20.9                –              –               –

      Goodwill on consolidation:
        Cost:
        At beginning of year                                              152.0            202.5              –               –
        Disposals                                                          (1.6)           (50.5)             –               –

      At 31 January                                                       150.4            152.0              –               –

      Amortisation:
       At beginning of year                                                 5.8              6.5              –               –
       Provided during the year                                             4.0              4.0              –               –
       Disposals                                                              –             (4.7)             –               –

        At 31 January                                                       9.8              5.8              –               –

      Net book value                                                      140.6            146.2              –               –

                                                                      $   796.0        $   815.5      $     4.6       $    79.6


      Market value:
       Investments listed
       overseas                                                       $     2.2        $     8.1      $       –       $       –


      Other assets include trademarks and patents amounting to $483.4 ($359.1 - net of minority interests) (1998: $488.5, $341.6
      - net of minority interests), lease rights and deposits.




                                                          – 222 –
APPENDIX V                              INFORMATION ON AKAI HOLDINGS LIMITED
                               (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

15.   CURRENT ASSETS

                                                                                   Group                            Company
                                                                           1999              1998           1999          1998

      Cash and bank balances
        and other liquid funds                                        $   262.0        $    429.9      $   118.9       $   241.7
      Accounts receivable
        and prepayments                                                   370.7             656.6           77.8            91.9
      Inventories                                                         184.5             248.2              –               –
      Investment held for
        disposal                                                             75                  –          75.0               –

                                                                      $   892.2            1,334.7     $   271.7       $   333.6


      Included in accounts receivable and prepayments are receivables from associated companies amounting to $26.2, after the
      provision of $25.6 (1998: $24.1). The details of the terms of the receivables from associated companies have been
      disclosed in note 2 to the financial statements.

16.   INVENTORIES

                                                                                                                   Group
                                                                                                            1999            1998

      Raw materials                                                                                    $    57.7       $    76.0
      Work in progress                                                                                      18.1            31.4
      Finished goods and merchandise                                                                       108.7           140.8

                                                                                                       $   184.5       $   248.2


      The carrying amount of inventories included in the above that are carried at net realisable value was $27.8 (1998: $26.2).

      As at 31 January 1999, the carrying amount of inventories of the Group pledged as security for liabilities amounted to $8.9
      (1998: $Nil).

17.   CURRENT LIABILITIES

                                                                                   Group                            Company
                                                                           1999              1998           1999          1998

      Bank loans and overdrafts                                       $   424.3        $    362.9      $    23.6       $   109.3

      Current portion of long term bank loans                              45.6             102.3              –               –
                                                                          469.9             465.2           23.6           109.3

      Accounts payable and
        accruals                                                          349.3             692.1           24.0            28.3

      Finance lease payables                                                 3.7               3.3             –               –

      Taxation                                                               6.0               8.4             –               –

                                                                      $   828.9        $ 1,169.0       $    47.6       $   137.6


      Included in accounts payable and accruals are payables to an associated company amounting to $5.2 (1998: $Nil). The
      details of the terms of the payables to the associated company have been disclosed in note 2 to the financial statements.




                                                           – 223 –
APPENDIX V                              INFORMATION ON AKAI HOLDINGS LIMITED
                               (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

18.   BANK LOANS, OVERDRAFTS AND BANKING FACILITIES

                                                                                   Group                              Company
                                                                            1999             1998            1999           1998

      Bank loans and overdrafts
        maturing:
         Within one year                                               $   469.9        $   465.2       $     23.6       $   109.3
          In the second year                                               116.5             60.3                –               –
          In the third of fifth years, inclusive                            66.3            144.0                –               –
      Beyond five years                                                      0.3              7.5                –               –

                                                                       $   653.0        $   667.0       $     23.6       $   109.3


      The majority of the bank loan facilities were undertaken by subsidiaries’ operations whose borrowings are primarily
      denominated in local currencies. Facilities of certain operations are supported by pledges of real estate, shares in certain
      subsidiaries and associated companies, general pledges of assets, guarantees, standby letters of credit, and similar security
      arrangements.

      The Group had guaranteed certain banking facilities jointly used by the Sansui group and a subsidiary amounting to $66.8
      (1998: $90.3) as at 31 January 1999. In addition, the Group had guaranteed certain facilities granted to the former
      subsidiaries now disposed of amounting to $14.7 (1998: $41.0) as at 31 January 1999.

      With respect to financial covenants given by the Group in support of certain bank borrowings, only one financial covenant
      relating to an interest cover ratio is not complied with by a subsidiary of the Group. The directors are of the view that the
      failure to comply with this ratio does not have any material adverse impact on the Group’s operations.

19.   FINANCE LEASE PAYABLES

      There were commitments under non-cancellable finance leases at the balance sheet date as follows:

                                                                                                                     Group
                                                                                                             1999             1998

      Amounts repayable:
       Within one year                                                                                  $      3.7       $     3.3

      In the second to fifth years, inclusive                                                                  8.9             4.3
      Beyond five years                                                                                        1.6             1.9

                                                                                                              14.2             9.5
      Portion classified as current liabilities                                                                3.7             3.3

                                                                                                        $     10.5       $     6.2




                                                            – 224 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

20.   LONG TERM LIABILITIES
                                                                                   Group                            Company
                                                                           1999            1998             1999          1998


      Bank loans                                                      $   183.1        $   211.8        $       –      $        –
      Finance lease payables                                               10.5              6.2                –               –
      Pension obligations                                                  14.8             18.0                –               –
      Unsecured convertible debentures due January 2001                     7.0                –                –               –

      Deferred taxation                                                      0.2             0.2                –               –

                                                                      $   215.6        $   236.2        $       –      $        –


      On 29 January 1999, a wholly-owned subsidiary of the Company has issued $7 in face value of unsecured convertible
      debentures (“Debentures”) entitling a third party investor to convert the Debentures into existing ordinary shares of Akai
      Electric Co., Ltd. under certain agreed terms and conditions.

21.   SHARE CAPITAL

      Shares

                                                                                                   Thousands
                                                                                                    of shares

      Authorised:
        Ordinary shares of HK$0.10 per share                                                       30,000,000          $   384.6

      Issued and fully paid ordinary shares:
         At beginning of year (ordinary shares of
           HK$1.00 per share)                                                                       1,660,275          $   212.8
      Reduction of share capital as authorised
         by a resolution passed at a general
         meeting of the Company on 23 July 1998                                                             –              (191.6)

      Bonus issue of 1 for 10 on 30 July 1998                                                         166,027                 2.1
      New issue on 24 August 1998                                                                     106,000                 1.4

      At 31 January 1999 (ordinary shares of HK$0.10 per share)                                     1,932,302          $     24.7


      On 27 May 1998, the directors of the Company proposed for adjustment of nominal value of the Company’s shares
      (“Adjustment Proposal”). Under the proposal, the nominal value of the issued shares of the Company was adjusted from
      HK$1.0 each to HK$0.10 each by cancelling paid-up capital to the extent of HK$0.9 on each of the issued shares of the
      Company. Accordingly, the issued share capital was adjusted from 1,660,274,627 shares of HK$1.00 each to 1,660,274,627
      shares of HK$0.10 each, resulting in a credit of $191.6 being transferred to the contributed surplus account of the
      Company. The authorised and unissued share capital of the Company was subdivided into shares of new nominal value of
      HK$0.10 each. The Adjustment Proposal was approved by the shareholders at a general meeting on 23 July 1998.

      On 23 July 1998, a resolution was passed by the shareholders at a general meeting for the issuance of bonus shares on the
      basis of one new share for every ten shares then held by way of capitalisation of the share premium of the Company.
      Accordingly, 166,027,462 new shares of HK$0.10 each of the Company was allotted, issued and credited as fully paid by
      way of capitalisation of $2.1 of the share premium of the Company. The issuance of bonus shares was completed on 30
      July 1998.

      On 24 August 1998, the Company issued 106,000,000 new shares of HK$0.10 each (“New Shares”) at a price of HK$0.40
      per share for cash pursuant to a private placement and subscription. The excess of the proceeds on the issue of New Shares
      over their par value, net of the related issue expenses, has been credited to the share premium account.

      Employee share options
      Under the Company’s employee share option scheme, the board of directors may at any time, during the period from 25
      July 1995 to 24 July 2005, grant options to subscribe for shares in the Company to any eligible employees including
      executive directors. The subscription price is the higher of the nominal value of the shares, and 80% of the average of the
      closing share price for the five trading days immediately preceding the offer of the option. The maximum number of shares
      in respect of which options may be granted, together with options exercised and options then outstanding under the
      scheme, may not exceed 10% of the issued share capital of the Company at the time of granting of such options excluding
      any shares issued pursuant to the scheme.

                                                           – 225 –
APPENDIX V                              INFORMATION ON AKAI HOLDINGS LIMITED
                               (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

      Under the scheme, no options were granted during the year ended 31 January 1999. During the year ended 31 January
      1999, no options were exercised and options to subscribe for 7.0 million shares expired. At 31 January 1999, there were
      outstanding options to subscribe for 43.6 million shares (1998: 50.6 million shares, adjusted for the 1 for 10 bonus issue).
      These share options are exercisable at prices ranging from HK$1.6636 to HK$2.1091 per share (adjusted for the 1 for 10
      bonus issue) from the date of grant of the options to the expiry dates, which range from 16 March 2000 to 28 August 2000.

      Warrants
      During the year, registered holders with warrant rights of HK$132 exercised their rights to subscribe for 40 shares in the
      Company at $0.4 (HK$3.3) per share.

      On 31 July 1998, all the Company’s outstanding warrants expired.

      As at 31 January 1999, the Company had no outstanding warrants.
22.   RESERVES

                                                                                   Group                             Company
                                                                           1999             1998            1999           1998

      Share of net tangible assets                                     $    69.2       $     59.4       $       –       $        –

      Share premium account:
        At beginning of year                                           $   140.0       $   257.7        $   140.0       $   257.7
        Premium on issue of
        ordinary shares under:
          New Issue                                                          4.1                –             4.1                –
          New Issue expenses                                                (0.3)               –            (0.3)               –

           1 for 10 bonus issue                                             (2.1)               –            (2.1)               –
           Scrip dividend scheme                                               –             19.9               –             19.9
        Exercises of warrants and options                                      –             20.0               –             20.0
        3 for 1 bonus issue                                                    –           (157.6)              –           (157.6)


        At 31 January                                                      141.7           140.0            141.7           140.0

      Contributed surplus:
        At beginning of year                                               278.8           284.5            292.1           297.8
        Reduction of share capital                                         191.6               –            191.6               –
        Repurchases of shares                                                  –            (5.7)               –            (5.7)

        At 31 January                                                      470.4           278.8            483.7           292.1

      Capital redemption reserve:
        At beginning of year                                                 1.3              0.9             1.3              0.9
        Transfer from contributed
        surplus on repurchases
        of shares during the year                                              –              0.4               –              0.4

        At 31 January                                                        1.3              1.3             1.3              1.3

      Capital reserve:
        At beginning of year                                                   –             12.4               –             12.4

      Arising on additional
         investment in a subsidiary                                          6.6                –               –                –
      Issue of scrip dividend                                                  –            (12.4)              –            (12.4)

      At 31 January                                                          6.6                –               –                –

      Currency translation reserve:
        At beginning of year                                               (32.5)           (39.4)              –                –
        Additions                                                           (4.1)            (2.7)              –                –
        Disposal of subsidiaries                                             1.0              9.6               –                –

        At 31 January                                                      (35.6)           (32.5)              –                –

      Total reserves:
        At 31 January                                                  $   584.4       $   387.6        $   626.7       $   433.4

        At beginning of year                                           $   387.6       $   516.1        $   433.4       $   568.8


      As at 31 January 1999, the currency translation deficit attributable to the Group’s associated companies included in the
      currency translation reserve amounted to $28.6 (1998: $25.2).


                                                           – 226 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

      The contributed surplus of the Group arose as a result of the reorganisation scheme in June 1992 and originally represented
      the difference between the nominal value of the shares and the share premium account of the former holding company of
      the Group, and the nominal amount of the shares of the Company allotted and issued under the reorganisation.

      The contributed surplus of the Company arose as a result of the same reorganisation and originally represented the
      dif ference between the consolidated shareholders’ funds of the former holding company of the Group and the nominal
      amount of the shares of the Company allotted and issued under the reorganisation. The reserve is available for distribution
      to shareholders of the Company under present Bermuda law. However, it is the intention of the directors of the Company
      that any amounts in the contributed surplus account will not be distributed by the Company in the future.

23.   RETAINED PROFITS

                                                                                     Group                          Company
                                                                             1999            1998          1999           1998
      Share of net tangible assets                                       $    69.2       $   59.4      $      –       $      –

      Retained profits:
        At beginning of year                                             $   512.5       $   483.5     $   411.2       $   408.6
        Net profit/(loss) for the year                                       (71.8)           36.8         (61.8)           10.4
        Dividends                                                                –            (7.8)            –            (7.8)

        At 31 January                                                    $   440.7       $   512.5     $   349.4       $   411.2


24.   COMMITMENTS

      Operating lease commitments

      Payments in respect of non-cancellable operating leases, committed to be made

      During the next year, at the balance sheet date were as follows:

                                                                                     Group                          Company
                                                                             1999            1998          1999           1998
      Share of net tangible assets                                       $    69.2       $   59.4      $      –       $      –


      Land and buildings:
      Expiring:
        Within one year                                                  $     0.1       $     3.6     $       –       $       –
        In the second to fifth years, inclusive                                1.4             7.6             –               –
      Beyond five years                                                          –             1.7             –               –

                                                                         $     1.5       $    12.9     $       –       $       –

      Others:

      Expiring:
        Within one year                                                        0.2             0.2             –               –

        In the second to fifth years, inclusive                                0.8             0.9             –               –

                                                                               1.0             1.1             –               –

                                                                         $     2.5       $    14.0     $       –       $       –


      Forward exchange contracts                                         $    37.9       $    74.3     $    13.3       $    10.8


      Capital expenditure contracted for                                 $     8.6       $    10.3     $       –       $       –




                                                           – 227 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

25.   CONTINGENT LIABILITIES

                                                                                    Group                         Company
                                                                             1999           1998         1999           1998


      Bills discounted with recourse                                   $     25.1       $    7.2    $        –      $        –


26.   DETAILS OF THE CONSOLIDATED CASH FLOW STATEMENT

      (a)    Reconciliation of profit/(loss) before share of results of associated companies to net cash inflow from operating
             activities

                                                                                                         1999            1998

             Profit/(loss) before share of results of associated companies                          $    (70.1)     $     56.2
             Interest income                                                                             (18.4)          (17.6)
             Interest expense                                                                             36.6            54.7
             Dividend income                                                                              (6.3)           (0.1)
             Depreciation                                                                                 36.3            43.8
             Loss/(gain) on disposal of fixed assets                                                      10.4            (0.8)
             Amortisation of deferred development costs                                                    2.9               –
             Amortisation of goodwill                                                                      4.0             4.0
             Loss on disposal of subsidiaries                                                                –             4.3
             Gain on disposal of associated companies                                                        –           (37.9)
             Loss on dilution of interest in an associated company                                           –             5.8
             Gain on redemption of convertible bonds of a subsidiary                                         –           (22.0)
             Provision for diminution in value of an unlisted investment                                  26.2               –
             Provision for guarantees issued to disposed subsidiaries                                      5.5               –
             Provision for receivable from an associated company                                          25.6               –
             Accounts receivable write off                                                                15.6             3.9
             Gain on disposal of unlisted investments                                                     (3.2)              –
             Loss on disposal of long term listed investment                                               0.1               –
             Decrease/(increase) in accounts receivable and prepayments                                  216.2          (255.0)
             Decrease in inventories                                                                      54.6            55.2
             Increase/(decrease) in accounts payable and accruals                                       (317.2)          164.4
             Increase in pension obligations                                                               0.5            19.7

             Net cash inflow from operating activities                                              $     19.3      $     78.6




                                                           – 228 –
APPENDIX V                        INFORMATION ON AKAI HOLDINGS LIMITED
                         (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   (b)   Analysis of changes in financing during the years

                                                       Share                         Short
                                                     capital                           term          Long
                                                  (including                          bank            term
                                                  premium,                            loans           bank
                                                contributed                            with          loans
                                                    surplus,    Convertible        maturity             and
                                                 capital and     debentures            over        finance
                                                redemption                of          three           lease       Minority
                                                    reserve)    subsidiaries        months        payables         interest

         At 1 February 1997                     $    604.0      $      51.8    $     271.5    $     419.8     $     241.0

         Cash inflow/(outflow) from
            financing - net                           16.8            14.5           (67.4)         (87.4)              –
         Scrip dividends                              24.5               –               –              –               –
         Issuable equity securities                  (12.4)              –               –              –               –
         Inception of finance leases                     –               –               –            0.8               –
         Disposal of subsidiaries                        –           (23.8)              –           (6.8)          (16.1)
         Minority share in earning
            for the year                                  –               –              –               –           21.0
         Conversion of convertible
            bonds                                         –          (13.3)              –               –           13.3
         Dividends paid                                   –              –               –               –           (0.4)
         Gain on redemption of
         convertible bonds                                –          (22.0)              –               –               –
         Exchange difference                              –           (7.2)           (3.0)           (2.8)           (0.2)

         At 31 January 1998 and
            1 February 1998                     $    632.9       $        -    $     201.1    $     323.6     $     258.6
         Cash inflow/(outflow) from
         financing - net                                5.2             7.0          (13.0)         (87.6)               –
         Inception of finance leases                      –               –              –            9.0                –
         Disposal of subsidiaries                         –               –              –           (4.9)               –
         Arising from partial
         divestment of interests in
            a subsidiary                                  –               –              –               –            (5.0)
         Arising from acquisition of
            subsidiaries                                6.6               –              –               –               –
         Minority share in loss of the
            year                                          –               –              –               –          (25.9)
         Dividends paid                                   –               –              –               –           (1.0)
         Issuance of shares of a
            subsidiary                                    –               –              –               –          (11.4)
         Exchange difference                              –               –            3.3             2.8           (3.8)

         At 31 January 1999                     $    644.7      $       7.0    $     191.4    $     242.9     $     211.5




                                                      – 229 –
APPENDIX V                        INFORMATION ON AKAI HOLDINGS LIMITED
                         (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   (c)   Analysis of the acquisition of a subsidiary

                                                                                                         1999            1998

         Net assets acquired:
         Unlisted investment, at cost                                                               $   127.1       $        –
         Minority interests                                                                             (49.0)               –

                                                                                                    $    78.1       $        –


         Satisfied by:
         Cash paid during the year                                                                  $    38.3       $        –
         Cash paid in prior year                                                                         39.8                –

                                                                                                    $    78.1       $        –


         The analysis of net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

                                                                                                         1999            1998

         Cash consideration paid during the year                                                    $    38.3       $        –


         The subsidiary acquired during the year contributed $Nil for net operating cash flows, paid $Nil in respect of the
         net returns on investments and servicing of finance, paid $Nil in respect of taxation, utilised $Nil for investing
         activities and utilised $Nil for financing activities.

         The turnover and the consolidated profit/(loss) after taxation include the turnover of $Nil and the attributable gain
         of $Nil relating to the subsidiary acquired during the year.

   (d)   Analysis of the acquisition of interests in an associated company

                                                                                                         1999            1998

         Share of net assets acquired:
         Unlisted investment, at cost                                                               $    38.8       $        –

         Satisfied by:
         Cash                                                                                       $    38.8       $        –


         The analysis of net outflow of cash and cash equivalents in respect of the acquisition of interests in an associated
         company is as follows:

                                                                                                         1999            1998

         Cash consideration                                                                         $    38.8       $        –




                                                       – 230 –
APPENDIX V                         INFORMATION ON AKAI HOLDINGS LIMITED
                          (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

   (e)   Analysis of the disposal of subsidiaries

                                                                                                            1999             1998

         Net assets disposed of:
         Fixed assets                                                                                  $      4.6       $    103.8
         Other assets                                                                                         9.0             95.1
         Goodwill                                                                                             1.6             45.8
         Cash and bank balances                                                                               0.4              5.6
         Interest in associated companies                                                                       –              6.1
         Accounts receivable and prepayments                                                                 16.2            176.3
         Inventories                                                                                          8.1            144.6
         Bank loans and overdrafts                                                                           (7.5)          (112.3)
         Accounts payable and accruals                                                                      (37.3)          (145.1)
         Taxation                                                                                               –             (1.7)
         Long term bank loans                                                                                (4.9)            (6.8)
         Convertible bonds                                                                                      –            (23.8)
         Pension obligations                                                                                 (3.7)          (110.5)
         Minority interests                                                                                     –            (16.1)
         Currency translation reserve                                                                         1.0              9.6

                                                                                                            (12.5)           170.6
         Loss on disposal of subsidiaries                                                                       –             (4.3)

                                                                                                       $    (12.5)      $    166.3


         Satisfied by:
         Cash received                                                                                 $        –       $     91.3
         Cash paid                                                                                          (12.5)               –

         Unlisted overseas investments                                                                          –             75.0

                                                                                                       $    (12.5)      $    166.3


         The analysis of net inflow/(outflow) of cash and cash equivalents in respect of the disposal of subsidiaries is as
         follows:

                                                                                                            1999             1998

         Cash consideration received/(paid)                                                            $    (12.5)      $     91.3
         Bank loans and overdrafts disposed of                                                                7.5            112.3
         Cash and bank balances disposed of                                                                  (0.4)            (5.6)

         Net inflow/(outflow) of cash and cash equivalents                                             $     (5.4)      $    198.0


         During the year, the Group entered into a sale and purchase agreement (the “Agreement”) for the disposal of
         certain subsidiaries. Under the Agreement, the Group was granted an option by the purchaser of the subsidiaries,
         for a period of three years from the date of the Agreement, to repurchase the subsidiaries disposed of from the
         purchaser at a price equivalent to 80 % of the value of such subsidiaries as determined by a valuation to be
         performed by an independent professional valuer as of the time the Group decides to exercise such option.

         The subsidiaries sold during the year contributed $Nil (1998: $39.1) for net operating cash flows, paid $Nil (1998:
         $9.3) in respect of the net returns on investments and servicing of finance, paid $Nil (1998: $2.4) in respect of
         taxation, contributed $Nil (1998: $1.3) for investing activities and utilised $Nil (1998: $13.6) for financing activities.

         The turnover and the net profit/(loss) attributable to shareholders include the turnover of $Nil (1998: $408.4) and
         the attributable gain of $Nil (1998: $1.9) relating to the subsidiaries prior to their disposal during the year.




                                                         – 231 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

      (f)    Exceptional items

             There was a net cash outflow in respect of the disposal of unlisted investments and in the reorganisation and
             relocation expenses attributable to the Group of $6.0 (1998: cash inflow of $147.1).

      (g)    Major non-cash transaction

             During the year, the Group entered into finance lease arrangements in respect of assets with a total capital value at
             the inception of the leases of $9.0 (1998: $0.8).

27.   SUBSEQUENT EVENTS

      On 11 January 1999, the Company announced its subscription of 40,000,000 new shares in Akai Electric Co., Ltd. (“Akai”)
      at a price of Yen 86 each for an aggregate consideration of approximately $31.1. The subscription was completed on 4
      February 1999. After the subscription, the Company’s shareholding in Akai increased to 74.4%.

      On 15 March 1999, the Debentures in the amount of $7.0 as set out in note 20 to the financial statements, were converted,
      together with the subsequent exercise of warrants, into an aggregate of 10,812,000 Akai Shares. Accordingly, the Company’s
      shareholding in Akai decreased from 74.4% to 71.2%.

      On 13 April 1999, Tomei entered into a subscription agreement with The Grande Holdings Limited (“Grande”) involving
      the subscription by Grande of 1,000,000,000 new shares of HK$0.01 per share (“Subscription”) of Tomei. The subscription
      price of HK$0.10 per share represented a discount of approximately 15.3% to the closing price of HK$0.118 per share on
      13 April 1999. The cash proceeds from the Subscription of $12.8 will be used as general working capital of the Tomei
      group. Upon completion of the Subscription, Grande holds approximately 31.8% of Tomei’s enlarged issued share capital
      and the Company’s effective interest in Tomei has been reduced to 24.1%. New directors as nominated by Grande have
      been appointed to the board of directors of Tomei on 27 May 1999, which constitute the majority of the members of the
      board of directors of Tomei. The Subscription was completed on 27 May 1999. Upon completion of the Subscription, the
      name of Tomei was changed to “Toyo Holdings Limited”.

      On 16 April 1999, the Company announced its subscription of 40,000,000 new shares in Akai at a price of Yen 96 each for
      an aggregate consideration of approximately $32.3. The subscription was completed on 10 May 1999. After the subscription,
      the Company’s shareholding in Akai increased to 74.4%.




                                                           – 232 –
APPENDIX V                            INFORMATION ON AKAI HOLDINGS LIMITED
                             (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

28.   PARTICULARS OF PRINCIPAL SUBSIDIARIES

      Particulars of the Company’s principal subsidiaries at 31 January 1999 are set out below.

                                      Place of                                Effective
                               incorporation/                               percentage
                                  registration             Class of                  of             Issued            Nature of
      Name                     and operations              holding             holding        share capital            business

      Held dir ectly

      Akai Electric                      Japan             Ordinary                  71            Yen 27,851       Manufacture
        Co., Ltd.                                                                                      million               and
                                                                                                                     distribution
                                                                                                                    of audio and
                                                                                                                 visual products

      Semi-Tech                         British            Ordinary                 100                  US$1         Investment
        (Europe) Ltd.                   Virgin                                                                           holding
                                        Island

      Held indirectly

      Akai Pty. Ltd.                  Australia            Ordinary                  71           A$7,600,000       Distribution
                                                                                                                    of audio and
                                                                                                                 visual products

      Akai (U.K.) Ltd.                    U.K.             Ordinary                  71      GBP4,151,000           Distribution
                                                                                                                    of audio and
                                                                                                                 visual products

      Akai Deutschland                Germany              Ordinary                  71       DM7,400,000           Distribution
        GmbH                                                                                                        of audio and
                                                                                                                 visual products

      Akai France                       France             Ordinary                  71           FF42 million      Distribution
        S.A.                                                                                                        of audio and
                                                                                                                 visual products

      Akai Electric                   Thailand             Ordinary                  57              Baht 120    Manufacture of
        (Thailand) Co.                                                                                million         audio and
        Ltd.                                                                                                     visual products

      Kong Wah                     Hong Kong               Ordinary                  71      HK$53 million          Manufacture
        Electronic                                                                                               and distribution
        Enterprises                                                                                                 of consumer
        Limited                                                                                                        electronic
                                                                                                                        products

      Kong Wah Estate              Hong Kong               Ordinary                  71      HK$30 million           Investment
        Ltd.                                                                                                            holding

      Merrywide                     Hong Kong             Ordinary                   51               HK$100         Investment
       Ltd.                                                                                                             holding




                                                           – 233 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES

                                       Place of                                 Effective
                                incorporation/                                percentage
                                   registration             Class of                   of              Issued            Nature of
      Name                      and operations              holding              holding         share capital            business

      Held indirectly (continued)

      Onwa                                  U.K             Ordinary                   71       GBP 7 million     Manufacture and
        Electronics                                                                                                 distribution of
        (U.K.) Ltd.                                                                                                visual products

      Persicus B.V.                 Netherlands             Ordinary                   71         NLG 40,000            Investment
                                                                                                                           holding

      Semi-Tech                          Finland            Ordinary                  100      FIM 1,015,000                Sale of
        (Finland) Oy                                                                                                visual products

      Semi-Tech                          Finland            Ordinary                  100     FIM 25,015,000        Manufacture of
        (Turku) Oy                                                                                                  visual products

      Zhongshan Kawa                        PRC             Ordinary                   53     HK$62,771,000         Manufacture of
        Electronic                                                                                                       audio and
        Group., Ltd.                                                                                                visual products

      Zhongshan Kawa                        PRC             Ordinary                   71     HK$27,900,000             Design and
        Electronic                                                                                                 development of
        Research &                                                                                                audio, visual and
        Development                                                                                                        telecom-
        Centre                                                                                                         munications
                                                                                                                           products

      The above table lists the subsidiaries of the Company as at 31 January 1999 which, in the opinion of the directors, either
      principally affected the results for the year, or formed a substantial portion of the net assets of the Group. To give details
      of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

29.   COMPARATIVE AMOUNTS

      Certain comparative amounts have been reclassified to conform with the current year’s presentation.

30.   APPROVAL OF THE FINANCIAL STATEMENTS

      The financial statements were approved by the board of directors on 26 June 1999.




                                                            – 234 –
APPENDIX V                             INFORMATION ON AKAI HOLDINGS LIMITED
                              (IN COMPULSORY LIQUIDATION) AND ITS SUBSIDIARIES


STATEMENT OF AFFAIRS

      The Statement of Affairs executed by one of the Akai Directors as at 23 August 2000, being the
date of commencement of the liquidation of Akai, is set out below:
                                                                                       Original Cost
                                                                                                as at      Estimated
                                                                                      23 August 2000 Realisable Value
                                                                                                US$              US$

     Assets (Note 1)
     Bank Balance and Cash                                                                    135,624                   135,624
     Investments in stocks or shares                                                      321,655,346                         0
     Land and Buildings                                                                       839,668                         0
     Investment in land interest                                                           57,000,000                         0
     Others (Note 2)                                                                          881,903                    32,051
     Debts due to Akai                                                                    282,559,763                         0

     Estimated amount available to preferential
       creditors subject to cost of liquidation                                           663,072,301                   167,675

     Liabilities (Note 3)
     Preferential Creditors
     Employees                                                                                                          (27,281)
     Estimated amount available to ordinary                                                                             140,394
       creditors subject to cost of liquidation

     Ordinar y Creditors
     Amounts due to banks                                                                                           (12,698,174)
     Accounts payable                                                                                               (17,493,671)
     Amounts due to subsidiaries/associated
       companies                                                                                                  (267,122,215)

     Total ordinary creditors                                                                                     (297,314,060)

     Contingent Liabilities                                                                                       (462,072,282)

     Estimated deficiency to creditors                                                                            (759,245,948)
     Issued Share Capital Fully paid                                                                                (28,155,267)

     Total Deficiency before the cost of
       Liquidation                                                                                                (787,401,215)

     Notes:

     1.       Please refer to the financial statements of the Akai Group for the year ended 31 January 1999 as set out on page
              205 to page 234 of this document for details of the assets of Akai.

     2.       The other assets of Akai comprise of (a) software costs capitalised since 1996 of US$272,458; (b) deposits paid of
              US$568,419; and (c) debenture (Discovery Bay Club) of US$41,026.

     3.       Please refer to the financial statements of the Akai Group for the year ended 31 January 1999 as set out on page
              205 to page 234 of this document and the paragraph headed “Indebtedness” set out on page 204 of this document
              for details of the liabilities of Akai.

     4.       In December 1999, certain assets of Akai were charged to Tremendous Springs Limited. The assets charged to
              Tremendous Springs Limited included Akai’s accounts receivable and Akai’s interest in various investments and
              securities. Aspects of the charges are the subject of litigation in Hong Kong. In light of the uncertainty associated
              of the outcome of this litigation, the Liquidators are unable to quantify what effect these charges will have on the
              realisations that would otherwise be available to the creditors of Akai.
                                                            – 235 –
APPENDIX VI                     SUMMARY OF THE CONSTITUTION OF HANG TEN
                        GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


     Set out below is a summary of certain provisions of the memorandum of association (the
“Memorandum of Association”) and bye-laws (the “Bye-laws”) of Hang Ten and of certain aspects of
Bermuda company law. For the purposes of this appendix only, the expression “the Company” when used
below shall mean “Hang Ten”.

1.   MEMORANDUM OF ASSOCIATION

      The Memorandum of Association states, inter alia, that the liability of members of the Company is
limited to the amount, if any, for the time being unpaid on the Hang Ten Shares respectively held by
them and that the Company is an exempted company as defined in the Companies Act. The Memorandum
of Association also sets out the objects for which the Company was formed, including acting as a holding
and investment company, and its powers, including the powers set out in the First Schedule to the
Companies Act, excluding paragraph 8 thereof. As an exempted company, the Company will be carrying
on business outside Bermuda from a place of business within Bermuda.

      In accordance with and subject to section 42A of the Companies Act, the Memorandum of Association
empowers the Company to purchase its own shares and pursuant to its Bye-laws, this power is exercisable
by the board of Directors (the “board”) upon such terms and subject to such conditions as it thinks fit.

2.   BYE-LAWS

      The Bye-laws were adopted on 24 October 2002. The following is a summary of certain provisions
of the Bye-laws:

     (a)   Directors

           (i)   Power to allot and issue shares and warrants

                 Subject to any special rights conferred on the holders of any shares or class of shares,
           any share may be issued with or have attached thereto such rights, or such restrictions,
           whether with regard to dividend, voting, return of capital, or otherwise, as the Company may
           by ordinary resolution determine (or, in the absence of any such determination or so far as
           the same may not make specific provision, as the board may determine). Subject to the
           Companies Act, any preference shares may be issued or converted into shares that are liable
           to be redeemed, at a determinable date or at the option of the Company or, if so authorised by
           the Memorandum of Association, at the option of the holder, on such terms and in such
           manner as the Company before the issue or conversion may by ordinary resolution determine.
           The board may issue warrants conferring the right upon the holders thereof to subscribe for
           any class of shares or securities in the capital of the Company on such terms as it may from
           time to time determine.

                 Subject to the provisions of the Companies Act, the Bye-laws, any direction that may
           be given by the Company in general meeting and, where applicable, the rules of any Designated
           Stock Exchange (as defined in the Bye-laws) and without prejudice to any special rights or
           restrictions for the time being attached to any shares or any class of shares, all unissued

                                                – 236 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


       shares in the Company shall be at the disposal of the board, which may offer, allot, grant
       options over or otherwise dispose of them to such persons, at such times, for such consideration
       and on such terms and conditions as it in its absolute discretion thinks fit, but so that no
       shares shall be issued at a discount.

             Neither the Company nor the board shall be obliged, when making or granting any
       allotment of, offer of, option over or disposal of shares, to make, or make available, any such
       allotment, offer, option or shares to members or others with registered addresses in any
       particular territory or territories being a territory or territories where, in the absence of a
       registration statement or other special formalities, this would or might, in the opinion of the
       board, be unlawful or impracticable. Members affected as a result of the foregoing sentence
       shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

       (ii)   Power to dispose of the assets of the Company or any of its subsidiaries

            There are no specific provisions in the Bye-laws relating to the disposal of the assets of
       the Company or any of its subsidiaries.

       Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised or done
             or approved by the Company and which are not required by the Bye-laws or the Companies Act to be
             exercised or done by the Company in general meeting.


       (iii) Compensation or payments for loss of office

             Payments to any Director or past Director of any sum by way of compensation for loss
       of office or as consideration for or in connection with his retirement from office (not being a
       payment to which the Director is contractually entitled) must be approved by the Company in
       general meeting.

       (iv)   Loans and provision of security for loans to Directors

             There are no provisions in the Bye-laws relating to the making of loans to Directors.
       However, the Companies Act contains restrictions on companies making loans or providing
       security for loans to their directors, the relevant provisions of which are summarised in the
       paragraph headed “Bermuda Company Law” in this Appendix.

       (v)    Financial assistance to purchase shares of the Company

             Neither the Company nor any of its subsidiaries shall directly or indirectly give financial
       assistance to a person who is acquiring or proposing to acquire shares in the Company for the
       purpose of that acquisition whether before or at the same time as the acquisition takes place
       or afterwards, provided that the Bye-laws shall not prohibit transactions permitted under the
       Companies Act.




                                                  – 237 –
APPENDIX VI                  SUMMARY OF THE CONSTITUTION OF HANG TEN
                     GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


       (vi)   Disclosure of interests in contracts with the Company or any of its subsidiaries

             A Director may hold any other office or place of profit with the Company (except that
       of auditor of the Company) in conjunction with his office of Director for such period and,
       subject to the Companies Act, upon such terms as the board may determine, and may be paid
       such extra remuneration (whether by way of salary, commission, participation in profits or
       otherwise) in addition to any remuneration provided for by or pursuant to any other Bye-
       laws. A Director may be or become a director or other officer of, or a member of, any
       company promoted by the Company or any other company in which the Company may be
       interested, and shall not be liable to account to the Company or the members for any
       remuneration, profits or other benefits received by him as a director, officer or member of, or
       from his interest in, such other company. Subject as otherwise provided by the Bye-laws, the
       board may also cause the voting power conferred by the shares in any other company held or
       owned by the Company to be exercised in such manner in all respects as it thinks fit,
       including the exercise thereof in favour of any resolution appointing the Directors or any of
       them to be directors or officers of such other company, or voting or providing for the payment
       of remuneration to the directors or officers of such other company.

             Subject to the Companies Act and to the Bye-laws, no Director or proposed or intending
       Director shall be disqualified by his office from contracting with the Company, either with
       regard to his tenure of any office or place of profit or as vendor, purchaser or in any other
       manner whatsoever, nor shall any such contract or any other contract or arrangement in
       which any Director is in any way interested be liable to be avoided, nor shall any Director so
       contracting or being so interested be liable to account to the Company or the members for
       any remuneration, profit or other benefits realised by any such contract or arrangement by
       reason of such Director holding that office or the fiduciary relationship thereby established. A
       Director who to his knowledge is in any way, whether directly or indirectly, interested in a
       contract or arrangement or proposed contract or arrangement with the Company shall declare
       the nature of his interest at the meeting of the board at which the question of entering into the
       contract or arrangement is first taken into consideration, if he knows his interest then exists,
       or in any other case, at the first meeting of the board after he knows that he is or has become
       so interested.

             A Director shall not vote (nor be counted in the quorum) on any resolution of the board
       in respect of any contract or arrangement or other proposal in which he is to his knowledge
       materially interested but this prohibition shall not apply to any of the following matters,
       namely:

              (aa) any contract or arrangement for giving of any security or indemnity to the Director
                   in respect of money lent or obligations incurred or undertaken by him at the
                   request of or for the benefit of the Company or any of its subsidiaries;

              (bb) any contract or arrangement for the giving by the Company of any security or
                   indemnity to a third party in respect of a debt or obligation of the Company or
                   any of its subsidiaries for which the Director has himself assumed responsibility
                   in whole or in part whether alone or jointly under a guarantee or indemnity or by
                   the giving of security;

                                             – 238 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


              (cc) any contract or arrangement concerning an offer of shares or debentures or other
                   securities of or by the Company or any other company which the Company may
                   promote or be interested in for subscription or purchase, where the Director is or
                   is to be interested as a participant in the underwriting or sub-underwriting of the
                   offer;

              (dd) any contract or arrangement in which the Director is interested in the same manner
                   as other holders of shares or debentures or other securities of the Company or any
                   of its subsidiaries by virtue only of his interest in shares or debentures or other
                   securities of the Company;

              (ee) any contract or arrangement concerning any other company in which he is
                   interested only, whether directly or indirectly, as an officer or executive or a
                   shareholder other than a company in which the Director together with any of his
                   associates (as defined by the rules, where applicable, of any Designated Stock
                   Exchange (as defined in the Bye-laws)) is beneficially interested in 5 per cent. or
                   more of the issued shares or of the voting rights of any class of shares of such
                   company (or of any third company through which his interest is derived); or

              (ff)   any proposal concerning the adoption, modification or operation of a share option
                     scheme, a pension fund or retirement, death, or disability benefits scheme or
                     other arrangement which relates both to Directors and employees of the Company
                     or of any of its subsidiaries and does not provide in respect of any Director as
                     such any privilege or advantage not accorded to the employees to which such
                     scheme or fund relates.

       (vii) Remuneration

             The ordinary remuneration of the Directors shall from time to time be determined by
       the Company in general meeting, such remuneration (unless otherwise directed by the resolution
       by which it is voted) to be divided amongst the Directors in such proportions and in such
       manner as the board may agree or, failing agreement, equally, except that any Director
       holding office for part only of the period in respect of which the remuneration is payable
       shall only rank in such division in proportion to the time during such period for which he
       held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel
       and incidental expenses reasonably incurred or expected to be incurred by them in attending
       any board meetings, committee meetings or general meetings or separate meetings of any
       class of shares or of debentures of the Company or otherwise in connection with the discharge
       of their duties as Directors.

             Any Director who, by request, goes or resides abroad for any purpose of the Company
       or who performs services which in the opinion of the board go beyond the ordinary duties of
       a Director may be paid such extra remuneration (whether by way of salary, commission,
       participation in profits or otherwise) as the board may determine and such extra remuneration
       shall be in addition to or in substitution for any ordinary remuneration provided for by or

                                             – 239 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


       pursuant to any other Bye-law. A Director appointed to be a managing director, joint managing
       director, deputy managing director or other executive officer shall receive such remuneration
       (whether by way of salary, commission or participation in profits or otherwise or by all or
       any of those modes) and such other benefits (including pension and/or gratuity and/or other
       benefits on retirement) and allowances as the board may from time to time decide. Such
       remuneration may be either in addition to or in lieu of his remuneration as a Director.

             The board may establish or concur or join with other companies (being subsidiary
       companies of the Company or companies with which it is associated in business) in establishing
       and making contributions out of the Company’s monies to any schemes or funds for providing
       pensions, sickness or compassionate allowances, life assurance or other benefits for employees
       (which expression as used in this and the following paragraph shall include any Director or
       ex-Director who may hold or have held any executive office or any office of profit with the
       Company or any of its subsidiaries) and ex-employees of the Company and their dependants
       or any class or classes of such persons.

             The board may pay, enter into agreements to pay or make grants of revocable or
       irrevocable, and either subject or not subject to any terms or conditions, pensions or other
       benefits to employees and ex-employees and their dependants, or to any of such persons,
       including pensions or benefits additional to those, if any, to which such employees or ex-
       employees or their dependants are or may become entitled under any such scheme or fund as
       is mentioned in the previous paragraph. Any such pension or benefit may, as the board
       considers desirable, be granted to an employee either before and in anticipation of, or upon
       or at any time after, his actual retirement.

       (viii) Retirement, appointment and removal

             At each annual general meeting, one third of the Directors for the time being (or if their
       number is not a multiple of three, then the number nearest to but not greater than one third)
       will retire from office by rotation provided that no Director holding office as chairman and/or
       managing director shall be subject to retirement by rotation, or be taken into account in
       determining the number of Directors to retire. The Directors to retire in every year will be
       those who have been longest in office since their last re-election or appointment but as
       between persons who became or were last re-elected Directors on the same day those to retire
       will (unless they otherwise agree among themselves) be determined by lot.

       Note: There are no provisions relating to retirement of Directors upon reaching any age limit.


              The Directors shall have the power from time to time and at any time to appoint any
       person as a Director either to fill a casual vacancy on the board or, subject to authorisation by
       the members in general meeting, as an addition to the existing board but so that the number
       of Directors so appointed shall not exceed any maximum number determined from time to
       time by the members in general meeting. Any Director so appointed shall hold office only
       until the next following annual general meeting of the Company and shall then be eligible for
       re-election at the meeting. Neither a Director nor an alternate Director is required to hold any
       shares in the Company by way of qualification.
                                                    – 240 –
APPENDIX VI                    SUMMARY OF THE CONSTITUTION OF HANG TEN
                       GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


               A Director may be removed by a special resolution of the Company before the expiration
         of his period of office (but without prejudice to any claim which such Director may have for
         damages for any breach of any contract between him and the Company) provided that the
         notice of any such meeting convened for the purpose of removing a Director shall contain a
         statement of the intention to do so and be served on such Director 14 days before the meeting
         and, at such meeting, such Director shall be entitled to be heard on the motion for his
         removal. Unless otherwise determined by the Company in general meeting, the number of
         Directors shall not be less than two. There is no maximum number of Directors unless
         otherwise determined from time to time by members of the Company.

               The board may from time to time appoint one or more of its body to be managing
         director, joint managing director, or deputy managing director or to hold any other employment
         or executive office with the Company for such period (subject to their continuance as Directors)
         and upon such terms as the board may determine and the board may revoke or terminate any
         of such appointments (but without prejudice to any claim for damages that such Director may
         have against the Company or vice versa). The board may delegate any of its powers, authorities
         and discretions to committees consisting of such Director or Directors and other persons as
         the board thinks fit, and it may from time to time revoke such delegation or revoke the
         appointment of and discharge any such committees either wholly or in part, and either as to
         persons or purposes, but every committee so formed shall, in the exercise of the powers,
         authorities and discretions so delegated, conform to any regulations that may from time to
         time be imposed upon it by the board.

         (ix)   Borrowing powers

               The board may from time to time at its discretion exercise all the powers of the
         Company to raise or borrow money, to mortgage or charge all or any part of the undertaking,
         property and assets (present and future) and uncalled capital of the Company and, subject to
         the Companies Act, to issue debentures, bonds and other securities of the Company, whether
         outright or as collateral security for any debt, liability or obligation of the Company or of any
         third party.

         Note: These provisions, in common with the Bye-laws in general, can be varied with the sanction of a special
               resolution of the Company.


   (b)   Alterations to constitutional documents

          The Bye-laws may be rescinded, altered or amended by the Directors subject to the
   confirmation of the Company in general meeting. The Bye-laws state that a special resolution shall
   be required to alter the provisions of the Memorandum of Association, to confirm any such rescission,
   alteration or amendment to the Bye-laws or to change the name of the Company.




                                                   – 241 –
APPENDIX VI                    SUMMARY OF THE CONSTITUTION OF HANG TEN
                       GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   (c)   Alteration of capital

         The Company may from time to time by ordinary resolution in accordance with the relevant
   provisions of the Companies Act:

         (i)    increase its capital by such sum, to be divided into shares of such amounts as the
                resolution shall prescribe;

         (ii)   consolidate and divide all or any of its capital into shares of larger amount than its
                existing shares;

         (iii) divide its shares into several classes and without prejudice to any special rights previously
               conferred on the holders of existing shares as the directors may determine;

         (iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the
              Memorandum of Association;

         (v)    change the currency denomination of its share capital;

         (vi) make provision for the issue and allotment of shares which do not carry any voting
              rights; and

         (vii) cancel any shares which, at the date of passing of the resolution, have not been taken,
               or agreed to be taken, by any person, and diminish the amount of its capital by the
               amount of the shares so cancelled.

         The Company may, by special resolution, subject to any confirmation or consent required by
   law, reduce its authorised or issued share capital or any share premium account or other
   undistributable reserve in any manner permitted by law.

   (d)   Variation of rights of existing shares or classes of shares

          Subject to the Companies Act, all or any of the special rights attached to the shares or any
   class of shares may (unless otherwise provided for by the terms of issue of that class) be varied,
   modified or abrogated either with the consent in writing of the holders of not less than three-
   fourths of the issued shares of that class or with the sanction of a special resolution passed at a
   separate general meeting of the holders of the shares of that class. To every such separate general
   meeting the provisions of the Bye-laws relating to general meetings will mutatis mutandis apply,
   but so that the necessary quorum (other than at an adjourned meeting) shall be two persons (or in
   the case of a member being a corporation, its duly authorised representative) holding or representing
   by proxy not less than one-third in nominal value of the issued shares of that class and at any
   adjourned meeting two holders present in person (or in the case of a member being a corporation,
   its duly authorised representative) or by proxy whatever the number of shares held by them shall be
   a quorum. Every holder of shares of the class shall be entitled on a poll to one vote for every such
   share held by him, and any holder of shares of the class present in person or by proxy may demand
   a poll.
                                                – 242 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   (e)   Special resolution-majority required

          A special resolution of the Company must be passed by a majority of not less than three-
   fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case
   of such members as are corporations, by their duly authorised representatives or, where proxies are
   allowed, by proxy at a general meeting of which not less than 21 clear days’ notice, specifying the
   intention to propose the resolution as a special resolution, has been duly given. Provided that,
   except in the case of an annual general meeting, if it is so agreed by a majority in number of the
   members having a right to attend and vote at such meeting, being a majority together holding not
   less than 95 per cent. in nominal value of the shares giving that right and, in the case of an annual
   general meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may
   be proposed and passed as a special resolution at a meeting of which less than 21 clear days’ notice
   has been given.

   (f)   Voting rights (generally and on a poll) and right to demand a poll

          Subject to any special rights or restrictions as to voting for the time being attached to any
   shares by or in accordance with the Bye-laws, at any general meeting on a show of hands, every
   member who is present in person (or being a corporation, is present by its duly authorised
   representative) or by proxy shall have one vote and on a poll every member present in person or by
   proxy or, being a corporation, by its duly authorised representative shall have one vote for every
   fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a
   share in advance of calls or installments is treated for the foregoing purposes as paid up on the
   share.

         Notwithstanding anything contained in the Bye-laws, where more than one proxy is appointed
   by a member which is a clearing house (as defined in the Bye-laws) (or its nominee(s)), each such
   proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote
   need not use all his votes or cast all the votes he uses in the same way.

          At any general meeting a resolution put to the vote of the meeting is to be decided on a show
   of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal
   of any other demand for a poll) a poll is demanded by (i) the chairman of the meeting or (ii) at
   least three members present in person or, in the case of a member being a corporation, by its duly
   authorised representative or by proxy for the time being entitled to vote at the meeting or (iii) any
   member or members present in person or, in the case of a member being a corporation, by its duly
   authorised representative or by proxy and representing not less than one-tenth of the total voting
   rights of all the members having the right to vote at the meeting or (iv) a member or members
   present in person or, in the case of a member being a corporation, by its duly authorised representative
   or by proxy and holding shares in the Company conferring a right to vote at the meeting being
   shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum
   paid up on all the shares conferring that right.

          If a recognised clearing house (or its nominee(s)) is a member of the Company it may
   authorise such persons as it thinks fit to act as its representative(s) at any meeting of the Company
   or at any meeting of any class of members of the Company provided that, if more than one person
                                               – 243 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   is so authorised, the authorisation shall specify the number and class of shares in respect of which
   each such person is so authorised. A person authorised pursuant to this provision shall be entitled
   to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if
   such person was the registered holder of the shares held by that clearing house (or its nominee(s))
   in respect of the number and class of shares specified in the relevant authorisation including the
   right to vote individually on a show of hands.

   (g)   Requirements for annual general meetings

          An annual general meeting of the Company must be held in each year other than the year in
   which its statutory meeting is convened at such time (within a period of not more than 15 months
   after the holding of the last preceding annual general meeting unless a longer period would not
   infringe the rules of any Designated Stock Exchange (as defined in the Bye-laws)) and place as
   may be determined by the board.

   (h)   Accounts and audit

          The board shall cause true accounts to be kept of the sums of money received and expended
   by the Company, and the matters in respect of which such receipt and expenditure take place, and
   of the property, assets, credits and liabilities of the Company and of all other matters required by
   the provisions of the Companies Act or necessary to give a true and fair view of the Company’s
   affairs and to explain its transactions.

         The accounting records shall be kept at the registered office or, subject to the Companies Act,
   at such other place or places as the board decides and shall always be open to inspection by any
   Director. No member (other than a Director) shall have any right of inspecting any accounting
   record or book or document of the Company except as conferred by law or authorised by the board
   or the Company in general meeting.

         Subject to the Companies Act, a printed copy of the Directors’ report, accompanied by the
   balance sheet and profit and loss account, including every document required by law to be annexed
   thereto, made up to the end of the applicable financial year and containing a summary of the assets
   and liabilities of the Company under convenient heads and a statement of income and expenditure,
   together with a copy of the auditors’ report, shall be sent to each person entitled thereto at least 21
   days before the date of the general meeting and laid before the Company in general meeting in
   accordance with the requirements of the Companies Act provided that this provision shall not
   require a copy of those documents to be sent to any person whose address the Company is not
   aware or to more than one of the joint holders of any shares or debentures; however, to the extent
   permitted by and subject to compliance with all applicable laws, including the rules of the Designated
   Stock Exchange (as defined in the Bye-laws), the Company may send to such persons a summary
   financial statement derived from the Company’s annual accounts and the directors’ report instead
   provided that any such person may by notice in writing served on the Company, demand that the
   Company sends to him, in addition to a summary financial statement, a complete printed copy of
   the Company’s annual financial statement and the directors’ report thereon.



                                               – 244 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


         Subject to the Companies Act, at the annual general meeting or at a subsequent special
   general meeting in each year, the members shall appoint an auditor to audit the accounts of the
   Company and such auditor shall hold office until the members appoint another auditor. Such
   auditor may be a member but no Director or officer or employee of the Company shall, during his
   continuance in office, be eligible to act as an auditor of the Company. The remuneration of the
   auditor shall be fixed by the Company in general meeting or in such manner as the members may
   determine.

         The financial statements of the Company shall be audited by the auditor in accordance with
   generally accepted auditing standards. The auditor shall make a written report thereon in accordance
   with generally accepted auditing standards and the report of the auditor shall be submitted to the
   members in general meeting. The generally accepted auditing standards referred to herein may be
   those of a country or jurisdiction other than Bermuda. If the auditing standards of a country or
   jurisdiction other than Bermuda are used, the financial statements and the report of the auditor
   should disclose this fact and name such country and jurisdiction.

   (i)   Notices of meetings and business to be conducted thereat

         An annual general meeting and any special general meeting at which it is proposed to pass a
   special resolution shall (save as set out in sub-paragraph (e) above) be called by at least 21 clear
   days’ notice in writing, and any other special general meeting shall be called by at least 14 clear
   days’ notice (in each case exclusive of the day on which the notice is given or deemed to be given
   and of the day for which it is given or on which it is to take effect). The notice must specify the
   time and place of the meeting and, in the case of special business, the general nature of that
   business. The notice convening an annual general meeting shall specify the meeting as such.

   (j)   Transfer of shares

         All transfers of shares may be effected by an instrument of transfer in the usual or common
   form or in a form prescribed by the Designated Stock Exchange or in such other form as the board
   may approve and which may be under hand or, if the transferor or transferee is a clearing house or
   its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as
   the board may approve from time to time. The instrument of transfer shall be executed by or on
   behalf of the transferor and the transferee provided that the board may dispense with the execution
   of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to
   do so and the transferor shall be deemed to remain the holder of the share until the name of the
   transferee is entered in the register of members in respect thereof. The board may also resolve
   either generally or in any particular case, upon request by either the transferor or the transferee, to
   accept mechanically executed transfers.

         The board in so far as permitted by any applicable law may, in its absolute discretion, at any
   time and from time to time transfer any share upon the principal register to any branch register or
   any share on any branch register to the principal register or any other branch register.




                                                – 245 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


         Unless the board otherwise agrees, no shares on the principal register shall be transferred to
   any branch register nor may shares on any branch register be transferred to the principal register or
   any other branch register. All transfers and other documents of title shall be lodged for registration
   and registered, in the case of shares on a branch register, at the relevant registration office and, in
   the case of shares on the principal register, at the registered office in Bermuda or such other place
   in Bermuda at which the principal register is kept in accordance with the Companies Act.

         The board may, in its absolute discretion, and without assigning any reason, refuse to register
   a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or
   any share issued under any share incentive scheme for employees upon which a restriction on
   transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share
   to more than four joint holders or any transfer of any share (not being a fully paid up share) on
   which the Company has a lien.

         The board may decline to recognise any instrument of transfer unless a fee of such maximum
   sum as any Designated Stock Exchange (as defined in the Bye-laws) may determine to be payable
   or such lesser sum as the Directors may from time to time require is paid to the Company in respect
   thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class
   of share and is lodged at the relevant registration office or registered office or such other place at
   which the principal register is kept accompanied by the relevant share certificate(s) and such other
   evidence as the board may reasonably require to show the right of the transferor to make the
   transfer (and if the instrument of transfer is executed by some other person on his behalf, the
   authority of that person so to do).

         The registration of transfers may be suspended and the register closed on giving notice by
   advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance
   with the requirements of any Designated Stock Exchange (as defined in the Bye-laws), at such
   times and for such periods as the board may determine and either generally or in respect of any
   class of shares. The register of members shall not be closed for periods exceeding in the whole 30
   days in any year.

   (k)   Power for the Company to purchase its own shares

         The Bye-laws supplement the Company’s Memorandum of Association (which gives the
   Company the power to purchase its own shares) by providing that the power is exercisable by the
   board upon such terms and conditions as it thinks fit.

   (l)   Power for any subsidiary of the Company to own shares in the Company

         There are no provisions in the Bye-laws relating to ownership of shares in the Company by a
   subsidiary.




                                               – 246 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   (m)   Dividends and other methods of distribution

         Subject to the Companies Act, the Company in general meeting may declare dividends in any
   currency to be paid to the members but no dividend shall be declared in excess of the amount
   recommended by the board. The Company in general meeting may also make a distribution to its
   members out of contributed surplus (as ascertained in accordance with the Companies Act). No
   dividend shall be paid or distribution made out of contributed surplus if to do so would render the
   Company unable to pay its liabilities as they become due or the realisable value of its assets would
   thereby become less than the aggregate of its liabilities and its issued share capital and share
   premium account.

         Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise
   provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares
   in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall
   for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and
   paid pro rata according to the amount paid up on the shares during any portion or portions of the
   period in respect of which the dividend is paid. The Directors may deduct from any dividend or
   other monies payable to a member by the Company on or in respect of any shares all sums of
   money (if any) presently payable by him to the Company on account of calls or otherwise.

         Whenever the board or the Company in general meeting has resolved that a dividend be paid
   or declared on the share capital of the Company, the board may further resolve either (a) that such
   dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid
   up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend
   (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend
   will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the
   whole or such part of the dividend as the board may think fit. The Company may also upon the
   recommendation of the board by an ordinary resolution resolve in respect of any one particular
   dividend of the Company that it may be satisfied wholly in the form of an allotment of shares
   credited as fully paid up without offering any right to shareholders to elect to receive such dividend
   in cash in lieu of such allotment.

          Whenever the board or the Company in general meeting has resolved that a dividend be paid
   or declared the board may further resolve that such dividend be satisfied wholly or in part by the
   distribution of specific assets of any kind.

         All dividends or bonuses unclaimed for one year after having been declared may be invested
   or otherwise made use of by the board for the benefit of the Company until claimed and the
   Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed
   for six years after having been declared may be forfeited by the board and shall revert to the
   Company.




                                               – 247 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   (n)   Proxies

          Any member of the Company entitled to attend and vote at a meeting of the Company is
   entitled to appoint another person as his proxy to attend and vote instead of him. A member who is
   the holder of two or more shares may appoint more than one proxy to represent him and vote on his
   behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of
   the Company. In addition, a proxy or proxies representing either a member who is an individual or
   a member which is a corporation shall be entitled to exercise the same powers on behalf of the
   member which he or they represent as such member could exercise.

   (o)   Call on shares and forfeiture of shares

         Subject to the Bye-laws and to the terms of allotment, the board may from time to time make
   such calls upon the members in respect of any monies unpaid on the shares held by them respectively
   (whether on account of the nominal value of the shares or by way of premium). A call may be made
   payable either in one lump sum or by installments. If the sum payable in respect of any call or
   instalment is not paid on or before the day appointed for payment thereof, the person or persons
   from whom the sum is due shall pay interest on the same at such rate not exceeding 20 per cent. per
   annum as the board may agree to accept from the day appointed for the payment thereof to the time
   of actual payment, but the board may waive payment of such interest wholly or in part. The board
   may, if it thinks fit, receive from any member willing to advance the same, either in money or
   money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any
   shares held by him, and upon all or any of the monies so advanced the Company may pay interest
   at such rate (if any) as the board may decide.

         If a member fails to pay any call on the day appointed for payment thereof, the board may
   serve not less than 14 clear days’ notice on him requiring payment of so much of the call as is
   unpaid, together with any interest which may have accrued and which may still accrue up to the
   date of actual payment and stating that, in the event of non-payment at or before the time appointed,
   the shares in respect of which the call was made will be liable to be forfeited.

         If the requirements of any such notice are not complied with, any share in respect of which
   the notice has been given may at any time thereafter, before the payment required by the notice has
   been made, be forfeited by a resolution of the board to that effect.

         Such forfeiture will include all dividends and bonuses declared in respect of the forfeited
   share and not actually paid before the forfeiture.

          A person whose shares have been forfeited shall cease to be a member in respect of the
   forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies which,
   at the date of forfeiture, were payable by him to the Company in respect of the shares, together
   with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until
   the date of actual payment at such rate not exceeding 20 per cent. per annum as the board determines.




                                                – 248 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   (p)   Inspection of register of members

         The register and branch register of members shall be open to inspection between 10:00 a.m.
   and 12:00 noon on every business day by members without charge, or by any other person upon a
   maximum payment of five Bermuda dollars, at the registered office or such other place in Bermuda
   at which the register is kept in accordance with the Companies Act or, upon a maximum payment
   of $10, at the Registration Office (as defined in the Bye-laws), unless the register is closed in
   accordance with the Companies Act.

   (q)   Quorum for meetings and separate class meetings

          For all purposes the quorum for a general meeting shall be two members present in person
   (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy
   and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting)
   convened to sanction the modification of class rights the necessary quorum shall be two persons
   holding or representing by proxy not less than one-third in nominal value of the issued shares of
   that class.

   (r)   Rights of the minorities in relation to fraud or oppression

         There are no provisions in the Bye-laws relating to rights of minority shareholders in relation
   to fraud or oppression. However, certain remedies are available to shareholders of the Company
   under Bermuda law, as summarised in paragraph 4(e) of this Appendix.

   (s)   Procedures on liquidation

         A resolution that the Company be wound up by the court or be wound up voluntarily shall be
   a special resolution.

          If the Company shall be wound up (whether the liquidation is voluntary or by the court) the
   liquidator may, with the authority of a special resolution and any other sanction required by the
   Companies Act, divide among the members in specie or kind the whole or any part of the assets of
   the Company whether the assets shall consist of property of one kind or shall consist of properties
   of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon
   any one or more class or classes of property to be divided as aforesaid and may determine how
   such division shall be carried out as between the members or different classes of members. The
   liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for
   the benefit of members as the liquidator, with the like authority, shall think fit, but so that no
   contributory shall be compelled to accept any shares or other property in respect of which there is a
   liability.




                                              – 249 –
APPENDIX VI                      SUMMARY OF THE CONSTITUTION OF HANG TEN
                         GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


     (t)   Untraceable members

            The Company may sell any of the shares of a member who is untraceable if (i) all cheques or
     warrants (being not less than three in total number) for any sum payable in cash to the holder of
     such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year
     period, the Company has not during that time received any indication of the existence of the
     member; and (iii) the Company has caused an advertisement to be published in accordance with the
     rules of the Designated Stock Exchange (as defined in the Bye-laws) giving notice of its intention
     to sell such shares and a period of three months, or such shorter period as may be permitted by the
     Designated Stock Exchange (as defined in the Bye-laws), has elapsed since such advertisement and
     the Designated Stock Exchange (as defined in the Bye-laws) has been notified of such intention.
     The net proceeds of any such sale shall belong to the Company and upon receipt by the Company
     of such net proceeds, it shall become indebted to the former member of the Company for an
     amount equal to such net proceeds.

     (u)    Other provisions

           The Bye-laws provide that to the extent that it is not prohibited by and is in compliance with
     the Companies Act, if warrants to subscribe for shares have been issued by the Company and the
     Company does any act or engages in any transaction which would result in the subscription price of
     such warrants being reduced below the par value of a share, a subscription rights reserve shall be
     established and applied in paying up the difference between the subscription price and the par
     value of a share on any exercise of the warrants.

           The Bye-laws also provide that the Company is required to maintain at its registered office a
     register of directors and officers in accordance with the provisions of the Companies Act and such
     register is open to inspection by members of the public without charge between 10:00 a.m. and
     12:00 noon on every business day.

3.   VARIATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS

       The Memorandum of Association may be altered by the Company in general meeting. In certain
circumstances, consent to the alteration must be obtained from the Minister of Finance of Bermuda. The
Bye-laws may be amended by the Directors subject to the confirmation of the Company in general
meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the
Memorandum of Association or to confirm any amendment to the Bye-laws or to change the name of the
Company. For these purposes, a resolution is a special resolution if it has been passed by a majority of
not less than three-fourths of the votes cast by such members of the Company as, being entitled to do so,
vote in person or, in the case of such members as are corporations, by their respective duly authorised
representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21
clear days’ notice specifying the intention to propose the resolution as a special resolution has been duly
given. Except in the case of an annual general meeting, the requirement of 21 clear days’ notice may be
waived by a majority in number of the members having the right to attend and vote at the relevant
meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving
that right.

                                                 – 250 –
APPENDIX VI                      SUMMARY OF THE CONSTITUTION OF HANG TEN
                         GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


4.   BERMUDA COMPANY LAW

      The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set out
below is a summary of certain provisions of Bermuda company law, although this does not purport to
contain all applicable qualifications and exceptions or to be a complete review of all matters of Bermuda
company law and taxation, which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar:

     (a)   Share capital

            The Companies Act provides that where a company issues shares at a premium, whether for
     cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares
     shall be transferred to an account, to be called the “share premium account”, to which the provisions
     of the Companies Act relating to a reduction of share capital of a company shall apply as if the
     share premium account were paid up share capital of the company except that the share premium
     account may be applied by the company:

           (i)    in paying up unissued shares of the company to be issued to members of the company
                  as fully paid bonus shares;

           (ii)   in writing off:

                  (aa) the preliminary expenses of the company; or

                  (bb) the expenses of, or the commission paid or discount allowed on, any issue of
                       shares or debentures of the company; or

           (iii) in providing for the premiums payable on redemption of any shares or of any debentures
                 of the company.

           However, only premiums arising on the same class of shares can be used to pay up bonus
     shares or in providing for the premiums payable on redemption of shares referred to in (i) and (iii)
     above respectively.

           In the case of an exchange of shares the excess value of the shares acquired over the nominal
     value of the shares being issued may be credited to a contributed surplus account of the issuing
     company.

           The Companies Act permits a company to issue preference shares and subject to the conditions
     stipulated therein to convert those preference shares into redeemable preference shares.

           The Companies Act includes certain protections for holders of special classes of shares,
     requiring their consent to be obtained before their rights may be varied. Where provision is made
     by the memorandum of association or bye-laws for authorising the variation of rights attached to
     any class of shares in the company, the consent of the specified proportions of the holders of the
     issued shares of that class or the sanction of a resolution passed at a separate meeting of the
                                                – 251 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   holders of those shares is required, and where no provision for varying such rights is made in the
   memorandum of association or bye-laws and nothing therein precludes a variation of such rights,
   the written consent of the holders of three-fourths of the issued shares of that class or the sanction
   of a resolution passed as aforesaid is required.

   (b)   Financial assistance to purchase shares of a company or its holding company

           A company is prohibited from providing financial assistance for the purpose of an acquisition
   of its own or its holding company’s shares unless there are reasonable grounds for believing that
   the company is, and would after the giving of such financial assistance be, able to pay its liabilities
   as they become due. In certain circumstances, the prohibition from giving financial assistance may
   be excluded such as where the assistance is only an incidental part of a larger purpose or the
   assistance is of an insignificant amount such as the payment of minor costs. In addition, the
   Companies Act expressly permits the grant of financial assistance where (i) the financial assistance
   does not reduce the company’s net assets or, to the extent the net assets are reduced, such financial
   assistance is provided for out of funds of the company which would otherwise be available for
   dividend or distribution; (ii) an affidavit of solvency is sworn by the directors of the company; and
   (iii) the financial assistance is approved by resolution of shareholders of the company.

   (c)   Purchase of shares and warrants by a company and its subsidiaries

          A company may, if authorised by its memorandum of association or bye-laws, purchase its
   own shares. Such purchases may only be effected out of the capital paid up on the purchased shares
   or out of the funds of the company otherwise available for dividend or distribution or out of the
   proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over
   the par value of the shares to be purchased must be provided for out of funds of the company
   otherwise available for dividend or distribution or out of the company’s share premium account.
   Any amount due to a shareholder on a purchase by a company of its own shares may (i) be paid in
   cash; (ii) be satisfied by the transfer of any part of the undertaking or property of the company
   having the same value; or (iii) be satisfied partly under (i) and partly under (ii). Any purchase by a
   company of its own shares may be authorised by its board of directors or otherwise by or in
   accordance with the provisions of its bye-laws. Such purchase may not be made if, on the date on
   which the purchase is to be effected, there are reasonable grounds for believing that the company
   is, or after the purchase would be, unable to pay its liabilities as they become due. The shares so
   purchased will be treated as cancelled and the company’s issued but not its authorised, capital will
   be diminished accordingly.

         A company is not prohibited from purchasing and may purchase its own warrants subject to
   and in accordance with the terms and conditions of the relevant warrant instrument or certificate.
   There is no requirement under Bermuda law that a company’s memorandum of association or its
   bye-laws contain a specific provision enabling such purchases and the directors of a company may
   rely upon the general power contained in its memorandum of association to buy and sell and deal
   in personal property of all kinds.




                                               – 252 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


         Under Bermuda law, a subsidiary may hold shares in its holding company and in certain
   circumstances, may acquire such shares. The holding company is, however, prohibited from giving
   financial assistance for the purpose of the acquisition, subject to certain circumstances provided by
   the Companies Act. A company, whether a subsidiary or a holding company, may only purchase its
   own shares for cancellation if it is authorised to do so in its memorandum of association or bye-
   laws pursuant to section 42A of the Companies Act.

   (d)   Dividends and distributions

         A company may not declare or pay a dividend, or make a distribution out of contributed
   surplus, if there are reasonable grounds for believing that (i) the company is, or would after the
   payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the
   company’s assets would thereby be less than the aggregate of its liabilities and its issued share
   capital and share premium accounts. Contributed surplus is defined for purposes of section 54 of
   the Companies Act to include the proceeds arising from donated shares, credits resulting from the
   redemption or conversion of shares at less than the amount set up as nominal capital and donations
   of cash and other assets to the company.

   (e)   Protection of minorities

         Class actions and derivative actions are generally not available to shareholders under the
   laws of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder
   to commence an action in the name of a company to remedy a wrong done to the company where
   the act complained of is alleged to be beyond the corporate power of the company or is illegal or
   would result in the violation of the company’s memorandum of association and bye-laws.
   Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud
   against the minority shareholders or, for instance, where an act requires the approval of a greater
   percentage of the company’s shareholders than actually approved it.

          Any member of a company who complains that the affairs of the company are being conducted
   or have been conducted in a manner oppressive or prejudicial to the interests of some part of the
   members, including himself, may petition the court which may, if it is of the opinion that to wind
   up the company would unfairly prejudice that part of the members but that otherwise the facts
   would justify the making of a winding up order on just and equitable grounds, make such order as
   it thinks fit, whether for regulating the conduct of the company’s affairs in future or for the
   purchase of shares of any members of the company by other members of the company or by the
   company itself and in the case of a purchase by the company itself, for the reduction accordingly of
   the company’s capital, or otherwise. Bermuda law also provides that the company may be wound
   up by the Bermuda court, if the court is of the opinion that it is just and equitable to do so. Both
   these provisions are available to minority shareholders seeking relief from the oppressive conduct
   of the majority, and the court has wide discretion to make such orders as it thinks fit.

         Except as mentioned above, claims against a company by its shareholders must be based on
   the general laws of contract or tort applicable in Bermuda.



                                              – 253 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


          A statutory right of action is conferred on subscribers of shares in a company against persons,
   including directors and officers, responsible for the issue of a document in respect of damage
   suffered by reason of an untrue statement therein, but this confers no right of action against the
   company itself. In addition, such company, as opposed to its shareholders, may take action against
   its officers including directors, for breach of their statutory and fiduciary duty to act honestly and
   in good faith with a view to the best interests of the company.

   (f)   Management

         The Companies Act contains no specific restrictions on the power of directors to dispose of
   assets of a company, although it specifically requires that every officer of a company, which
   includes a director, managing director and secretary, in exercising his powers and discharging his
   duties must do so honestly and in good faith with a view to the best interests of the company and
   exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable
   circumstances. Furthermore, the Companies Act requires that every officer should comply with the
   Companies Act, regulations passed pursuant to the Companies Act and the bye-laws of the company.

   (g)   Accounting and auditing requirements

         The Companies Act requires a company to cause proper records of accounts to be kept with
   respect to (i) all sums of money received and expended by the company and the matters in respect
   of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the
   company and (iii) the assets and liabilities of the company.

         Furthermore, it requires that a company keeps its records of account at the registered office
   of the company or at such other place as the directors think fit and that such records shall at all
   times be open to inspection by the directors or the resident representative of the company. If the
   records of account are kept at some place outside Bermuda, there shall be kept at the office of the
   company in Bermuda such records as will enable the directors or the resident representative of the
   company to ascertain with reasonable accuracy the financial position of the company at the end of
   each three month period, except that where the company is listed on an appointed stock exchange,
   there shall be kept such records as will enable the directors or the resident representative of the
   company to ascertain with reasonable accuracy the financial position of the company at the end of
   each six month period.

         The Companies Act requires that the directors of the company must, at least once a year, lay
   before the company in general meeting financial statements for the relevant accounting period.
   Further, the company’s auditor must audit the financial statements so as to enable him to report to
   the members. Based on the results of his audit, which must be made in accordance with generally
   accepted auditing standards, the auditor must then make a report to the members. The generally
   accepted auditing standards may be those of a country or jurisdiction other than Bermuda or such
   other generally accepted auditing standards as may be appointed by the Minister of Finance of
   Bermuda under the Companies Act; and where the generally accepted auditing standards used are
   other than those of Bermuda, the report of the auditor shall identify the generally accepted auditing



                                               – 254 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   standards used. All members of the company are entitled to receive a copy of every financial
   statement prepared in accordance with these requirements, at least seven days before the general
   meeting of the company at which the financial statements are to be tabled.

   (h)   Auditors

         At each annual general meeting, a company must appoint an auditor to hold office until the
   close of the next annual general meeting; however, this requirement may be waived if all of the
   shareholders and all of the directors, either in writing or at the general meeting, agree that there
   shall be no auditor.

         A person, other than an incumbent auditor, shall not be capable of being appointed auditor at
   an annual general meeting unless notice in writing of an intention to nominate that person to the
   office of auditor has been given not less than 21 days before the annual general meeting. The
   company must send a copy of such notice to the incumbent auditor and give notice thereof to the
   members not less than 7 days before the annual general meeting. An incumbent auditor may,
   however, by notice in writing to the secretary of the company waive the requirements of the
   foregoing.

          Where an auditor is appointed to replace another auditor, the new auditor must seek from the
   replaced auditor a written statement as to the circumstances of the latter’s replacement. If the
   replaced auditor does not respond within 15 days, the new auditor may act in any event. An
   appointment as auditor of a person who has not requested a written statement from the replaced
   auditor is voidable by a resolution of the shareholders at a general meeting. An auditor who has
   resigned, been removed or whose term of office has expired or is about to expire, or who has
   vacated office is entitled to attend the general meeting of the company at which he is to be
   removed or his successor is to be appointed; to receive all notices of, and other communications
   relating to, that meeting which a member is entitled to receive; and to be heard at that meeting on
   any part of the business of the meeting that relates to his duties as auditor or former auditor.

   (i)   Exchange control

         An exempted company is usually designated as “non-resident” for Bermuda exchange control
   purposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to deal
   in currencies of countries outside the Bermuda exchange control area which are freely convertible
   into currencies of any other country. The permission of the Bermuda Monetary Authority is required
   for the issue of shares and warrants by the company and the subsequent transfer of such shares and
   warrants. In granting such permission, the Bermuda Monetary Authority accepts no responsibility
   for the financial soundness of any proposals or for the correctness of any statements made or
   opinions expressed in any document with regard to such issue. Before the company can issue or
   transfer any further shares and warrants in excess of the amounts already approved, it must obtain
   the prior consent of the Bermuda Monetary Authority.

         Permission of the Bermuda Monetary Authority will normally be granted for the issue and
   transfer of shares and warrants to and between persons regarded as resident outside Bermuda for
   exchange control purposes without specific consent for so long as the shares and warrants are listed
                                              – 255 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   on an appointed stock exchange (as defined in the Companies Act). Issues to and transfers involving
   persons regarded as “resident” for exchange control purposes in Bermuda will be subject to specific
   exchange control authorisation.

   (j)   Taxation

         Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions,
   nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation
   will be payable by an exempted company or its operations, nor is there any Bermuda tax in the
   nature of estate duty or inheritance tax applicable to shares, debentures or other obligations of the
   company held by non-residents of Bermuda. Furthermore, a company may apply to the Minister of
   Finance of Bermuda for an assurance, under the Exempted Undertakings Tax Protection Act 1966
   of Bermuda, that no such taxes shall be so applicable until 28 March 2016, although this assurance
   will not prevent the imposition of any Bermuda tax payable in relation to any land in Bermuda
   leased or let to the company or to persons ordinarily resident in Bermuda.

   (k)   Stamp duty

         An exempted company is exempt from all stamp duties except on transactions involving
   “Bermuda property”. This term relates, essentially, to real and personal property physically situated
   in Bermuda, including shares in local companies (as opposed to exempted companies). Transfers of
   shares and warrants in all exempted companies are exempt from Bermuda stamp duty.

   (l)   Loans to directors

          Bermuda law prohibits the making of loans by a company to any of its directors or to their
   families or companies in which they hold more than a 20 per cent. interest, without the consent of
   any member or members holding in aggregate not less than nine-tenths of the total voting rights of
   all members having the right to vote at any meeting of the members of the company. These
   prohibitions do not apply to anything done to provide a director with funds to meet the expenditure
   incurred or to be incurred by him for the purposes of the company, provided that the company
   gives its prior approval at a general meeting or, if not, the loan is made on condition that it will be
   repaid within six months of the next following annual general meeting if the loan is not approved
   at or before such meeting. If the approval of the company is not given for a loan, the directors who
   authorised it will be jointly and severally liable for any loss arising therefrom.

   (m)   Inspection of corporate records

          Members of the general public have the right to inspect the public documents of a company
   available at the office of the Registrar of Companies in Bermuda which will include the company’s
   certificate of incorporation, its memorandum of association (including its objects and powers) and
   any alteration to the company’s memorandum of association. The members of the company have
   the additional right to inspect the bye-laws of a company, minutes of general meetings and the
   company’s audited financial statements, which must be presented to the annual general meeting.
   Minutes of general meetings of a company are also open for inspection by directors of the company
   without charge for not less than two hours during business hours each day. The register of members
                                               – 256 –
APPENDIX VI                   SUMMARY OF THE CONSTITUTION OF HANG TEN
                      GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


   of a company is open for inspection by members without charge and to members of the general
   public for a fee. The company is required to maintain its share register in Bermuda but may, subject
   to the provisions of the Companies Act, establish a branch register outside Bermuda. Any branch
   register of members established by the company is subject to the same rights of inspection as the
   principal register of members of the company in Bermuda. Any person may require a copy of the
   register of members or any part thereof which must be provided within fourteen days of a request.
   Bermuda law does not, however, provide a general right for members to inspect or obtain copies of
   any other corporate records.

         A company is required to maintain a register of directors and officers at its registered office
   and such register must be made available for inspection for not less than two hours in each day by
   members of the public without charge.

   (n)   Winding up

          A company may be wound up by the Bermuda court on application presented by the company
   itself, its creditors or its contributors. The Bermuda court also has authority to order winding up in
   a number of specified circumstances including where it is, in the opinion of the Bermuda court, just
   and equitable that such company be wound up.

         A company may be wound up voluntarily when the members so resolve in general meeting,
   or, in the case of a limited duration company, when the period fixed for the duration of the
   company by its memorandum expires, or the event occurs on the occurrence of which the
   memorandum provides that the company is to be dissolved. In the case of a voluntary winding up,
   such company is obliged to cease to carry on its business from the time of passing the resolution
   for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to
   above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests
   entirely in his hands and no future executive action may be carried out without his approval.

         Where, on a voluntary winding up, a majority of directors make a statutory declaration of
   solvency, the winding up will be a members’ voluntary winding up. In any case where such
   declaration has not been made, the winding up will be a creditors’ voluntary winding up.

         In the case of a members’ voluntary winding up of a company, the company in general
   meeting must appoint one or more liquidators within the period prescribed by the Companies Act
   for the purpose of winding up the affairs of the company and distributing its assets. If the liquidator
   at any time forms the opinion that such company will not be able to pay its debts in full, he is
   obliged to summon a meeting of creditors.

         As soon as the affairs of the company are fully wound up, the liquidator must make up an
   account of the winding up, showing how the winding up has been conducted and the property of
   the company has been disposed of, and thereupon call a general meeting of the company for the
   purposes of laying before it the account and giving an explanation thereof. This final general
   meeting requires at least one month’s notice published in an appointed newspaper in Bermuda.



                                               – 257 –
APPENDIX VI                     SUMMARY OF THE CONSTITUTION OF HANG TEN
                        GROUP HOLDINGS LIMITED AND BERMUDA COMPANY LAW


           In the case of a creditors’ voluntary winding up of a company, the company must call a
     meeting of creditors of the company to be summoned on the day following the day on which the
     meeting of the members at which the resolution for winding up is to be proposed is held. Notice of
     such meeting of creditors must be sent at the same time as notice is sent to members. In addition,
     such company must cause a notice to appear in an appointed newspaper on at least two occasions.

           The creditors and the members at their respective meetings may nominate a person to be
     liquidator for the purposes of winding up the affairs of the company provided that if the creditors
     nominate a different person, the person nominated by the creditors shall be the liquidator. The
     creditors at the creditors’ meeting may also appoint a committee of inspection consisting of not
     more than five persons.

           If a creditors’ winding up continues for more than one year, the liquidator is required to
     summon a general meeting of the company and a meeting of the creditors at the end of each year to
     lay before such meetings an account of his acts and dealings and of the conduct of the winding up
     during the preceding year. As soon as the affairs of the company are fully wound up, the liquidator
     must make an account of the winding up, showing how the winding up has been conducted and the
     property of the company has been disposed of, and thereupon shall call a general meeting of the
     company and a meeting of the creditors for the purposes of laying the account before such meetings
     and giving an explanation thereof.

5.   GENERAL

      Conyers Dill & Pearman, the Company’s legal advisers on Bermuda law, have sent to the Company
a letter of advice summarising certain aspects of Bermuda company law. This letter is available for
inspection as referred to in the paragraph headed “Documents available for inspection” in Appendix VII.
Any person wishing to have a detailed summary of Bermuda company law or advice on the differences
between it and the laws of any jurisdiction with which he is more familiar is recommended to seek
independent legal advice.




                                               – 258 –
APPENDIX VII                             STATUTORY AND GENERAL INFORMATION
                                         ON HANG TEN GROUP HOLDINGS LIMITED


FURTHER INFORMATION ABOUT HANG TEN

1.   Incorporation

       Hang Ten was incorporated in Bermuda under the Companies Act as an exempted company with limited
liability on 17 July 2002. Hang Ten has an established place of business in Hong Kong at Room 107, 1st
Floor, St. George’s Building, 2 Ice House Street, Central, Hong Kong and was registered as an overseas
company in Hong Kong under Part XI of the Companies Ordinance on 3 September 2002. Such registration
contains a notice of appointment of Chan Wing Sun of 12B Bowen Road, Hong Kong and Kenneth Hung of
Unit E, 12th Floor, Tower 8, Island Resort, 28 Siu Sai Wan Road, Chai Wan, Hong Kong as the agents of
Hang Ten for the purposes of acceptance of service of process in Hong Kong on its behalf. As Hang Ten was
incorporated in Bermuda, its operations are subject to the Companies Act and to its constitution which
comprises its memorandum of association and bye-laws. A summary of the various parts of its constitution
and relevant aspects of the Companies Act is set out in Appendix VI to this document.

2.   Changes in share capital of Hang Ten

     (a)   At the date of incorporation of Hang Ten, its authorised share capital was HK$100,000
           divided into 10,000,000 shares of HK$0.01 each, all of which were allotted and issued to Mr.
           Kenneth Hung.

     (b)   On 24 October 2002, a resolution was passed by the sole shareholder of Hang Ten to the
           effect that, subject to the Sale and Purchase Agreement becoming unconditional and with
           effect from the date of completion of the Sale and Purchase Agreement, the authorised and
           issued share capital of Hang Ten of HK$100,000 divided into 10,000,000 ordinary shares of
           HK$0.01 each will be sub-divided into 100,000,000 ordinary shares of HK$0.001 each and,
           following such subdivision, the authorised share capital of Hang Ten will be increased from
           HK$100,000 divided into 100,000,000 shares of HK$0.001 each to HK$323,070,000, of
           which HK$250,000,000 will be divided into 250,000,000,000 Hang Ten Shares of HK$0.001
           each and HK$73,070,000 will be divided into 7,307 CPS of HK$10,000 each, by the creation
           of an additional 249,900,000,000 Hang Ten Shares and 7,307 CPS.

     (c)   Save as aforesaid and in the sections headed “Corporate reorganisation” and “Written
           resolutions of the sole shareholder of Hang Ten passed on 24 October 2002” below, there has
           been no alteration in the share capital of Hang Ten since the date of its incorporation.

     (d)   Assuming that the Proposal becomes unconditional and Closing takes place, but taking no
           account of any Hang Ten Shares which may be issued on conversion of the CPS held by the
           Investors or exercise of the Warrants or Options that may be granted, the authorised share
           capital of Hang Ten immediately following Closing will be HK$323,070,000, of which
           HK$250,000,000 will be divided into 250,000,000,000 Hang Ten Shares and HK$73,070,000
           will be divided into 7,307 CPS, and the issued capital of Hang Ten will be HK$97,480,000,
           of which HK$27,100,000 will be divided into 27,100,000,000 Hang Ten Shares and
           HK$70,380,000 will be divided into 7,038 CPS, fully paid or credited as fully paid, and
           222,900,000,000 Hang Ten Shares will remain unissued. Other than pursuant to the conversion

                                                – 259 –
APPENDIX VII                            STATUTORY AND GENERAL INFORMATION
                                        ON HANG TEN GROUP HOLDINGS LIMITED


           of the CPS or exercise of the Warrants or any Options that may be granted, there is no
           intention to issue any part of the authorised but unissued capital of Hang Ten.

3.   Written resolutions of the sole shareholder of Hang Ten passed on 24 October 2002.

     Pursuant to written resolutions passed by the sole shareholder of Hang Ten on 24 October 2002:

     (a)   subject to the Sale and Purchase Agreement becoming unconditional and with effect from the
           date of completion of the Sale and Purchase Agreement, the authorised and issued share
           capital of Hang Ten of HK$100,000 divided into 10,000,000 ordinary shares of HK$0.01
           each will be sub-divided into 100,000,000 ordinary shares of HK$0.001 each and, following
           such subdivision, the authorised share capital of Hang Ten will be increased from HK$100,000
           divided into 100,000,000 shares of HK$0.001 each to HK$323,070,000, of which
           HK$250,000,000 will be divided into 250,000,000,000 Hang Ten Shares of HK$0.001 each
           and HK$73,070,000 will be divided into 7,307 CPS of HK$10,000 each, by the creation of an
           additional 249,900,000,000 Hang Ten Shares and 7,307 CPS;

     (b)   subject to and conditional upon the fulfilment or waiver of the conditions set out in the
           Restructuring Agreement and the Scheme becoming effective, the Directors were authorised
           to allot and issue, credited as fully paid, an aggregate of 300,000,000 Hang Ten Shares to the
           Akai Shareholders entitled thereto (or person(s) selected by the Liquidators) in accordance
           with the terms of the Scheme as consideration for the Akai Shares;

     (c)   subject to and conditional upon the fulfilment or waiver of the conditions set out in the
           Restructuring Agreement and Closing taking place, the Directors were authorised to allot and
           issue, credited as fully paid, an aggregate of 2,100,000,000 Hang Ten Shares to Akai (or as it
           may direct);

     (d)   subject to the Sale and Purchase Agreement becoming unconditional, the Directors were
           authorised to execute on behalf of Hang Ten the Warrant Instrument and allot and issue,
           credited as fully paid, a total of 7,307 CPS, a total of 21,910,000,000 Hang Ten Shares and
           Warrants in an aggregate principal amount of HK$44,020,000 to the Investors and the Other
           Investors (or such other persons as they may respectively designate) in accordance with their
           respective entitlements thereto pursuant to the terms of the Sale and Purchase Agreement and
           to credit as fully paid the 100,000,000 Hang Ten Shares resulting from the sub-division
           described in paragraph 3(a) above held by Mr. Kenneth Hung as partial satisfaction of the
           consideration attributable to him for the sale of his interest in Hang Ten (BVI) to Hang Ten;

     (e)   conditional upon the Listing Committee of the Stock Exchange granting approval for the
           Share Option Scheme and the grant of Options thereunder and the listing of and permission
           to deal in the Hang Ten Shares which may fall to be issued pursuant to the exercise of any
           such Options, the rules of the Share Option Scheme were approved and adopted and the
           Directors were authorised to grant Options to subscribe for Hang Ten Shares thereunder and
           to allot, issue and deal with Hang Ten Shares pursuant to the exercise of Options that may be
           granted and to do all such acts and things as they may consider necessary or expedient to
           implement the Share Option Scheme;
                                                – 260 –
APPENDIX VII                           STATUTORY AND GENERAL INFORMATION
                                       ON HANG TEN GROUP HOLDINGS LIMITED


   (f)   subject to and conditional upon the fulfilment or waiver of the conditions set out in the
         Restructuring Agreement:

         (i)    a general unconditional mandate was given to the Directors to exercise all the powers
                of Hang Ten to allot, issue and deal with, otherwise than by way of rights issues or an
                issue of Hang Ten Shares upon the exercise of any conversion rights attached to the
                CPS or subscription rights attached to the Warrants or any warrants or convertible
                securities or pursuant to the exercise of any Options which may be granted under the
                Share Option Scheme or any other option scheme or other similar arrangements or any
                scrip dividend schemes in accordance with the bye-laws of Hang Ten or a specific
                authority granted by the shareholders of Hang Ten in general meeting, Hang Ten Shares
                or securities or options convertible into Hang Ten Shares with an aggregate nominal
                amount not exceeding 20% of the aggregate nominal value of the ordinary share capital
                of Hang Ten in issue immediately following Closing but prior to conversion of the CPS
                held by the Investors or exercise of the Warrants, such mandate to remain in effect until
                whichever is the earliest of:

                (1)   the conclusion of the next annual general meeting of Hang Ten;

                (2)   the expiration of the period within which the next annual general meeting of
                      Hang Ten is required by its bye-laws or any applicable laws of Bermuda to be
                      held; or

                (3)   the passing of an ordinary resolution by shareholders of Hang Ten in general
                      meeting revoking or varying such mandate;

         (ii)   a general unconditional mandate was given to the Directors authorising them to exercise
                all the powers of Hang Ten to repurchase on the Stock Exchange, or any other stock
                exchange on which the securities of Hang Ten may be listed and which is recognised by
                the SFC and the Stock Exchange for this purpose, in accordance with all applicable
                laws and the requirements of the Listing Rules (or of such other stock exchange), such
                number of Hang Ten Shares with an aggregate nominal value not exceeding 10% of the
                aggregate nominal value of the ordinary share capital of Hang Ten in issue immediately
                following Closing but prior to conversion of the CPS held by the Investors or exercise
                of the Warrants, such mandate to remain in effect until whichever is the earliest of:

                (1)   the conclusion of the next annual general meeting of Hang Ten;

                (2)   the expiration of the period within which the next annual general meeting of
                      Hang Ten is required by its bye-laws or any applicable laws of Bermuda to be
                      held; or

                (3)   the passing of an ordinary resolution by shareholders of Hang Ten in general
                      meeting revoking or varying such mandate.



                                               – 261 –
APPENDIX VII                             STATUTORY AND GENERAL INFORMATION
                                         ON HANG TEN GROUP HOLDINGS LIMITED


           (iii) the general unconditional mandate mentioned in (i) above was extended by the addition
                 to the aggregate nominal value of the ordinary share capital of Hang Ten which may be
                 allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant
                 to such general mandate of an amount representing the aggregate nominal value of the
                 ordinary share capital of Hang Ten repurchased by it (if any) under the authority
                 granted to the Directors as referred to in (ii) above;

     (g)   the bye-laws of Hang Ten were adopted.

4.   Corporate reorganisation

     On 28 March 2002, ILC disposed of the entire issued share capital of Hang Ten (China) Group
Limited to Accurate Sino Developments Limited for a cash consideration of US$20,000. Accurate Sino
Developments Limited is a company in which the Investors collectively hold an indirect interest of
approximately 97.01%. As a result of this disposal, Hang Ten (China) Group Limited ceased to be a
wholly owned subsidiary of ILC.

      On 28 October 2002, Hang Ten (BVI), Asian Wide, a company beneficially owned by Mr. Kenneth
Hung and his family members, and YGM entered into two agreements with the Other Investors, Best
Standand Limited and Raytop Limited, respectively, pursuant to which Hang Ten (BVI) will issue 21,839
shares and 16,379 shares of US$0.10 each to Best Standand Limited and Raytop Limited respectively,
representing approximately 2.10% and 1.58% respectively of its issued share capital as enlarged by these
shares. The consideration for the issue of these shares will be satisfied in cash as to HK$20 million by
Best Standand Limited and HK$15 million by Raytop Limited. Completion of these two agreements will
take place prior to the completion of the Sale and Purchase Agreement.

       On 28 October 2002, the Investors, the Other Investors and Hang Ten entered into the Sale and
Purchase Agreement pursuant to which Hang Ten will acquire from the Investors and the Other Investors
their interest in the entire issued share capital of Hang Ten (BVI), which will be satisfied by 7,307 CPS,




                                                 – 262 –
APPENDIX VII                               STATUTORY AND GENERAL INFORMATION
                                           ON HANG TEN GROUP HOLDINGS LIMITED


a total of 22,010,000,000 Hang Ten Shares credited as fully paid and Warrants in an aggregate principal
amount of HK$44,020,000 to the Investors and the Other Investors in the proportions set out below.

                                                                                                    No. of
                                    Approximate                                                  Warrants
                                   percentage of                                             (to be issued
                                   shares held in                                             in principal
                                       Hang Ten                           No. of Hang           amount of
     Names                                 (BVI)      No. of CPS           Ten Shares       HK$0.01 each)

     Asian Wide                           60.68%              4,434    12,600,000,000        2,520,000,000
     Kenneth Hung                          3.85%                282       800,000,000          160,000,000
     Dennis Kung                           1.93%                141       400,000,000           80,000,000
     Peggy Hung                            1.93%                141       400,000,000           80,000,000
     Pamela Hung                           1.93%                141       400,000,000           80,000,000
     YGM                                  24.08%              1,759     5,000,000,000        1,000,000,000
     Wang Li Wen                           0.96%                 70       200,000,000           40,000,000
     Kao Yu Chu                            0.96%                 70       200,000,000           40,000,000
     Best Standand Limited                 2.10%                153       463,000,000           92,600,000
     Raytop Limited                        1.58%                116       347,000,000           69,400,000
     Designated Person                         –                  –     1,200,000,000          240,000,000


     Total:                             100.00%               7,307    22,010,000,000        4,402,000,000


     Completion of the Sale and Purchase Agreement is conditional on the issue of the Closing Notice
and will take place on or immediately prior to Closing. Upon completion of the Sale and Purchase
Agreement, Hang Ten (BVI) will become a wholly owned Subsidiary of Hang Ten.

5.   Changes in the share capital of members of the Hang Ten (BVI) Group

       Members of the Hang Ten (BVI) Group are referred to in the accountants’ report, the text of which
is set out in Appendix II to this document.

      Within the two years immediately preceding the date of this document, changes in the share capital
of the following members of the Hang Ten (BVI) Group have taken place:

     (a)      Pursuant to a subscription agreement dated 9 November 2001 entered into between the Investors
              and Hang Ten (BVI), Hang Ten (BVI) issued a total of 999,999 new shares of US$0.10 each
              to the Investors at a price of US$17 per share for a total cash consideration of US$16,999,983
              (equivalent to approximately HK$132.6 million); The total issued share capital of Hang Ten
              (BVI) immediately following completion of this agreement comprised, 1,000,000 ordinary
              shares of US$0.10 each; and




                                                    – 263 –
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                                              ON HANG TEN GROUP HOLDINGS LIMITED


     (b)   Pursuant to two agreements dated 28 October 2002 entered into between Hang Ten (BVI),
           Asian Wide, a company beneficially owned by Mr. Kenneth Hung and his family members,
           YGM and the Other Investors, Hang Ten (BVI) will issue 21,839 shares and 16,379 shares of
           US$0.10 each to Best Standand Limited and Raytop Limited respectively, the consideration
           for which will be satisfied in cash as to HK$20 million by Best Standand Limited and HK$15
           million by Raytop Limited.

     As at the Latest Practicable Date, the total issued share capital of Hang Ten (BVI) comprised
1,000,000 ordinary shares of US$0.10 each.

     Save as aforesaid, there has been no alteration in the share capital of any members of the Hang Ten
(BVI) Group within the two years immediately preceding the date of this document.

6.   Purchase by Hang Ten of its own shares

     This section includes information required by the Stock Exchange to be included in this document
concerning the repurchase by Hang Ten of its own securities.

           The Listing Rules permit companies whose primary listings are on the Stock Exchange to
     repurchase its securities on the Stock Exchange subject to certain restrictions, the most important
     of which are summarised below:

     (a)   Shareholders’ approval

                 All repurchases on the Stock Exchange by a company with its primary listing on the
           Stock Exchange must be approved in advance by an ordinary resolution of the shareholders,
           either by way of general mandate or by specific approval in relation to a particular transaction.

           Note: On 24 October 2002, a written resolution was passed by the sole shareholder of Hang Ten, whereby,
                 conditional upon listing, a general unconditional mandate (“buyback mandate”) was given to the Directors
                 authorising the Directors to exercise all powers of Hang Ten to repurchase on the Stock Exchange or any
                 other stock exchange recognised by the SFC and the Stock Exchange for this purpose, such number of Hang
                 Ten Shares as will represent up to ten per cent. of the aggregate nominal amount of the ordinary share
                 capital of Hang Ten in issue immediately following Closing but prior to conversion of the CPS held by the
                 Investors or exercise of the Warrants at any time until the next annual general meeting of Hang Ten or until
                 the buyback mandate is revoked or varied earlier by an ordinary resolution of its shareholders in general
                 meeting or at the time when its next annual general meeting is required by law or its bye-laws to be held,
                 whichever is the earliest.


     (b)   Exercise of the buyback mandate

           Exercise in full of buyback mandate, on the basis of 27,100,000,000 Hang Ten Shares in
     issue immediately following the listing of the Hang Ten Shares but prior to the conversion of any
     CPS held by the Investors or exercise of any Warrants, could accordingly result in up to 2,710,000,000
     Hang Ten Shares being repurchased by Hang Ten during the period prior to the conclusion of the
     next annual general meeting of Hang Ten, the expiration of the period within which the next annual
     general meeting of Hang Ten is required by law or its bye-laws to be held or when revoked or
     varied by an ordinary resolution of the shareholders in general meeting of Hang Ten, whichever is
     the earliest.
                                                 – 264 –
APPENDIX VII                          STATUTORY AND GENERAL INFORMATION
                                      ON HANG TEN GROUP HOLDINGS LIMITED


   (c)   Reasons for repurchases

        Repurchases of Hang Ten Shares will only be made if the Directors believe that such
   repurchases will benefit Hang Ten and its shareholders. Such repurchases may, depending on
   market conditions and funding arrangements at the time, lead to an enhancement of the net value of
   Hang Ten and its assets and/or its earnings per Hang Ten Share.

   (d)   Funding of repurchases

         In repurchasing securities, Hang Ten may only apply funds legally available for such purpose
   in accordance with its bye-laws, the Listing Rules and the applicable laws of Bermuda.

         There might be a material adverse impact on the working capital or gearing position of Hang
   Ten (as compared with the position disclosed in this document) in the event that the buyback
   mandate is exercised in full. However, the Directors do not propose to exercise the buyback
   mandate to such an extent as would, in the circumstances, have a material adverse effect on the
   working capital requirements of Hang Ten or the gearing levels which in the opinion of the Directors
   are from time to time appropriate for Hang Ten.

   (e)   General

        None of the Directors or, to the best of their knowledge having made all reasonable enquiries,
   any of their associates have any present intention to sell Hang Ten Shares to Hang Ten or its
   Subsidiaries if the buyback mandate is exercised.

         The Directors have undertaken to the Stock Exchange that, so far as the same may be
   applicable, they will exercise the buyback mandate in accordance with the bye-laws of Hang Ten,
   the Listing Rules and the applicable laws of Bermuda.

          No connected Person (as defined in the Listing Rules) has notified Hang Ten that he has a
   present intention to sell Hang Ten Shares to Hang Ten, or has undertaken not to do so, in the event
   that the buyback mandate is exercised.

         If as a result of a repurchase of Hang Ten Shares pursuant to an exercise of the buyback
   mandate, a shareholder ’s proportionate interest in the voting rights of Hang Ten increases, such
   increase will be treated as an acquisition for the purposes of the Code. Accordingly, a shareholder
   or group of shareholders acting in concert (as interpreted according to the Code) could obtain or
   consolidate control of Hang Ten and become obliged to make a mandatory offer in accordance with
   Rule 26 of the Code as a result of any such increase depending on the percentage of voting rights
   attached to the Hang Ten Shares owned by the relevant shareholder or the shareholders acting in
   concert (as the case may be). Based on 27,100,000,000 issued Hang Ten Shares immediately
   following Closing but prior to any conversion of the CPS held by the Investors or exercise of the
   Warrants, if the Directors exercise in full the power to repurchase Hang Ten Shares from shareholders
   other than the Investors and parties acting in concert with them, the total shareholding of the



                                              – 265 –
APPENDIX VII                            STATUTORY AND GENERAL INFORMATION
                                        ON HANG TEN GROUP HOLDINGS LIMITED


     Investors and parties acting in concert with them in the issued ordinary share capital of Hang Ten
     would be increased to 100% of the issued ordinary share capital of Hang Ten. The Directors are not
     aware of any consequence that would arise under the Code as a result of any repurchases pursuant
     to the buyback mandate.

           Such an increase would however mean that the total amount of the issued ordinary share
     capital of Hang Ten in public hands would be reduced to less than 25% and this would only be
     permitted if the Stock Exchange agrees to waive the dealing restriction regarding the percentage of
     public shareholding referred to under paragraph (a)(iii) above. It is believed that a waiver of this
     provision would not normally be given other than in exceptional circumstances. The Directors do
     not intend to exercise the buyback mandate to such an extent as will result in the number of Hang
     Ten Shares which are in public hands falling below 25% or the relevant prescribed minimum
     percentage required by the Stock Exchange from time to time.

           Hang Ten has not repurchased any Hang Ten Shares in the six months preceding the Latest
     Practicable Date.

FURTHER INFORMATION ABOUT THE BUSINESS

7.   Material contracts

      The following contracts (not being contracts in the ordinary course of business) have been entered
into by Hang Ten or any member of the Hang Ten (BVI) Group within the two years preceding the date
of this document and are or may be material:

     (a)   a shareholders’ agreement dated 14 June 1996, as supplemented by an agreement dated 10
           June, 2002, between, among others, ILC and the other shareholders of Hang Ten Phils., Corp.
           in relation to the establishment of and their shareholdings in Hang Ten Phils., Corp.;

     (b)   a joint venture agreement dated 23 October 2000 between ILC and Global Inc. in relation to
           the establishment, management and operation of Hang Ten Korea Corp. as amended by two
           amendment agreements dated 31 January and 1 June 2001 respectively;

     (c)   a share purchase agreement dated 9 November 2001 entered into between Hang Ten (BVI),
           certain of the Investors and other third parties pursuant to which Hang Ten (BVI) acquired
           from such Investors and third parties approximately 97.01% of the issued share capital of
           ILC for a total cash consideration of approximately US$54.6 million (equivalent to
           approximately HK$425.88 million);

     (d)   a subscription agreement dated 9 November 2001 entered into between Hang Ten (BVI) and
           the Investors pursuant to which Hang Ten (BVI) issued to the Investors an aggregate of
           999,999 shares of US$0.10 each at a price of US$17 per share for a total cash consideration
           of US$16,999,983 (equivalent to approximately HK$132.6 million);




                                                – 266 –
APPENDIX VII                          STATUTORY AND GENERAL INFORMATION
                                      ON HANG TEN GROUP HOLDINGS LIMITED


   (e)   a shareholders’ agreement dated 9 November 2001 entered into between Hang Ten (BVI) and
         the Investors in relation to the regulation of the businesses, affairs and management of Hang
         Ten (BVI);

   (f)   shareholder’s loan agreements dated 9 November 2001 between members of the Kung Family
         and YGM as lenders and Hang Ten (BVI) as borrower (as supplemented by two agreements
         dated 21 June 2002 between Asian Wide and YGM respectively as lenders and Hang Ten
         (BVI) as borrower) in relation to the granting of loans by the Kung Family in an aggregate
         principal amount of US$15 million and by YGM in an aggregate principal amount of US$5
         million to Hang Ten (BVI);

   (g)   a disposal agreement dated 28 March 2002 entered into between ILC and Accurate Sino
         Developments Limited pursuant to which ILC disposed of the entire issued share capital of
         Hang Ten (China) Group Limited to Accurate Sino Developments Limited for a cash
         consideration of US$20,000;

   (h)   the Restructuring Agreement;

   (i)   a subscription agreement dated 28 October 2002 entered into between Hang Ten (BVI) and
         Best Standand Limited pursuant to which Hang Ten (BVI) will issue 21,839 shares of US$0.10
         each in its capital to Best Standand Limited for a cash consideration of HK$20 million;

   (j)   a subscription agreement dated 28 October 2002 entered into between Hang Ten (BVI) and
         Raytop Limited pursuant to which Hang Ten (BVI) will issue 16,379 shares of US$0.10 each
         in its capital to Raytop Limited for a cash consideration of HK$15 million; and

   (k)   the Sale and Purchase Agreement.




                                             – 267 –
APPENDIX VII                                           STATUTORY AND GENERAL INFORMATION
                                                       ON HANG TEN GROUP HOLDINGS LIMITED


8.      Intellectual property rights

        Trademarks

      As at the Latest Practicable Date, the Hang Ten (BVI) Group had obtained registration of the
following marks:

                               Class (note:                                          Period of
                               (I) = international                    Registration   Validity and
Trade/Service   Place of       Class; (N) =          Registration     Date           Expiry Date
Mark            Registration   national Class)       Number           d/m/y          d/m/y          Product/Services Covered

                ALGERIA        25 (I)                51038            30/06/1996     30/06/2006     Clothing, footwear, headgear and all