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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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<DIV align="center"><FONT size="4"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</FONT></DIV>

<DIV align="center"><FONT size="3"><B>WASHINGTON, D.C. 20549</B>
</FONT></DIV>

<P align="center"><FONT size="5"><B>FORM 20-F</B>
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        <TD><FONT size="3">&nbsp;</FONT></TD>
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Registration statement pursuant to section 12(b) or (g)&nbsp;of the
Securities Exchange Act of 1934</FONT></TD>
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<P align="center"><FONT size="2">or
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Annual report pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934<BR>
For the fiscal year ended: March&nbsp;31, 2002</FONT></TD>
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<P align="center"><FONT size="2">or
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        <TD><FONT size="3">&nbsp;</FONT></TD>
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Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934<BR>
For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
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<P align="left"><FONT size="2">Commission file number: 0-29368
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<P align="center"><FONT size="6"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<DIV align="center"><FONT size="2">(Exact Name of Registrant as Specified in its Charter)
</FONT></DIV>

<P align="center"><FONT size="6"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<DIV align="center"><FONT size="2">(Translation of Registrant&#146;s Name Into English)
</FONT></DIV>

<P align="center"><FONT size="2">British Virgin Islands<BR>
(Jurisdiction of Incorporation or Organization)
</FONT>

<P align="center"><FONT size="2">1/F, Novel Industrial Building<BR>
850-870 Lai Chi Kok Road<BR>
Cheung Sha Wan, Kowloon, Hong Kong<BR>
(Address of Principal Executive Offices)
</FONT>

<P align="left"><FONT size="2">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act: None
</FONT>
<P align="left"><FONT size="2">Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act.
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<B>Title of Each Class</B></FONT></TD>
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<B>Name of Each Exchange<BR>
On Which Registered</B></FONT></TD>
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<HR size="1" noshade></FONT></TD>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
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National Market Tier of the<BR>
Nasdaq Stock Market</FONT></TD>
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<P align="left"><FONT size="2">Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d)
of the Act: None
</FONT>
<P align="left"><FONT size="2">Indicate the number of outstanding shares of each of the issuer&#146;s classes of
capital or common stock as of the close of the period covered by the annual
report.
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
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9,138,900</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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<P align="left"><FONT size="2">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
registrant was required to file such reports), and (2)&nbsp;has been subject to such
filling requirements for the past 90&nbsp;days. Yes &#091;X&#093; No &#091;&nbsp;&nbsp;&#093;
</FONT>
<P align="left"><FONT size="2">Indicate by check mark which financial statement item the registrant has
elected to follow. Item&nbsp;17 &#091;X&#093; Item&nbsp;18 &#091;&nbsp;&nbsp;&#093;
</FONT>
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<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

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<TR><TD colspan="9"><A HREF="#000">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">ITEM 3. KEY INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">ITEM 4. INFORMATION ON THE COMPANY</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">ITEM 8. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">ITEM 9. THE OFFER AND LISTING</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">ITEM 10. ADDITIONAL INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">ITEM 15. &#091;RESERVED&#093;</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">ITEM 16. &#091;RESERVED&#093;</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">PART IV</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">ITEM 17. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">ITEM 18. FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">ITEM 19. EXHIBITS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">EXHIBIT INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#025">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv4w1.txt">EX-4.1: K.C. CHAO EMPLOYMENT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv4w2.txt">EX-4.2: MEI-LING LIU EMPLOYMENT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv4w3.txt">EX-4.3: ALAIN REY EMPLOYMENT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv8w1.txt">EX-8.1: LIST OF SUBSIDIARIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w8.txt">EX-10.8: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w9.txt">EX-10.9: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w10.txt">EX-10.10: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w11.txt">EX-10.11: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w12.txt">EX-10.12: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w13.txt">EX-10.13: CREDIT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w17.txt">EX-10.17: SHARE PURCHASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv10w22.txt">EX-10.22: CONSENT OF PRICEWATERHOUSECOOPERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="y63676exv99w1.txt">EX-99.1: SECTION 906 CERTIFICATION</A></TD></TR>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P align="center"><FONT size="2"><B>TABLE OF CONTENTS</B>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preliminary Note</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
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        <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>PART I</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 1.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Identity of Directors, Senior Management and Advisors</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 2.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Offer Statistics and Expected Timetable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 3.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Key Information</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 4.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Information of the Company</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 5.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating and Financial Review and Prospects</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 6.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Directors, Senior Management and Employees</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
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<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 7.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Major Shareholders and Related Party Transactions</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">30</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 8.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Information</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">32</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 9.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">The Offer and Listing</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">33</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 10.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional Information</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">34</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 11.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Quantitative and Qualitative Disclosures About Market Risk</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">39</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 12.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Description of Securities Other than Equity Securities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
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        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>PART II</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD colspan="3" valign="top"><FONT size="2">Item 13.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Defaults, Dividend Arrearages and Delinquencies</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 14.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Material Modifications to the Rights of Security Holders
and Use of Proceeds</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
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        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>PART III</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 15.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#091;Reserved&#093;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3" valign="top"><FONT size="2">Item 16.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&#091;Reserved&#093;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>PART IV</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3" valign="top"><FONT size="2">Item 17.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Statements</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3" valign="top"><FONT size="2">Item 18.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Statements</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3" valign="top"><FONT size="2">Item 19.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exhibits</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">41</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top" align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financial Statements Pursuant to Item&nbsp;17</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>PRELIMINARY NOTE</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains forward-looking statements within the meaning
of Section&nbsp;27A of the Securities Act of 1933, as amended, and Section&nbsp;21E of
the Securities Exchange Act of 1934, as amended. Such statements are indicated
by words or phrases such as &#147;anticipate,&#148; &#147;estimate,&#148; &#147;project,&#148; &#147;expect,&#148;
&#147;believe&#148; and similar words or phrases. Such statements are based on current
expectations and are subject to certain risks and uncertainties including, but
not limited to, the overall level of consumer spending on apparel, the
financial strength of the retail industry generally and the Company&#146;s customers
in particular, changes in trends in the market segments in which the Company
competes, the level of demand for the Company&#146;s garments and fabrics, actions
by its major customers or existing or new competitors and changes in economic
or political conditions in the markets where the Company sells or manufactures
its products, as well as other risks and uncertainties both referenced and not
referenced in this annual report. These risks are more fully described under
Item&nbsp;3. &#147;Key Information&#151;Risk Factors&#148; of this annual report. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated or projected. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references in this document to &#147;Novel Denim&#148; or the &#147;Company&#148; are to
Novel Denim Holdings Limited, a British Virgin Islands (&#147;BVI&#148;) international
business company, and its subsidiaries.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this annual report, unless otherwise specified or unless the context
otherwise requires, all references to &#147;$&#148; or &#147;dollars&#148; are to U.S. dollars and
all references to &#147;fiscal&#148; or &#147;fiscal year&#148; refer to the fiscal year ended
March&nbsp;31 of the calendar year mentioned.
</FONT>
<!-- link1 "PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="center"><FONT size="2"><B>PART I</B>
</FONT>

<!-- link2 "ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%" align="left" nowrap><FONT size="2"><B>ITEM 1.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="92%"><FONT size="2"><B>IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Not Applicable.</FONT></TD>
</TR>
</TABLE>
<!-- link2 "ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%" align="left" nowrap><FONT size="2"><B>ITEM 2.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="92%"><FONT size="2"><B>OFFER STATISTICS AND EXPECTED TIMETABLE</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="92%"><FONT size="2">Not Applicable.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">1</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<!-- link2 "ITEM 3. KEY INFORMATION" -->
<DIV align="left"><A NAME="003"></A></DIV>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%" align="left" nowrap><FONT size="2"><B>ITEM 3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="92%"><FONT size="2"><B>KEY INFORMATION</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected consolidated financial and other information presented below
have been prepared in accordance with U.S. generally accepted accounting
principles (&#147;U.S. GAAP&#148;) and are derived from the Consolidated Financial
Statements of the Company for the years ended March&nbsp;31, 1998 through 2002. The
Consolidated Financial Statements for, and as of, the year ended March&nbsp;31, 1998
has been audited by Price Waterhouse, independent accountants. The Consolidated
Financial Statements for, and as of, the years ended March&nbsp;31, 1999 through
2002 have been audited by PricewaterhouseCoopers, independent accountants. The
information should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Annual Report
and Item&nbsp;5. &#147;Operating and Financial Review and Prospects.&#148;
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="59%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="19"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD align="center" colspan="19"><FONT size="1">(in thousands, except per share amounts)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Statement of Income Data:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">85,715</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">97,702</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,101</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of goods sold</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">60,275</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">70,185</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">84,456</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">107,465</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">132,201</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross profit</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">25,440</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">27,517</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,645</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">30,581</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26,384</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other revenues (1)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">50</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">337</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">638</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">440</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">789</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and administrative expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,958</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,901</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,248</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,187</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18,693</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Impairment loss (2)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,375</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other expenses (3)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">225</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">589</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,532</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">17,728</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,035</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,245</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,105</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,172</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,499</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,723</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,169</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,955</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before minority interest, tax and effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,360</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,229</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,312</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,076</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,150</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">49</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">48</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(52</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">48</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">82</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Taxation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">298</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,311</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,181</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,364</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,028</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,770</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(308</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,311</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">16,181</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,364</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,028</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,078</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per share after accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic Earnings per share</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.71</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.30</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.23</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted Earnings per share</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.71</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.29</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted average Ordinary Shares outstanding &#150; Basic (7)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,145</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,438</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,438</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,221</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,110</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted average Ordinary Shares outstanding &#150; Diluted (7)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,179</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,479</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,439</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,316</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,256</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="58%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="19"><FONT size="1"><B>As of March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD align="center" colspan="19"><FONT size="1">(in thousands)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Balance Sheet Data:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,630</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,876</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,017</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,361</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,995</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Working capital (exclusive of cash and cash equivalents) (4)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,346</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,360</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,474</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">21,682</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,130</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">82,926</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">116,670</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">124,710</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">149,120</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">189,380</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term debt (5)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,880</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18,877</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18,099</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">27,681</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">54,963</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt (6)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">751</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,545</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,068</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,610</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">17,542</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity (7)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">63,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">79,386</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">85,750</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">94,880</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">97,209</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="55%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="19"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Operating Data:</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garment production (thousands of pieces)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,878</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,708</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,711</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,395</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,391</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric production (thousands of meters)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,858</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,228</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,190</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">24,716</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">33,302</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric printing (thousands of
meters)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,882</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Other revenues consist of disposals of property, plant and equipment,
sales of scrap materials, net proceeds from yarn sales, commissions
received from an affiliate and other related or nonrecurring items. See
Item&nbsp;7. &#147;Major Shareholders and Related Party Transactions.&#148;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Impairment loss consists of a partial write off of fixed assets in
Madagascar related to the closure of the Madagascar operations.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Other expenses consist of the write-off of start-up costs associated with
the Company&#146;s Madagascar and South African facilities in fiscal 2001 and
1999, respectively.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Working capital consists of current assets less current liabilities.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Including current portion of long-term debt and capital leases.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Including long-term portion of capital leases.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(7)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">During fiscal 2001, the Company repurchased 420,200 Ordinary Shares for a
total of approximately $3.1&nbsp;million. During fiscal 2002, the Company
repurchased 20,100 Ordinary Shares for a total of approximately $0.2
million.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">2</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="left"><FONT size="2"><B>Risk Factors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Uncertainties in Garment and Fabric Industries</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2002, approximately 51% of total sales were to U.S. customers,
approximately 27% of total sales were directly to European customers (primarily
in Belgium, France, The Netherlands and the United Kingdom), approximately 11%
of total sales were to customers in African countries for further conversion
and sale, approximately 10% of total sales were to customers in Asian countries
and approximately 1% of total sales were to customers in other countries.
Historically, the apparel industry has been subject to substantial cyclical
variations. In particular, Europe and the United States (&#147;U.S.&#148;) have
experienced fluctuations in demand for denim and chino in recent years. There
can be no assurance that the Company&#146;s financial condition and results of
operations will not be adversely affected by any such fluctuations. In
addition, a recession in the general European and/or U.S. economies or
uncertainties regarding future economic prospects that affect consumer spending
habits could have a material adverse effect on Novel Denim&#146;s results of
operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dependence on Key Customers; No Long-term Contracts with Customers</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Gap, Inc. (the &#147;Gap&#148;) has been a substantial customer of Novel Denim
and accounted for approximately 31% of Novel Denim&#146;s total sales (and
approximately 41% of its total garment sales) in fiscal 2002. For the same
period, Tommy Hilfiger Corporation and its subsidiaries (&#147;Tommy Hilfiger&#148;)
accounted for approximately 15% of the Company&#146;s total sales (and approximately
20% of its total garment sales) and Vetir S.A. (Mi-Temps) (&#147;Mi-Temps&#148;)
accounted for approximately 7% of the Company&#146;s total sales in fiscal 2002 (and
approximately 9% of its total garment sales). Combined, these top three
customers (which are all garment customers), accounted for approximately 52% of
Novel Denim&#146;s total sales in fiscal 2002 (and approximately 70% of its total
garment sales). The loss of The Gap, Tommy Hilfiger or Mi-Temps as a customer,
or a significant reduction in their purchases from Novel Denim, could have a
material adverse effect on the Company&#146;s financial condition and results of
operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not have any long-term contracts with its customers. As a
result, there can be no assurance that historic levels of business from any
customer of the Company will continue in the future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Foreign Operations in Mauritius, Madagascar and South Africa</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s operations are affected by economic, environmental,
political, governmental and labor conditions in Mauritius, Madagascar and South
Africa, where all of its manufacturing facilities are presently located.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the last few years, the Company has experienced a shortage of labor
and rising labor costs. The government of Mauritius currently permits the
importation of foreign labor. In March 2002, the Company&#146;s operations in
Mauritius were adversely affected by a labor dispute relating to the Company&#146;s
expatriate employees who requested that the Company make a number of changes
before they returned to work. As of March&nbsp;31, 2002 approximately 24% of the
Company&#146;s employees in Mauritius were expatriate employees. Following
negotiations, the Company agreed to make some modifications to its existing
operations and all but a small number of expatriate employees subsequently
returned to work. As a result, garment production was adversely affected with
orders having delayed shipments, increased air freight costs and some order
cancellations. While the Company believes that it will recover from these
events within fiscal 2003, no assurances can be made that additional customers
will not cancel or reduce orders with the Company. There also can be no
assurance that the Company&#146;s results of operations will not be adversely
affected by an increase in labor costs in the future. See Item&nbsp;5. &#147;Operating
and Financial Review and Prospects.&#148; In addition, any change in Mauritius&#146;
labor policy could have a material adverse effect on the Company.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In early calendar 2002, the Company&#146;s operations in Madagascar were
significantly and adversely affected by strikes resulting from disputed
presidential elections. The disputed election resulted in many of the country&#146;s
commercial services and infrastructure being significantly disrupted or halted
causing severe logistical and supply problems to companies operating in the
capital city of Antananarivo. As a result, the Company announced on March&nbsp;28,
2002 that it was moving out of the country and began shipping its equipment to
Mauritius and South Africa. The Company&#146;s production during this period was
adversely affected by order cancellations, increased air freight costs,
impairment of fixed assets in Madagascar and the write down of raw material and
finished good inventories. For fiscal 2002, sales from Madagascar represented
</FONT>
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<P align="left"><FONT size="2">approximately 18.68% of total sales and 25.0% of total garment sales. In
addition the Company employed approximately 6,000 people in Madagascar as of
March&nbsp;31, 2002, representing approximately 42% of its total employees.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;South Africa, where the Company began operating fabric manufacturing
facilities in 1998, has undergone significant political and economic
instability. Since the historic all-races election of 1994, which marked the
end of apartheid, the African National Congress (&#147;ANC&#148;) sought to rebuild
both the political, social and economic foundations of the country. Political,
economic and social tensions continue to sustain a high level of violence in
South Africa. In 1999, Mr.&nbsp;Thabo Mbeki, Nelson Mandela&#146;s successor, was
inaugurated as the country&#146;s new president, following the re-election of the
ANC government. The Mbeki government is now focused on easing monetary policy,
stabilizing the South African rand and increasing consumer consumption. A
significant portion of the population in South Africa is unemployed and/or
uneducated. Accordingly, no predictions can be made regarding the political,
social or economic stability of South Africa. Furthermore, there can be no
assurance that economic, political, governmental or labor conditions in South
Africa will not have an adverse effect on the Company&#146;s results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Uncertainties Relating to New Operations in China</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 2001, the Company began operations in People&#146;s Republic of
China (&#147;PRC&#148; or &#147;China&#148;) through the acquisition of NDP Holdings Limited
(&#147;NDP&#148;) (see Item&nbsp;7. &#147;Major Shareholders and Related Party
Transactions&#151;Acquisition of NDP Holdings Limited&#148;), which began operations in
1988. The PRC has historically had a planned economy but has, in certain
aspects, been transitioning to a more market-oriented economy. Although the
Company believes the economic reform and the macroeconomic measures adopted by
the PRC, including the encouragement of private economic activity and greater
economic decentralization, have had and may continue to have a positive effect
on the economic development of the PRC, the Company cannot predict the future
direction of these economic reforms or the effects these measures may have on
the Company&#146;s business, financial position or results of operations.
Furthermore, the Chinese government may not continue to pursue these policies
or may significantly alter them to the Company&#146;s detriment from time to time
without notice.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specifically, changes in policies by the Chinese government resulting in
changes in rules, regulations, laws, or their interpretation, or the imposition
of confiscatory taxation, restrictions on currency conversion or imports and
sources of supply could materially and adversely affect either the Company&#146;s
financial condition or results of operations. For example, the nationalization
or other expropriation of private enterprises by the Chinese government could
result in the total loss of the Company&#146;s investment in China. NDP&#146;s
subsidiary operations in China are also, by law, subject to administrative
review by various national, provincial and local agencies of the Chinese
government. Governmental oversight or changes to existing the rules and
regulations relating to administrative review could adversely affect the
Company&#146;s results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s new operations in China are subject to other risks as well,
including:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>A lack of remedies and impartiality under the Chinese legal system may
prevent the Company from enforcing the tenancy agreements under which NDP
operates its factories or affect its ability to maintain NDP&#146;s business
license.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NDP operates its factory under long term tenancy agreements (through 2038)
with the local Chinese government. These tenancy agreements may be difficult to
enforce in China, which could force the Company to accept terms that may not be
as favorable as those provided in its other tenancy agreements. Unlike the
U.S., China has a civil law system in which judicial decisions have little
precedential value. The Chinese government has enacted some laws and
regulations dealing with matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. However, the Company&#146;s
ability to enforce commercial claims or to resolve commercial disputes is
unpredictable because the laws may be relatively new. These matters may also
be subject to the exercise of considerable discretion by agencies of the
Chinese government, and forces unrelated to the legal merits of a particular
matter or dispute may influence their outcome.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NDP&#146;s activities in China also require business licenses which are subject
to review and approval by various national and local agencies of
Chinese government. Should NDP&#146;s business licenses in China not
be renewed or approved,
NDP would be required to move its operations out of China, which would impair
its profitability, competitiveness and market position and would jeopardize
NDP&#146;s ability to continue operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Possible changes and uncertainties in economic policies in the Special
Economic Zones of China in which NDP operates could harm NDP&#146;s operations by
eliminating benefits it currently enjoys.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its economic reform, China has designated certain areas,
including Shenzhen where NDP has certain manufacturing facilities, as Special
Economic Zones. Foreign enterprises in these areas benefit from greater
economic
</FONT>
<P align="center"><FONT size="2">4</FONT>

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<P align="left"><FONT size="2">autonomy and more favorable tax treatment than enterprises in other parts of
China. Changes in the policies or laws governing Special Economic Zones could
eliminate these benefits. Moreover, economic reforms and growth in China have
been more successful in certain provinces than others, and the continuation or
increase of these disparities could affect the political or social stability of
China.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Uncertain applications of Chinese tax laws could subject the Company to
greater taxes in China.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under applicable Chinese law, the Company has been afforded a number of
tax concessions by the Chinese taxing authorities and have avoided paying taxes
on a substantial portion of its operations in China. The Chinese tax system is
subject to substantial uncertainties and was subject to significant changes
enacted on January&nbsp;1, 1994, the interpretation and enforcement of which are
still uncertain. Currently, under the Chinese tax system the Company can obtain
tax benefits by reinvesting profits of its subsidiary in China. The Company is
subject to taxes at a rate of 15% of the Company&#146;s Chinese taxable profits.
Changes in Chinese tax laws or their interpretation or application may, subject
the Company to greater Chinese taxation in the future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Controversies affecting China&#146;s trade with the United States could harm
the Company&#146;s operations or depress its share price.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While China has been granted permanent most favored nation trade status in
the United States, controversies between the United States and China may arise
that threaten the status quo involving trade between the United States and
China. These controversies could adversely affect NDP&#146;s business by, among
other things, causing its products in the United States to become more
expensive, which could result in a reduction in the demand for its products by
customers in the United States. Political or trade friction between the United
States and China, whether or not actually affecting the Company&#146;s business,
could also adversely affect the prevailing market price of the Company&#146;s
ordinary shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Changes in currency rates involving the Hong Kong dollar or Chinese yuan
could increase the Company&#146;s expenses or cause economic or political problems
affecting its business.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NDP&#146;s sales are predominately denominated in Hong Kong and U.S. dollars.
In addition, a significant portion of NDP&#146;s operating costs including labor
and electricity costs are denominated in Chinese yuan. The Hong Kong government
may not continue to maintain the present currency exchange mechanism, which
fixes the Hong Kong dollar at approximately 7.80 to each U.S. dollar. If the
currency exchange mechanism between the Hong Kong dollar and the U.S. dollar is
changed, the Company&#146;s results of operations and financial condition could be
materially adversely affected. Any material increase in the value of the Hong
Kong dollar or Chinese yuan relative to the U.S. dollar would increase the
Company&#146;s expenses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of NDP&#146;s business is generated from Hong Kong. In
addition a significant portion of NDP&#146;s costs are denominated in Hong Kong
dollars. Hong Kong is a Special Administrative Region of PRC with its own
government and legislature and it currently enjoys a high degree of autonomy
from the PRC. The Company can give no assurance that Hong Kong will continue to
enjoy autonomy from the PRC. The Hong Kong dollar has remained relatively
constant due to the U.S. dollar peg and currency board system that has been in
effect in Hong Kong since 1983. However, in early 1999, the Hong Kong dollar
was subject to currency speculation and the SAR government substantially
supported the market for the Hong Kong dollar, both directly and indirectly
through the large-scale purchase of securities listed on the Hong Kong Stock
Exchange. The Company can give no assurance that the historical currency peg of
the Hong Kong dollar to the U.S. dollar will be maintained, and changes to the
historical currency peg could adversely affect the Company&#146;s business.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Changes in International Trade Policies Affecting Import Duties and Quotas</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s operations are subject to changes in international trade
policies, practices and agreements. The export of garments and fabric by the
Company to the European Community (&#147;EC&#148;) is largely governed by the terms of
the Fourth Lom&#233; Convention (the &#147;Lom&#233; Convention&#148; or &#147;Lom&#233; IV&#148;), an
international cooperation agreement among the 15 nations of the EC and 70
African, Caribbean and Pacific countries (&#147;ACP States&#148;). As Mauritius and
Madagascar are members of the Lom&#233; Convention, exports of garments and fabric
manufactured in those countries to the EC are not subject to EC import duties
or quotas. The Lom&#233; Convention was extended in June 2000 for an additional
period of 20&nbsp;years. Any change in the Lom&#233; Convention that would subject the
Company to import duties or quotas could have a material adverse effect on the
Company&#146;s results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2000, the United States passed legislation to create a favorable
trade relationship between the United States and certain sub-Saharan countries,
including Mauritius, Madagascar and South Africa, under the Africa Growth and
Opportunity
</FONT>
<P align="center"><FONT size="2">5</FONT>

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<P align="left"><FONT size="2">Act (&#147;AGOA&#148;). The new legislation allows the Company to sell its garments
into the United States on a duty-free and quota-free basis, subject to certain
conditions, the most significant of which requires the Company to use fabric
manufactured in either Africa or the United States. In January 2001, Mauritius
received permission from the United States to begin shipping products under the
AGOA and in March 2001, South Africa and Madagascar received similar approvals.
Any change in AGOA that would subject the Company to import duties or quotas
or changes in the fabric sourcing requirements could have a material adverse
effect on the Company&#146;s operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside of the EC, the Company&#146;s activities are affected by trade
agreements which limit imports from Mauritius, Madagascar and South Africa.
Any further limits on garment and fabric imports from the countries in which
the Company exports into the United States, or any expansion in the number of
signatory countries to the North American Free Trade Agreement (&#147;NAFTA&#148;), could
have a material adverse effect on the Company&#146;s operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, changes in international trade in garments and fabric may be
expected as a result of the recent Uruguay Round Agreement on Textiles and
Clothing, which provides for the gradual and complete integration of garments
and fabric into the General Agreement on Tariffs and Trade (&#147;GATT&#148;). Over a
ten-year transition period which began in January 1995, quotas are scheduled to
be phased out and duties are scheduled to be reduced. With respect to the EC,
this may result in a reduction in the competitive advantage afforded to ACP
States under the Lom&#233; Convention vis &#224; vis non-ACP States (such as China).
Elsewhere, including in the United States, this may result in reduced quotas
and tariffs on exports from other countries which are not parties to NAFTA or
agreements such as the AGOA. There can be no assurance, however, as to the
ultimate effect of any such changes on Novel Denim&#146;s results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Constraints in Production Capacity</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has limited production capacity. From inception through late
fiscal 1999, the Company&#146;s manufacturing facilities operated at full capacity
and the Company from time to time limited supply to certain customers when
demand for its products exceeded its capacity.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s production capacity is also subject to some seasonal
fluctuations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2000, the Company&#146;s operations in Mauritius, which accounted
for 82% of the Company&#146;s total production during fiscal 2000, were adversely
affected by a continued serious drought, which forced the Company to find
alternative water sources necessary for its operations. The drought limited the
Company&#146;s washing and dyeing capabilities and caused the Company to operate
both its fabric and garment operations in Mauritius at less than full capacity.
As a result, the Company rescheduled and reduced orders to certain of its
customers, which in-turn resulted in a reduction in sales, and made additional
investments to increase its water resources, including opening a new garment
washing and finishing facility in St. Felix, Mauritius. If severe seasonal
fluctuations or drought conditions occur in the future, the Company&#146;s results
of operations could be materially and adversely affected.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, during fiscal 2002, the Company was adversely affected by
production disruptions in Madagascar following disputed presidential elections
as well disruptions in Mauritius resulting from a labor dispute. See Item&nbsp;5.
&#147;Closure of Madagascar Operations.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Potential Risks in Managing Rapid Growth</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim has significantly expanded its operations since 1994. As a
result, the Company&#146;s sales have grown from $34.1&nbsp;million in fiscal 1994 to
$158.6&nbsp;million in fiscal 2002, primarily as a result of significant expansions
in production in Mauritius and other countries as well as through limited
acquisitions. This growth has placed increasing demands on the Company&#146;s
management resources and operating systems. The Company has experienced
problems in the past in connection with the integration of local labor at new
facilities. There can be no assurance that Novel Denim will not experience
manufacturing problems and/or product delivery delays in the future as a result
of, among other things, construction delays, the integration and training of
local labor and ramping up production at new facilities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that the Company&#146;s historical growth rates will
continue in the future. Novel Denim&#146;s success will, in part, depend upon the
ability of the Company to continue to manage growth effectively. In particular,
management continues to invest in computer hardware and software to further
integrate its accounting and production systems. There can
</FONT>
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<P align="left"><FONT size="2">be no assurance that such systems can be implemented within a reasonable time
period without disruption in customer service or deliveries and without
diversion of management&#146;s resources.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Possible Fluctuations in Availability and Cost of Raw Materials</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cotton is the primary raw material used in the production of Novel Denim&#146;s
products. In fiscal 2002, approximately 45% of the Company&#146;s direct costs of
fabric and approximately 24% of the Company&#146;s direct costs of garments were
attributable to the cost of cotton. In fiscal 2002, the Company&#146;s consumption
of raw cotton was approximately 19,000 metric tons at a cost of approximately
$23&nbsp;million. The availability and consequently the cost of cotton fluctuates as
a result of a variety of natural and economic factors. In recent years, the
cost of cotton has experienced unusual volatility, which has been reflected in
the Company&#146;s gross profit margins.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to diversify its sources of cotton, Novel Denim currently
purchases raw cotton from six suppliers. The cotton obtained from these
suppliers is grown in various regions of Africa, primarily West and East
Africa. Any shortage of cotton or material increase in price could materially
and adversely affect the Company&#146;s results of operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dependence on Key Personnel</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s ability to maintain its competitive position is largely
dependent on the personal efforts and abilities of its senior management,
particularly Silas K.F. Chou, Chairman of the Board, K.C. Chao, Chief Executive
Officer and President, Alain Rey, Chief Financial Officer, Mei-Ling Liu, Senior
Vice President &#150; Operations and Isaacs C.C. Lam, Senior Vice President &#150; Sales
and Marketing. Each of K.C. Chao, Alain Rey, Mei-Ling Liu and Isaacs C.C. Lam
has an employment contract with the Company. Novel Denim believes that the loss
of the services of any of these executives could have a material adverse effect
on the Company. The Company does not currently have &#147;key man&#148; insurance with
respect to any of these individuals.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Competition in the Garment and Fabric Businesses</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The denim and chino garment and fabric businesses are highly competitive.
In its garment business, Novel Denim faces competition primarily from
manufacturers within Europe, the associated countries such as Algeria, Tunisia
and Morocco (the &#147;Associated Countries&#148;) and the ACP States and more
recently, the Far East and Mexico. In the manufacturing of denim and chino
fabric, Novel Denim faces competition from manufacturers in Europe and the
Associated Countries such as Hellenic in Greece, Legler/T.R.C./C.D.I. in Italy,
Orta in Turkey, Swift in Tunisia, Tavex in Spain and Uco in Belgium. In the
manufacturing of printed and dyed fabrics in China, the Company faces
competition from China Dyeing Holdings, Perfects Enterprise Ltd. and Hing Fung
Printing and Dyeing Pty. Ltd. Some of the Company&#146;s fabric competitors are
significantly larger and more diversified than the Company and have
substantially greater resources. In addition, the Company requires a longer
shipping time than many of its competitors. Management believes that Novel
Denim&#146;s ability to compete effectively depends upon its continued ability to
offer high-quality garments and fabric at competitive prices.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rights of Shareholders under British Virgin Islands Law may be Less than
in U.S. Jurisdictions</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim is organized under the laws of the British Virgin Islands.
Principles of law relating to matters affecting the validity of corporate
procedures, the fiduciary duties of the Company&#146;s management, directors and
controlling shareholders and the rights of the Company&#146;s shareholders differ
from, and may not be as protective of shareholders as those that would apply if
Novel Denim were incorporated in a jurisdiction within the United States.
Directors of the Company have the power to take certain actions without
shareholder approval, including an amendment of the Company&#146;s Memorandum of
Association or Articles of Association, a change in the Company&#146;s authorized
capital and certain fundamental corporate transactions, including
reorganizations, certain mergers or consolidations, the sale or transfer of
assets provided such assets form less than 50% of the assets of the Company or
the sale or transfer of such assets is not outside of the usual course of the
Company&#146;s business as well as the creation of a lien on the Company&#146;s assets.
In addition, there is doubt that the courts of the British Virgin Islands would
enforce liabilities predicated upon United States securities laws. See Item&nbsp;10.
&#147;Additional Information&#151;Exchange Controls and Other Limitations Affecting
Security Holders&#151;Comparison of United States and British Virgin Islands
Corporate Laws.&#148;
</FONT>
<P align="center"><FONT size="2">7</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Enforceability of Civil Liabilities</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a British Virgin Islands international business company.
All but one of the Company&#146;s directors, all of its executive officers and its
controlling shareholder are residents outside of the United States. See Item&nbsp;6.
&#147;Directors, Senior Management and Employees.&#148; All or a substantial portion of
the assets of such persons may be located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to realize against them upon judgments
of courts of the United States predicated upon civil liability provisions of
the federal securities laws of the United States. The Company has been advised
by its British Virgin Islands counsel that there is doubt as to the
enforceability in the British Virgin Islands in original actions or in actions
for enforcement of judgments of United States courts or of liabilities
predicated upon the federal securities laws of the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Currency and Exchange Rate Fluctuations</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has operations in Mauritius, South Africa, China and until
March 2002, Madagascar and is therefore subject to currency and exchange rate
fluctuations with the U.S. dollar. The Mauritian rupee has historically
experienced a devaluation against the U.S. dollar, falling approximately 50%
between March 1990 and March 2002 and approximately 6.5% during fiscal 2002.
Similarly, in Madagascar where the Company operated from May 1998 to March
2002, the Madagascar franc has also experienced a devaluation against the U.S.
dollar, falling 9.7% between April 1999 and March 2002 and by approximately
4.4% during fiscal 2002. The South African rand has also experienced a
devaluation against the U.S. dollar falling approximately 85% between September
1998 and March 2002 and approximately 43% during fiscal 2002. The Chinese yuan
has been relatively stable against the U.S. dollar having devalued 0.5% from
1996 to 2002 and held stable during 2002. Although Novel Denim&#146;s labor and
certain other operating costs and local borrowings are denominated in Mauritian
rupees, Madagascar francs and South African rands, the devaluations have not
had a material adverse effect on the Company&#146;s overall financial performance
because all of its garment and fabric sales are denominated in either U.S.
dollars or European currencies, which have generally appreciated against these
local currencies. In addition, the price of raw cotton, the Company&#146;s principal
raw material, is denominated in U.S. dollars. Nevertheless, changes in exchange
rates could adversely affect the Company&#146;s results of operations in the future.
Novel Denim currently enters into forward foreign exchange contracts to hedge
certain foreign currency denominated firm commitments. See Item&nbsp;5. &#147;Operating
and Financial Review and Prospects&#151;Inflation and Exchange Rates.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Control by Principal Shareholder; Conflicts of Interest</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, Novel Apparel (BVI)&nbsp;Limited (&#147;Novel Apparel&#148;)
owned 49.8% of the outstanding Ordinary Shares of the Company, net of treasury
stock, and is able to effectively control the election of the Board of
Directors of the Company and approve or disapprove any other matters submitted
to the shareholders. In December 1998, Novel Enterprises Limited (&#147;NEL&#148;), a
Hong Kong corporation and a wholly owned subsidiary of Westleigh Limited
(&#147;Westleigh&#148;), transferred its 80% interest in Novel Apparel to Novel
Holdings (BVI)&nbsp;Limited (&#147;NHL&#148;), another wholly owned subsidiary of Westleigh.
Westleigh is privately owned by members of the Chao family, including Messrs.
Silas Chou and Ronald Chao and Ms.&nbsp;Susana Chou. The Chao family thereby
indirectly controls the Company. In addition, during fiscal 2000, Mr.&nbsp;K.C.
Chao individually purchased, through open market transactions, 505,000 Ordinary
Shares of the Company. None of the shareholders of the Chao family reside in or
is a citizen of the United States. Certain affiliates of NEL produce fabric and
garments in the ordinary course for customers in the Far East. While these
products do not compete with those of the Company, there can be no assurance
that conflicts of interest with respect to business opportunities will not
arise in the future or that any such conflicts will be resolved in favor of the
Company.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s customers include Pepe Jeans Europe B.V. and its affiliates
(&#147;Pepe Europe&#148;), Tommy Hilfiger, Tommy Hilfiger Europe B.V. (&#147;Tommy
Europe&#148;) which was acquired by Tommy Hilfiger in July 2001, and certain other
affiliates of NEL. Mr.&nbsp;Silas K.F. Chou, a member of the Chao family and
Chairman of the Board of Directors of the Company, is also Co-Chairman of the
Board of Tommy Hilfiger and a Director of NEL and certain of its affiliates.
Certain other officers and directors of the Company are also officers and/or
directors of Tommy Hilfiger, Pepe Europe, NEL and certain of its affiliates.
See Item&nbsp;6. &#147;Directors, Senior Management and Employees.&#148; In addition, the
Chao family has an approximately 27% indirect ownership interest in Pepe Europe
and a small indirect ownership interest in Tommy Hilfiger.
</FONT>

<P align="center"><FONT size="2">8</FONT>



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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any conflicts of interest between the Company and Pepe Europe, Tommy
Hilfiger or certain other affiliates of NEL arise, such disputes will be
resolved by the Company&#146;s independent directors. See Item&nbsp;7. &#147;Major
Shareholders and Related Party Transactions.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Foreign Corporations; Potential Changes in Circumstances Affecting U.S. Shareholders</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because Novel Denim is a British Virgin Islands international business
company, the income of the Company and its foreign subsidiaries generally is
not subject to United States federal income taxation. However, various
provisions of the Internal Revenue Code of 1986, as amended, impose special
taxes in certain circumstances on non-United States corporations and their
shareholders. See Item&nbsp;10. &#147;Additional Information&#151;Taxation&#151;United States
Federal Income Taxation.&#148;</FONT>
<!-- link2 "ITEM 4. INFORMATION ON THE COMPANY" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 4. INFORMATION ON THE COMPANY</B>
</FONT>

<P align="left"><FONT size="2"><B>Overview</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim is a leading, world-class, vertically-integrated supplier of
high-quality denim and chino garments and fabric as well as knitted garments to
the European Community (&#147;EC&#148;) and the United States. The Company was
incorporated in 1989 in the British Virgin Islands as an international business
company under the International Business Companies Act. The Company initially
was a denim fabric manufacturer, and became a vertically-integrated producer of
basic and value-added denim garments to complement its fabric production in
1990 with the addition of sewing and finishing facilities. In August 1998, the
Company further expanded into the production of chino fabric and garments. In
February 2001, the Company further introduced knitted shirts to its garment
product range through its manufacturing operations in Madagascar. Following the
political and operational instability in Madagascar, the Company announced in
March 2002 that it was shipping its equipment from Madagascar to Mauritius and
ceasing production of knitted shirts. In October 2001, the Company further
expanded into the production of dyed and printed fabrics through the
acquisition of an existing business in Shenhzen, China.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim offers a wide range of high-quality basic and value-added
garments and fabric in accordance with customer specifications. The Company
produces a wide variation of garments, including jeans, chinos, shirts, skirts,
shorts and jackets in a variety of styles, colors and finishes, such as
overdyed, stonewashed, sandblasted and stretch. The Company also produces an
extensive range of different kinds of denim and chino fabrics, including
lighter-weight fabrics, fabrics made with alternative weaves and treatments and
specialty colors and finishes. Novel Denim&#146;s customers include major
manufacturers, retailers and licensees that market under proprietary labels and
trademarks such as Dockers<sup>&#174;</sup>, DYNAM&#153;,
Fila<sup>&#174;</sup>, the Gap<sup>&#174;</sup>,
Nico<sup>&#174;</sup>, Pepe<sup>&#174;</sup> and Tommy
Hilfiger<sup>&#174;</sup>.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s principal executive offices are located at 1/F Novel
Industrial Building, 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong
Kong. Its telephone number is 011-852-2785-5988.
</FONT>
<P align="left"><FONT size="2"><B>The Company</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s principal manufacturing facilities are currently located in
Mauritius, an island nation located in the southwest Indian Ocean, 1,100 miles
east of the African coastline. In May 1998, the Company expanded its sewing
production capabilities by opening a new facility adjoining its existing fabric
mill and laundry facility in Mauritius. In August 1998, the Company further
expanded into South Africa with the acquisition of an existing textile
manufacturing facility in Cape Town. See Item&nbsp;7. &#147;Major Shareholders and
Related Party Transactions&#151;Acquisition of Novel Spinners and Novel Weavers.&#146;&#146;
The Company&#146;s yarn and fabric operations in South Africa serve as a foundation
to support the Company&#146;s fabric and garment operations in Mauritius. In October
2001, the Company expanded its manufacturing operations outside of Africa
through the acquisition of NDP Holdings Limited (&#147;NDP&#148;). See Item&nbsp;7. &#147;Major
Shareholders and Related Party Transactions&#151;Acquisition of NDP Holdings
Limited&#148;. The Company historically has benefited from relatively low labor
costs as compared to its competitors in Europe and the Associated Countries. In
addition, Mauritius&#146; laws and regulations relating to its Export Processing
Zone (&#147;EPZ&#148;) currently exempt Novel Denim from import duties on raw materials
and machinery.
</FONT>
<P align="center"><FONT size="2">9</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has benefited from favorable trade relationships between the
countries in which it manufactures its products and the United States and EC.
Because Mauritius is a member of the Lom&#233; Convention, the Company benefits from
quota-free and duty-free access to the EC for its products shipped from
Mauritius. During fiscal 2001 the United States passed into law the AGOA which
provides qualified countries (Mauritius and South Africa qualified in late
fiscal 2001) to ship qualified apparel products into the United States on a
duty-free and quota-free basis, subject to certain restrictions. See Item&nbsp;3.
&#147;Key Information&#151;Risk Factors&#151;Changes in International Trade Policies
Affecting Import Duties and Quotas.&#148; The Company has ceased producing knitted
garments after closing its operations in Madagascar because these products
would be subject to additional import restrictions if manufactured in another
location, significantly increasing the costs to produce such goods.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since inception, Novel Denim has continued to increase its manufacturing
capacity to meet customer demands. The Company increased its production of
garments from 1.8&nbsp;million pieces in fiscal 1994 to 15.4&nbsp;million pieces in
fiscal 2002 and its production of fabric from 7.7&nbsp;million meters to 33.3
million meters during the same period. The Company believes that there is
potential for increased customer demand and the Company plans to expand its
production capacity in order to satisfy this demand. In fiscal 2003, the
Company expects to benefit from the opening of a new woven garment facility in
Cape Town, South Africa which is expected to be able to produce in excess of
250,000 garments a month.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Company&#146;s sales of garments and fabric have grown
primarily through the addition of new equipment, which has allowed the Company
to expand its production in response to increasing demand from its European and
U.S. customers.
</FONT>
<P align="left"><FONT size="2"><B>Growth Strategies</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s principal growth strategies are to: (i)&nbsp;utilize its
vertically-integrated production to increase flexibility and improve margins
and to broaden its product range; (ii)&nbsp;further expand production capacity and
reduce labor and other costs; (iii)&nbsp;geographic diversification; and (iv)
increase sales to existing customers and expand sales to new customers in
existing markets.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B><I>Utilize its Vertically-Integrated Production to Increase Flexibility
and Improve Margins and to Broaden its Product Range. </I></B>The Company&#146;s
ability to manufacture a broad range of fabrics that can be sold to
third parties or used internally to produce high-quality garments
provides the company with flexibility to shift garment production to
make those products (whether chino or denim) in higher demand and
therefore improve overall margins. The Company expects to continually
expand its fabric operations as it gradually expands its garment
operations. The Company has expanded its garment operations from 4.7
million garments in fiscal 1997 to 15.4&nbsp;million garments in fiscal 2002
and its fabric production capabilities from 15.8&nbsp;million meters to 33.3
million meters during the same periods. The Company has broadened its
garment product range from denim in fiscal 1998 to chino garments and
fabrics in fiscal 1999. In fiscal 2001, the Company further expanded
its product range to include the production of knitted shirts, through
its Madagascar facilities, but subsequently ceased production of those
products at the end of fiscal 2002. In fiscal 2002, the Company
expanded its fabric offering with the addition of printed fabrics and
more sophisticated fabric dyeing abilities through the acquisition of
NDP, which through its subsidiaries, owns and operates an integrated
fabric dyeing, printing and finishing facility in the Shenzhen region of
the People&#146;s Republic of China (&#147;PRC&#148;), near Hong Kong, capable of
processing 40&nbsp;million meters of fabric annually. NDP sells primarily to
fabric converters in Hong Kong, South-east Asia and the PRC for eventual
sales into the United States, Europe and Japan. The Company expects to
integrate the marketing of these products into its garment operations as
well as market NDP&#146;s fabrics to the Company&#146;s existing fabric customers.
The Company also believes that NDP could serve as a fabric foundation
for the Company to expand its garment manufacturing operations in China.
See Item&nbsp;7. &#147;Major Shareholders and Related Party
Transactions&#151;Acquisition of NDP Holdings Limited.&#148; During fiscal 2002,
garment sales were comprised of approximately 64% denim, 28% chino and
8% knits. During the same period third party fabric sales were
comprised of approximately 37% denim, 38% chino, and 25% printed
fabrics.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B><I>Further Expand Production Capacity and Reduce Labor and Other Costs.</I></B>
In order to reduce its labor costs and benefit from favorable trade
relationships with the United States and Europe, the Company has taken a
number actions to expand production and enhance its competitiveness. In
1998 the Company expanded its operations into South Africa through the
acquisition of an existing fabric spinning facility in Cape Town, South
Africa. The Company subsequently expanded this facility to include
weaving capabilities and denim fabric dyeing capabilities.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">10</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">The Company expects garment operations to begin during the third quarter
of fiscal 2003. The facility&#146;s location allows the Company to benefit from
the close proximity to the Company&#146;s raw cotton sources, Cape Town&#146;s
established infrastructure and the area&#146;s relatively low electricity
costs. In fiscal 2002, the Company expanded beyond Africa with the
acquisition of NDP in China which it expects to serve as a foundation for
future fabric and possibly garment expansion within China. China
currently benefits from favorable labor costs and quality standards at
least as high as Mauritius, however without the favorable trade
arrangements that the Company&#146;s African operations have with respect to
the EU and the United States. In fiscal 2003, the Company intends to
continue to invest and expand its garment and fabric production capacity
to meet the continuing demand in its primary markets, including further
expanding the Company&#146;s product range.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B><I>Geographic Diversification. </I></B>The Company believes that in order to
maintain its competitiveness in increasingly difficult global garment
and fabric markets, it needs to focus on diversifying its production.
The Company plans to develop operations in markets that provide
favorable labor or trade relationships with the Company&#146;s customers in
the United States and Europe. For example, the Company has already
expanded from production solely in Mauritius into South Africa and
China.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B><I>Increase Sales to Existing Customers and Expand Sales to New
Customers in Existing Markets. </I></B>The Company believes there is potential
for further growth by expanding sales to existing garment and fabric
customers as Novel Denim increases its production and broadens its
product range. In particular, the Company believes there is an
opportunity to expand its sales to U.S. customers as a result of the
AGOA. See Item&nbsp;3. &#147;Key Information&#151;Risk Factors&#151;Changes in
International Trade Policies Affecting Import Duties and Quotas.&#148;
Although there can be no assurance, the Company believes that sales to
such accounts can be increased as its customers benefit from the
continuing demand for products. The Company also intends to expand its
customer base in its existing markets. The Company believes that this
expansion can be accomplished by leveraging its customer portfolio and
extensive industry contacts to attract new customers particularly with
respect to NDP where the Company is introducing a broader fabric range
for its existing customers.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Products</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim manufactures denim garments and fabric and in August 1998
began the production of chino fabric and garments and from March 2001 until
approximately March 2002 produced knitted shirts. Net sales represented by each
of the Company&#146;s segments from fiscal 1998 to 2002 are set forth below:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="41%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="19"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD align="center" colspan="7"><FONT size="1">(in thousands)</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">57,809</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">77,197</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">81,650</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">109,971</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">118,460</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric (including inter-divisional sales)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">45,589</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">45,502</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">48,714</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">63,308</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">84,273</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inter-divisional sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(17,683</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(24,997</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(25,263</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(35,233</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(44,148</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">85,715</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">97,702</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,101</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Garments</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1990, Novel Denim began manufacturing high-quality denim garments
following the addition of sewing and finishing facilities to its existing
fabric manufacturing plant. As a result of these additions, the Company
established a vertically-integrated facility encompassing all manufacturing
processes necessary to convert raw cotton into high-quality garments. In 1998,
the Company expanded its product offering with the development of a
vertically-integrated chino fabric and garment operation. Vertical integration
allows Novel Denim to produce both denim and chino garments cost-effectively
because: (i)&nbsp;the quality of the fabric supplied is assured; (ii)&nbsp;less fabric
inventory is required; (iii)&nbsp;packaging costs are greatly reduced; and (iv)
certain transportation costs are eliminated. This vertically-integrated process
also provides the Company with the flexibility to manufacture a variety of
garments and fabric according to customers&#146; specifications and delivery
requirements. During fiscal 2002, Novel Denim used approximately 58% of the
fabric it produced for the production of garments, as compared with
approximately 53% in fiscal 2001 and approximately 48% in fiscal 2000.
</FONT>
<P align="center"><FONT size="2">11</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim produces a broad and diverse range of garment types including
a variety of jeans, chinos, shirts, shorts, skirts and jackets. For fiscal
2002, the Company&#146;s chino, denim and knitted garments represented approximately
64%, 28% and 8%, respectively, of total garment sales. Among these items, denim
jeans are the most popular and accounted for approximately 5.7&nbsp;million pairs or
37% of the Company&#146;s total garment sales in fiscal 2002. Novel Denim
manufactures its jeans in a variety of colors, weights and finishes. The
Company&#146;s basic jeans are stonewashed, indigo blue denim,
14&nbsp;1/2 ounce,
five-pocket jeans that are commonly worn by both teenagers and adults. The
remaining 63% of its garment production consisted of value-added chino pants,
denim jackets, shirts, shorts and skirts. By varying colors, accessories and
finishes, the Company has been able to command higher prices and achieve a
higher gross profit margin for these value-added garments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fabric</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since its inception in 1988, the Company has been a manufacturer of denim
fabric and currently produces an extensive range of denim fabrics. Novel
Denim&#146;s core denim fabric is an indigo blue 14&nbsp;1/2 ounce fabric. In order to
take advantage of changing fashion trends, the Company complements its core
denim fabric with a variety of other denim fabrics which differ in weight,
finish and color. In early fiscal 2002, the Company completed the construction
of a new denim dyeing facility within its South African facility to further
expand it fabric capacity. In August 1998, the Company expanded its fabric
product offering to include chino fabric with the acquisition of an existing
textile facility in Cape Town, South Africa, which at the time of the
acquisition had only yarn production capabilities. Using the facility as its
foundation, the Company added weaving capacity in the new plant as well as in
its existing facilities in Mauritius, thereby expanding its total fabric
production capacity. In March 1999, the Company completed the construction of a
new dyeing and weaving facility in Mauritius to process the raw undyed chino
fabric for sale to third parties as well as for the manufacturing of chino
garments. During fiscal 2000, in response to the significant reduction in
demand for denim fabrics, the Company upgraded certain of its denim weaving
equipment to allow for conversion to weaving chino fabrics. In October 2001,
the Company significantly increased its fabric production capabilities through
the acquisition of NDP, a large fabric printing and dyeing plant in Shenhzen
China capable of processing over 30&nbsp;million meters a year. See Item&nbsp;7. &#147;Major
Shareholders and Related Party Transactions&#151;Acquisition of NDP Holdings
Limited.&#148; The Company&#146;s current production capabilities allow for varying the
weaving capacity between chino and denim fabrics, thereby increasing the
flexibility of the Company&#146;s production abilities. In fiscal 2002, the
Company&#146;s fabric production was comprised of approximately 37% denim, 38% chino
and 25% printed fabrics. The Company expects to continue to develop its fabric
production capabilities to better service its garment operations as well as to
provide its third-party fabric customers with high-quality and a broader range
of denim and other fabrics.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Customers</B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim sells its garments to over 50 customers and its fabric to
approximately 180 customers. Novel Denim&#146;s major garment customers include The
Burton Group plc (&#147;Burton&#148;), The Gap, Mi-Temps and Tommy Hilfiger. The
Company&#146;s major fabric customers are VF Corporation and Jordache International
and fabric converters such as Cogimex (France) and China Point (Asia) Limited.
In fiscal 2002, approximately 51% of the Company&#146;s total sales were to U.S.
customers, approximately 27% of the Company&#146;s total sales were directly to
European customers (primarily in Belgium, France, The Netherlands and the
United Kingdom), approximately 11% of total sales were to customers in African
countries for further conversion and sale to Europe and approximately 11% of
total sales were to customers in other countries including those in Asia. For
the same period, the Company&#146;s top three customers, Tommy Hilfiger, The Gap and
Mi-Temps, accounted for approximately 52% of its total sales. During the past
two fiscal years, The Gap and Tommy Hilfiger each accounted for more than 10%
of the Company&#146;s total sales. The Gap, accounted for approximately 31% and 23%
of the Company&#146;s total sales in fiscal 2002 and fiscal 2001, respectively, and
Tommy Hilfiger accounted for approximately 15% of the Company&#146;s total sales in
fiscal 2002 compared to approximately 16% in fiscal 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tommy Hilfiger designs, sources and markets men&#146;s and women&#146;s sportswear,
jeanswear and childrenswear under the Tommy Hilfiger<sup>&#174;</sup> and related labels and
trademarks in the United States and Europe. The Gap is an international
specialty retailer selling casual apparel, personal care and other accessories
for men, women and children. The Gap sells its products under a number of
brands including the Gap, Banana Republic and Old Navy. Mi-Temps is a
French-based discount retailer of value-oriented footwear and apparel with
stores throughout Europe. It sells denim products under the private label name
&#147;DYNAM&#153;&#148;. Pepe Europe designs, sources and markets men&#146;s and women&#146;s jeans
and jeans-related products to retailers in Europe under the
Pepe<sup>&#174;</sup> label and
trademarks.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not have any long-term contracts with its customers.
Nevertheless, due to its reliable customer service, its high-quality denim and
chino products and its competitive pricing, the Company has maintained
long-term
</FONT>
<P align="center"><FONT size="2">12</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">relationships with many of its customers such as Bonnit, Burton, The Gap,
Mi-Temps, Tommy Hilfiger and VF Europe, who have been customers for more than
five years. Novel Denim&#146;s garment customers generally submit and reserve their
preliminary indications of potential order quantity six months in advance. The
orders are then confirmed by the customers three to four months prior to the
beginning of the manufacturing process by specifying colors, styles and sizes.
Because of this order time lag, the Company can assess accurately its garment
production capacity on a monthly basis to satisfy its customers&#146; requirements.
The Company&#146;s regular fabric customers place their fabric orders and secure
them with a letter of credit approximately one month in advance.
</FONT>
<P align="left"><FONT size="2"><B>Marketing and Sales; Distribution</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company sells its products primarily in the United States, Belgium,
France, Germany, The Netherlands and the United Kingdom to well-known designers
of denim and chino garments, popular retailers of fashionable denim and chino
garments as well as to other manufacturers. Novel Denim&#146;s sales and marketing
staff of 125 individuals is divided into garment and fabric groups, with 90
individuals specializing in garments and 35 individuals specializing in fabric.
These two teams are responsible for: (i)&nbsp;soliciting and obtaining purchase
orders from customers; (ii)&nbsp;translating customer specifications into guidelines
for the production of high-quality products; (iii)&nbsp;in the case of garments,
purchasing accessories; and (iv)&nbsp;arranging for shipment. The Company&#146;s sales
group operates from Hong Kong, Mauritius, Macau and London. Novel Denim&#146;s
fabric sales team coordinates all of the Company&#146;s fabric sales from Mauritius.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Company&#146;s own marketing and sales teams, Novel Denim
employs three sales agencies whose sales agents frequently visit the Company&#146;s
customers in France, The Netherlands and the United Kingdom to maintain strong
working relationships. The sales agencies receive a commission on sales of
Novel Denim&#146;s products. The agencies do not market any other denim
manufacturer&#146;s products.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim distributes its products to its customers directly from its
manufacturing facilities in Mauritius, Madagascar and South Africa, primarily
by sea. The time required for the Company to manufacture a customer&#146;s order is
approximately 45&nbsp;days. In addition, the Company requires approximately one
month to ship its products to its customers. Although Novel Denim has a longer
shipping time than many of its competitors, this has not had an adverse effect
on the Company&#146;s sales because denim and chino garments are typically worn
year-round and, as a result, customers typically order garments six months in
advance.
</FONT>
<P align="left"><FONT size="2"><B>Manufacturing and Capital Expenditures</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s vertically-integrated facilities provide Novel Denim with
the flexibility and efficiency necessary to offer its customers a variety of
denim and chino products tailored to their design and delivery requirements.
These facilities encompass every aspect of the production process, from the
spinning, weaving, dyeing and finishing of fabric and the manufacturing of
garments. In addition, because its facilities are vertically integrated, the
Company can strictly enforce quality control throughout the entire
manufacturing process.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim&#146;s textile facilities clean and spin cotton into yarn through
the use of spinning machinery which produces quality yarns at high speeds. The
Company produces both the traditional open-end yarn and the value-added ring
spun yarn. The yarn is then woven into fabric on weaving machines.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the yarn has been woven into fabric, the fabric is forwarded to the
fabric finishing lines. It is then dyed and treated by applying special
chemicals and/or resins to give it a smooth quality as well as certain other
properties. The Company may also dye its fabric again to produce an overdyed
look in blue, black or a variety of other colors. In the case of denim fabrics,
the yarn is dyed before being woven into fabric. Novel Denim stores
approximately 60&nbsp;days of fabric in inventory.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s garment production strategy has been to modernize its sewing
plants in order to minimize production costs and cycle times while maximizing
design flexibility and improving quality. The Company has invested in automated
sewing and computerized cutting machines which offer several advantages over
conventional machines, including faster sewing speed, higher quality and lower
production costs. Novel Denim also utilizes automated machines to sew delicate
and more intricate embroidery patterns. The Company&#146;s garments are then
finished to provide them with a variety of special qualities such as
stonewashed, bleached or overdyed. The Company&#146;s production lines enable it to
produce varying styles of
</FONT>
<P align="center"><FONT size="2">13</FONT>

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<P align="left"><FONT size="2">garments and thus fill multiple orders simultaneously. The Company manufactures
garments according to specific customer purchase orders which prevents an
unnecessary, costly accumulation of inventory.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Production and capital expenditures from fiscal 1998 to fiscal 2002 are
set forth below:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="52%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="19"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="19"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1998</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>1999</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garment Products (thousands of pieces)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,878</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,708</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,711</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,395</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,391</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric (thousands of meters)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,858</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,228</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,190</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">24,716</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">49,184</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital
Expenditures (thousands of dollars)</FONT></DIV></TD>
<TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,082</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,925</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,844</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,824</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,755</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,415</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,959</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,313</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,462</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,228</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8,497</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">23,885</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,157</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">16,286</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,983</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 2002, the Company announced that it was experiencing
significant production disruptions at its Madagascar plants due to events
following the country&#146;s disputed presidential elections. See Item&nbsp;3. &#147;Key
Information&#151;Risk Factors&#151;Foreign Operations in Mauritius, Madagascar and South
Africa.&#148; The Company started operations in Madagascar in 1998 and prior to the
production disruptions was producing approximately 200,000 woven garments a
month and approximately 300,000 knitted garments a month for shipment primarily
to the United States. For fiscal year 2002, the Company shipped approximately
5.1&nbsp;million garments from Madagascar representing 36% of total garments and 28%
of total sales. As a result of the operational instability caused by these
events, the Company announced the closure of these facilities, the ceasing of
production of knitted shirts, and the transfer of assets to its existing
operations in Mauritius and South Africa. At March&nbsp;31, 2002, the Company took
an impairment charge of $2.4&nbsp;million, wrote-down inventories and provided for
redundancy costs for the fourth quarter of fiscal 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2002, the Company invested to expand its fabric production
capabilities in South Africa and China following the acquisition of NDP in
October 2001 as well as upgraded its existing capabilities. In South Africa,
the Company completed the construction of a new denim fabric dyeing facility
providing it the capabilities to dye and finish over 6&nbsp;million meters of fabric
a year. In addition, the Company began construction of a modern garment
manufacturing facility adjacent to its existing fabric operations in Cape Town.
The facility, expected to open in October 2002, is planned to produce over
250,000 garments a month for export primarily to the U.S. For additional
information see Item&nbsp;5. &#147;Operating and Financial Review And
Prospects&#151;Liquidity and Capital Resources.&#148;
</FONT>

<P align="center"><FONT size="2">14</FONT>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">Geographic breakdown of sales by location from fiscal 2000 to fiscal 2002
is set forth below:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="20%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">U.S</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">29,451</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">56,127</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">78,679</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">65</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">65</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,725</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">29,516</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">56,192</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">80,404</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Europe</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">50,237</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">49,521</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">37,043</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,939</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,531</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,784</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">53,176</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">51,052</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">43,827</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">164</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,322</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">512</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,772</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,973</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">14,803</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,936</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,295</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,315</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,798</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,001</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,226</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">17,675</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">24,506</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,813</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">19,473</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">27,507</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">19,039</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">81,650</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">109,971</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">118,460</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">23,451</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">28,075</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40,125</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,101</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Quality Control</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim&#146;s quality control team has adopted strict standards at each
stage of garment and fabric production to ensure the quality of its products.
The Company monitors the quality of its products throughout the manufacturing
process beginning with the raw cotton fiber and ending with the final garment.
In its garment manufacturing facilities, a quality control team consisting of
80 members, under the leadership of an operations director and manager,
inspects a sample of the garment production on a daily basis. Novel Denim
employs a quality control staff of 20 people in its fabric manufacturing
facilities. The Company tests the quality of the raw cotton it purchases and
also tests intermediate yarn products along the spinning process to ensure
strong, high-quality spun yarn. As a result, the Company has not experienced
any significant quality claims from its customers.
</FONT>
<P align="left"><FONT size="2"><B>Raw Materials</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cotton is the primary raw material used in the production of Novel Denim&#146;s
products. In fiscal 2002, approximately 45% of the Company&#146;s direct costs of
fabric and approximately 24% of the Company&#146;s direct costs of garments were
attributable to the cost of cotton. In fiscal 2002, the Company&#146;s consumption
of raw cotton was approximately 19,000 metric tons at a cost of approximately
$23&nbsp;million. The availability and consequently the cost of cotton fluctuates as
a result of a variety of natural and economic factors. In recent years, the
cost of cotton has experienced unusual volatility, which has been reflected in
the Company&#146;s gross profit margins.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to diversify its sources of cotton, Novel Denim currently
purchases raw cotton from six suppliers. The Company uses cotton which is
hand-picked and grown in various regions of Africa, primarily West and East
Africa. Because its cotton is grown in Africa in close proximity to Mauritius
and South Africa, the Company benefits from low transportation costs. Novel
Denim enters into purchase contracts with its cotton suppliers six to eight
months in advance of delivery to provide for a continuous supply of cotton and
to limit the effect of short-term fluctuations in cotton prices.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also purchases dyes, chemicals and garment accessories from a
variety of suppliers. These raw materials have historically been available in
adequate supply.
</FONT>
<P align="center"><FONT size="2">15</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Management Information Systems</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has invested in computer hardware, systems applications and
software to: (i)&nbsp;enhance the speed and efficiency of its garment design and
manufacturing and its denim fabric production; (ii)&nbsp;support the sale and
distribution of denim products to its customers; and (iii)&nbsp;improve the
integration and efficiency of its Mauritius, Madagascar, South African and Hong
Kong operations. Currently, the Company has compiled a database of its
production data ranging from raw cotton quality checks to garment washing
processes, as well as spare parts and warehouse inventory figures. The
Company&#146;s computer network facilitates quick, secure and accurate data transfer
and communications. The Company&#146;s production control system is comparable to
that of other denim garment and fabric manufacturers. However, because the
Company recognizes that expansion and increased production may burden its
current system, it intends to continue to invest in existing and new systems in
conjunction with its increased production and expansion.
</FONT>
<P align="left"><FONT size="2"><B>Research and Development</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company employs a team of 15 people in its research and development
(&#147;R&#038;D&#148;) department. Members of the Company&#146;s R&#038;D team are highly skilled and
experienced. Their primary functions are to research and review production
programs and processing methods to meet increasingly stringent customer demands
while maintaining the Company&#146;s high quality standards. As a result of the
efforts of its R&#038;D team, Novel Denim has been able to replicate and refine
special dyeing and spinning techniques requested by its customers, such as
overdyeing and the ring spun process. Ultimately their work leads to the
development of new fabrics.
</FONT>
<P align="left"><FONT size="2"><B>Governmental Regulation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal, state and local regulations relating to the workplace and the
discharge of materials into the environment are continually changing;
therefore, it is difficult to gauge the total future impact of such regulations
on the Company. However, existing government regulations are not expected to
have a material effect on the Company&#146;s financial position, operating results
or planned capital expenditures. The Company currently has an active
environmental protection committee and an active workplace safety organization.
</FONT>
<P align="left"><FONT size="2"><B>Competition</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The garment and fabric businesses are highly competitive. In its garment
business, Novel Denim faces competition primarily from manufacturers within
Europe, the Associated Countries and the ACP States and more recently Mexico
and the Far East for U.S. customers. In the manufacturing of fabric, Novel
Denim faces competition from manufacturers in Europe and the Associated
Countries such as Hellenic in Greece, Legler/T.R.C./C.D.I. in Italy, Orta in
Turkey, Swift in Tunisia, Tavex in Spain and Uco in Belgium. In the
manufacturing of printed and dyed fabrics in China, the Company faces
competition from China Dyeing Holdings, Perfects Enterprise Ltd. And Hing Fung
Printing and Dyeing Pty. Ltd. Some of the Company&#146;s fabric competitors are
significantly larger and more diversified than the Company and have
substantially greater resources. The major competitive factors among
manufacturers of products include price, quality and flexibility, product
styling and differentiation and customer service, with the significance of each
factor depending upon the particular needs of the customer and the product
involved.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim competes primarily on the basis of quality, price, flexibility
and service. By manufacturing garments in Mauritius and South Africa (fiscal
2003) which have relatively low labor costs, the Company maintains a
comparative cost advantage over its competitors who manufacture in Europe and
the Associated Countries and, as a result, can provide its products at
attractive prices. In addition, Mauritius&#146;s EPZ currently exempts Novel Denim
from import duties on raw materials and machinery. Because Mauritius is a
member of the Lom&#233; Convention, Novel Denim also benefits from quota-free and
duty-free access for its products to the EC. Compared to its competitors who
manufacture in Lom&#233; Convention countries, management believes the Company
offers high-quality products at competitive prices. Similarly, Mauritius and
South Africa are approved to benefit from the U.S. AGOA. The Company&#146;s
vertically-integrated garments operation permits it to produce its garments
from its own fabric, thereby maximizing margins, reducing transportation costs
and enabling it to monitor quality. The Company, however, requires a longer
shipping time than many of its competitors. See Item&nbsp;3. &#147;Key Information&#151;Risk
Factors&#151; Changes in International Trade Policies Affecting Import Duties and
Quotas.&#148;
</FONT>
<P align="center"><FONT size="2">16</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Backlog</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim&#146;s garment customers generally submit their preliminary
indications of potential order quantity six to eight months in advance. The
orders are then confirmed by the customers three to four months prior to the
beginning of the manufacturing process by specifying colors, styles and sizes.
Because of this order time lag, the Company can assess accurately its garment
production capacity on a monthly basis to satisfy its customers&#146; requirements.
The Company&#146;s backlog in garments as of March&nbsp;31, 2001 and March&nbsp;31, 2002 was
8.0&nbsp;million and 6.0&nbsp;million pieces, respectively. Because the fabric business
is a commodity type business, the Company does not have significant backlog in
fabric.
</FONT>
<P align="left"><FONT size="2"><B>Properties</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal executive offices of Novel Denim are located at 1/F, Novel
Industrial Building, 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong
Kong. The general location, use and approximate size of the Company&#146;s principal
properties are set forth below. All properties are leased except where
otherwise specified.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
        <TD width="43%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="39%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Approximate Area</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1"><B>Location</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Use</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>in Square Feet</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Hong Kong</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Executive office<SUP>(1)</SUP>
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">21,500</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Port Louis, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Executive office
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">12,800</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Ile d&#146;Ambre, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Fabric factory<SUP>(1,2)</SUP>,
laundry<SUP>(1)</SUP>, sewing factory
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">636,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Coromandel, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Sewing factory, laundry and
executive office
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">95,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Montagne Longue, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Sewing factory
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">70,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Grand Bois, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Sewing factory
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">50,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">St. Felix, Mauritius</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Laundry, sewing factory
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">165,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Antananarivo, Madagascar</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Sewing factory
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">200,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Cape Town, South Africa</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Fabric, laundry and
sewing factory<SUP>(3)</SUP>
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">305,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Shenhzen, China</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Fabric factory and
executive offices<SUP>(4)</SUP>
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">550,000</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Properties leased from affiliates of NEL.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">200,000 square feet owned freehold.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">100,000 square feet owned freehold.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Land owned under a ground lease expiring in 2038. Property owned.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim leases the space for its executive offices in Hong Kong and
the land for certain of its operations in Mauritius from affiliates of NEL. See
Item&nbsp;7. &#147;Major Shareholders and Related Party Transactions.&#148; The Company
believes that its existing facilities are well maintained and in good operating
condition and are adequate for its present level of operations.
</FONT>
<P align="center"><FONT size="2">17</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>Organization Structure</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a list of all of Novel Denim&#146;s significant subsidiaries
as of March&nbsp;31, 2002, including the name, country of incorporation or residence
and of ownership interest and voting power held.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
        <TD width="53%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="31%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Country of</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Percentage</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">incorporation</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">of ownership,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Name of Subsidiary</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">or residence</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">voting interest</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Textiles Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Mauritius
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">98.7</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Denim (HK)&nbsp;Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Hong Kong
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Garments (Mauritius) Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Mauritius
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Nomacotex Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Jersey
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Garments International Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Jersey
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Byren Trading Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Jersey
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Garments (Madagascar) S.A.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Madagascar
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Spinner (S.A.)(Pty) Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
South Africa
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Weavers (S.A.)(Pty) Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
South Africa
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Battel Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
British Virgin Islands
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Kotten Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
British Virgin Islands
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Good Port Finance Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
British Virgin Islands
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Dyers (Pty) Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
South Africa
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Garments (S.A.) (Pty) Ltd.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
South Africa
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">NDP Holdings Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
British Virgin Islands
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">NDP Investment Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
British Virgin Islands
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Noveltex Trading Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Hong Kong
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">NDP Trading Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Hong Kong
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">NDP Fabrics Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Hong Kong
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Income Pearl Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Hong Kong
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Novel Dyeing and Printing Mills
Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
China
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">100.0</FONT></TD>
        <TD nowrap valign="top"><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<!-- link2 "ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B>
</FONT>

<P align="left"><FONT size="2"><B>Operating Results</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information should be read in conjunction with the Company&#146;s
Consolidated Financial Statements and related notes thereto included elsewhere
in this Annual Report.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cotton is the single largest component of the Company&#146;s cost of goods
sold. The Company enters into purchase contracts with its cotton suppliers six
to eight months in advance of delivery to provide for a continuous supply of
cotton and to limit the effect of short-term fluctuations in cotton prices.
During fiscal 2000, the Company was adversely affected by the significant
(approximately 20%) reduction in cotton pricing which resulted in the Company
using above market cost of cotton. This in turn significantly reduced the
Company&#146;s gross margins during fiscal 2000. In fiscal 2001 and 2002, cotton
costs were more in line with current market values which assisted in the
improvement of the Company&#146;s gross margin over the prior year.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Another component of the Company&#146;s cost of goods sold is labor costs,
which are primarily denominated in Mauritian rupees. As a result of near
full-employment in Mauritius over the last several years, general wage rates
have been subject to upward pressures. Labor costs historically have not had a
significant effect on the Company&#146;s results of operations because of the
devaluation of the rupee against the U.S. dollar (which declined over 50%
between March 1992 and March 2002 and approximately 6.5% in fiscal 2002).
However, in fiscal 2002 the Company&#146;s operations in Mauritius were adversely
affected by a labor dispute, now resolved, which is likely to result in higher
labor costs for the Company.
</FONT>
<P align="center"><FONT size="2">18</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that in a relatively stable cotton price environment,
the steady increase in higher margin garment production, coupled with reduced
labor costs and a continued commitment to increasing efficiency, should result
in relatively stable gross margins for the Company in a price competitive
environment.
</FONT>
<P align="left"><FONT size="2"><B>Results of Operations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, the percentage
relationship to net sales of selected items as summarized from the Company&#146;s
Consolidated Financial Statements and accounting books and records:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="70%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1"><B>Fiscal Year Ended March 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">100.0</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">100.0</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">100.0</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of goods sold</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">80.4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">77.8</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">83.4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross profit</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">22.1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other revenues</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and administrative expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11.0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11.8</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Impairment loss</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11.0</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3.8</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2.3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Taxation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">.2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6.1</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8.7</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1.3</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year Ended March&nbsp;31, 2002 Compared to Year Ended March&nbsp;31, 2001</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net sales </I>increased 14.9% to $158.6&nbsp;million in fiscal 2002 from $138.1
million in fiscal 2001. Net sales in the garment division were $118.5&nbsp;million
in fiscal 2002 compared to $110.0&nbsp;million in fiscal 2001, an increase of 7.7%.
The increase in garment sales was primarily the result of an increase in
garment production capacity in the Company&#146;s sewing plants in Mauritius and
Madagascar. The garment division sold 15.4&nbsp;million pieces in fiscal 2002 as
compared to 12.4&nbsp;million pieces in fiscal 2001, an increase of 24.2%. Net sales
in the fabric division (including inter-divisional sales) increased 33.1% to
$84.3&nbsp;million in fiscal 2002 from $63.3&nbsp;million in fiscal 2001, primarily due
to an increase in production capacity after the acquisition of a dyeing and
printing company in China in October 2001. The fabric division sold 32&nbsp;million
meters of fabric in fiscal 2002 as compared to 24.7&nbsp;million meters in fiscal
2001, an increase of 29.4%. Third party fabric sales were $40.1&nbsp;million in
fiscal 2002 compared to $28.1&nbsp;million in fiscal 2001, an increase of 42.9%.
This increase in third party fabric sales was primarily due to the increase in
production capacity after the acquisition of a dyeing and printing company in
China in October 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross profit </I>decreased 13.7% to $26.4&nbsp;million in fiscal 2002 from $30.6
million in fiscal 2001. Gross profit as a percentage of net sales decreased to
16.6% in fiscal 2002 from 22.2% in fiscal 2001. This decrease in gross profit
margin was primarily due to the political deadlock in the Madagascar
presidential elections which caused national strikes and other severe
disruptions to production resulting in the write down of cancelled orders and
raw materials, partially offset by higher margins associated with the Company&#146;s
newly acquired NDP operations.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other revenues </I>increased to $790,000 in fiscal 2002 from $440,000 in
fiscal 2001. Other revenues consisted of net gains on disposal of property,
plant and equipment, claims received from third parties, proceeds from sales of
scrap materials, a government grant received in South Africa and a recognized
gain on financial instruments, relating to the Company&#146;s de-designated currency
contracts for sales in non-U.S. denominated currencies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Selling, general and administrative expenses </I>as a percentage of net sales
increased to 11.8% in fiscal 2002 compared to 11.0% in fiscal 2001. Selling,
general and administrative expenses increased 23.1% to $18.69&nbsp;million in fiscal
2002 from $15.19&nbsp;million in fiscal 2001. The increases were mainly related to
the newly acquired operations in China and increases in selling and marketing
expenses associated with the increase in sales, partially offset by the
exchange gain from borrowings
</FONT>
<P align="center"><FONT size="2">19</FONT>

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<P align="left"><FONT size="2">denominated in Mauritius rupees and South African rand amounting to
approximately $2.73&nbsp;million in fiscal 2002 compared to a gain of approximately
$1.95&nbsp;million in the fiscal 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Impairment losses </I>amounting to $2.38&nbsp;million in fiscal 2002 represented a
partial write off of fixed assets in Madagascar related to the closure of the
Madagascar operations<I>.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other expenses </I>of $589,000 in fiscal 2001 represented the write off of
start-up costs associated with the plant expansion in Madagascar<I>.</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating income </I>decreased 60.0% to $6.1&nbsp;million in fiscal 2002 from $15.2
million in fiscal 2001. Operating income as a percentage of net sales decreased
to 3.8% in fiscal 2002 from 11.0% in fiscal 2001, primarily as a result of the
decrease in gross profit margin. In the garment division, the Company reported
an operating loss of $7.8&nbsp;million in fiscal 2002 compared to an operating
profit of $11.6&nbsp;million in fiscal 2001. Operating income as a percentage of net
sales for the garment division decreased to (6.6)% in fiscal 2002 from 10.6% in
fiscal 2001, primarily due to production disruptions in Madagascar and
Mauritius in the fourth quarter of fiscal 2002, events of September&nbsp;11 and
continued pricing pressure. In the fabric division, operating income increased
significantly to $13.3&nbsp;million in fiscal 2002 from $6.4&nbsp;million in fiscal 2001,
primarily due to an improvement in the average fabric selling price as well as
operating efficiencies. Operating income as a percentage of net sales for the
fabric division increased to 15.8% in fiscal 2002 from 10.1% in fiscal 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense, net </I>in fiscal 2002 increased 24.8% to $4.0&nbsp;million from
$3.2&nbsp;million in fiscal 2001, primarily due to the increase in working capital
required to operate the Company&#146;s expanding operations and the borrowings
associated with the acquisition of NDP. Interest expense, net as a percentage
of net sales increased to 2.5% in fiscal 2002 from 2.3% in fiscal 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cumulative effect of accounting change </I>amounting to $308,000 in fiscal
2002 was the cumulative gain resulting from the adoption on April&nbsp;1, 2001 of
Statement of Financial Accounting Standards (SFAS)&nbsp;No.133, Accounting for
Derivative Instruments and Hedging Activities which contributes $0.03 in both
basic and diluted earnings per share in fiscal 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net income </I>decreased 82.7% to $2.1&nbsp;million in fiscal 2002 from $12.0
million in fiscal 2001. Such decrease was primarily attributable to lower
operating income and an increase in interest expense as described above.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year Ended March&nbsp;31, 2001 Compared to Year Ended March&nbsp;31, 2000</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net sales </I>increased 31.3% to $138.05&nbsp;million in fiscal 2001 from $105.10
million in fiscal 2000. Net sales in the garment division were $109.97&nbsp;million
in fiscal 2001 compared to $81.65&nbsp;million in fiscal 2000, an increase of 34.7%.
The increase in garment sales was primarily the result of an increase in
garment production capacity in the Company&#146;s sewing plants in Mauritius and
Madagascar. The garment division sold 12.4&nbsp;million pieces in fiscal 2001 as
compared to 8.7&nbsp;million pieces in fiscal 2000, an increase of 42%. Net sales in
the fabric division (including inter-divisional sales) increased 30.0% to
$63.31&nbsp;million in fiscal 2001 from $48.71&nbsp;million in fiscal 2000, primarily due
to an increase in production and some improvement in basic denim fabric prices.
The fabric division sold 24.7&nbsp;million meters of fabric in fiscal 2001 as
compared to 19.2&nbsp;million meters in fiscal 2000, an increase of 29%. Third party
fabric sales were $28.0&nbsp;million in fiscal 2001 compared to $23.5&nbsp;million in
fiscal 2000, an increase of 20%. This increase in third party fabric sales was
primarily due to the additional production capacity provided by the Company&#146;s
South Africa weaving operation. The Company&#146;s fabric conversion rate (the
percentage of total fabric produced by the Company which was used by the
garment division) was 52.8% in fiscal 2001 compared to 47.9% in fiscal 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross profit </I>increased 48.1% to $30.58&nbsp;million in fiscal 2001 from $20.65
million in fiscal 2000. Gross profit as a percentage of net sales increased to
22.1% in fiscal 2001 from 19.6% in fiscal 2000. This increase in gross profit
margin was primarily due to reduced cotton unit costs and increased production
efficiencies, partially offset by a decrease in the average selling price of
garments.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other revenues </I>decreased to $440,000 in fiscal 2001 from $638,000 in
fiscal 2000. Other revenues consisted of net gains on disposal of property,
plant and equipment, claims received from third parties, proceeds from sales of
scrap materials and a government grant received in South Africa.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Selling, general and administrative expenses </I>as a percentage of net sales
declined to 11.0% in fiscal 2001 from approximately 11.6% in fiscal 2000,
principally due to the leveraging of expenses over a higher sales base.
Selling, general
</FONT>
<P align="center"><FONT size="2">20</FONT>

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<P align="left"><FONT size="2">and administrative expenses increased 24.0% to $15.19&nbsp;million in fiscal 2001
from $12.25&nbsp;million in fiscal 2000. The increase was mainly related to the
increases in selling and marketing expenses associated with the increase in
sales, and additional expenses incurred by the Company&#146;s London sales office
which opened during the third quarter of fiscal 2000, partially offset by a net
exchange gain on South African and Mauritian borrowings denominated in South
African rand and Mauritian rupee, and other net exchange gains totaling
approximately $1.9&nbsp;million compared to approximately $412,000 in fiscal 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other expenses </I>were $589,000 in fiscal 2001 compared to $0 in fiscal 2000.
Other expenses represented the write off of start-up costs associated with the
Company&#146;s plant expansion in Madagascar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating income </I>increased 68.7% to $15.25&nbsp;million in fiscal 2001 from
$9.04&nbsp;million in fiscal 2000. Operating income as a percentage of net sales
increased to 11.0% in fiscal 2001 from 8.6% in fiscal 2000, primarily as a
result of the increase in gross profit margin. In the garment division,
operating income increased 10% to $11.64&nbsp;million in fiscal 2001 from $10.58
million in fiscal 2000. Operating income as a percentage of net sales for the
garment division decreased to 10.6% in fiscal 2001 from 13.0% in fiscal 2000,
primarily due to a reduction in the average garment price and higher operating
costs associated with the Company&#146;s garment operations in Madagascar. In the
fabric division, operating income increased significantly to $6.42&nbsp;million in
fiscal 2001 from a loss of $1.15&nbsp;million in fiscal 2000, primarily due to an
improvement in the average fabric selling price as well as operating
efficiencies. Operating income as a percentage of net sales for the fabric
division increased to 10.1% in fiscal 2001 from (2.4)% in fiscal 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense, net </I>in fiscal 2001 increased 16.5% to $3.17&nbsp;million from
$2.72&nbsp;million in fiscal 2000, primarily due to the increase in working capital
required to operate the Company&#146;s expanding operations and to fund the
Company&#146;s share repurchase program. Interest expense, net as a percentage of
net sales decreased to 2.3% in fiscal 2001 from 2.5% in fiscal 2000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net income </I>increased 89.0% to $12.03&nbsp;million in fiscal 2001 from $6.36
million in fiscal 2000. Such increase was primarily attributable to higher
operating income, partially offset by an increase in interest expense as
described above.
</FONT>
<P align="left"><FONT size="2"><B>Liquidity and Capital Resources</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2002, the Company&#146;s primary funding requirements related to the
financing of capital expenditure and working capital (principally the purchase
of raw cotton and the financing of receivables). The Company&#146;s current sources
of liquidity are cash on hand, cash from operations and available credit. The
Company believes that its available capital resources and working capital are
sufficient for the Company&#146;s present requirements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, the Company had approximately $13&nbsp;million of cash
and cash equivalents compared to $2.4&nbsp;million at March&nbsp;31, 2001. This increase
was the net effect of an increase in cash provided by operating and financing
activities, partially offset by a reduction in cash provided by investing
activities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash from operating activities in fiscal 2002 was $3.6&nbsp;million. This
amount was comprised primarily of cash generated from net earnings offset, in
part, by an increase in working capital. The increase in working capital was
principally due to a higher inventory level, which increased 22.7% to $50.9
million at March&nbsp;31, 2002 from $41.4&nbsp;million at March&nbsp;31, 2001. Higher
inventory levels at March&nbsp;31, 2002 were attributable to the increase in the
Company&#146;s work-in-process inventory following the acquisition of NDP and the
increase in garment productions, as well as additional raw material inventory.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains working capital, overdraft and other short-term
facilities with various commercial banks in Mauritius, Madagascar, South Africa
and Hong Kong. Credit available under such arrangements totaled $71.3&nbsp;million
as of March&nbsp;31, 2002 and there was $52.5&nbsp;million outstanding as of March&nbsp;31,
2002. These facilities bear interest at rates based on the respective
Mauritius, Madagascar and South African base rates, the Hong Kong prime rate
and lending rates available on other non-U.S. dollar currencies and ranged from
3.3% to 16.5% in fiscal 2002. The weighted average interest rate for the
Company&#146;s short-term borrowings at and for the fiscal year ended March&nbsp;31, 2002
was 6.56% and 7.24% respectively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The short-term credit facilities available in Mauritius require one of the
Company&#146;s subsidiaries in Mauritius to maintain a certain maximum debt/equity
ratio. The Company was in compliance with this covenant as of March&nbsp;31, 2002.
In addition, these short-term facilities are secured by the assets of the
Company&#146;s Mauritius subsidiaries.
</FONT>
<P align="center"><FONT size="2">21</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the acquisition of NDP in October 2001, the Company
incurred long-term loans to partially fund the acquisition. As of March&nbsp;31,
2002, the Company had $13.9&nbsp;million of long-term debt comprised of two notes.
The first note is for $9&nbsp;million with no amortization during the first year and
then quarterly amortization during the next 4&nbsp;years. The second note is for
approximately 51&nbsp;million Mauritian rupees (approximately $4.9&nbsp;million) with no
amortization and then monthly amortization during the next 4&nbsp;years. During
fiscal 2002 the Company also repaid approximately $350,000 in long-term debt.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures, primarily for construction of industrial buildings,
purchases of equipment, machinery and leasehold improvements, were
approximately $11.0&nbsp;million in fiscal 2002. Capital expenditures in fiscal 2002
were financed principally through operating cash flows of the Company and
short-term borrowings. The Company intends to incur capital expenditure of
approximately $12.0&nbsp;million in fiscal 2003, primarily to upgrade its dyeing and
weaving facilities in the fabric division and to expand the garment division
with a new garment facility in Cape Town, South Africa. Management expects
these future capital expenditure will be financed by internally generated funds
and available credit facilities. Funds may also be required to finance the
Company&#146;s share repurchase program, announced June&nbsp;5, 2000, in which the Board
of Directors authorized the repurchase of up to $5&nbsp;million of its outstanding
shares in the open market from time to time. Since the inception of the share
repurchase program through March&nbsp;31, 2002 the Company has repurchased 440,300
shares at an aggregate cost of approximately $3.3&nbsp;million.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company generally does not extend credit to its customers. However,
for certain major customers, the Company does extend credit for periods of up
to 120&nbsp;days. A majority of the Company&#146;s sales are guaranteed by letters of
credit or other bank guarantees. The Company has credit policies and procedures
which it uses to manage its credit risk. Over the past three fiscal years, the
Company has had no bad-debt write-offs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company conducts much of its business in various non-U.S. dollar
currencies. As a result, it is subject to the transaction exposures that arise
from foreign exchange rate movements between the dates that foreign currency
transactions are entered into and the date they are consummated. In response to
this exposure, the Company entered forward foreign exchange contracts to hedge
approximately 70% of its foreign currency denominated firm commitments for
fiscal 2002, primarily consisting of sales to customers invoiced in currencies
other than the U.S. dollar. Assets expressed in foreign currencies which are
hedged by these forward contracts are reported at appropriate contract rates.
Forward foreign exchange contracts as of March&nbsp;31, 2002 generally had
maturities of less than five months and related to major European currencies.
Counterparties to the transactions are typically large international financial
institutions.
</FONT>
<P align="left"><FONT size="2"><B>Critical Accounting Policies</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to cash equivalents, inventories, income taxes,
financing operations, claims, pensions and other post-retirement benefits,
impairment cost, and contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Inventories</I>. Stocks and work in progress are stated at the lower of cost
or net realizable value. Cost, calculated on a weighted average basis,
comprises the cost of raw materials, direct labor and an appropriate portion of
production overhead. The Company continually reviews the value of its
inventories and makes adjustments when it believes the likely realizable value
is below cost.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company enters into commitments for the purchase of raw cotton which
is a component of the finished goods it manufactures. In determining the net
realizable value of such finished goods, the Company considers the effect of
changes in the price of raw cotton between the date it enters into the purchase
commitments and the balance sheet date. Where such changes result in a
reduction in the estimated net realizable value of inventory to less than cost,
appropriate provisions are made.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Property, plant and equipment. </I>Property, plant and equipment is stated at
cost less accumulated depreciation. Interest costs incurred during the
construction period of certain long term assets are capitalized. No interest
was capitalized in the
</FONT>
<P align="center"><FONT size="2">22</FONT>

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<P align="left"><FONT size="2">years ended March&nbsp;31, 2000, 2001 and 2002. The Company calculates the
estimated useful lives of assets based on industry practice and determines its
ability to fully utilize these assets. Depreciation of property, plant and
equipment is calculated to write off the cost of individual assets in equal
annual installments over their estimated useful lives which range from 3 1/3 to
50&nbsp;years.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Transfers of accounts receivable with recourse</I>. The Company has entered
into an agreement with a financial institution pursuant to which the financial
institution has agreed to make advances to it which are secured by accounts
receivable. The advances are made with recourse to the Company and are
accounted for as financing transactions in accordance with the provisions of
SFAS No.140, &#147;Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities&#148;, since the Company has not effectively
surrendered control of the receivables.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Costs of Start-Up Activities</I>. The Company early adopted Statement of
Position (&#147;SOP&#148;) No.&nbsp;98-5, Reporting on the Costs of Start-Up Activities. SOP
No.&nbsp;98-5 requires that costs of start-up activities and organization costs, as
defined, be expensed as incurred. For the year ended March&nbsp;31, 2001 and 2002,
the Company recognized a charge of $588,709 and nil, respectively. This charge
is included in other expense in the consolidated statement of income.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Forward Foreign Exchange Contracts. </I>The Company conducts certain
transactions in various non-U.S. dollar currencies. As a result, it is subject
to the transaction exposures that arise from foreign exchange rate movements
between the dates that foreign currency transactions are entered into and the
date they are consummated. In response to this exposure, the Company enters
into forward foreign exchange contracts to hedge certain foreign currency
denominated firm commitments, primarily sales to customers invoiced in
currencies other than the U.S. dollar. The primary purpose of the Company&#146;s
foreign currency hedging activities is to manage the volatility associated with
foreign currency revenues and the other assets and liabilities created in the
normal course of business. The Company does not hold or issue financial
instruments for trading purposes. On April&nbsp;1, 2001, the company adopted SFAS
No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148;, as
amended by SFAS No.&nbsp;138, &#147;Accounting for Certain Derivative Instruments and
Certain Hedging Activities&#148;. Under SFAS No.&nbsp;133, all derivative instruments
(including certain derivative instruments embedded in other contracts) are
recognized in the balance sheet at their fair values and changes in fair value
are recognized immediately in earnings, unless the derivatives qualifies as
hedges of future cash flows. For derivatives qualifying as hedges of future
cash flows, the effective portion of changes in fair value is recorded
temporarily, in equity, then recognized in earnings along with the related
effects of the hedged items. Any ineffective portion of hedges is reported in
earnings as it occurs.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Recoverability of Long-lived Assets. </I>Long-lived assets are reviewed for
impairment whenever events of changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Assets are grouped and
evaluated at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated results in its
evaluation of potential impairment. The Company measures the amount of the
impairment by comparing the carrying amount of the assets to its fair value.
The Company estimates fair value based on the best information available making
whatever estimates, judgments and projections are considered necessary. The
estimation of fair value is generally measured by determining the net selling
price or by discounting expected future cash flows at discount rates
commensurate with the risk involved. The Company adopted Statement of
Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;121, &#147;Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of&#148; in the year
ended March&nbsp;31, 1997.
</FONT>
<P align="left"><FONT size="2"><B>Inflation and Exchange Rates</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Local expenses incurred in Mauritius mainly relate to wages, salaries and
short-term borrowings. Wage rates are reviewed on a yearly basis to take
account of inflation and other price increases. Wage rate increases in fiscal
year 2002 were approximately 5.5%. However, these increases have been more than
offset by an approximate 6.5% devaluation of the Mauritian rupee against the
U.S. dollar during fiscal 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Local expenses incurred in Madagascar mainly relate to wages and salaries.
Since the Company began operations in Madagascar, there have been no government
imposed wage or salary increases. During fiscal 2002, the Madagascar franc
devalued approximately 4.4% against the U.S. dollar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Local expenses incurred in South Africa mainly relate to local borrowings,
the purchase of raw materials, electricity costs and wages and salaries. During
fiscal 2002, the South African rand devalued approximately 43% against the U.S.
dollar.
</FONT>
<P align="center"><FONT size="2">23</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Local expenses incurred in China mainly relate to local borrowings, the
purchase of raw materials, electricity costs and wages and salaries. During
fiscal 2002, the Chinese yuan held constant against the U.S. dollar. Wage rate
increases in the Shenzhen region in fiscal year 2002 were approximately 10.0%.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has also been able to offset the effects of inflation it
experienced in recent years by increases in productivity through investments in
modern and cost-effective manufacturing facilities. As a result, inflation has
not had a material impact on the Company&#146;s results of operations in recent
years.
</FONT>
<P align="left"><FONT size="2"><B>Seasonality of Business</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Garments are worn year-round and, as such, demand for Novel Denim&#146;s
products and the level of its sales fluctuate only moderately throughout the
year.
</FONT>
<P align="left"><FONT size="2"><B>Euro Conversion</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 1999, 11 of the 15 member countries of the European Union
established permanent, fixed conversion rates between their existing currencies
and the European Union&#146;s common currency called the
&#147;euro&#148;.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transition period for the introduction of the euro was phased in over
a period ending January&nbsp;1, 2002, with the existing currencies being completely
removed from circulation on July&nbsp;1, 2002. The Company has been preparing for
the use of the euro. The timing of the Company&#146;s phasing out all uses of the
existing currencies complied with applicable legal requirements and also was
scheduled to facilitate optimal coordination with the plans of our vendors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes the introduction of the euro and the phasing out of
the other currencies did not have a material impact on the Company&#146;s
consolidated financial statements.
</FONT>
<P align="left"><FONT size="2"><B>Taxation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates in four jurisdictions where it is subject to profits
taxes; namely Mauritius, South Africa, China and Hong Kong. The Company became
subject to tax in Mauritius effective April&nbsp;1, 2000. No tax charge has been
recorded during the year ended March&nbsp;31, 2002, in respect of the Mauritian
operations, as the Company had sufficient tax losses carried forward to off-set
taxable profits.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s subsidiaries incorporated in South Africa are subject to tax
at a rate of 30%. During the year ended March&nbsp;31, 2002, the Company&#146;s South
African subsidiaries had taxable income and a provision amounting to $20,891
has been provided in the financial statements. During the year ended March&nbsp;31,
2002, a deferred tax provision amounting to $111,258 has been provided in the
financial statements in respect of temporary differences within the South
African subsidiaries.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s subsidiaries incorporated in Hong Kong are subject to tax at
a rate of 16%. During the year ended March&nbsp;31, 2002, the Company&#146;s Hong Kong
subsidiaries had taxable income and a provision amounting to $16,430 has been
provided in the financial statements.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s subsidiary incorporated in China, is subject to tax at a
rate of 15%. During the year ended March&nbsp;31, 2002, the Company&#146;s China
subsidiary had taxation income and a provision amounting to $149,626 has been
provided in the financial statements.
</FONT>
<P align="left"><FONT size="2"><B>Closure of Madagascar Operations</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following a strategic review of the Company&#146;s operations in Madagascar,
the Company announced on March&nbsp;28, 2002 its intention to close its Madagascar
operations after more than three months of significant political and social
unrest in the country and severe disruptions to the business caused by national
strikes, road and port blockages and fuel shortages. As a result, the Company
recorded an impairment charge to its fixed assets totaling $2.4&nbsp;million
reflecting a write-down in the value of equipment relating to its knitwear
business as well as the write-off of other equipment and tools, leasehold
</FONT>
<P align="center"><FONT size="2">24</FONT>

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<P align="left"><FONT size="2">improvement and furniture and fixtures. For the woven and laundry machinery and
computer equipment, no provision has been made based on the Company&#146;s
expectation and assumption that the machinery and equipment can be successfully
relocated. In addition, the Company made a provision for inventories of $3.8
million and redundancy costs of $0.4&nbsp;million. During the first quarter of
fiscal 2003, the Company incurred additional expenses associated with the
closure and shipment of equipment from Madagascar.
</FONT>
<P align="left"><FONT size="2"><B>Expansion into China</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;7, 2001, the Company entered into an agreement to acquire NDP
for $18.97&nbsp;million in cash from a subsidiary of Novel Enterprises Limited, an
affiliate of Novel Apparel Limited, the principal shareholder of the Company.
NDP, through its subsidiaries, owns and operates an integrated fabric dyeing,
printing and finishing facility in the Shenzhen region of the People&#146;s Republic
of China (&#145;&#145;PRC&#146;&#146;), near Hong Kong, capable of processing 40&nbsp;million meters of
fabric annually. NDP sells primarily to fabric converters in Hong Kong,
South-east Asia and the PRC for eventual sales into the United States, Europe
and Japan. The transaction closed on October&nbsp;1, 2001. The acquired business
contributed revenues of $14,088,680 and operating profit of $1,779,645 to the
Company for the period from October&nbsp;1, 2001 to March&nbsp;31, 2002. The acquisition
has been accounted for using purchase accounting, negative goodwill amounting
to $6.9&nbsp;million arose on acquisition, which was primarily derived from the fair
value of NDP&#146;s property, plant and equipment, at the time of the acquisition,
being higher than the purchase price. The negative goodwill has been allocated
to reduce proportionally the values assigned to noncurrent assets.
Accordingly, the operating results of NDP have been included in
the Company&#146;s consolidated financial statement since the date of acquisition.
</FONT>
<P align="left"><FONT size="2"><B>Recently Issued Accounting Standards</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;1, 2001, the Company adopted Statement of Financial Accounting
Standards (&#145;&#145;SFAS&#146;&#146;) No.&nbsp;133, &#147;Accounting for Derivative Instruments and
Hedging Activities&#148;, as amended by SFAS No.&nbsp;138, &#147;Accounting for Certain
Derivative Instruments and Certain Hedging Activities&#148;. SFAS No.&nbsp;133, as
amended, establishes accounting and reporting standards for derivative
instruments. Specifically, SFAS No.&nbsp;133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. Additionally, the
fair value adjustments will affect either stockholders&#146; equity or net income
depending on whether the derivative instrument qualifies as a hedge for
accounting purposes and, if so, the nature of the hedging activity. As of
April&nbsp;1, 2001, the adoption of the new standard resulted in an unrealized gain
of $307,991. This transition adjustment has been recognized in fiscal 2002&#146;s
net income in accordance with the transitional provisions of SFAS No.&nbsp;133.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the acquisition of NDP, the Company adopted SFAS
No.141 Business Combinations (&#147;SFAS 141&#148;) and SFAS No.&nbsp;142 Goodwill and Other
Intangible Assets (&#147;SFAS 142&#148;). In July 2001, the Financial Accounting
Standards Board (the &#147;Board&#148;) issued Statement of Financial Accounting
Standards SFAS 141 and SFAS 142. SFAS No.&nbsp;141 (a)&nbsp;requires that the purchase
method of accounting be used for all business combinations initiated after
June, 30 2001; (i)&nbsp;establishes specific criteria for the recognition of
intangible assets separately from goodwill; and (ii)&nbsp;requires unallocated
negative goodwill to be written off. The Company has applied SFAS 141 to the
acquisition of NDP during the year. SFAS No.&nbsp;142 (a)&nbsp;addresses financial
accounting and reporting for goodwill and intangible assets; (b)&nbsp;provides
guidance on the amortization of intangible assets other than goodwill; (c)
requires that goodwill not be amortized; and (d)&nbsp;requires an annual evaluation
of goodwill and certain intangible assets for impairment. SFAS 141 is
effective for all business combinations initiated after June&nbsp;30, 2001. Most
provisions of SFAS No.&nbsp;142 are effective for fiscal years beginning after
December&nbsp;15, 2001.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2001, the Board issued SFAS 143 which requires entities to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
assets. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
SFAS No.&nbsp;143 is effective for fiscal years beginning after June&nbsp;15, 2002. The
Company is currently assessing the impact of the adoption of this statement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 2001, the Board issued SFAS No.&nbsp;144 which requires that those
long-lived assets to be sold be measured at the lower of carrying amount or
fair value less cost to sell, whether reported in continued operations or in
discontinued
</FONT>
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<P align="left"><FONT size="2">operations. Under this statement, discontinued operations will no longer be
measured at net realizable value or include amounts for operating leases that
have not yet occurred. SFAS No.&nbsp;144 is effective for fiscal years beginning
after December&nbsp;15, 2001. The Company is currently assessing the impact of the
adoption of this statement.
</FONT>
<P align="left"><FONT size="2"><B>Trend Information</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the end of fiscal 2002, the Company&#146;s operations have partially
recovered from the events during the fourth quarter of 2002 which included the
production disruptions in Madagascar and the subsequent closure of the
Company&#146;s operations in that country as well as the labor dispute in Mauritius.
The overall production disruptions are likely to continue to impact the
company&#146;s shipments and margins during the next few quarters. The anticipated
improvement of the global garment and fabric market will also influence the
Company&#146;s financial performance in fiscal 2003.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer development continues to be a primary focus of the Company
particularly as the Company concentrates on maintaining its long-standing
customer relationships and further developing new customers particularly in the
U.S. The Company&#146;s garment production should benefit from expansion into South
Africa, which should help to compensate for lost production from Madagascar.
In addition, the Company expects to continue to develop its fabric business and
plans to further benefit from the acquisition of NDP which both increases
fabric production capacity and broadens the Company&#146;s product range. Given the
continued difficulties within the global apparel market due to the overall
consumer market, increasing supply and shorter product cycles, it is difficult
to determine what impact a weakening global economy will have on the Company&#146;s
results.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, the Company had a garment order backlog of
approximately 6&nbsp;million pieces, representing approximately 7&nbsp;months of garment
production. The shorter backlog, compared to prior years, is reflective of the
Company&#146;s production disruptions. Order backlog includes both specific orders
as well as production bookings.
</FONT>
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<P align="left"><FONT size="2"><B>ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors and executive officers of the Company are:
</FONT>
<CENTER>
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        <TD><FONT size="1">&nbsp;</FONT></TD>
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        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
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        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year in Which</B></FONT></TD>
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        <TD><FONT size="1">&nbsp;</FONT></TD>
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        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Current Director</B></FONT></TD>
</TR>
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        <TD nowrap align="center"><FONT size="1"><B>Name</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Age</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
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        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Term Expires</B></FONT></TD>
</TR>
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        <TD valign="top"><FONT size="2">Silas K.F. Chou</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
56
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director, Chairman of the Board
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2004</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">K.C. Chao</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
53
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director, Chief Executive Officer and President
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2002</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Alain Rey</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
42
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director, Chief Financial Officer and
Senior Vice President&#151;Finance
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2004</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Lester M.Y. Ma</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
55
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director and Treasurer
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2003</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Mei-Ling Liu</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
55
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Senior Vice President&#151;Operations
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">NA</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Isaacs C.C. Lam</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
43
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Senior Vice President&#151;Sales and Marketing
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">NA</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Ronald K.Y. Chao</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
63
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2003</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Susana Chou</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
60
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2002</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Noel Jervis</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
57
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2004</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Leavitt B. Ahrens, Jr.</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
58
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Director
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">2003</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Lawrence T.S. Lok</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">
45
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Secretary
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right" valign="top"><FONT size="2">NA</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Silas K.F. Chou</I>&#151;Mr.&nbsp;Chou is a founder of the Company and has been the
Company&#146;s Chairman of the Board since 1996 and a Director since 1990. In 1996,
Mr.&nbsp;Chou was Managing Director of NEL from 1996 to 2002 and currently serves as
a Director. In addition, Mr.&nbsp;Chou is Chairman of the Board of Directors of
Tommy Hilfiger, an apparel company listed on the New York Stock Exchange, a
position he has held as either Chairman or Co-Chairman of the Board from 1992.
In addition, Mr.&nbsp;Chou was Chairman of the Board of Pepe Jeans London
Corporation and its predecessors from 1992 to 1998. Mr.&nbsp;Chou devotes a
significant portion of his time to matters other than those relating to the
Company, including those relating to NEL and its affiliates, Pepe Europe and
Tommy Hilfiger.
</FONT>
<P align="center"><FONT size="2">26</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>K.C. Chao</I>&#151;Mr.&nbsp;Chao is a founder of the Company and has been the Chief
Executive Officer and President of Novel Denim since February 1996. Mr.&nbsp;Chao is
responsible for the overall activities of the Company. He also has been a
Director of the Company since 1990. Mr.&nbsp;Chao has also been a Director of NEL
since 1996. He is a national of the Republic of Mauritius.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Alain Rey</I>&#151;Mr.&nbsp;Rey has been the Chief Financial Officer since 1996 and was
promoted to Senior Vice President&#151;Finance in September 1998. He also has been a
Director of the Company since 1997. Mr.&nbsp;Rey is an associate member of the
Institute of Chartered Accountants in England and Wales. For more than five
years prior to joining the Company in 1996, Mr.&nbsp;Rey held various senior
managerial positions with textile companies in Mauritius. From 1986 to 1988,
Mr.&nbsp;Rey was the head of the audit division for France and Monaco in the
consumer services department of Citibank and prior to that performed audit, tax
and consulting services for Coopers &#038; Lybrand in London. He is a national of
the Republic of Mauritius.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lester M.Y. Ma</I>&#151;Mr.&nbsp;Ma has been a Director of the Company since 1992 and
the Treasurer of the Company since 1997. He has also been a director of Tommy
Hilfiger since 1992. Mr.&nbsp;Ma has also served as an Executive Director and Group
Chief Accountant of NEL for more than five years.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mei-Ling Liu</I>&#151;Ms.&nbsp;Liu was promoted to Senior Vice President&#151;Operations of
the Company in September 1998, having served as Vice President&#151;Operations since
1993, prior to which she was the Production Manager at one of the Company&#146;s
subsidiaries. Prior to joining Novel Denim, Ms.&nbsp;Liu was first a technical
manager and later general manager for ten years at a cotton mill in Shanghai
where her responsibilities included product design. She is a national of the
Republic of Mauritius.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Isaacs C.C. Lam</I>&#151;Mr.&nbsp;Lam was promoted to Senior Vice President&#151;Sales and
Marketing of the Company in April 2000, having served as Vice President and
General Merchandising Manager for the Company&#146;s garment division since January
2000. Mr.&nbsp;Lam has almost 20&nbsp;years of sales experience in the garment
manufacturing, and served most recently as General Merchandising Manager for a
leading Hong Kong-based manufacturer of trousers and knitwear for branded
customers in the United States and Europe.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ronald K.Y. Chao</I>&#151;Mr.&nbsp;Chao was a Director of the Company from 1989 to 1990
and from 1997 to present. He also has been a director of Tommy Hilfiger since
1992. In 1996, Mr.&nbsp;Chao resigned as Managing Director of NEL, a position he
held for more than five years prior thereto, and was appointed as Vice Chairman
of NEL.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Susana Chou</I>&#151;Ms.&nbsp;Chou has been a Director of the Company since 1997. In
1996, she was appointed as Vice Chairman of NEL, and for more than five years
prior thereto she was an Executive Director of NEL. Ms.&nbsp;Chou also serves as the
President of H. Nolasco and Company Limited, a diversified trading company
based in Macau. In addition to her business activities, Ms.&nbsp;Chou is President
of the Legislative Assembly of Macau and a member of China&#146;s National Committee
of the Chinese People&#146;s Political Consultative Conference.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Noel Jervis</I>&#151;Mr.&nbsp;Jervis has been a Director of the Company since 1997. From
1993 to 1996, he served as the Chief Executive Officer of Courtaulds Textiles
plc (&#145;&#145;Courtaulds&#146;&#146;), Europe&#146;s second largest textile manufacturer. For more
than 25&nbsp;years prior thereto, Mr.&nbsp;Jervis held various senior finance positions
at Courtaulds, followed by an appointment as Chairman of its International
Fabrics Group from 1988 to 1993. Mr.&nbsp;Jervis also serves as Chairman of
Interfloor Group Ltd, Europe&#146;s largest manufacturer of carpet underlays,
specialist rubber flooring and carpet fitting accessories and as Chairman of
Sherwood Group plc, a designer and distributor of women&#146;s intimate apparel and
manufacturer of lace.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Leavitt B. Ahrens, Jr. </I>&#151;Mr.&nbsp;Ahrens has been a Director of the Company
since 1997. Mr.&nbsp;Ahrens served as Senior Vice President, International at
Rubbermaid Incorporated, a leading brand manufacturer and marketer of consumer
and commercial products, where he was responsible for the company&#146;s global
growth strategy from April 1996 to April 1999. Prior to joining Rubbermaid,
Mr.&nbsp;Ahrens was with VF Corporation for over 10&nbsp;years, where he most recently
served as President-VF Asia-Pacific after serving as President-VF Europe:
Jeanswear, where he managed the Lee<SUP>&#174;</SUP>,
Wrangler<SUP>&#174;</SUP> and Maverick<SUP>&#174;</SUP> brands.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lawrence T.S. Lok</I>&#151;Mr.&nbsp;Lok has been the Secretary of Novel Denim since
1997. He has also been the Secretary of Tommy Hilfiger and NEL since 1994. In
addition, Mr.&nbsp;Lok also has been Deputy Financial Controller of NEL since 1998
and for more than five years prior thereto was Deputy Group Chief Accountant of
NEL. He is a fellow of the Chartered Association of Certified Accountants.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Silas K.F. Chou, K.C. Chao, Ronald K.Y. Chao and Ms.&nbsp;Susana Chou
are siblings.
</FONT>
<P align="center"><FONT size="2">27</FONT>

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<P align="left"><FONT size="2"><B>Committees of the Board of Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Board of Directors has standing Audit and Compensation
committees which meet at least twice a year.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee recommends to the Board of Directors an accounting
firm to serve as the Company&#146;s independent accountants, reviews the scope and
results of the annual audit of the Company&#146;s consolidated financial statements,
reviews non-audit services provided to the Company by the Company&#146;s independent
accountants, monitors transactions among the Company and its affiliates and
other similar and customary functions. The Audit Committee currently consists
of Messrs.&nbsp;Jervis, who serves as Chairman, and Ahrens.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee is charged with supervising the Company&#146;s
compensation policies, administering the employee incentive plans, reviewing
officers&#146; salaries and bonuses, approving significant changes in employee
benefits and recommending to the Board of Directors such other forms of
remuneration as it deems appropriate. The Compensation Committee currently
consists of Messrs.&nbsp;Silas Chou, who serves as Chairman, Jervis and Ahrens.
</FONT>
<P align="left"><FONT size="2"><B>Compensation of Directors And Officers</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2002, the aggregate salary and bonus compensation paid by the
Company and its subsidiaries to all directors and officers of the Company as a
group (8 persons) for services in all capacities was $1,045,219, including nil
pursuant to an informal bonus arrangement. Under the informal bonus
arrangement, the Company distributes up to 5% of Novel Denim&#146;s income before
bonuses and minority interests each year as bonuses to executive officers and
employees. In addition, under a deferred employee benefit plan, the aggregate
amount accrued in fiscal 2002 by the Company for all of Novel Denim&#146;s directors
and officers for long service benefits, which the Company is obligated by
statute to provide, was $70,058.
</FONT>
<P align="left"><FONT size="2"><B>Certain Employment Agreements</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim has employment agreements with K.C. Chao, Alain Rey, Mei-Ling
Liu and Isaacs Lam.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The employment agreement with Mr.&nbsp;Chao provides for his employment as
Chief Executive Officer and President of Novel Denim. The term of his
employment agreement is until March&nbsp;31, 2004.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The employment agreement with Mr.&nbsp;Rey provides for his employment as Chief
Financial Officer and Senior Vice President of Novel Denim. The term of his
employment agreement is until March&nbsp;31, 2004.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The employment agreement with Ms.&nbsp;Liu provides for her employment as
Senior Vice President&#151;Operations of Novel Denim. The term of her employment
agreement is until March&nbsp;31, 2004.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The employment agreement with Mr.&nbsp;Lam provides for his employment as Vice
President of Novel Denim and General Merchandising Manager of the Company&#146;s
garment division. The term of his employment agreement is until December&nbsp;31,
2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the employment agreements provides that if the executive
terminates his or her employment with the Company, other than at the end of the
employment term or for &#145;&#145;good reason&#146;&#146; (as defined in the agreements), the
executive may not compete with the Company for a period of one year thereafter.
</FONT>
<P align="left"><FONT size="2"><B>Employees</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, Novel Denim had approximately 14,300 full-time
employees compared to 10,900 at March&nbsp;31, 2001 and 6,800 at March&nbsp;31, 2000.
Approximately 51% are located in Mauritius, 42% in Madagascar, 3% South Africa,
3% China and 1% in other regions including Hong Kong. Because Mauritius is near
full employment, the country permits the importation of foreign labor.
Approximately 24% of the Company&#146;s work force in Mauritius now consists of
skilled workers from China. These non-Mauritian workers have three-year
employment contracts with the Company and are paid the same wages as Novel
Denim&#146;s Mauritian labor force. In addition, Novel Denim has recruited highly
educated engineers and technicians from Hong Kong and Europe. With the
exception of approximately 400 employees in South Africa, none of the
</FONT>
<P align="center"><FONT size="2">28</FONT>

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<P align="left"><FONT size="2">Company&#146;s employees is a member of a union and the Company provides its workers
with a clean and modern working environment as well as job training. In fiscal
2002, Novel Denim&#146;s employee turnover rate was less than 10% for its local
workers and de minimus for workers recruited from outside Mauritius. The
Company seeks to maintain excellent relations with its employees.
</FONT>
<P align="left"><FONT size="2"><B>Share Ownership</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only directors and executive officers of Novel Denim who are deemed to
have beneficial ownership of more than 1% of Novel Denim&#146;s outstanding Ordinary
Shares are Messrs.&nbsp;Silas Chou, Ronald Chou, K.C. Chao and Ms.&nbsp;Susana Chou, all
of whom are related to Novel Apparel, Novel Denim&#146;s major shareholder. For
details please see Footnotes 1 and 3 to the share ownership table and the notes
thereto in Item&nbsp;7. &#147;Major Shareholders and Related Party Transactions.&#148;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2002, Novel Denim&#146;s directors and executive officers, in
the aggregate, held options under its stock option plans to purchase up to
384,000 Ordinary Shares. 364,000 of these, which were granted under the
Employee Plan (defined herein), have an average exercise price of $11.47 and
will expire 10&nbsp;years from the date of grant. 20,000 of these, which were
granted under the Non-Employee Director Plan (defined herein), have an average
exercise price of $14.63 and will expire 10&nbsp;years from the date of grant.
</FONT>
<P align="left"><FONT size="2"><B>Stock Option Plans</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Employee Plan</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August 1997, the Company adopted a stock incentive plan (the &#147;Employee
Plan&#146;&#146;) authorizing the issuance of an aggregate of up to 450,000 Ordinary
Shares to directors, officers and employees of the Company and its
subsidiaries. In September 1999, the Company amended the Employee Plan to
increase the number of Ordinary Shares authorized for issuance thereunder to
900,000. Messrs.&nbsp;Silas K.F. Chou, K.C. Chao, Ronald K.Y. Chao and Ms.&nbsp;Susana
Chou are not eligible for grants under the Employee Plan.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Employee Plan is administered by the Compensation Committee of the
Board of Directors of the Company. The Compensation Committee determines the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms and conditions of each grant, subject to the provisions of
the Employee Plan.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Non-Employee Directors Stock Option Plan</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 1997, the Company adopted a non-employee directors stock option
plan (the &#147;Non-Employee Directors Plan&#146;&#146;) authorizing the issuance of an
aggregate of up to 50,000 Ordinary Shares to directors who are not officers or
employees of the Company or any subsidiary of the Company. The Non-Employee
Directors Plan is administered by the Compensation Committee of the Company.
Adjustments in the aggregate number and kind of shares reserved for issuance
and subject to options granted under the Non-Employee Directors Plan are made
by the Compensation Committee in the event of a merger, consolidation,
recapitalization, reorganization, stock split, stock dividend, extraordinary
distribution with respect to the Ordinary Shares or other change in corporate
structure affecting the shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Non-Employee Directors Plan, subject to adjustment as described
above, each non-employee director (other than Mr.&nbsp;Ronald Chao and Ms.&nbsp;Susana
Chou who are not eligible for grants under this plan) will receive an initial
grant of options to purchase 6,000 Ordinary Shares and subsequent annual grants
of options to purchase 1,000 Ordinary Shares. All grants will have an exercise
price equal to the fair market value of the Ordinary Shares at the date of
grant.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Outstanding Options</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2002, 661,960 options, net of cancellations, have been
granted and remain unexercised under the Employee Plan. The average exercise
price of such options is $11.16 per share.
</FONT>
<P align="center"><FONT size="2">29</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2002, 20,000 options, net of cancellations, have been
granted and remain unexercised under the Non-Employee Directors Plan. The
average exercise price of such options is $14.63 per share.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term, under both plans, of each stock option is 10&nbsp;years, unless
terminated earlier in accordance with the terms of the relevant plan. Such
stock options have varied vesting schedules.
</FONT>
<!-- link2 "ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS" -->
<DIV align="left"><A NAME="007"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of July&nbsp;31, 2002, the Company was effectively controlled by its 50.0%
shareholder, Novel Apparel, an affiliate of NEL. All shareholders have the
same voting rights. As of July&nbsp;31, 2002, there were 9,107,300 outstanding
Ordinary Shares and approximately 50% of the outstanding Ordinary Shares were
held by approximately 28 record holders (excluding Novel Apparel) in the United
States. The following table sets forth as of June&nbsp;30, 2002 (i)&nbsp;the persons
owning more than 5% of the Ordinary Shares and (ii)&nbsp;the share ownership and
exerciseable share options of all the directors and officers of the Company as
a group:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
        <TD width="73%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1"><B>Ordinary Shares (1)</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percent</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Novel Apparel (BVI)&nbsp;Limited (2)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,550,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">50.0</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital Group International, Inc.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,109,700</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12.2</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FMR Corporation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">964,670</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">10.6</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">K.C. Chao (3)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">505,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5.5</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All directors and officers as a group (other
than as set forth in relation to Novel Apparel
and K.C. Chao)
(9 persons) (4)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">395,700</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4.3</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Based upon 9,107,300 Ordinary Shares, net of treasury stock. Does not
reflect the dilution arising from the exercise of stock options.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">NHL owns 80% of the Ordinary Shares of Novel Apparel with K.C. Chao, the
Company&#146;s Chief Executive Officer and President, owning the remaining 20%.
NHL is indirectly wholly owned by members of the Chao family (including
Messrs.&nbsp;Silas Chou, Ronald Chao and Ms.&nbsp;Susana Chou).</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Not including Ordinary Shares held by Novel Apparel.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="top">
      <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Does not include 15,100 Ordinary Shares held by a spouse of a member of
the Board of Directors. Includes options to purchase Ordinary Shares held
by certain officers and directors, exercisable within 60&nbsp;days of the date
of this Annual Report and 8,500 Ordinary Shares held by two directors, and
does not include Ordinary Shares held by Novel Apparel which may be deemed
beneficially owned by certain officers and directors as described in note
2 above.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><B>Transactions with Affiliates</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described below, the Company has engaged in certain related party
transactions with NEL and its affiliates in fiscal 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sales Agencies</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In The Netherlands and France, Novel Denim employs the marketing and sales
services of two agencies which are affiliates of the Chao family. The sales
agencies receive a commission based on sales of Novel Denim products. The
Company incurred $512,692 of sales commissions under these agreements during
fiscal 2002. The agencies do not market any other denim manufacturer&#146;s
products.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sales of Products and Services</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim&#146;s customers include Tommy Hilfiger, Pepe Europe and certain
other affiliates of NEL. The Chao family has an approximately 27% indirect
ownership interest in Pepe Europe and a small indirect ownership interest in
Tommy
</FONT>
<P align="center"><FONT size="2">30</FONT>

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<P align="left"><FONT size="2">Hilfiger. In addition, Mr.&nbsp;Silas K.F. Chou, the Company&#146;s Chairman of the
Board, is also Co-Chairman of the Board of Tommy Hilfiger. Messrs.&nbsp;Ronald Chao,
Lester Ma and Lawrence Lok, directors and/or officers of the Company, are also
directors and/or officers of Tommy Hilfiger, Pepe Europe and/or NEL and its
affiliates. See Item&nbsp;6. &#147;Directors, Senior Management and Employees.&#146;&#146; Tommy
Hilfiger and Pepe Europe purchased $23.9&nbsp;million and $1.0&nbsp;million, respectively
of products from the Company during fiscal 2002. Novel Denim intends to
continue to sell products to Tommy Hilfiger and Pepe Europe. See
Item&nbsp;3. &#147;Key
Information&#151;Risk Factors&#151;Control by Principal Shareholder; Conflicts of
Interest.&#146;&#146;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Purchases of Materials and Services</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company purchases certain raw materials and other inventory items from
certain affiliates of NEL. During fiscal 2002, purchases from these companies
amounted to approximately $25,000.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company receives certain services from NEL and its affiliates,
including information systems, staff resources, office space and related
overheads. The Company paid $134,783 in fiscal 2002 for such services. The cost
of such services is apportioned based on usage.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leases of Office Space and Land</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Novel Denim leases office space from an affiliate of NEL. The Company paid
rent of $173,432 in fiscal 2002, under leases covering approximately 14,500
square feet. In addition, the Company leases 422,830 square feet of land, which
includes a 380,000 square foot factory and laundry facility, in Mauritius from
an NEL affiliate under a 50-year arrangement which began in 1989. Annual rental
payments under this lease arrangement are not material.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the transactions undertaken with related parties has been
negotiated on an arms-length basis and the Company believes that the terms of
such transactions are no less favorable to the Company than could be obtained
from unaffiliated parties. The Audit Committee of the Board of Directors, which
is comprised of two non-employee directors who are not affiliated with NEL or
Novel Apparel, reviews transactions between the Company and its affiliates to
provide that such transactions are on terms which are no less favorable as a
whole to the Company than could be obtained from unaffiliated parties and that
such transactions are properly reported. See Item&nbsp;6. &#147;Directors, Senior
Management and Employees.&#146;&#146;
</FONT>
<P align="left"><FONT size="2"><B>Acquisition of Novel Spinners and Novel Weavers</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;9, 1998, Novel Denim entered into a Share Purchase Agreement
with Novel Apparel to purchase all the outstanding shares of Novel Spinners
(S.A.) (Pty) Ltd. and Novel Weavers (S.A.) (Pty) Ltd. Novel Spinners owns and
operates an existing 215,000 square foot state-of-the-art spinning facility in
Cape Town, South Africa. Novel Weavers was a dormant company. On August&nbsp;31,
1998, the Company acquired Novel Spinners and Novel Weavers for approximately
$8.8&nbsp;million in cash and the assumption of debt. The transaction was negotiated
and approved by an independent committee of the Company&#146;s Board of Directors.
Messrs.&nbsp;Silas Chou, Ronald Chao, K.C. Chao, Lester Ma and Ms.&nbsp;Susana Chou are
directors and/or officers of Novel Apparel and Novel Denim.
</FONT>
<P align="left"><FONT size="2"><B>Acquisition of NDP Holdings Limited</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;7, 2001, the Company entered into an agreement to acquire NDP
for $18.97&nbsp;million in cash from a subsidiary of Novel Enterprises Limited, an
affiliate of Novel Apparel. NDP, through its subsidiaries, owns and operates
an integrated fabric dyeing, printing and finishing facility in the Shenzhen
region of the PRC, close to Hong Kong, capable of processing 40&nbsp;million meters
of fabric annually. The transaction closed on October&nbsp;1, 2001. The
transaction was negotiated and approved by an independent committee of the
Company&#146;s Board of Directors. Messrs.&nbsp;Silas Chou, Ronald Chao, K.C. Chao,
Lester Ma and Ms.&nbsp;Susana Chou are directors and/or officers of Novel Apparel
and Novel Denim.
</FONT>
<P align="left"><FONT size="2"><B>Registration Rights Agreement</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under a registration rights agreement between Novel Apparel and the
Company entered into prior to the Company&#146;s initial public offering, Novel
Apparel has the right, subject to certain conditions, to require the Company to
register under the
</FONT>
<P align="center"><FONT size="2">31</FONT>

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<P align="left"><FONT size="2">Securities Act of 1933, as amended, Ordinary Shares held by it. Pursuant to the
registration rights agreement, Novel Apparel was granted unlimited demand and
piggy-back registration rights. The Company has agreed to pay all expenses
incurred in connection with all piggy-back registrations and with the first
four demand registrations, and will share expenses ratably with Novel Apparel
in connection with any additional such demand registrations. The registration
rights agreement provides for indemnities between the Company and Novel Apparel
for certain liabilities under the Securities Act of 1933.
</FONT>
<!-- link2 "ITEM 8. FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="008"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 8. FINANCIAL INFORMATION</B>
</FONT>

<P align="left"><FONT size="2"><B>Consolidated Statements and Other Financial Information</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;17. Financial Statements&#148; and pages F-1 through F-23.
</FONT>
<P align="left"><FONT size="2"><B>Legal Proceedings</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no material legal proceedings pending against the Company.
</FONT>
<P align="left"><FONT size="2"><B>Dividend Distributions</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not have a stated dividend policy and has not declared or
paid any dividends since the Company&#146;s IPO in 1997.
</FONT>
<P align="center"><FONT size="2">32</FONT>

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<!-- link2 "ITEM 9. THE OFFER AND LISTING" -->
<DIV align="left"><A NAME="009"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 9. THE OFFER AND LISTING</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Ordinary Shares, par value U.S. $1.00, are listed and traded
on the National Market Tier of the Nasdaq Stock Market (''Nasdaq&#146;&#146;) under the
symbol &#147;NVLD&#146;&#146;.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for each of the periods indicated, the
reported high and low sales prices per Ordinary Share as reported on Nasdaq:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="61%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Annual Information</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15.500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2001</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.625</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2000</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.625</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2.750</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 1999</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">28.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8.875</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Quarterly Information</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2003</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">7.150</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12.890</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">7.300</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15.500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6.260</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15.500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8.760</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fiscal Year ended March&nbsp;31, 2001</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.625</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6.625</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9.125</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4.338</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First quarter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Monthly Information</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">August 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6.500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">5.190</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">July 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">7.390</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">5.500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">June 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9.340</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">7.150</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">May 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8.300</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">April 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">7.560</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">March 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12.000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9.250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">33</FONT>

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<!-- link2 "ITEM 10. ADDITIONAL INFORMATION" -->
<DIV align="left"><A NAME="010"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 10. ADDITIONAL INFORMATION</B>
</FONT>

<P align="left"><FONT size="2"><B>Objects and Purposes</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The objects and powers of the Company are set forth in clause 4 of its
Memorandum and Articles of Association. The Company has a broad range of
corporate powers and the powers of the Company may be exercised irrespective of
whether it derives corporate benefit from its actions. The Company may borrow
money and mortgage or charge any of its property and undertakings as security
for such borrowings or the borrowings of a third party. It may also issue
debentures, debenture stock and other securities whenever money is borrowed.
</FONT>
<P align="left"><FONT size="2"><B>Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulation&nbsp;77 of the Memorandum and Articles of Association allows the
directors to compensate themselves by way of a board resolution. No approval
by the member is required.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Where a conflict of interest exists on the part of a director of the
Company, that director is not prohibited from voting with respect to the matter
and the matter may be validly approved under BVI law if that director declares
his or her interest in the transaction to the other directors and the
transaction is then approved by the other disinterested directors. A director
may borrow from the Company, if the disinterested directors approve the
transaction in accordance with the provisions of this paragraph. Directors are
not required to own any of the Company&#146;s shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A director holds office until conclusion of office, death, removal or
resignation. Directors stand for reelection at staggered annual intervals. At
meetings at which directors are to be elected, the successors of the retiring
directors are elected by a plurality vote of all votes cast at the meeting.
</FONT>
<P align="left"><FONT size="2"><B>Share Capital</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has an authorized share capital of US$28,000,000 which
consists of 23,000,000 Ordinary Shares, US$1.00 par value (&#147;Ordinary
Shares&#146;&#146;), and 5,000,000 preference shares, par value
US$1.00 (&#147;Preference
Shares&#146;&#146;). At March&nbsp;31, 2002, the Company had 9,138,900 Ordinary Shares issued
and outstanding, of which 298,600 Ordinary Shares were repurchased by the
Company and held at cost as treasury shares, all of which were fully paid.
Share rights may be varied with the written consent of the holders of a
majority of each class or series of shares to be affected by the variation.
Dividends which remain unclaimed three years after having been declared may be
forfeited at the option of the directors for the benefit of the Company. No
Preference Shares have been issued.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ordinary Shares have one vote each, are subject to redemption,
purchase or acquisition by the Company for fair value and have the right to
receive dividends and distributions upon the liquidation of the Company. The
rights of the Preference Shares are to be determined by the directors of the
Company by way of a duly passed resolution of directors prior to the Company&#146;s
issuance of any preference shares. Neither the Ordinary Shares nor the
Preference Shares have pre-emption rights or restrictions on their transfer.
</FONT>
<P align="left"><FONT size="2"><B>Meeting of Members</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors of the Company are required to convene an annual meeting of
members to consider the election of directors and any other matters which the
directors propose to be considered. The directors may also convene such other
meetings of members at such times as the directors consider necessary or
desirable. The directors are also required to convene a meeting of members on
the request of the members holding 50% or more of the outstanding voting
shares in the Company. The affirmative vote of more than 50% of all the votes
of the shares at the members&#146; meeting entitled to vote is required to pass any
resolution.
</FONT>
<P align="center"><FONT size="2">34</FONT>

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<P align="left"><FONT size="2"><B>Material Contracts</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes it has no material contracts which occurred outside
of its normal course of business during the past two fiscal years. All material
contracts which occurred in the ordinary course of business are attached to
this registration statement as exhibits.
</FONT>
<P align="left"><FONT size="2"><B>Exchange Controls and Other Limitations Affecting Security Holders</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Exchange Controls</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are currently no exchange control restrictions on remittances of
dividends on the Company&#146;s Ordinary Shares or on the conduct of the Company&#146;s
operations either in Hong Kong, where the Company&#146;s principal executive office
is located, Mauritius, where its principal manufacturing operations are
located, or the British Virgin Islands, where it is incorporated. There are
currently no limitations imposed by British Virgin Islands law or by the
Company&#146;s Memorandum of Association and Articles of Association on the right of
non-resident or foreign owners to hold or vote the Company&#146;s Ordinary Shares.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Comparison of United States and British Virgin Islands Corporate Laws</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the laws of most jurisdictions in the United States, majority and
controlling shareholders generally have certain &#147;fiduciary&#146;&#146; responsibilities
to the minority shareholders. Shareholder action must be taken in good faith
and actions by controlling shareholders which are obviously unreasonable may be
declared null and void. British Virgin Islands law protecting the interests of
minority shareholders may not be as protective in all circumstances as the law
protecting minority shareholders in United States jurisdictions. Under
applicable British Virgin Islands law, majority shareholders do not owe direct
fiduciary duties to minority shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While British Virgin Islands law does permit a shareholder of a British
Virgin Islands company to sue its directors derivatively (i.e., in the name of
and for the benefit of the company) and to sue the company and its directors
for his benefit and for the benefit of others similarly situated, the
circumstances in which any such action may be brought, and the procedures and
defenses that may be available in respect of any such action, may result in the
rights of shareholders of a British Virgin Islands international business
company being more limited than those of shareholders of a company organized in
the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors of the Company have the power to take certain actions without
shareholder approval, including an amendment of the Company&#146;s Memorandum of
Association or Articles of Association, an increase or reduction in the
Company&#146;s authorized capital or a change in the Company&#146;s name, which would
require shareholder approval under the laws of most United States
jurisdictions. In addition, the directors of a British Virgin Islands
international business company may, without shareholder approval among other
things, implement a sale, transfer, exchange or disposition of less than 50% of
any assets, property, part of the business, or securities of the international
business company, the winding up or dissolution of the company, or any
combination thereof, if they determine it is in the best interests of the
corporation, its creditors, or its shareholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As in most United States jurisdictions, the board of directors of a
British Virgin Islands international business company is charged with the
management of the affairs of the company. In most United States jurisdictions,
directors owe a fiduciary duty to the corporation and its shareholders,
including a duty of care, pursuant to which directors must properly apprise
themselves of all reasonably available information, and a duty of loyalty,
pursuant to which they must protect the interest of the company and refrain
from conduct that injures the corporation or its stockholders or that deprives
the corporation or its stockholders of any profit or advantage. Many United
States jurisdictions have enacted various statutory provisions which permit the
monetary liability of directors to be eliminated or limited. Under British
Virgin Islands law, a director owes a fiduciary duty to the company, but
liability of a director to the company is primarily limited to cases of willful
malfeasance in the performance of his duties or to cases where the director has
not acted honestly and in good faith and with a view to the best interest of
the corporation. However, under its Articles of Association, the Company is
authorized to indemnify any person who is made or threatened to be made a party
to a legal, administrative or investigative proceeding by virtue of being a
director, officer or liquidator of the Company, provided such person acted
honestly and in good faith and with a view to the best interest of the Company
and, in the case of a criminal proceeding, such person had no reasonable cause
to believe that
</FONT>
<P align="center"><FONT size="2">35</FONT>

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<P align="left"><FONT size="2">his conduct was unlawful. The Company&#146;s Articles of Association also obligate
the Company to indemnify any director, officer or liquidator of the Company who
was successful in any such proceedings against expenses and judgments, fines
and amounts paid in settlement and reasonably incurred in connection with the
proceedings, where such person met the standard of conduct described in the
preceding sentence.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing description of certain differences between British Virgin
Islands and United States corporate laws is only a summary and does not purport
to be complete or to address every applicable aspect of such laws. See Item&nbsp;3.
&#147;Key Information&#151;Risk Factors&#151;Enforceability of Civil Liabilities&#146;&#146; and
&#147;&#151;Rights of Shareholders under British Virgin Islands Law may be Less than in
U.S. Jurisdictions.&#146;&#146;
</FONT>
<P align="left"><FONT size="2"><B>Taxation</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following section does not deal with all possible tax consequences
relating to an investment in the Ordinary Shares and does not purport to deal
with the tax consequences applicable to all categories of investors, some of
which (such as dealers in securities or currencies, insurance companies and
tax-exempt entities) may be subject to special rules. In particular, the
discussion does not address the tax consequences under state, local and other
national (e.g., non-United States, non-British Virgin Islands and non-Hong
Kong) tax laws. Accordingly, each prospective investor should consult its own
tax advisor regarding the particular tax consequences to it of an investment in
the Ordinary Shares. The following discussion is based upon laws, regulations
and relevant interpretations thereof in effect as of the date of this Annual
Report, all of which are subject to change, possibly retroactively.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>United States Federal Income Taxation</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following presents the material United States federal income tax
consequences of the acquisition, ownership and disposition of Ordinary Shares
and does not purport to be a complete analysis or listing of all possible tax
considerations. The discussion deals only with Ordinary Shares held as capital
assets and does not address any special United States tax consequences that may
be applicable to U.S. Holders (as defined below) that are subject to special
treatment under the United States Internal Revenue Code of 1986, as amended
(the &#147;Code&#146;&#146;), such as dealers in securities or currencies, traders in
securities that elect to use a mark-to-market method for their securities
holdings, financial institutions, tax exempt entities, regulated investment
companies, real estate investment trusts, insurance companies, investors liable
for alternative minimum tax, persons holding Ordinary Shares as part of a
hedging, conversion, constructive sale or integrated transaction or a straddle,
persons owning directly or indirectly 10% or more of the total combined voting
power of all classes of voting stock of the Company, investors in pass-through
entities or persons whose functional currency is not the United States dollar.
Furthermore, the discussion below is based upon the provisions of the Code, and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
United States federal income tax consequences different from those described
below. Prospective purchasers who are U.S. Holders are urged to satisfy
themselves as to the overall United States federal, state and local tax
consequences of their ownership of the Ordinary Shares by consulting their own
tax advisors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used herein, a &#147;U.S. Holder&#146;&#146; of an Ordinary Share means a holder that
is for U.S. federal income tax purposes, a citizen or resident of the United
States, a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof, an estate the income
of which is subject to United States federal income taxation regardless of its
source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one or more
United States persons have the authority to control all substantial decisions
of such trust or the trust has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States person.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a partnership holds Ordinary Shares, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. Prospective purchasers who are partners of a partnership holding
Ordinary Shares should consult their own tax advisors.
</FONT>
<P align="center"><FONT size="2">36</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Taxation of Dividend</I><B><I>s</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross amount of dividends paid to U.S. Holders of Ordinary Shares will
be treated as dividend income to such Holders, to the extent paid out of
current or accumulated earnings and profits, as determined under United States
federal income tax principles. Such income will be includable in the gross
income of a U.S. Holder as ordinary income on the day received by the U.S.
Holder. Such dividends will not be eligible for the dividends received
deduction allowed to corporations under the Code.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of calculating the foreign tax credit, dividends paid on the
Ordinary Shares will be treated as income from sources outside the United
States and will generally constitute &#147;passive income&#146;&#146; or, in the case of
certain U.S. Holders, &#147;financial services income.&#146;&#146;
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the amount of any distribution exceeds the Company&#146;s
current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in the adjusted basis of the Ordinary Shares (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the Ordinary Shares), and the balance
in excess of adjusted basis will be taxed as capital gain recognized on a sale
or exchange.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Personal Holding Company Status</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A foreign corporation will be classified as a foreign personal holding
company (an &#147;FPHC&#146;&#146;) if (i)&nbsp;at any time during the Company&#146;s taxable year,
five or fewer individuals, who are United States citizens or residents,
directly or indirectly own more than 50% of the corporation&#146;s stock (by either
voting power or value) (the &#147;shareholder test&#146;&#146;) and (ii)&nbsp;the corporation
receives at least 60% of its gross income (regardless of source), as adjusted,
from certain passive sources (the &#147;income test&#146;&#146;). After its initial year of
qualification as an FPHC, a corporation may remain an FPHC even if only 50% of
its gross income is FPHC income (i.e., passive income such as interest,
dividends, etc.).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the Company will derive most of its income from dividends paid by
its subsidiaries, the Company believes that it satisfies, and expects that it
will continue to satisfy, the income test. The Company believes that the
shareholder test was not met prior to the Company&#146;s initial public offering and
has not been met at any time after such offering. However, due to a number of
factors (including the FPHC stock attribution rules, possible change in
residence by current indirect shareholders and possible acquisition of Ordinary
Shares by purchase, gift, or bequest by individuals related to or partners of
current indirect shareholders), there can be no assurance that the Company will
not become an FPHC in the future.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Company were classified as an FPHC, U.S. Holders (including certain
indirect holders) would be required to include in income their pro rata share
of the Company&#146;s undistributed FPHC income if they were holders on the last day
of the Company&#146;s taxable year (or if earlier, the last day on which the Company
satisfies the shareholder test). Such income would be taxable to such persons
as a dividend, even if no cash dividend were actually paid. In such a case, a
U.S. Holder would be entitled to increase its tax basis in the Ordinary Shares
by the amount of such deemed FPHC dividend. U.S. Holders who dispose of their
Ordinary Shares prior to the date discussed above would not be subject to these
rules. Moreover, if the Company became an FPHC, United States persons who
acquire Ordinary Shares from decedents would not receive a &#147;stepped-up&#146;&#146; basis
in such Ordinary Shares. Instead, such a holder would have a tax basis equal to
the lower of fair market value or the decedent&#146;s basis.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company will notify U.S. Holders in the event that it concludes that
it is classified as an FPHC for any taxable year.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Personal Holding Company Tax</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
corporation will be classified as a personal holding company (a &#147;PHC&#146;&#146;)
if (i)&nbsp;at any time during the last half of the Company&#146;s taxable year, five or
fewer individuals own more than 50% of the corporation&#146;s stock (by value)
directly or indirectly and (ii)&nbsp;the corporation receives at least 60% of its
gross income, as adjusted, from certain passive sources. However, if a
corporation is an FPHC (see above) it cannot be a PHC. A corporation classified
as a PHC is subject to a 39.6% tax on its undistributed personal holding
company income. Foreign corporations (such as the Company) determine their
liability for PHC tax by considering only (a)&nbsp;gross income derived from United
States sources and (b)&nbsp;gross income which is effectively connected with a
United States trade or business (collectively, &#147;U.S. Taxable Income&#146;&#146;).
</FONT>
<P align="center"><FONT size="2">37</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While more than 50% of the Ordinary Shares is currently owned, directly or
indirectly, by five or fewer individuals, the Company does not currently have,
or expect to have in the future, any U.S. Taxable Income. Accordingly, the
Company does not expect to have any PHC tax liability.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Passive Foreign Investment Company Status</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that it is, for United States federal tax
purposes, a passive foreign investment company (a &#147;PFIC&#146;&#146;), and expects to
continue its operations in such a manner that it will not be a PFIC. If,
however, the Company is or does become a PFIC, U.S. Holders could be subject to
additional federal income taxes on certain distributions or gains with respect
to Ordinary Shares plus an interest charge on certain taxes treated as having
been deferred by the U.S. Holder under the PFIC rules of the United States
federal income tax laws.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Taxation of Capital Gains</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For United States federal income tax purposes, a U.S. Holder will
recognize taxable gain or loss on any sale or exchange of an Ordinary Share in
an amount equal to the difference between the amount realized for the Ordinary
Share and the U.S. Holder&#146;s basis in the Ordinary Share. Such gain or loss will
be capital gain or loss. Capital gains of individuals derived with respect to
capital assets held for more than one year are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations. Any
gain or loss recognized by a U.S. Holder will generally be treated as United
States source gain or loss.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Information Reporting and Backup Withholding</I>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, information reporting requirements will apply to dividends
paid in respect of the Ordinary Shares or the proceeds received on the sale,
exchange, or redemption of the Ordinary Shares paid within the United States
(and, in certain cases, outside the United States) by U.S. Holders other than
certain exempt recipients (such as corporations) and backup withholding may
apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer
identification number or to report interest and dividends required to be shown
on its federal income tax returns. A U.S. Holder who does not provide a correct
taxpayer identification number may be subject to penalties imposed by the
Internal Revenue Service. Backup withholding will not apply with respect to
payments made to certain exempt recipients, such as corporations and tax-exempt
organizations. The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a credit against the U.S. Holder&#146;s United States
federal income tax liability and may entitle such U.S. Holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>British Virgin Islands Taxation</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the laws of the British Virgin Islands as currently in effect, a
holder of Ordinary Shares who is not a resident of the British Virgin Islands
is exempt from British Virgin Islands income tax on dividends paid with respect
to the Ordinary Shares and no holder of Ordinary Shares is liable for British
Virgin Islands income tax on gains realized on sale or disposition of such
Ordinary Shares. In addition, the British Virgin Islands does not impose a
withholding tax on dividends paid by the Company. A company incorporated under
the International Business Companies Act is deemed not to be a resident for
this purpose.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands with respect to the Company. In addition, the Ordinary
Shares are not subject to any transfer taxes, stamp duties or similar charges.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no income tax treaty or convention currently in effect between
the United States and the British Virgin Islands.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Hong Kong Taxation</I></B>
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the laws of Hong Kong, as currently in effect, a holder of Ordinary
Shares who is not a resident of Hong Kong is exempt from Hong Kong income tax
on dividends paid with respect to such shares and no holder of Ordinary Shares
is liable for Hong Kong income tax on gains realized on sale or other
disposition of such Ordinary Shares. Hong Kong does not
</FONT>
<P align="center"><FONT size="2">38</FONT>

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<P align="left"><FONT size="2">impose a withholding tax on dividends paid by the Company or its subsidiaries.
In addition, the Company will not be subject to Hong Kong taxes as a result of
its receipt of dividends from any of its subsidiaries.
</FONT>
<!-- link2 "ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="011"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is exposed to market risks relating to fluctuations in the
price of raw cotton, interest rates on its borrowings and exchange rates of
foreign currencies in which the Company transacts business.
</FONT>
<P align="left"><FONT size="2"><B>Cotton Commodity Exposure</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commodity price risk relates to the fluctuations in world prices of raw
cotton. Cotton is the primary raw material used in the production of the
Company&#146;s products. The Company has a purchasing policy designed to ensure
uninterrupted supplies of cotton of appropriate quality for its fabric
production. The Company purchases cotton by way of forward contracts,
denominated in U.S. dollars, typically amounting to approximately six to eight
months of planned consumption. Price risk in this period is partially mitigated
by the Company&#146;s garment order backlog, where the Company enters into
agreements with its garment customers for deliveries which spread over a
corresponding period to the consumption of the cotton contracts. These
purchases are therefore not sensitive to changes in the market price of cotton.
However, increases or decreases in the market price of cotton may affect the
fair value of cotton commodity purchase contracts.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, the Company had outstanding contracted commitments
to purchase cotton for delivery over the next six to eight months at a
contracted amount of $10.4&nbsp;million. A 10% decline in the market price of cotton
would have a negative impact of approximately $1.0&nbsp;million on the fair value of
the existing contracts.
</FONT>
<P align="left"><FONT size="2"><B>Interest Rate Exposure</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company partially finances its working capital requirements by way of
short-term borrowings. The borrowings are made mainly in the Mauritian rupee
and the U.S. dollar. The interest rates on borrowings in these currencies are
traditionally more volatile than for U.S. dollar loans.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below represents the U.S. dollar equivalent of short-term
borrowings outstanding in each currency together with the Company&#146;s weighted
average rate of borrowings as of March&nbsp;31, 2002.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="65%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Outstanding at</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center" colspan="2"><FONT size="1"><B>Currency</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>March 31, 2002</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mauritian rupee</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$15.1 million</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">United States dollar</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$16.8 million</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">French franc</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$0.7 million</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Madagascar franc</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$1.4 million</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other currencies</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$18.5 million</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total short-term borrowings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center"><FONT size="2">$52.5 million</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="4" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average interest rate</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6.56</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal year 2002, the Company&#146;s weighted average short-term
borrowings were $40.98&nbsp;million at a weighted average interest rate of 7.24%. A
one percent increase in the Company&#146;s cost of borrowing would have resulted in
a $0.41&nbsp;million decrease in earnings during fiscal year 2002.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company attempts to mitigate the risk associated with unfavorable
movements in interest rates by balancing its local requirements with overall
funding in U.S. dollars, while also taking into account foreign exchange rate
historical trends.
</FONT>
<P align="center"><FONT size="2">39</FONT>

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<P align="left"><FONT size="2"><B>Foreign Currency Exposures</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. dollar represents the functional currency of the Company,
including the subsidiaries incorporated in Mauritius, South Africa, Madagascar
and Jersey. However, the Company&#146;s earnings are affected by fluctuations in the
value of: (i)&nbsp;local currencies of the countries in which the subsidiaries
operate; (ii)&nbsp;the currencies in which the raw materials are purchased; and
(iii)&nbsp;the currencies in which its products are sold.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company attempts to mitigate the risks of adverse movements in foreign
exchange rates, by: (i)&nbsp;purchasing its raw materials in U.S. dollars whenever
possible (during fiscal 2002 approximately 90% of the Company&#146;s cotton
purchases were made in U.S. dollars); (ii)&nbsp;restricting its borrowings in local
currencies to the minimum levels required to finance its working capital and
leasing requirements in the relevant country; and (iii)&nbsp;entering into forward
foreign exchange contracts, with maturities of up to one year, to hedge certain
foreign currency denominated firm commitments, primarily consisting of sales to
customers invoiced in currencies other than the U.S. dollar.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2002, the total value of forward contracts in hand were
valued at $9.89&nbsp;million, hedging part of anticipated cash flows from sales.
Assuming a 10% adverse movement in each of the respective non-U.S. currencies,
the Company&#146;s earnings would be reduced by approximately $0.99&nbsp;million,
representing reduced cash flows from anticipated sales less gains on forward
contracts hedging such sales.
</FONT>
<!-- link2 "ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES" -->
<DIV align="left"><A NAME="012"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</FONT>
<!-- link1 "PART II" -->
<DIV align="left"><A NAME="013"></A></DIV>
<P align="center"><FONT size="2"><B>PART II</B>
</FONT>

<!-- link2 "ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES" -->
<DIV align="left"><A NAME="014"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</FONT>

<!-- link2 "ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS" -->
<DIV align="left"><A NAME="015"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</FONT>
<!-- link1 "PART III" -->
<DIV align="left"><A NAME="016"></A></DIV>
<P align="center"><FONT size="2"><B>PART III</B>
</FONT>

<!-- link2 "ITEM 15. &#091;RESERVED&#093;" -->
<DIV align="left"><A NAME="017"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 15. &#091;RESERVED&#093;</B>
</FONT>

<!-- link2 "ITEM 16. &#091;RESERVED&#093;" -->
<DIV align="left"><A NAME="018"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 16. &#091;RESERVED&#093;</B>
</FONT>

<!-- link1 "PART IV" -->
<DIV align="left"><A NAME="019"></A></DIV>
<P align="center"><FONT size="2"><B>PART IV</B>
</FONT>

<!-- link2 "ITEM 17. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="020"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 17. FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See pages F-1 through F-23, incorporated herein by reference.
</FONT>
<!-- link2 "ITEM 18. FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="021"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 18. FINANCIAL STATEMENTS</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Applicable.
</FONT>
<P align="center"><FONT size="2">40</FONT>

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<!-- link2 "ITEM 19. EXHIBITS" -->
<DIV align="left"><A NAME="022"></A></DIV>
<P align="left"><FONT size="2"><B>ITEM 19. EXHIBITS</B>
</FONT>

<!-- link1 "EXHIBIT INDEX" -->
<DIV align="left"><A NAME="023"></A></DIV>
<P align="center"><FONT size="2"><B>EXHIBIT INDEX</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Number</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">1&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended and Restated Memorandum of Association and Articles of Association of the
Company (previously filed as Exhibit&nbsp;3 to Registration No.&nbsp;333-7184 and incorporated
herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.1</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the Company and K.C. Chao</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.2</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the Company and Mei-Ling Liu</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.3</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the Company and Alain Rey</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.4</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of January&nbsp;1, 2000 between the Company and Isaacs Lam
(previously filed as Exhibit&nbsp;2.4 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31, 2000
and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.5</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of February&nbsp;15, 1989 between Novel Textiles Limited (formerly known as
''Union Textiles Limited&#146;&#146;) and Summit Textiles Limited (previously filed as Exhibit
10.5 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.6</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of July&nbsp;19, 1990 between Novel Garments (Mauritius) Limited and Fatvan
Industrial Ltd. (previously filed as Exhibit&nbsp;10.6 to Registration No.&nbsp;333-7184 and
incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.7</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of May&nbsp;19, 1993 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.7 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.8</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of May&nbsp;19, 1993 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.8 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.9</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)&nbsp;Limited and Swanco Limited
(previously filed as Exhibit&nbsp;10.9 to Registration No.&nbsp;333-7184 and incorporated herein
by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.10</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)&nbsp;Limited and Swanco Limited
(previously filed as Exhibit&nbsp;10.10 to Registration No.&nbsp;333-7184 and incorporated
herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.11</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)&nbsp;Limited and Swanco Limited
(previously filed as Exhibit&nbsp;10.11 to Registration No.&nbsp;333-7184 and incorporated
herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.12</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)&nbsp;Limited and Swanco Limited
(previously filed as Exhibit&nbsp;10.12 to Registration No.&nbsp;333-7184 and incorporated
herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.13</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of January&nbsp;30, 1996 between Novel Garments (Mauritius) Limited and
Development Bank of Mauritius Ltd. (previously filed as Exhibit&nbsp;10.13 to Registration
No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">41</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Number</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD  colspan="3" nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap colspan="3" align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.14</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of October&nbsp;29, 1996 between Novel Garments (Mauritius) Limited and
Development Bank of Mauritius Ltd. (previously filed as Exhibit&nbsp;10.14 to Registration
No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.15</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of January 1997 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.15 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.16</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated May&nbsp;28, 1996 between Industrial Development Corporation of South Africa
Limited and Novel Spinners SA (Proprietary) Limited and Novel Weavers SA (Proprietary)
Limited (previously filed as Exhibit&nbsp;2.3 to Form&nbsp;20-F for the fiscal year ended March
31, 1999 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.17</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of October&nbsp;19, 1999 between Byren Trading Limited and Cayuga Estates
Limited (previously filed as Exhibit&nbsp;2.5 to Form&nbsp;20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.18</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of September&nbsp;1, 1999 between Novel Garments (Mauritius) Ltd and Didi
Industrial Limited (previously filed as Exhibit&nbsp;2.6 to Form&nbsp;20-F for the fiscal year
ended March&nbsp;31, 2000 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.19</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended Lease Agreement dated April&nbsp;1, 1999 between Novel Denim (HKD)&nbsp;Ltd and Swanco
Limited (previously filed as Exhibit&nbsp;2.7 to Form&nbsp;20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.20</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease Agreement dated April&nbsp;13, 2000 between Novel Garments (Madagascar) S.A. and
Filatex S.A. (previously filed as Exhibit&nbsp;4.20 to Form&nbsp;20-F for the fiscal year ended
March&nbsp;31, 2001 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.21</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease Agreement dated April&nbsp;13, 2000 between Novel Garments (Madagascar) S.A. and
Filatex S.A. (previously filed as Exhibit&nbsp;4.21 to Form&nbsp;20-F for the fiscal year ended
March&nbsp;31, 2001 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.22</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended and Restated Employee Stock Option Plan of the Company and its subsidiaries
(previously filed as Exhibit&nbsp;4.1 to Form&nbsp;S-8 (Registration No.&nbsp;333-10796), as filed on
September&nbsp;14, 1999 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">4.23</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Non-Employee Directors Stock Option Plan of the Company (previously filed as Exhibit
10.24 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">8.1</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">List of Subsidiaries</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.1</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Land Purchase Agreement dated as of April&nbsp;18, 1995 between Novel Textiles Limited and
Rajman Prayag (previously filed as Exhibit&nbsp;10.16 to Registration No.&nbsp;333-7184 and
incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.2</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;18, 1996 between Novel Textiles Limited and
Finlease Company Limited (previously filed as Exhibit&nbsp;10.17 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.3</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May&nbsp;13, 1996 between Novel Textiles Limited and The
Mauritius Commercial Bank Ltd. (previously filed as Exhibit&nbsp;10.18 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">42</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Number</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"  nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.4</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;6, 1996 between Novel Garments (Mauritius)
Limited and The Mauritius Commercial Bank Ltd. (previously filed as Exhibit&nbsp;10.19 to
Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.5</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;6, 1996 between Novel Textiles Limited and The
Mauritius Commercial Bank Ltd. (previously filed as Exhibit&nbsp;10.20 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.6</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of October&nbsp;7, 1996 between Novel Garments (Mauritius)
Limited and The Hongkong and Shanghai Banking Corporation Limited (previously filed as
Exhibit&nbsp;10.21 to Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.7</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of February&nbsp;28, 1997 between Novel Textiles Limited and
Banque Nationale De Paris Intercontinentale (previously filed as Exhibit&nbsp;10.22 to
Registration No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.8</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May&nbsp;21, 2001 between Novel Textiles Limited and Banque
Nationale De Paris Intercontinentale</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.9</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May&nbsp;25, 2001 between Novel Spinners (SA)(Pty)Ltd, Novel
Weavers (SA)(Pty)Ltd, Seawind Investments 4 (Pty) Ltd and Nedcor Bank Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.10</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;23, 2001 between Novel Spinners (SA)(Pty)Ltd and
Nedcor Bank Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
                        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.11</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;27, 2002 between Novel Denim Holdings Limited and
The Hongkong and Shanghai Banking Corporation Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.12</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;27, 2002 between Novel Denim (HK)&nbsp;Ltd and The
Hongkong and Shanghai Banking Corporation Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.13</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;28, 2002 between Novel Garments International Ltd
and The Hongkong and Shanghai Banking Corporation Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.14</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Registration Rights Agreement dated as of May&nbsp;13, 1997 between the Company and Novel
Apparel (BVI)&nbsp;Limited (previously filed as Exhibit&nbsp;10.25 to Registration No.&nbsp;333-7184
and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.15</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Redemption Agreement dated as of April&nbsp;25, 1997 between the Company and Novel Apparel
(BVI)&nbsp;Limited (previously filed as Exhibit&nbsp;10.26 to Registration No.&nbsp;333-7184 and
incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.16</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Share Purchase Agreement dated August&nbsp;9, 1998 by and among Novel Textiles (BVI)
Limited, Novel Denim Holdings Limited and Novel Enterprises Limited (previously filed
as Exhibit&nbsp;2.1 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31, 1999 and incorporated
herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.17</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Share Purchase Agreement dated August&nbsp;7, 2001 by and among Novel Investment Holdings
Limited, Novel Denim Holdings Limited and Novel Enterprises Limited</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.18</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Suspensive Sale Agreement dated May&nbsp;6, 1996 between Findevco (Proprietary) Limited
and Novel Spinners SA (Proprietary) Limited and Novel Weavers SA (Proprietary) Limited
(previously filed as Exhibit&nbsp;2.4 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31, 1999
and incorporated herein by reference)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">43</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Exhibit</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><FONT size="1"><B>Number</B></FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1"><B>Description</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.19</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement and Guarantee dated June&nbsp;23, 1999 between Novel Denim Holdings
Limited and Certain of its Subsidiaries and The Hongkong and Shanghai Banking
Corporation Limited (previously filed as Exhibit&nbsp;2.9 to Form&nbsp;20-F for the fiscal year
ended March&nbsp;31, 2000 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.20</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement and Guarantee dated August&nbsp;11, 1999 between Novel Denim Holdings
Limited and Certain of its Subsidiaries and The Hongkong and Shanghai Banking
Corporation Limited (previously filed as Exhibit&nbsp;2.10 to Form&nbsp;20-F for the fiscal year
ended March&nbsp;31, 2000 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.21</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated May&nbsp;25, 2000 between Novel Denim Holdings Limited and Certain
of its Subsidiaries and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit&nbsp;10.15 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31,
2001 and incorporated herein by reference)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">10.22</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Consent of PricewaterhouseCoopers</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">99.1</FONT></TD>
                <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Section&nbsp;906 Certification</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">44</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="024"></A></DIV>
<P align="center"><FONT size="2"><B>SIGNATURES</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant hereby certifies that it meets all of the requirements for
filing on Form&nbsp;20-F and that its has duly caused and authorized the undersigned
to sign this Annual Report on its behalf.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="65%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="30%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
NOVEL DENIM HOLDINGS LIMITED</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center" valign="top"><FONT size="2">
/s/ Silas K.F. Chou
<HR size="1" noshade>
Silas K.F. Chou, Chairman of the Board</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">Date: September&nbsp;25, 2002</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">45</FONT>



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<P align="center"><FONT size="2"><B>CERTIFICATIONS</B>
</FONT>

<P align="left"><FONT size="2">I, K.C. Chao, certify that:
</FONT>
<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Novel Denim Holdings
Limited;
</FONT>
<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
</FONT>
<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="45%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="46%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
/s/
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">K.C. CHAO</FONT></TD>
</TR>
<TR>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" valign="top" align="left"><HR size="1" noshade width="65%" align="left"></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Name:<BR>
Title:<BR>
Date:
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">K.C. Chao<br>
Chief Executive Officer and President<br>
September&nbsp;25, 2002</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">I, Alain Rey, certify that:
</FONT>
<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this annual report on Form&nbsp;20-F of Novel Denim Holdings
Limited;
</FONT>
<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
</FONT>
<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="45%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="46%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
/s/
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">ALAIN REY</FONT></TD>
</TR>
<TR>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" valign="top" align="left"><HR size="1" noshade width="65%" align="left"></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Name:<BR>
Title:<BR>
Date:
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Alain Rey<br>
Chief Financial Officer<br>
September&nbsp;25, 2002</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">46</FONT>

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<!-- link1 "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="025"></A></DIV>
<P align="center"><FONT size="2"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="91%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Page</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Report of Independent Accountants</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Income for the years ended March&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Balance Sheets as of March&nbsp;31, 2001 and 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Cash Flows for the years ended March&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Changes in Shareholders&#146; Equity for the years ended March&nbsp;31, 2000, 2001 and 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">F-6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes to Consolidated Financial Statements</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="3" align="center" nowrap><FONT size="2">F-7 to F-28</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">$ = United States Dollars
</FONT>
<P align="center"><FONT size="2">F-1</FONT>

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<P align="center"><FONT size="2"><B>REPORT OF INDEPENDENT ACCOUNTANTS</B>
</FONT>

<P align="left"><FONT size="2">To the Board of Directors and Shareholders of Novel Denim Holdings Limited
</FONT>

<P align="left"><FONT size="2">In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of changes in shareholders&#146; equity and of
cash flows present fairly, in all material respects, the financial position of
Novel Denim Holdings Limited and its subsidiaries (the &#147;Company&#148;) as of March
31, 2001 and 2002 and the results of their operations and their cash flows for
each of the three years ended March&nbsp;31, 2000, 2001 and 2002 in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company&#146;s management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
</FONT>
<P align="left"><FONT size="2">As discussed in Notes 3(q) and 18 to the financial statements, the Company
adopted SFAS No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging
Activities&#148;, as amended by SFAS No.&nbsp;138, &#147;Accounting for Certain Derivative
Instruments and Certain Hedging Activities&#148;.
</FONT>
<P align="left"><FONT size="2">PricewaterhouseCoopers<br>
Hong Kong<br>
June&nbsp;10, 2002
</FONT>
<P align="center"><FONT size="2">F-2</FONT>

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<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>CONSOLIDATED STATEMENTS OF INCOME</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="48%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585,168</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046,191</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,100,924</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of goods sold</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(132,201,378</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(107,465,596</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(84,455,752</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross profit</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26,383,790</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">30,580,595</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,645,172</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other revenues</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">789,562</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">440,196</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">638,028</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Selling, general and administrative expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(18,693,399</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(15,186,886</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(12,248,521</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Impairment loss</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,375,295</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other expenses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(588,709</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,104,658</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,245,196</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,034,679</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,955,121</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,168,750</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,722,587</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before minority interest, tax and
effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,149,537</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,076,446</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,312,092</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Taxation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(298,205</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(81,544</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(47,653</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">51,595</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,769,788</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">307,997</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per share before accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.19</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.30</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.19</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.29</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per share after accounting change</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.23</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.30</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.29</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes to these Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">F-3</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>CONSOLIDATED BALANCE SHEETS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="64%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>ASSETS</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current assets:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,995,472</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,360,748</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">28,342,886</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">25,581,613</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">50,885,767</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">41,472,565</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Spare parts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,651,802</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,293,682</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,579,775</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,179,340</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">99,455,702</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">73,887,948</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">89,924,400</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">75,231,737</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">189,380,102</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">149,119,685</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current liabilities:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term borrowings and bank overdrafts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">52,532,174</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">27,680,949</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of long-term debt</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,924,104</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">247,081</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of capital leases</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">506,275</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">398,122</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,785,626</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,137,345</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued salaries and wages and other accrued liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">14,558,394</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,372,176</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Due to related parties</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">23,539</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,122</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">73,330,112</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">49,844,795</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,029,661</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">102,950</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term portion of capital leases</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,512,814</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,507,092</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">762,289</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">330,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">536,187</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">454,643</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">92,171,063</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">54,239,480</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preferred Shares, $1 par value, 5,000,000 shares authorized, no
shares issued and outstanding</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Ordinary Shares $1 par value, 23,000,000 shares authorized,
9,437,500 issued and outstanding</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional paid-in capital</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,568,016</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,823,128</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Treasury stock, at cost (shares : 2002 &#150; 298,600; 2001 &#150; 367,700)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,247,176</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,733,953</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">74,431,315</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">72,353,530</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other Comprehensive Income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,384</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total shareholders&#146; equity</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">97,209,039</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">94,880,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Commitments
and contingencies (note 13)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom">
<TD><FONT size="2">&nbsp;</FONT></TD>
<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Liabilities and Shareholders&#146; Equity</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">189,380,102</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">149,119,685</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes to these Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">F-4</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>CONSOLIDATED STATEMENTS OF CASH FLOW</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="3%">&nbsp;</TD>
        <TD width="52%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net income to cash provided
by operating activities:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11,852,612</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,702,489</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,832,375</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on disposition of fixed assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(68,649</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(56,171</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(123,289</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Impairment loss</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,375,295</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other changes that provided (used)&nbsp;cash</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Decrease (increase)&nbsp;in accounts receivable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">707,211</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(7,225,651</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">840,743</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in inventories</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(5,217,638</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(9,622,632</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(7,234,661</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Decrease (increase)&nbsp;in spare parts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">311,954</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(429,956</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">162,895</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in other current assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,597,303</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(550,703</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(93,231</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in accounts payable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(4,556,323</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,985,681</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(447,207</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in accrued liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,268,591</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,601,955</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,265,213</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in other long term liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(11,218</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">95,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(56,595</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in amount due to related parties</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(47,427</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(215,600</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">213,649</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by operating activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,557,708</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11,313,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,723,579</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>





<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investing activities
</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>




<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investment in property, plant and equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(10,983,278</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(16,286,173</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(10,157,054</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investment in subsidiaries</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(16,158,489</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from disposition of property, plant and
equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">192,913</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">402,128</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">859,888</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in investing activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(26,948,854</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(15,884,045</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(9,297,166</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financing activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in short term borrowings and
bank overdrafts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">22,287,122</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,582,323</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(154,063</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from long-term debt</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,953,765</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment of long-term debt</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(350,031</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(382,705</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(358,075</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment of current maturities of capital leases</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,096,651</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,386,790</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(772,829</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment of repurchase of ordinary shares</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(178,410</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,117,040</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from exercise of share options</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">410,075</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">218,441</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by (used in) financing activities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">34,025,870</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,914,229</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,284,967</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
     <TR><TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">10,634,724</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">343,389</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(858,554</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at beginning of year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,360,748</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,017,359</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,875,913</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at end of year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,995,472</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,360,748</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,017,359</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents are comprised of:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,995,472</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,360,748</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,017,359</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Supplemental cash flow disclosure</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest paid</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,165,037</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,240,373</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,137,861</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax paid</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">152,623</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes to these Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">F-5</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="33%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Additional</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Other</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Total</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Ordinary</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Retained</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Paid-in</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Treasury</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Comprehensive</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Shareholders'</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Shares</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Earnings</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Capital</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Stock</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Income</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Equity</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance as of March&nbsp;31, 1999</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">53,961,050</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,987,774</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">79,386,324</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance as of March&nbsp;31, 2000</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">60,324,737</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,987,774</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">85,750,011</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Share repurchase, not
retired (number of shares: 420,200)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,117,040</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,117,040</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercise of share option
(number of shares: 52,500)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(164,646</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">383,087</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">218,441</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance as of March&nbsp;31, 2001</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">72,353,530</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,823,128</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,733,953</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">94,880,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Share repurchase, not retired
(number of shares: 20,100)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(178,410</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(178,410</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercise of share options
(number of shares: 89,200)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(255,112</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">665,187</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">410,075</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Derivatives qualifying as
hedges</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,384</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,384</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance as of March&nbsp;31, 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">74,431,315</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,568,016</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">($2,247,176</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">19,384</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">97,209,039</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">See accompanying notes to these Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">F-6</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>1.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Organization and Business and Basis of Presentation</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Organization and business</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Novel Denim Holdings Limited (hereinafter &#147;Novel Denim&#148; or the &#147;Company&#148;;
references include all subsidiaries unless the context otherwise
requires) was incorporated in the British Virgin Islands in November
1989. During the year ended March&nbsp;31, 1996, the Company was reorganized
and acquired certain denim fabric production and related operations from
its then controlling shareholder, Novel Enterprises Limited (&#147;NEL&#148;).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In December 1998, NEL sold its entire interest in Novel Denim to an
affiliate company. Further to this transaction, this affiliate company
has an indirect interest in NEL and Novel Denim.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company is a holding company with no independent operations. As of
March&nbsp;31, 2002, the Company has twenty one subsidiaries, two of which are
incorporated in Mauritius, one of which is incorporated in Madagascar,
three of which are incorporated in the Channel Islands, four of which are
incorporated in South Africa, five of which are incorporated in the
British Virgin Islands, five of which are incorporated in Hong Kong, and
one of which is incorporated in Peoples Republic of China (&#147;China&#148;). The
Mauritius subsidiaries are Novel Textiles Limited (&#147;NTL&#148;) and Novel
Garments (Mauritius) Limited (&#147;NGML&#148;). NTL is mainly engaged in the
manufacture and sale of fabric while NGML&#146;s main business is garment
production. The subsidiary incorporated in Madagascar is Novel Garments
(Madagascar) Limited (&#147;NGMAD&#148;). NGMAD&#146;s main business is garment
production. The subsidiaries incorporated in the Channel Islands are
Nomacotex Limited (&#147;NL&#148;), Novel Garments International Limited (&#147;NGIL&#148;)
and Byren Trading Limited (&#147;BTL&#148;). NL and NGIL are involved in the
purchase and supply of raw cotton to NTL and the sale of garments
manufactured by NGML and NGMAD, respectively. BTL has a branch office in
London acting as a sales office for the European Market. The South Africa
subsidiaries are Novel Spinners (SA) (Pty) Limited (&#147;NSL&#148;), Novel Dyers
(SA) (Pty) Limited (&#147;NDL&#148;), Novel Weavers (SA) (Pty) Limited (&#147;NWL&#148;) and
Novel Garments (SA) (Pty) Ltd. (&#147;NGSAL&#148;). NSL is engaged in the
manufacture of cotton yarn, NDL is engaged in the dying process of cotton
yarn, NWL is engaged in the manufacture of fabrics and NGSAL will be
engaged in garment production which is expected to commence in mid fiscal
2003. The British Virgin Islands subsidiaries are Kotten Limited
(&#147;Kotten&#148;), Battel Limited (&#147;Battel&#148;), Good Port Finance Limited
(&#147;GPFL&#148;), NDP Holdings Limited (&#147;NDPHL&#148;) and NDP Investment Limited
(&#147;NDPIL&#148;). Kotten and Battel are engaged in marketing activities for
NGML and NGIL, GPFL is engaged in group internal funding activities,
NDPHL and NDPIL are investment holding companies. The company
incorporated in China is Novel Dyeing and Printing Mills Ltd (NDPML)
which is engaged in the dyeing and printing of fabrics. The companies
incorporated in Hong Kong are Novel Denim (HK)&nbsp;Limited (&#147;ND-HK&#148;), NDP
Fabrics Limited (&#147;NDPFL&#148;), Noveltex Trading Limited (&#147;NTXL&#148;), NDP Trading
Limited (&#147;NDPTL&#148;) and Income Pearl Limited (&#147;IPL&#148;). ND-HK is engaged in
the provision of sourcing, marketing and logistical support to NGML and
NGMAD as well as being a sales office in South East Asia for fabrics
manufactured by NTL and NWL, NTXL is engaged in the sourcing activities
for NDPML, NDPFL is a engaged in sales and providing logistical support
to NDPML, NDPTL and IPL are both investment holding companies.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">With the exception of NTL, which is 98.65% owned by the Company, all
other subsidiaries are wholly owned by the Company.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On July&nbsp;23, 1997, the Company completed its initial public offering of
its Ordinary Shares (the &#147;Offering&#148;) pursuant to which the Company sold
937,500 shares at an offering price of $18.00 per share. The Company&#146;s
controlling shareholder also participated in the Offering by selling
3,950,000 shares of the Company (including 637,500 shares sold pursuant
to the exercise of the underwriters&#146; over allotment option). Proceeds to
the Company, net of associated costs amounting to $2,949,726, were
$13,925,274.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On August&nbsp;31, 1998, the Company completed its acquisition of NSL and NWL
from an affiliate of the Company for a consideration of $8,777,584 plus
the assumption of debt. The transaction was negotiated and approved by
the independent committee of the Company&#146;s Board of Directors.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-7</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>1.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Organization and Business and Basis of Presentation (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Organization and business (continued)</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On October&nbsp;1, 2001, the Company completed its acquisition of
NDPHL from an affiliate of the Company for a consideration of
$16,158,489 plus the assumption of debt. The transaction was
negotiated and approved by the independent committee of the
Company&#146;s Board of Directors.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On March&nbsp;28, 2002 the Company announced its intention to close
its Madagascar operations after more than three months of
significant political and social unrest in the country and severe
disruption to the business. A review has been carried out for fixed
assets located in Madagascar to ensure that the carrying amount of
fixed assets does not exceed the fair value. As a result, an
impairment loss of $2,375,295 has been recorded in the year ended
March&nbsp;31, 2002.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(b)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Basis of presentation</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Consolidated Financial Statements include the accounts of Novel Denim
and all of its subsidiary companies and have been prepared in accordance
with principles generally accepted in the United States of America.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>2.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Critical Accounting Policies</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The preparation of consolidated financial statements requires the Company
to make estimates and judgements that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company
evaluates its estimates, including those related to cash equivalents,
inventories, income taxes, financing operations, claims, impairment cost,
and contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Cash and cash equivalents</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Cash includes cash equivalents. Highly liquid investments with
maturities of three months or less when purchased are considered to be
cash equivalents. Because of the short maturities of these instruments,
the carrying amount is a reasonable estimate of fair value.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(b)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Inventories</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Inventories and work in progress are stated at the lower of cost or net
realizable value. Cost, calculated on a weighted average basis,
comprises the cost of raw materials, direct labor and an appropriate
portion of production overheads.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company enters into commitments for the purchase of raw cotton which
is a component of the finished goods it manufactures. In determining the
net realizable value of such finished goods, the Company considers the
effect of changes in the price of raw cotton between the date it enters
into the purchase commitments and the balance sheet date. Where such
changes result in a reduction in the estimated net realizable value of
inventory to less than cost, appropriate provisions are made.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp; </FONT></TD>
        <TD width="3%"><FONT size="2">(c)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Spare parts</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Spare parts for property, plant and equipment are carried at the lower of
cost or net realizable value. The cost of spare parts is charged to
expense when the spare parts are placed into service.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-8</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp; </FONT></TD>
        <TD width="3%"><FONT size="2">(d)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Property, plant and equipment</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Property, plant and equipment is stated at cost less accumulated
depreciation. Interest costs incurred during the construction period of
certain long term assets are capitalized. No interest was capitalized in
the years ended March&nbsp;31, 2000, 2001 and 2002. Depreciation of property,
plant and equipment is calculated to write off the cost of individual
assets in equal annual installments over their estimated useful lives
which are as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="75%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1"><B>Years</B></FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Buildings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">50</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leasehold improvements</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">6 <SUP>2</SUP>/3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Furniture and fixtures</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">6 <SUP>2</SUP>/3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equipment and tools</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">6 <SUP>2</SUP>/3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plant and machinery</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="2">6 <SUP>2</SUP>/3-10</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Motor vehicles</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">3 <SUP>1</SUP>/3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Computer equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="center"><FONT size="2">3 <SUP>1</SUP>/3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">No depreciation is provided on construction in progress until it is
completed and becomes operational.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company adopted Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;121, &#147;Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of&#148; in the year ended March
31 1997. The Statement requires management to review the carrying
values of certain assets when circumstances indicate that such
carrying values may not be recoverable.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp; </FONT></TD>
        <TD width="3%"><FONT size="2">(e)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Leases</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Leases where substantially all the rewards and risks of ownership of
assets remain with the leasing company are accounted for as operating
leases. Rental payments applicable to such operating leases are
recognized over the lease term.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Leases which meet the capital lease criteria specified in SFAS No.&nbsp;13 are
accounted for as capital leases. Interest costs associated with such
leases are recognized on an effective yield basis.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"> &nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(f)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Income taxes</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company is subject to taxation on earnings derived from its
Mauritius, South African, Hong Kong and China operations, but is not
subject to taxation in other jurisdictions in which it operates (note 5).
To the extent the Company&#146;s earnings are taxable, related deferred tax
assets and liabilities are determined in accordance with SFAS No.&nbsp;109,
&#147;Accounting for Income Taxes,&#148; and result from revenues and expenses
being recognized in different time periods for financial reporting
purposes and for income tax purposes. Under SFAS No.&nbsp;109, deferred
income taxes arise from temporary differences and losses carried forward
which are tax-effected at the tax rates in effect at the end of the
period.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp; </FONT></TD>
        <TD width="3%"><FONT size="2">(g)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Foreign currency</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The U.S. dollar represents the functional currency of Novel Denim,
including the subsidiaries incorporated in Mauritius, South Africa, the
Channel Islands, the British Virgin Islands and Madagascar. Transactions
in currencies other than U.S. dollars (&#147;Foreign currencies&#148;) are
translated into U.S. dollars at exchange rates in effect at the
transaction dates. Assets expressed in foreign currencies which are
covered by forward contracts are translated at contract rates. Gains and
losses on forward contracts intended to hedge, and effective as hedges
of, firm foreign currency commitments are deferred. All other monetary
assets and liabilities expressed in foreign currencies are translated at
exchange rates at the balance sheet date. All such exchange differences
are dealt with in the income statement. Net foreign currency translation
gains included in net income for the years ended March&nbsp;31, 2000, 2001
and 2002 were $411,292, $1,948,100 and $2,997,020, respectively.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-9</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp; </FONT></TD>
        <TD width="3%"><FONT size="2">(g)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Foreign currency (continued)</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For subsidiary companies which use U.S. dollars as their
functional currency, translation of their foreign currency accounts
is dealt with as follows:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">Property, plant and equipment and related depreciation and
inventories are translated into U.S. dollars at amounts which
approximate historical rates of exchange.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">Other assets and liabilities, representing monetary items,
are translated at exchange rates at the balance sheet date and
income and expense items at amounts which approximate historical
rates of exchange.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">All translation gains and losses arising from remeasurement are included
in net income.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The functional currency of ND-HK, NDPML, NTXL and NDPFL is the Hong Kong
dollar. The effect on the Company&#146;s equity of translating the accounts
of these companies into U.S. dollars is not material.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(h)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Revenue recognition</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The company has reviewed its accounting policies in accordance with
Bulletin (SAB)&nbsp;No.&nbsp;101, &#147;Revenue Recognition in Financial Statements&#148;.
SAB No.&nbsp;101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. The company&#146;s
policies for revenue recognition are consistent with the views expressed
in SAB No.&nbsp;101.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Sales are recognized when goods are delivered and title has been passed
to customers. Due provision has been made for sales returns.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(i) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Earnings per share</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In 1998, the Company adopted SFAS No.&nbsp;128, &#147;Earnings per Share&#148;. SFAS
No.&nbsp;128 requires that companies present basic and diluted per share
amounts for income from continuing operations and net income on the face
of the income statement, regardless of the magnitude of their difference.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Basic earnings per share is computed by dividing income available to
holders of Ordinary Shares by the weighted average number of Ordinary
Shares outstanding during the period.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Diluted earnings per share gives effect to all dilutive potential
Ordinary Shares outstanding during the period. The weighted average
number of Ordinary Shares outstanding is adjusted to include the number
of additional Ordinary Shares that would have been outstanding if the
dilutive potential Ordinary Shares had been issued.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In computing the dilutive effect of potential Ordinary Shares, the
average stock price for the period is used in determining the number of
treasury shares assumed to be purchased with the proceeds from exercise
of warrants and options.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(j)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Stock options</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">SFAS No.&nbsp;123 allows companies which have stock-based compensation
arrangements with employees to adopt a fair-value basis of accounting for
stock options and other equity instruments, or to continue to apply the
existing accounting rules under Accounting Principles Board (&#147;APB&#148;)
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to Employees&#148;, but with
additional financial statement disclosure. The Company plans to continue
to account for stock-based compensation arrangements under APB Opinion
No.&nbsp;25 and provides additional disclosure to that effect in note 16.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-10</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(k)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Treasury Stock</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Treasury stock is accounted for using the cost method. When treasury
stock is reissued, the value is computed and recorded using a
weighted-average basis.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(l)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Transfers of accounts receivable with recourse</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company has entered into an agreement with a financial institution
pursuant to which the financial institution has agreed to make advances
to it which are secured by accounts receivable. The advances are made
with recourse to the Company and are accounted for as financing
transactions in accordance with the provisions of SFAS No.140,
&#147;Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities&#148;, since the Company has not effectively
surrendered control of the receivables.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(m) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Use of estimates</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect
the reported amount of assets, liabilities, sales and expenses. Actual
results could differ from those estimates.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(n) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Comprehensive Income</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On April&nbsp;1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS)&nbsp;No.&nbsp;130, &#147;Reporting Comprehensive Income.&#148; Other
comprehensive income refers to revenue, expenses, gains and losses that
under accounting principles generally accepted in the United States are
included in comprehensive income but are excluded from net income as
these amounts are recorded directly as an adjustment to shareholders&#146;
equity, net of tax. The Company&#146;s other comprehensive income is composed
of unrealized gains and losses on cash flow hedge adjustments.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Statement 130 requires unrealized gains or losses on the Company&#146;s
foreign currency translation adjustments to be included in comprehensive
income. However, as noted in note 2 (g), the effect on the Company&#146;s
equity of translating the accounts of ND-HK, NDPML, NTXL and NDPFL into
US dollars is not material.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(o) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Segment and Geographic Information</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On April&nbsp;1, 1998, the Company adopted SFAS No.&nbsp;131, &#147;Disclosures about
Segments of an Enterprise and Related Information.&#148; SFAS 131 established
interim and annual report standards for an enterprise&#146;s operating
segments and related disclosures about its products, services, geographic
areas and major customers. The Company has two reportable segments: the
manufacturing and sales of garments and fabric products. The information
for these segments is the information used by the Company&#146;s chief
operating decision-maker to evaluate operating performance. See &#147;Segment
Information&#148; (note 12) for further information regarding SFAS 131.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(p) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Costs of Start-Up Activities</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company early adopted Statement of Position (&#147;SOP&#148;) No.&nbsp;98-5,
Reporting on the Costs of Start-Up Activities. SOP No.&nbsp;98-5 requires
that costs of start-up activities and organization costs, as defined, be
expensed as incurred. For the years ended March&nbsp;31, 2001 and 2002, the
Company recognized a charge of $588,709 and nil, respectively. This
charge is included in other expense in the consolidated statement of
income.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-11</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(q) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Derivative Financial Instruments</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On April&nbsp;1, 2001, the company adopted SFAS No.&nbsp;133, &#147;Accounting for
Derivative Instruments and Hedging Activities&#148;, as amended by SFAS No.
138, &#147;Accounting for Certain Derivative Instruments and Certain Hedging
Activities&#148;. Under SFAS No.&nbsp;133, all derivative instruments (including
certain derivative instruments embedded in other contracts) are
recognized in the balance sheet at their fair values and changes in fair
value are recognized immediately in earnings, unless the derivatives
qualifies as hedges of future cash flows. For derivatives qualifying as
hedges of future cash flows, the effective portion of changes in fair
value is recorded temporarily, in equity, then recognized in earnings
along with the related effects of the hedged items. Any ineffective
portion of hedges is reported in earnings as it occurs. Further
information about derivatives and hedging is provided in note 18.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The cumulative effect of adopting this accounting change at April
1, 2001, was the recognition in the consolidated statement of income
of an unrealized gain amounting to $307,991.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(r) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Recoverability of Long-lived Assess</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Long-lived assets are reviewed for impairment whenever events of changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Assets are grouped and evaluated at the lowest
level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated
results in its evaluation of potential impairment. The Company
measures the amount of the impairment by comparing the carrying
amount of the assets to its fair value. The Company estimates fair
value based on the best information available making whatever
estimates, judgements and projections are considered necessary. The
estimation of fair value is generally measured by determining the
net selling price or by discounting expected future cash flows at
discount rates commensurate with the risk involved.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(s) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>New Accounting Pronouncements</I></FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2"><B>(i)</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B>SFAS No.141 Business Combinations (&#147;SFAS 141&#148;) and SFAS No
142 Goodwill and Other Intangible Assets (&#147;SFAS142&#148;)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">In July 2001, the Financial Accounting Standards Board (the &#147;Board&#148;)
issued Statement of Financial Accounting Standards SFAS 141 and SFAS
142</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">SFAS No.&nbsp;141 requires that the purchase method of accounting be used
for all business combinations initiated after 30 June 2001; (i)
establishes specific criteria for the recognition of intangible
assets separately from goodwill; and (ii)&nbsp;requires unallocated
negative goodwill to be written off. The Company has appropriately
applied SFAS 141 to the acquisition of NDP during the year.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">SFAS No.&nbsp;142 (a)&nbsp;addresses financial accounting and reporting for
goodwill and intangible assets; (b)&nbsp;provides guidance on the
amortization of intangible assets other than goodwill; (c)&nbsp;requires
that goodwill not be amortized; and (d)&nbsp;requires an annual evaluation
of goodwill and certain intangible assets for impairment. SFAS 141
is effective for all business combinations initiated after 30 June,
2001. Most provisions of SFAS No.&nbsp;142 are effective for fiscal years
beginning after 15 December 2001.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2"><B>(ii)</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B>SFAS No 143 Accounting for Asset Retirement Obligations
(&#147;SFAS 143&#148;)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">In July 2001, the Board issued SFAS 143 which requires entities to
record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability
is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived assets. Over time, the
liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon
settlement. SFAS 143 is effective for fiscal years beginning after
15 June 2002.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-12</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Significant Accounting Policies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(t) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>New Accounting Pronouncements (continued)</I></FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2"><B>(iii)</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2"><B>SFAS No 144 Accounting for the Impairment or Disposal of
Long-Lived Assets (&#147;SFAS 144&#148;)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="91%"><FONT size="2">In October 2001, the Board issued SFAS 144 which requires that
those long-lived assets to be sold be measured at the lower of
carrying amount or fair value less cost to sell, whether reported
in continued operations or in discontinued operations. Under this
statement, discontinued operations will no longer be measured at
net realizable value or include amounts for operating leases that
have not yet occurred. SFAS 144 is effective for fiscal years
beginning after 15 December 2001.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Except for SFAS 141, which has already been adopted, the Company is
currently assessing the impact of the adoption of these statements.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>4.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Inventories</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Inventories consist of the following:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="40%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Raw materials</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">20,816,918</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">20,329,419</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Work in progress</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">22,163,156</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">17,121,730</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Finished goods</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,905,693</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,021,416</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">50,885,767</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">41,472,565</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>5.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Property, Plant and Equipment</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Property, plant and equipment consist of the following:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="56%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land and buildings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">37,820,882</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">25,073,781</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Land use rights</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,187,549</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leasehold improvements</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,507,555</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,865,810</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plant and machinery</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">104,029,974</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">74,051,063</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equipment and tools</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">16,488,533</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,795,392</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Furniture and fixtures</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,791,997</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,653,922</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Computer equipment</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,422,163</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,127,068</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Motor vehicles</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,598,776</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,024,215</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Construction in progress</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,195,848</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,007,436</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">172,043,277</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">122,598,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less : Accumulated depreciation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">82,118,882</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">47,366,950</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">89,924,395</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">75,231,737</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-13</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>5.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Property, Plant and Equipment (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Plant and machinery includes leased equipment with a cost of $6,489,930
and $11,711,984 at March&nbsp;31, 2001 and 2002. Depreciation charged during
the years ended March&nbsp;31, 2001 and 2002 amounted to $841,869 and
$977,780, respectively. Accumulated depreciation in respect of such
equipment amounted to $2,183,328 and $3,756,078 at March&nbsp;31, 2001 and
2002, respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Land and buildings includes leased buildings with a cost of $4,253,800
and $4,100,848 at March&nbsp;31, 2001 and 2002, respectively. Depreciation
charged during the year ended March&nbsp;31, 2001 and 2002 amounted to $82,851
and $82,671, respectively. Accumulated depreciation in respect of such
building amounted to $266,991 and $355,752 at March&nbsp;31, 2001 and 2002,
respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Property, plant and equipment with a net book value of $54,648,333 as of
March&nbsp;31, 2002 has been pledged as collateral for certain bank borrowings
(notes 7 and 8).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>6.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Income Taxes</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Novel Denim has in place various tax strategies to minimize tax
liabilities in the jurisdictions in which it operates. The company is
not taxed on income in the British Virgin Islands where it is
incorporated.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiaries which are incorporated in the Channel Islands are not
subject to income tax because they are non-resident in the Channel
Islands.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiary which is incorporated in Madagascar is exempt from income
tax for a period of 5&nbsp;years starting in calendar year 1998.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Effective from April&nbsp;1, 2000 the Mauritius subsidiaries are subject to
tax at a rate of 15%.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiaries which are incorporated in Hong Kong were subject to tax
at a rate of 16% on income arising in Hong Kong during the years ended
March&nbsp;31, 1999, 2001 and 2002 or have unutilised tax losses to offset
against the assessable profit during the years.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiaries which are incorporated in South Africa were
subject to tax at a rate of 30% on income during the year ended
March&nbsp;31, 2000, 2001 and 2002. The subsidiaries, however, had no
taxable income or have unutilised tax losses to offset against the
assessable profit during these years.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiaries which are incorporated in the British Virgin Islands are
not subject to income tax because they are non-resident in the British
Virgin Islands.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The subsidiary which is incorporated in China is subject to tax
at a rate of 15%.</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="56%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Reconciliation of Effective Income Tax Charge</B></FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax charge at applicable rate</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">734,004</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,061,441</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">228,802</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax losses not recognized</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,279,803</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">298,334</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Utilisation of previously unrecognised losses</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(680,626</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,022,781</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(83,606</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income not subject to tax</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(195,740</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(104,926</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(76,334</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expenses not deductible for tax purposes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">159,757</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">55,182</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">39,279</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of exchange rate changes</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(998,993</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(287,250</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(108,141</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">298,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The applicable tax rate represents the weighted average of the rates of
taxation prevailing in the territories in which the Company operates.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-14</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>6.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Income Taxes (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Income before income taxes consists of:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="40%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">British Virgin Islands</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,006,527</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">259,743</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,782,378</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">143,010</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11,816,703</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,094,470</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,149,537</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,076,446</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,312,092</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The provision for income taxes consists of:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="37%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>

        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>

        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>

        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current tax expenses:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;British Virgin Islands</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>

<TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">186,947</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current provision</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">186,947</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax expenses:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;British Virgin Islands</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">111,258</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total deferred provision</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">111,258</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total provision</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">298,205</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Deferred tax assets / (liabilities)&nbsp;comprises the following:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="46%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets :</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss carry forward</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,311,170</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,345,615</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other temporary difference</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,919,650</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">653,643</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total deferred tax assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,230,820</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,999,258</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
         <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fixed assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,535,902</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,583,602</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total deferred tax liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,535,902</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,583,602</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,806,176</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,415,656</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net deferred tax liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(111,258</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company recorded a valuation allowance for the deferred tax
assets based on the uncertainty as to their ultimate realization.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-15</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>7.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Short-Term Borrowings</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company maintains working capital, overdraft and other credit
facilities with various commercial bank groups in Mauritius, South
Africa, Madagascar, Hong Kong and China. Such facilities bear interest
at rates based on the Mauritius, South Africa and Madagascar base rate,
the Hong Kong prime rate and lending rates on other non-U.S. dollar
currencies and ranged from 3.381% to 16.500% during the year ended March
31, 2002. Information relating to the Company&#146;s short-term credit
facilities is summarized as follows:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="62%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total credit facilities available</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">71,272,542</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">35,669,283</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at end of the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">52,532,174</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">27,680,949</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maximum amount outstanding during the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">52,532,174</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">33,280,378</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Average borrowings during the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">40,984,608</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26,195,693</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted average interest rate:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On average borrowings, computed monthly</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7.24</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9.57</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At year end</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6.56</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9.41</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The balance at the end of the year and maximum amount outstanding during
the year include amounts in respect of receivables discounted with banks
(note 3(l)).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Interest expense on short-term credit facilities amounted to $2,180,625,
$2,506,597 and $2,857,009 for the years ended March&nbsp;31, 2000, 2001 and
2002, respectively. The Company&#146;s credit facilities are subject to
periodic review by the lenders and are payable on demand. A portion of
the Company&#146;s short-term facilities is secured by liens on the assets of
NTL, NGML and NGMAD.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>8.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Long-Term Debt</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Long-term debt</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Long term borrowing arrangements are comprised of three loans which were
arranged by NDHL, NTL Mauritius and NSL with various commercial bank
groups. Information relating to the Company&#146;s long-term debt facilities
is summarized as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="45%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="15"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>

<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
</TR>


<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Loan 2</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Loan 3</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Total</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Loan 1</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total credit facilities available</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,000,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,978,427</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">13,978,427</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">350,031</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at end of the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,000,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,953,765</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,953,765</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">350,031</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maximum amount outstanding during
the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,000,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,978,427</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,978,427</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">732,736</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Average borrowings during the year</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,846,154</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,458,620</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,441,550</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">531,349</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted average interest rate:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On average borrowings, computed
monthly</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2.94</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">10.37</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5.63</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13.07</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At year end</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2.62</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">10.75</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5.51</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13.95</FONT></TD>
        <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Interest expense on long-term debt amounted to $122,914, $69,436 and
$530,134 for the years ended March&nbsp;31, 2000, 2001 and 2002, respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Loan 1 was arranged with NEDBANK in South Africa and was fully repaid in
August 2001.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Loan 2 was arranged with The Hongkong &#038; Shanghai Banking Corporation Ltd
in Hong Kong. The loan period is for five years from October 2001 with no
principal repayment during the first year and then followed by equal
quarterly repayments during the rest of the loan period.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-16</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>8.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Long-Term Debt (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Long-term debt (continued)</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Loan 3 is arranged with BNPI Ltd and Mauritius Commercial Bank Ltd
in Mauritius amounting to Mauritian Rupees (&#147;Rs&#148;) Rs50,000,000 and
Rs1,000,000 respectively. The loan period is for five years from October
2001 with no principal repayment during the first year and then followed
by equal monthly repayments during the rest of the loan period.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(b)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Scheduled maturities</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The aggregate amounts of long-term debt maturing in the next five years
and thereafter are as follows:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="74%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Fiscal Year Ending March 31,</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">As of March 31, 2002</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,924,104</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,729,395</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,985,390</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,189,876</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,125,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,953,765</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less:
Amounts repayable within one year included in current liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,924,104</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,029,661</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>9.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Closure of Madagascar Operation</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On March&nbsp;28, 2002 the Company announced its intention to close
its Madagascar operations after more than three months of
significant political and social unrest in the country and severe
disruption to the business.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(a)</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Impairment of long-lived assets</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">A review of the long-lived assets located in Madagascar has
been carried out to ensure that the carrying amount of the assets
does not exceed their fair value.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For the woven and laundry machinery and computer equipment, no
provision has been made based on the Company&#146;s expectation and
assumption that the machinery and equipment can be successfully
relocated, not withstanding the ongoing political and social
instability within Madagascar, to the Company&#146;s other operations in
Mauritius, South Africa and China, the Company can fully utilize the
capacity transferred, and the transferred assets can generate
sufficient cash flows to support the assets&#146; carrying value.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For the knit plant, machinery and equipment, an impairment loss
of $577,295 was recorded, based on the Company&#146;s estimate of the net
selling price of the assets. This also assumes that the machinery
and equipment can be successfully relocated to the Company&#146;s other
operations in Mauritius, South Africa and China.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For other equipment and tools, leasehold improvement and
furniture and fixtures, the Company estimate that the fair value of
these assets is nil since these assets will not be relocated out of
Madagascar and can not generate any future benefit to the Company.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">As a result a total impairment loss of $2,375,295 has been
recorded for the year ended March&nbsp;31, 2002.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-17</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>9.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Closure of Madagascar Operation (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%" align="left"><FONT size="2">(b) </FONT></TD>
        <TD width="95%"><FONT size="2"><I>Provisions for inventories</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">A review has been carried out in respect of inventories located in
Madagascar and provisions have been made based on the full physical
inventory count and the Company&#146;s estimate of the inventories&#146; net
realizable value after the inclusion of future freight, transportation,
packing and related costs, to ensure that the carrying amount of
inventories does not exceed their net realizable value.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">As a result, an inventory provision of $3,824,000 has been recorded in
the cost of goods sold for the year ended March&nbsp;31, 2002.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">(c) </FONT></TD>
        <TD width="95%"><FONT size="2"><I>Redundancy costs</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Redundancy cost of $405,000 has been provided and written off in the cost
of goods sold for the year ended March&nbsp;31 2002, based on the minimum
amount required by local Madagascar regulation. Such costs were paid in
April 2002.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">All the costs related to the closure of the Company&#146;s closure of
Madagascar operation were attributable to the results of the garments
division in the segment information (note 12).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>10.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Related Party Transactions</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">At March&nbsp;31, 2002, an affiliate of Novel Enterprises Ltd. (&#147;NEL&#148;) held
49.79% of the issued and outstanding ordinary shares of the Company.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Amounts due from related parties comprised trade receivables, management
and service fees and commissions due from affiliates of NEL to which
denim fabric was sold (see (a)&nbsp;and (b)&nbsp;below).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Amounts due to related parties comprise balances with affiliates of NEL.
The balances relate to purchases of raw materials and other inventory
items, general and administrative expenses (including commissions) and
leases (see (d)&nbsp;below).</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">(a) </FONT></TD>
        <TD width="95%"><FONT size="2"><I>Sales to related parties</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company&#146;s customers include Tommy Hilfiger U.S.A., Inc., Pepe Jeans
Europe B.V., Tommy Hilfiger Wholesale, Inc., Tommy Hilfiger Europe B.V.
and certain other affiliates of NEL. Tommy Hilfiger U.S.A., Inc.
(&#147;THUSA&#148;) and Tommy Hilfiger Europe B.V are subsidiaries of Tommy
Hilfiger Corporation (&#147;Tommy Hilfiger&#148;). Tommy Hilfiger Wholesale, Inc.
(&#147;THWS&#148;) is a subsidiary of THUSA. Pepe Jeans Europe B.V. is a
subsidiary of Pepe Holdings Limited (&#147;Pepe Holdings&#148;). Affiliates of the
Company have indirect interests in Tommy Hilfiger and Pepe Holdings.
Additionally, the Company&#146;s Chairman is the Co-Chairman of Tommy
Hilfiger.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Sales to these related companies are summarized as follows:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="46%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger U.S.A., Inc.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">5,517,983</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,620,085</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">50,595</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger Wholesale, Inc.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18,318,967</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,490,742</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">12,920,620</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pepe Jeans Europe B.V.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,013,366</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,079,043</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,727,836</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger Europe B.V.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">58,328</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">68,113</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,133,959</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">24,908,644</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">24,257,983</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,833,010</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-18</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>10.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Related Party Transactions (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Amounts receivable from these companies which are included in accounts
receivable are as follows:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="58%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger U.S.A., Inc.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">708,010</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,143,444</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger Wholesale, Inc.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,659,319</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,391,676</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pepe Jeans Europe B.V.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">92,621</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">313,346</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tommy Hilfiger Europe B.V.</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">37,588</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,390</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,497,538</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,868,856</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(b) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Purchases from related parties</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company purchases certain raw materials and other inventory items
from affiliates of NEL. Purchases from these companies amounted to
$920,394, $993,993 and $24,608 for the years ended March&nbsp;31, 2000, 2001
and 2002, respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(c)</FONT></TD>
        <TD width="96%"><FONT size="2"> <I>Selling, general and administrative expenses</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">During 1997, the Company received certain services from NEL and its
affiliates, including provision of information systems, staff resources,
office space and related overheads. In fiscal 2001 and 2002, such
services were limited to the provision of certain company secretarial
services. Charges to the Company for these services amounted to
$132,075, $132,029 and $134,783 for the years ended March&nbsp;31, 2000, 2001
and 2002, respectively. The charges are based on apportionment of
services provided based on estimated or actual usage. Management
believes this apportionment to be a reasonable allocation method.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company pays commissions to companies affiliated with NEL which act
as selling agents on the Company&#146;s behalf. Total commission expense
amounted to $608,795, $629,205 and $512,692 for the years ended March&nbsp;31,
2000, 2001 and 2002, respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Had the Company operated on a stand-alone basis, management believes that
selling, general and administrative expenses would not have varied
materially from amounts recognized in the years presented.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">(d) </FONT></TD>
        <TD width="96%"><FONT size="2"><I>Leases</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company leases office space from a company which is a subsidiary of
NEL. Rental charges to the Company for the years ended March&nbsp;31, 2000,
2001 and 2002 amounted to $88,555, $136,543 and $173,432, respectively.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In addition, the Company leases land in Mauritius from a subsidiary of
NEL under a long term arrangement. The lease commenced in 1989 and has a
term of 50&nbsp;years. Annual rental charges under the lease arrangement are
not material.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-19</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>11.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Acquisition</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">On October&nbsp;1, 2001 the Company acquired 100% of the share capital of
NDP Holdings Ltd. from a subsidiary of NEL. NDPHL, through its
subsidiaries, owns and operates an integrated fabric dyeing, printing and
finishing facility in the Shenzhen region of China. In addition to
significantly expanding the Company&#146;s overall fabric capacity, the
acquisition brings the Company: (i)&nbsp;a much broader and more sophisticated
range of fabric products to offer existing and new customers; (ii)&nbsp;a
highly experienced and well trained technical fabric management team; and
(iii)&nbsp;a platform for future growth within Asia. The acquired business
contributed revenues of $14,088,680 and operating profit of $1,779,645 to
the Company for the period from October&nbsp;1, 2001 to March&nbsp;31, 2002.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The fair value of assets and liabilities arising from the acquisition
are as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="80%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">As of October 1, 2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,278,511</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">3,468,484</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,195,564</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Spare Parts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">670,074</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other current assets</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">803,132</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,768,597</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term borrowing and bank overdrafts</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,564,103</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,204,604</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued salaries and wages and other accrued liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,555,737</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Due to related parties</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(61,844</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term liabilities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(443,507</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fair value of net assets acquired</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">26,354,567</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Negative goodwill arising on acquisition</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(6,917,567</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total purchase consideration</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,437,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less: Cash and cash equivalents in subsidiary acquired</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,278,511</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash outflow on acquisition</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">16,158,489</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The acquisition has been accounted for using purchase accounting,
negative goodwill arising on acquisition was primarily derived from the
fair value of NDPHL&#146;s property, plant and equipment, at the time of the
acquisition, being higher than the purchase price. The negative goodwill
has been allocated to reduce proportionately the values assigned to
noncurrent assets. Accordingly, the operating results of NDP Holdings
Ltd have been included in the Company&#146;s consolidated financial statement
since the date of acquisition.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following unaudited pro forma consolidated results of operations
for the years ended March&nbsp;31, 2001 and 2002 assume the NDP Holdings Ltd
acquisition occurred as of April&nbsp;1, 2000:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="37%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="11%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="11%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">170,029,958</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">168,388,821</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net earnings</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,875,918</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,296,085</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Earnings per share:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Primary</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.21</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.68</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Fully-diluted</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.20</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.65</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">There were no acquisitions in fiscal 2000 or 2001.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-20</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>12.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Segment Information and Sales to Major Customers</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company adopted SFAS No.&nbsp;131, &#147;Disclosures about Segments of an
Enterprise and Related Information,&#148; during the fourth quarter of fiscal
1998. SFAS No.&nbsp;131 establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company generates substantially all of its operating income through
the export of garments and fabric from Mauritius, Madagascar, South
Africa and PRC to its customers in Europe, U.S. and elsewhere.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company has two business segments, the manufacture and sale of
garments and the manufacture and sale of fabric. The fabric division
sells both to third parties and to the garments division. Overheads in
respect of common services provided to these segments but not directly
attributable to either segment are allocated on the basis of an estimate
of the benefit received by each segment. Overheads not allocated to
either of these segments are included within &#147;Corporate and other&#148; in the
analysis of operating income by segment presented below.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="4%"><FONT size="2">(a)</FONT></TD>
        <TD width="95%"><FONT size="2"><I>Segment Information</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following sets out sales by business segment:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="51%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments&#151;third parties</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">118,459,721</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">109,971,378</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">81,649,900</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric&#151;garments division and third parties</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">84,273,576</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">63,307,713</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">48,713,644</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inter-divisional sales</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(44,148,129</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(35,232,900</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(25,262,620</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585,168</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046,191</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,100,924</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following sets out operating income by business segment and a
reconciliation to income before minority interest:</FONT></TD>
</TR>



</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="54%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">(7,808,978</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11,641,050</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,583,574</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">13,339,339</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,416,910</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,154,311</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and other</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(478,275</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(926,921</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(786,886</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Elimination of unrealized profit</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,052,573</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(1,885,843</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">392,302</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating income</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,104,659</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">15,245,196</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,034,679</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense, net</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,955,121</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(3,168,750</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(2,722,587</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before minority interest and taxation</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,149,538</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,076,446</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,312,092</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Eliminations comprise elimination of unrealized (profit) / loss on
inter-divisional sales of inventory.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">F-21</FONT>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>12.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Segment Information and Sales to Major Customers (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Segment Information (continued)</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following sets out capital expenditure and depreciation expense by
segment:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="32%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital expenditure:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,754,706</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,824,021</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,843,801</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,228,572</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,462,152</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,313,253</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,983,278</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">16,286,173</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,157,054</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,708,208</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">3,769,577</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,835,494</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">7,144,404</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,932,915</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,996,881</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11,852,612</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">9,702,492</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">8,832,375</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">&nbsp;&nbsp;The following sets out identifiable assets between segments:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="42%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="11%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="11%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="12%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Garments</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">63,186,358</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">62,041,901</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fabric</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">123,670,758</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">86,625,977</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and other</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,522,986</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">451,807</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">189,380,102</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">149,119,685</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">&nbsp;&nbsp;Included in corporate and other identifiable assets are certain cash and
cash equivalents, and certain related party balances.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">&nbsp;&nbsp;The following sets out long-lived assets by country:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="34%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="13%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="14%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="13%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="14%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">As of March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mauritius</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">50,942,526</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">51,710,374</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Madagascar</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,783,708</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,283,939</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">South Africa</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">18,198,109</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">14,541,778</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">China</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">14,342,303</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">&#151;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Others</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">657,729</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">695,646</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">89,924,395</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">75,231,737</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Major customers</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company sells garments to THWS and The Gap Inc., which individually
comprise more than 10% of the Company&#146;s sales during the year. Sales to
THWS are disclosed in note 10 above. Sales to The Gap Inc. amounted to
$14,259,558, $31,604,398 and $48,926,829 for the years ended March&nbsp;31,
2000, 2001 and 2002, respectively.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-22</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>12.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Segment Information and Sales to Major Customers (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(c)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Export sales</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following sets out sales by country:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="20%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Fiscal Year Ended March 31,</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Europe</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- France</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10,947,979</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,763,386</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,075,836</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Britain</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">19,573,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">29,875,202</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">21,956,251</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Netherlands</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,455,742</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">5,701,237</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">14,153,718</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Belgium</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,191,667</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">103,035</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,959,242</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Africa</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Mauritius</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,615,116</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">8,256,374</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,794,449</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Madagascar</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,682,411</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,282,400</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4,075,859</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">- Zimbabwe</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,475,932</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">2,093,033</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,511,832</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">USA</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">80,403,837</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">56,191,891</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">29,516,307</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Others</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">29,238,984</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">20,779,633</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">15,057,430</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">158,585,168</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">138,046,191</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">105,100,924</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>13.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Commitments and Contingencies</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Operating leases</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company enters into noncancellable lease agreements for premises
and equipment used in the normal course of business. The following
table shows the future minimum obligations under operating lease
commitments:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="50%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="22%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="22%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Fiscal Year Ending March 31,</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">As of March 31, 2002</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1,999,008</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,497,143</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,310,004</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">44,315</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">660</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Thereafter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">21,120</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">4,872,250</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Capital leases</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Future minimum obligations for assets held under capital lease
arrangements are as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="64%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="15%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="15%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Fiscal Year Ending March 31,</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">As of March 31, 2002</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">574,364</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,683,627</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">748,146</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">710,541</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">788,950</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Thereafter</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,615,257</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6,120,885</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less: interest costs</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(101,796</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,019,089</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-23</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>13.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Commitments and Contingencies (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(c)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Letters of credit</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company is contingently liable for unexpired bank letters of credit
as of March&nbsp;31, 2002 of $4,426,049 related to commitments for the
purchase of inventories, spare parts and machinery.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(d)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Purchase commitments</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In the normal course of business the Company enters into contractual
arrangements for future purchases of raw cotton to ensure availability
and timely delivery. As of March&nbsp;31, 2002, the Company had outstanding
purchase commitments for inventory of $10,360,307. The amount the
Company was required to pay in respect of these commitments was less than
the spot price, as at March&nbsp;31, 2002, for such inventory by $502,989.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">No provision is required in respect of this amount since the
estimated net realizable value of the related finished goods
inventory exceeds estimated cost.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company also enters into contractual arrangements for the purchase of
plant and machinery and factory premises construction. As of March&nbsp;31,
2002, the Company had such outstanding commitments of $1,477,341.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>14.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Employee Benefits</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Other liabilities comprise a provision for deferred employee benefits
amounting to $330,000 and $651,031 as of March&nbsp;31, 2001 and 2002,
respectively. The provision represents an estimate of long service
payments payable to employees in Hong Kong in the future and is
calculated based on the applicable laws of Hong Kong.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company also distributes up to 5% of its income before bonuses and
minority interest each year as bonuses to executives and other employees
under an informal arrangement. All amounts payable under this
arrangement up to March&nbsp;31, 2002 have been provided for in the financial
statements.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>15.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Stock Repurchases</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">From time to time, the Board of Directors authorizes the company to
repurchase the ordinary shares of Novel Denim Holdings Limited. The
company repurchased 20,100 common shares at a cost of $178,410 in 2002
(2001: 420,200 common shares at a cost of $3,117,040). In 2002, the
company did not retire the shares it repurchased. In 2002, the Company
issued 89,200 treasury shares, as a result of exercises of stock options
by employees. At March&nbsp;31, 2002, 298,600 (2001: 367,700) of treasury
stock is retained. The Company plans to continue to purchase shares on
the open market from time to time, depending on market conditions.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-24</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>16.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Stock-based Compensation Plans</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">In August 1997, the Company adopted an Employee Stock Incentive Plan and
a Non-Employee Directors Stock Option Plan (collectively, the &#147;Plans&#148;),
which made available for grant, until December&nbsp;31, 2007, up to 950,000
common shares. The Plans permit the granting of incentive stock options,
restricted stock and stock appreciation rights.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Stock options are granted to purchase stock at a price not less than the
fair market value on the date of grant, vest over a period of five years,
and may be outstanding for any period up to 15&nbsp;years from the date of
grant. Generally, no stock option may be exercised until the employee
has remained in the continuous employment of the Company for one year
after the option is granted.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following is a summary of stock option transactions which occurred
during the year ended March&nbsp;31, 2002:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="66%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Weighted Average</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Options</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Exercise Price Per Share</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD colspan="1"><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding as of April&nbsp;1, 2001</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">728,160</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">10.34</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">75,000</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">11.03</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cancelled</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(16,000</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4.75</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">(89,200</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">4.60</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Outstanding as of March&nbsp;31, 2002</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">697,960</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11.28</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="4" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The following table summarizes information concerning currently
outstanding and exercisable options:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
        <TD width="47%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="11"><FONT size="1">Options Outstanding</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="7"><FONT size="1">Options Exercisable</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="11"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Weighted Average</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Weighted</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Weighted</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Range of</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Remaining</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Average Exercise</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Average Price</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">exercise prices</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Outstanding</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Contractual Life</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Price Per Share</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Exercisable</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">Per Share</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$3.5625&nbsp;-&nbsp;$20.25</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">697,960</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">6.92</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11.28</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">384,440</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">11.95</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company applies APB No.&nbsp;25, in accounting for its stock options.
Under APB No.&nbsp;25, because the exercise price of the Company stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-25</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>16.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Stock-based Compensation Plans (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Pro forma information regarding net income and earnings per share is
required by SFAS No.&nbsp;123, and has been determined as if the Company had
accounted for its stock options under the fair value method of SFAS No.
123. The weighted average fair value of options granted was estimated at
$4.7539 in 2001 and $5.2892 in 2002. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 2001 and 2002,
respectively: risk-free interest rate of 5.69% and 5.59%; dividend yields
of 0%; volatility factors of the expected market price of the Company
Ordinary Shares of 39% and 40%; and a weighted-average expected lives of
the options of 6&nbsp;years.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options&#146; vesting period. The
Company pro forma information is as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
        <TD width="5%">&nbsp;</TD>
        <TD width="71%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="9%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income / (loss):</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">($19,674</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic earnings / (loss)&nbsp;per share:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.23</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">($0.00</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted earnings / (loss)&nbsp;per share:</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">As reported</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pro forma</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">($0.00</FONT></TD>
        <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Because compensation expense associated with an option is recognized over
the vesting period, the current year impact on pro forma net income may
not be representative of compensation expense in future years, when the
effect of the amortization of multiple awards would be reflected in the
income statement.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-26</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>17.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Earnings Per Share</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Basic earnings per share and diluted earnings per share have been
calculated in accordance with SFAS No.&nbsp;128, as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="47%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="7%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2002</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2001</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center" colspan="3"><FONT size="1">2000</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income (Numerator for
basic and diluted earnings per
share-income available to
holders of Ordinary Shares)</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">2,077,785</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">12,028,793</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">6,363,687</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Denominator for basic earnings
per share-weighted-average
shares</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,110,485</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,220,684</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,437,500</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of dilutive securities</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">145,966</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">95,257</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">1,823</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Denominator for diluted
earnings per
share-weighted-average number
of Ordinary Shares and
dilutive potential Ordinary
Shares</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,256,451</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,315,941</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">9,439,323</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><HR size="1" noshade></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic earnings per share</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.23</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.30</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted earnings per share</FONT></DIV></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">1.29</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="right"><FONT size="2">$</FONT></TD>
        <TD align="right"><FONT size="2">0.67</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Stock options to purchase 329,000 common share in 2002 and 279,000 common
shares in 2001 were outstanding, but were not included in the computation
of diluted earnings per share because the exercise price of the options
was greater than the average market price of the common shares and,
therefore, the effect would have been antidilutive.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>18.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Financial Instruments</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(a)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Concentrations of credit risk</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist primarily of cash on
deposit with financial institutions and accounts receivable.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company maintains cash and cash equivalents and certain other
financial instruments with various financial institutions in Hong Kong,
China, Singapore, Madagascar, South Africa and Mauritius and the
Company&#146;s exposure to any one institution is limited.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Concentrations of credit risk with respect to accounts receivable arise
due to a significant portion of the Company&#146;s sales deriving from
relatively few customers. As of March&nbsp;31, 2002, accounts receivable
included $20,368,042 attributable to the Company&#146;s ten largest
receivables balances. The Company manages its risk by securing letters
of credit for the majority of its sales.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Forward foreign exchange contracts</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company conducts certain transactions in various non-U.S. dollar
currencies. As a result, it is subject to the transaction exposures that
arise from foreign exchange rate movements between the dates that foreign
currency transactions are entered into and the date they are consummated.
In response to this exposure, the Company enters into forward foreign
exchange contracts to hedge certain foreign currency denominated firm
commitments, primarily sales to customers invoiced in currencies other
than the U.S. dollar. The primary purpose of the Company&#146;s foreign
currency hedging activities is to manage the volatility associated with
foreign currency revenues and the other assets and liabilities created in
the normal course of business. The Company does not hold or issue
financial instruments for trading purposes.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-27</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>NOVEL DENIM HOLDINGS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS&#151;(Continued)</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2"><B>18.</B></FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><B>Financial Instruments (continued)</B></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(b)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Forward foreign exchange contracts (continued)</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">Principal currencies hedged include the Euro and British pound. At March
31, 2002 such forward exchange contracts were recorded at their fair
value with gains of $61,260 and losses of $55,465, which are reflected in
other current assets and other accrued liabilities in the Company&#146;s
consolidated balance sheet, respectively. The maturity dates of the
forward exchange contracts outstanding at March&nbsp;31, 2002 ranged from 1
month to 5&nbsp;months.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">For forward exchange contracts designated as cash flow hedges, gains and
losses are recorded in other comprehensive income until the foreign
currency denominated sales transactions are recognized in earnings. For
the year ended March&nbsp;31, 2002 forward exchange contracts with contract
values amounting to $6,698,879 were de-designated from cash flow hedge
and a net loss on these derivatives of $13,589 was reclassified to net
revenues. Hedge ineffectiveness had no material impact on earnings for
the year ended March&nbsp;31, 2002. The Company estimates that net derivative
gains of $19,384 included in accumulated other comprehensive income at
March&nbsp;31, 2002 will be reclassified into earnings during the next twelve
months.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The Company enters into various other types of financial instruments in
the normal course of business. Fair values for these financial
instruments are based on quoted market price.</FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;&nbsp;(c)</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2"><I>Cash and cash equivalents</I></FONT></TD>
</TR>
<TR>
        <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
        <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
        <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
        <TD width="96%"><FONT size="2">The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value because of the relatively short
maturities of these assets and liabilities. The carrying value of
short-term borrowings approximates fair value as the loans have variable
interest rates.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-28</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<P align="center"><FONT size="2">EXHIBIT INDEX
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="75%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Exhibit</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Page</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Description</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended and Restated Memorandum of Association and Articles
of Association of the Company (previously filed as Exhibit&nbsp;3
to Registration No. 333-7184 and incorporated herein by
reference)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the
Company and K.C. Chao</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the
Company and Mei-Ling Liu</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of April&nbsp;1, 2002 between the
Company and Alain Rey</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Employment Agreement dated as of January&nbsp;1, 2000 between the
Company and Isaacs Lam (previously filed as Exhibit 2.4 to
Form 20-F for the fiscal year ended March 31, 2000 and
incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of February 15, 1989 between Novel Textiles
Limited (formerly known as &#147;Union Textiles Limited&#148;) and
Summit Textiles Limited (previously filed as Exhibit&nbsp;10.5 to
Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of July 19, 1990 between Novel Garments
(Mauritius) Limited and Fatvan Industrial Ltd. (previously
filed as Exhibit 10.6 to Registration No. 333-7184 and
incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.7</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of May 19, 1993 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.7 to
Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.8</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of May 19, 1993 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.8 to
Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.9</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit&nbsp;10.9
to Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.10</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit&nbsp;10.10
to Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.11</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit&nbsp;10.11
to Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.12</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of March&nbsp;31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit&nbsp;10.12
to Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.13</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of January 30, 1996 between Novel Garments
(Mauritius) Limited and Development Bank of Mauritius Ltd.
(previously filed as Exhibit 10.13 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="75%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Exhibit</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Page</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Description</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.14</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of October 29, 1996 between Novel Garments
(Mauritius) Limited and Development Bank of Mauritius Ltd.
(previously filed as Exhibit 10.14 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.15</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of January 1997 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.15 to
Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.16</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated May 28, 1996 between Industrial Development
Corporation of South Africa Limited and Novel Spinners SA
(Proprietary) Limited and Novel Weavers SA (Proprietary)
Limited (previously filed as Exhibit&nbsp;2.3 to Form&nbsp;20-F for the
fiscal year ended March&nbsp;31, 1999 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.17</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of October 19, 1999 between Byren Trading
Limited and Cayuga Estates Limited (previously filed as
Exhibit 2.5 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31,
2000 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.18</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease dated as of September&nbsp;1, 1999 between Novel Garments
(Mauritius) Ltd and Didi Industrial Limited (previously filed
as Exhibit 2.6 to Form&nbsp;20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.19</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended Lease Agreement dated April&nbsp;1, 1999 between Novel
Denim (HKD) Ltd and Swanco Limited (previously filed as
Exhibit 2.7 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31,
2000 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.20</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease Agreement dated April&nbsp;13, 2000 between Novel Garments
(Madagascar) S.A. and Filatex S.A. (previously filed as
Exhibit 4.20 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31,
2001 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.21</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Lease Agreement dated April&nbsp;13, 2000 between Novel Garments
(Madagascar) S.A. and Filatex S.A. (previously filed as
Exhibit 4.21 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31,
2001 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amended and Restated Employee Stock Option Plan of the
Company and its subsidiaries (previously filed as Exhibit&nbsp;4.1
to Form S-8 (Registration No. 333-10796), as filed on
September&nbsp;14, 1999 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">4.23</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Non-Employee Directors Stock Option Plan of the Company
(previously filed as Exhibit 10.24 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">8.1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">List of Subsidiaries</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Land Purchase Agreement dated as of April&nbsp;18, 1995 between
Novel Textiles Limited and Rajman Prayag (previously filed as
Exhibit&nbsp;10.16 to Registration No. 333-7184 and incorporated
herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.2</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;18, 1996 between Novel
Textiles Limited and Finlease Company Limited (previously
filed as Exhibit 10.17 to Registration No. 333-7184 and
incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.3</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May 13, 1996 between Novel
Textiles Limited and The Mauritius Commercial Bank Ltd.
(previously filed as Exhibit 10.18 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="75%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Exhibit</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Page</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Description</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.4</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;6, 1996 between Novel
Garments (Mauritius) Limited and The Mauritius Commercial
Bank Ltd. (previously filed as Exhibit&nbsp;10.19 to Registration
No.&nbsp;333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.5</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;6, 1996 between Novel
Textiles Limited and The Mauritius Commercial Bank Ltd.
(previously filed as Exhibit 10.20 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.6</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of October&nbsp;7, 1996 between Novel
Garments (Mauritius) Limited and The Hongkong and Shanghai
Banking Corporation Limited (previously filed as Exhibit
10.21 to Registration No.&nbsp;333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.7</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of February&nbsp;28, 1997 between Novel
Textiles Limited and Banque Nationale De Paris
Intercontinentale (previously filed as Exhibit 10.22 to
Registration No. 333-7184 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.8</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May 21, 2001 between Novel
Textiles Limited and Banque Nationale De Paris
Intercontinentale</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.9</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of May 25, 2001 between Novel
Spinners (SA)(Pty)Ltd, Novel Weavers (SA)(Pty)Ltd, Seawind
Investments 4 (Pty) Ltd and Nedcor Bank Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.10</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of August&nbsp;23, 2001 between Novel
Spinners (SA)(Pty)Ltd and Nedcor Bank Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.11</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;27, 2002 between Novel
Denim Holdings Limited and The Hongkong and Shanghai Banking
Corporation Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.12</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;27, 2002 between Novel
Denim (HK) Ltd and The Hongkong and Shanghai Banking
Corporation Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.13</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated as of March&nbsp;28, 2002 between Novel
Garments International Ltd and The Hongkong and Shanghai
Banking Corporation Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.14</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Registration Rights Agreement dated as of May 13, 1997
between the Company and Novel Apparel (BVI) Limited
(previously filed as Exhibit 10.25 to Registration No.
333-7184 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.15</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Redemption Agreement dated as of April&nbsp;25, 1997 between the
Company and Novel Apparel (BVI)&nbsp;Limited (previously filed as
Exhibit&nbsp;10.26 to Registration No. 333-7184 and incorporated
herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.16</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Share Purchase Agreement dated August&nbsp;9, 1998 by and among
Novel Textiles (BVI) Limited, Novel Denim Holdings Limited
and Novel Enterprises Limited (previously filed as Exhibit
2.1 to Form&nbsp;20-F for the fiscal year ended March&nbsp;31, 1999 and
incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.17</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Share Purchase Agreement dated August&nbsp;7, 2001 by and among
Novel Investment Holdings Limited, Novel Denim Holdings
Limited and Novel Enterprises Limited</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
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        <TD width="8%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
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        <TD width="75%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><FONT size="1">Exhibit</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Page</FONT></TD>
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        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Description</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><FONT size="1">Number</FONT></TD>
</TR>
<TR valign="bottom">
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
        <TD><FONT size="1">&nbsp;</FONT></TD>
        <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.18</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Suspensive Sale Agreement dated May&nbsp;6, 1996 between Findevco
(Proprietary) Limited and Novel Spinners SA (Proprietary)
Limited and Novel Weavers SA (Proprietary) Limited
(previously filed as Exhibit 2.4 to Form&nbsp;20-F for the fiscal
year ended March 31, 1999 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.19</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement and Guarantee dated June&nbsp;23, 1999 between
Novel Denim Holdings Limited and Certain of its Subsidiaries
and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit 2.9 to Form&nbsp;20-F for the fiscal
year ended March 31, 2000 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.20</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement and Guarantee dated August&nbsp;11, 1999 between
Novel Denim Holdings Limited and Certain of its Subsidiaries
and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit&nbsp;2.10 to Form&nbsp;20-F for the fiscal
year ended March 31, 2000 and incorporated herein by
reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.21</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Credit Agreement dated May&nbsp;25, 2000 between Novel Denim
Holdings Limited and Certain of its Subsidiaries and The
Hongkong and Shanghai Banking Corporation Limited (previously
filed as Exhibit 10.15 to Form&nbsp;20-F for the fiscal year ended
March&nbsp;31, 2001 and incorporated herein by reference)</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">10.22</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Consent of PricewaterhouseCoopers</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">99.1</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
&#151;
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Section&nbsp;906 Certification</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">&nbsp;</FONT>



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NOVEL DENIM HOLDINGS LIMITED
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
o
Registration statement pursuant to section 12(b) or (g) of the
Securities Exchange Act of 1934
or
x
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: March 31, 2002
or
o
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from      to
Commission file number: 0-29368
NOVEL DENIM HOLDINGS LIMITED
(Exact Name of Registrant as Specified in its Charter)
NOVEL DENIM HOLDINGS LIMITED
(Translation of Registrant's Name Into English)
British Virgin Islands
(Jurisdiction of Incorporation or Organization)
1/F, Novel Industrial Building
850-870 Lai Chi Kok Road
Cheung Sha Wan, Kowloon, Hong Kong
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Title of Each Class
Name of Each Exchange
On Which Registered
Ordinary Shares
National Market Tier of the
Nasdaq Stock Market
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
Ordinary Shares, par value US $1.00
9,138,900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filling requirements for the past 90 days. Yes [X] No [  ]
Indicate by check mark which financial statement item the registrant has
elected to follow. Item 17 [X] Item 18 [  ]
TABLE OF CONTENTS
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
ITEM 4. INFORMATION ON THE COMPANY
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8. FINANCIAL INFORMATION
ITEM 9. THE OFFER AND LISTING
ITEM 10. ADDITIONAL INFORMATION
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
PART III
ITEM 15. [RESERVED]
ITEM 16. [RESERVED]
PART IV
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
EXHIBIT INDEX
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
EX-4.1: K.C. CHAO EMPLOYMENT AGREEMENT
EX-4.2: MEI-LING LIU EMPLOYMENT AGREEMENT
EX-4.3: ALAIN REY EMPLOYMENT AGREEMENT
EX-8.1: LIST OF SUBSIDIARIES
EX-10.8: CREDIT AGREEMENT
EX-10.9: CREDIT AGREEMENT
EX-10.10: CREDIT AGREEMENT
EX-10.11: CREDIT AGREEMENT
EX-10.12: CREDIT AGREEMENT
EX-10.13: CREDIT AGREEMENT
EX-10.17: SHARE PURCHASE AGREEMENT
EX-10.22: CONSENT OF PRICEWATERHOUSECOOPERS
EX-99.1: SECTION 906 CERTIFICATION
Table of Contents
TABLE OF CONTENTS
Page
Preliminary Note
1
PART I
Item 1.
Identity of Directors, Senior Management and Advisors
1
Item 2.
Offer Statistics and Expected Timetable
1
Item 3.
Key Information
2
Item 4.
Information of the Company
9
Item 5.
Operating and Financial Review and Prospects
18
Item 6.
Directors, Senior Management and Employees
26
Item 7.
Major Shareholders and Related Party Transactions
30
Item 8.
Financial Information
32
Item 9.
The Offer and Listing
33
Item 10.
Additional Information
34
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
39
Item 12.
Description of Securities Other than Equity Securities
40
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
40
Item 14.
Material Modifications to the Rights of Security Holders
and Use of Proceeds
40
PART III
Item 15.
[Reserved]
40
Item 16.
[Reserved]
40
PART IV
Item 17.
Financial Statements
40
Item 18.
Financial Statements
40
Item 19.
Exhibits
41
Financial Statements Pursuant to Item 17
F-1
Table of Contents
PRELIMINARY NOTE
This annual report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Such statements are indicated
by words or phrases such as "anticipate," "estimate," "project," "expect,"
"believe" and similar words or phrases. Such statements are based on current
expectations and are subject to certain risks and uncertainties including, but
not limited to, the overall level of consumer spending on apparel, the
financial strength of the retail industry generally and the Company's customers
in particular, changes in trends in the market segments in which the Company
competes, the level of demand for the Company's garments and fabrics, actions
by its major customers or existing or new competitors and changes in economic
or political conditions in the markets where the Company sells or manufactures
its products, as well as other risks and uncertainties both referenced and not
referenced in this annual report. These risks are more fully described under
Item 3. "Key Information—Risk Factors" of this annual report. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated or projected. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
All references in this document to "Novel Denim" or the "Company" are to
Novel Denim Holdings Limited, a British Virgin Islands ("BVI") international
business company, and its subsidiaries.
In this annual report, unless otherwise specified or unless the context
otherwise requires, all references to "$" or "dollars" are to U.S. dollars and
all references to "fiscal" or "fiscal year" refer to the fiscal year ended
March 31 of the calendar year mentioned.
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
1
Table of Contents
ITEM 3.
KEY INFORMATION
The selected consolidated financial and other information presented below
have been prepared in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP") and are derived from the Consolidated Financial
Statements of the Company for the years ended March 31, 1998 through 2002. The
Consolidated Financial Statements for, and as of, the year ended March 31, 1998
has been audited by Price Waterhouse, independent accountants. The Consolidated
Financial Statements for, and as of, the years ended March 31, 1999 through
2002 have been audited by PricewaterhouseCoopers, independent accountants. The
information should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Annual Report
and Item 5. "Operating and Financial Review and Prospects."
Fiscal Year Ended March 31,
1998
1999
2000
2001
2002
(in thousands, except per share amounts)
Statement of Income Data:
Net sales
$
85,715
$
97,702
$
105,101
$
138,046
$
158,585
Cost of goods sold
60,275
70,185
84,456
107,465
132,201
Gross profit
25,440
27,517
20,645
30,581
26,384
Other revenues (1)
50
337
638
440
789
Selling, general and administrative expenses
8,958
9,901
12,248
15,187
18,693
Impairment loss (2)
—
—
—
—
2,375
Other expenses (3)
—
225
—
589
—
Operating income
16,532
17,728
9,035
15,245
6,105
Interest expense, net
1,172
1,499
2,723
3,169
3,955
Income before minority interest, tax and effect of accounting change
15,360
16,229
6,312
12,076
2,150
Minority interest
49
48
(52
)
48
82
Taxation
—
—
—
—
298
Income before effect of accounting change
15,311
16,181
6,364
12,028
1,770
Cumulative effect of accounting change
—
—
—
—
(308
)
Net income
$
15,311
$
16,181
$
6,364
$
12,028
$
2,078
Earnings per share after accounting change
Basic Earnings per share
$
1.67
$
1.71
$
0.67
$
1.30
$
0.23
Diluted Earnings per share
$
1.67
$
1.71
$
0.67
$
1.29
$
0.22
Weighted average Ordinary Shares outstanding – Basic (7)
9,145
9,438
9,438
9,221
9,110
Weighted average Ordinary Shares outstanding – Diluted (7)
9,179
9,479
9,439
9,316
9,256
As of March 31,
1998
1999
2000
2001
2002
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
9,630
$
2,876
$
2,017
$
2,361
$
12,995
Working capital (exclusive of cash and cash equivalents) (4)
15,346
15,360
20,474
21,682
13,130
Total assets
82,926
116,670
124,710
149,120
189,380
Short-term debt (5)
6,880
18,877
18,099
27,681
54,963
Long-term debt (6)
751
4,545
5,068
3,610
17,542
Shareholders' equity (7)
63,205
79,386
85,750
94,880
97,209
Fiscal Year Ended March 31,
1998
1999
2000
2001
2002
Operating Data:
Garment production (thousands of pieces)
5,878
7,708
8,711
12,395
15,391
Fabric production (thousands of meters)
15,858
15,228
19,190
24,716
33,302
Fabric printing (thousands of
meters)
—
—
—
—
15,882
(1)
Other revenues consist of disposals of property, plant and equipment,
sales of scrap materials, net proceeds from yarn sales, commissions
received from an affiliate and other related or nonrecurring items. See
Item 7. "Major Shareholders and Related Party Transactions."
(2)
Impairment loss consists of a partial write off of fixed assets in
Madagascar related to the closure of the Madagascar operations.
(3)
Other expenses consist of the write-off of start-up costs associated with
the Company's Madagascar and South African facilities in fiscal 2001 and
1999, respectively.
(4)
Working capital consists of current assets less current liabilities.
(5)
Including current portion of long-term debt and capital leases.
(6)
Including long-term portion of capital leases.
(7)
During fiscal 2001, the Company repurchased 420,200 Ordinary Shares for a
total of approximately $3.1 million. During fiscal 2002, the Company
repurchased 20,100 Ordinary Shares for a total of approximately $0.2
million.
2
Table of Contents
Risk Factors
Uncertainties in Garment and Fabric Industries
In fiscal 2002, approximately 51% of total sales were to U.S. customers,
approximately 27% of total sales were directly to European customers (primarily
in Belgium, France, The Netherlands and the United Kingdom), approximately 11%
of total sales were to customers in African countries for further conversion
and sale, approximately 10% of total sales were to customers in Asian countries
and approximately 1% of total sales were to customers in other countries.
Historically, the apparel industry has been subject to substantial cyclical
variations. In particular, Europe and the United States ("U.S.") have
experienced fluctuations in demand for denim and chino in recent years. There
can be no assurance that the Company's financial condition and results of
operations will not be adversely affected by any such fluctuations. In
addition, a recession in the general European and/or U.S. economies or
uncertainties regarding future economic prospects that affect consumer spending
habits could have a material adverse effect on Novel Denim's results of
operations.
Dependence on Key Customers; No Long-term Contracts with Customers
The Gap, Inc. (the "Gap") has been a substantial customer of Novel Denim
and accounted for approximately 31% of Novel Denim's total sales (and
approximately 41% of its total garment sales) in fiscal 2002. For the same
period, Tommy Hilfiger Corporation and its subsidiaries ("Tommy Hilfiger")
accounted for approximately 15% of the Company's total sales (and approximately
20% of its total garment sales) and Vetir S.A. (Mi-Temps) ("Mi-Temps")
accounted for approximately 7% of the Company's total sales in fiscal 2002 (and
approximately 9% of its total garment sales). Combined, these top three
customers (which are all garment customers), accounted for approximately 52% of
Novel Denim's total sales in fiscal 2002 (and approximately 70% of its total
garment sales). The loss of The Gap, Tommy Hilfiger or Mi-Temps as a customer,
or a significant reduction in their purchases from Novel Denim, could have a
material adverse effect on the Company's financial condition and results of
operations.
The Company does not have any long-term contracts with its customers. As a
result, there can be no assurance that historic levels of business from any
customer of the Company will continue in the future.
Foreign Operations in Mauritius, Madagascar and South Africa
The Company's operations are affected by economic, environmental,
political, governmental and labor conditions in Mauritius, Madagascar and South
Africa, where all of its manufacturing facilities are presently located.
During the last few years, the Company has experienced a shortage of labor
and rising labor costs. The government of Mauritius currently permits the
importation of foreign labor. In March 2002, the Company's operations in
Mauritius were adversely affected by a labor dispute relating to the Company's
expatriate employees who requested that the Company make a number of changes
before they returned to work. As of March 31, 2002 approximately 24% of the
Company's employees in Mauritius were expatriate employees. Following
negotiations, the Company agreed to make some modifications to its existing
operations and all but a small number of expatriate employees subsequently
returned to work. As a result, garment production was adversely affected with
orders having delayed shipments, increased air freight costs and some order
cancellations. While the Company believes that it will recover from these
events within fiscal 2003, no assurances can be made that additional customers
will not cancel or reduce orders with the Company. There also can be no
assurance that the Company's results of operations will not be adversely
affected by an increase in labor costs in the future. See Item 5. "Operating
and Financial Review and Prospects." In addition, any change in Mauritius'
labor policy could have a material adverse effect on the Company.
In early calendar 2002, the Company's operations in Madagascar were
significantly and adversely affected by strikes resulting from disputed
presidential elections. The disputed election resulted in many of the country's
commercial services and infrastructure being significantly disrupted or halted
causing severe logistical and supply problems to companies operating in the
capital city of Antananarivo. As a result, the Company announced on March 28,
2002 that it was moving out of the country and began shipping its equipment to
Mauritius and South Africa. The Company's production during this period was
adversely affected by order cancellations, increased air freight costs,
impairment of fixed assets in Madagascar and the write down of raw material and
finished good inventories. For fiscal 2002, sales from Madagascar represented
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approximately 18.68% of total sales and 25.0% of total garment sales. In
addition the Company employed approximately 6,000 people in Madagascar as of
March 31, 2002, representing approximately 42% of its total employees.
South Africa, where the Company began operating fabric manufacturing
facilities in 1998, has undergone significant political and economic
instability. Since the historic all-races election of 1994, which marked the
end of apartheid, the African National Congress ("ANC") sought to rebuild
both the political, social and economic foundations of the country. Political,
economic and social tensions continue to sustain a high level of violence in
South Africa. In 1999, Mr. Thabo Mbeki, Nelson Mandela's successor, was
inaugurated as the country's new president, following the re-election of the
ANC government. The Mbeki government is now focused on easing monetary policy,
stabilizing the South African rand and increasing consumer consumption. A
significant portion of the population in South Africa is unemployed and/or
uneducated. Accordingly, no predictions can be made regarding the political,
social or economic stability of South Africa. Furthermore, there can be no
assurance that economic, political, governmental or labor conditions in South
Africa will not have an adverse effect on the Company's results of operations.
Uncertainties Relating to New Operations in China
In October 2001, the Company began operations in People's Republic of
China ("PRC" or "China") through the acquisition of NDP Holdings Limited
("NDP") (see Item 7. "Major Shareholders and Related Party
Transactions—Acquisition of NDP Holdings Limited"), which began operations in
1988. The PRC has historically had a planned economy but has, in certain
aspects, been transitioning to a more market-oriented economy. Although the
Company believes the economic reform and the macroeconomic measures adopted by
the PRC, including the encouragement of private economic activity and greater
economic decentralization, have had and may continue to have a positive effect
on the economic development of the PRC, the Company cannot predict the future
direction of these economic reforms or the effects these measures may have on
the Company's business, financial position or results of operations.
Furthermore, the Chinese government may not continue to pursue these policies
or may significantly alter them to the Company's detriment from time to time
without notice.
Specifically, changes in policies by the Chinese government resulting in
changes in rules, regulations, laws, or their interpretation, or the imposition
of confiscatory taxation, restrictions on currency conversion or imports and
sources of supply could materially and adversely affect either the Company's
financial condition or results of operations. For example, the nationalization
or other expropriation of private enterprises by the Chinese government could
result in the total loss of the Company's investment in China. NDP's
subsidiary operations in China are also, by law, subject to administrative
review by various national, provincial and local agencies of the Chinese
government. Governmental oversight or changes to existing the rules and
regulations relating to administrative review could adversely affect the
Company's results of operations.
The Company's new operations in China are subject to other risks as well,
including:
A lack of remedies and impartiality under the Chinese legal system may
prevent the Company from enforcing the tenancy agreements under which NDP
operates its factories or affect its ability to maintain NDP's business
license.
NDP operates its factory under long term tenancy agreements (through 2038)
with the local Chinese government. These tenancy agreements may be difficult to
enforce in China, which could force the Company to accept terms that may not be
as favorable as those provided in its other tenancy agreements. Unlike the
U.S., China has a civil law system in which judicial decisions have little
precedential value. The Chinese government has enacted some laws and
regulations dealing with matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. However, the Company's
ability to enforce commercial claims or to resolve commercial disputes is
unpredictable because the laws may be relatively new. These matters may also
be subject to the exercise of considerable discretion by agencies of the
Chinese government, and forces unrelated to the legal merits of a particular
matter or dispute may influence their outcome.
NDP's activities in China also require business licenses which are subject
to review and approval by various national and local agencies of
Chinese government. Should NDP's business licenses in China not
be renewed or approved,
NDP would be required to move its operations out of China, which would impair
its profitability, competitiveness and market position and would jeopardize
NDP's ability to continue operations.
Possible changes and uncertainties in economic policies in the Special
Economic Zones of China in which NDP operates could harm NDP's operations by
eliminating benefits it currently enjoys.
As part of its economic reform, China has designated certain areas,
including Shenzhen where NDP has certain manufacturing facilities, as Special
Economic Zones. Foreign enterprises in these areas benefit from greater
economic
4
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autonomy and more favorable tax treatment than enterprises in other parts of
China. Changes in the policies or laws governing Special Economic Zones could
eliminate these benefits. Moreover, economic reforms and growth in China have
been more successful in certain provinces than others, and the continuation or
increase of these disparities could affect the political or social stability of
China.
Uncertain applications of Chinese tax laws could subject the Company to
greater taxes in China.
Under applicable Chinese law, the Company has been afforded a number of
tax concessions by the Chinese taxing authorities and have avoided paying taxes
on a substantial portion of its operations in China. The Chinese tax system is
subject to substantial uncertainties and was subject to significant changes
enacted on January 1, 1994, the interpretation and enforcement of which are
still uncertain. Currently, under the Chinese tax system the Company can obtain
tax benefits by reinvesting profits of its subsidiary in China. The Company is
subject to taxes at a rate of 15% of the Company's Chinese taxable profits.
Changes in Chinese tax laws or their interpretation or application may, subject
the Company to greater Chinese taxation in the future.
Controversies affecting China's trade with the United States could harm
the Company's operations or depress its share price.
While China has been granted permanent most favored nation trade status in
the United States, controversies between the United States and China may arise
that threaten the status quo involving trade between the United States and
China. These controversies could adversely affect NDP's business by, among
other things, causing its products in the United States to become more
expensive, which could result in a reduction in the demand for its products by
customers in the United States. Political or trade friction between the United
States and China, whether or not actually affecting the Company's business,
could also adversely affect the prevailing market price of the Company's
ordinary shares.
Changes in currency rates involving the Hong Kong dollar or Chinese yuan
could increase the Company's expenses or cause economic or political problems
affecting its business.
NDP's sales are predominately denominated in Hong Kong and U.S. dollars.
In addition, a significant portion of NDP's operating costs including labor
and electricity costs are denominated in Chinese yuan. The Hong Kong government
may not continue to maintain the present currency exchange mechanism, which
fixes the Hong Kong dollar at approximately 7.80 to each U.S. dollar. If the
currency exchange mechanism between the Hong Kong dollar and the U.S. dollar is
changed, the Company's results of operations and financial condition could be
materially adversely affected. Any material increase in the value of the Hong
Kong dollar or Chinese yuan relative to the U.S. dollar would increase the
Company's expenses.
A significant portion of NDP's business is generated from Hong Kong. In
addition a significant portion of NDP's costs are denominated in Hong Kong
dollars. Hong Kong is a Special Administrative Region of PRC with its own
government and legislature and it currently enjoys a high degree of autonomy
from the PRC. The Company can give no assurance that Hong Kong will continue to
enjoy autonomy from the PRC. The Hong Kong dollar has remained relatively
constant due to the U.S. dollar peg and currency board system that has been in
effect in Hong Kong since 1983. However, in early 1999, the Hong Kong dollar
was subject to currency speculation and the SAR government substantially
supported the market for the Hong Kong dollar, both directly and indirectly
through the large-scale purchase of securities listed on the Hong Kong Stock
Exchange. The Company can give no assurance that the historical currency peg of
the Hong Kong dollar to the U.S. dollar will be maintained, and changes to the
historical currency peg could adversely affect the Company's business.
Changes in International Trade Policies Affecting Import Duties and Quotas
The Company's operations are subject to changes in international trade
policies, practices and agreements. The export of garments and fabric by the
Company to the European Community ("EC") is largely governed by the terms of
the Fourth Lomé Convention (the "Lomé Convention" or "Lomé IV"), an
international cooperation agreement among the 15 nations of the EC and 70
African, Caribbean and Pacific countries ("ACP States"). As Mauritius and
Madagascar are members of the Lomé Convention, exports of garments and fabric
manufactured in those countries to the EC are not subject to EC import duties
or quotas. The Lomé Convention was extended in June 2000 for an additional
period of 20 years. Any change in the Lomé Convention that would subject the
Company to import duties or quotas could have a material adverse effect on the
Company's results of operations.
In June 2000, the United States passed legislation to create a favorable
trade relationship between the United States and certain sub-Saharan countries,
including Mauritius, Madagascar and South Africa, under the Africa Growth and
Opportunity
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Act ("AGOA"). The new legislation allows the Company to sell its garments
into the United States on a duty-free and quota-free basis, subject to certain
conditions, the most significant of which requires the Company to use fabric
manufactured in either Africa or the United States. In January 2001, Mauritius
received permission from the United States to begin shipping products under the
AGOA and in March 2001, South Africa and Madagascar received similar approvals.
Any change in AGOA that would subject the Company to import duties or quotas
or changes in the fabric sourcing requirements could have a material adverse
effect on the Company's operations.
Outside of the EC, the Company's activities are affected by trade
agreements which limit imports from Mauritius, Madagascar and South Africa.
Any further limits on garment and fabric imports from the countries in which
the Company exports into the United States, or any expansion in the number of
signatory countries to the North American Free Trade Agreement ("NAFTA"), could
have a material adverse effect on the Company's operations.
In addition, changes in international trade in garments and fabric may be
expected as a result of the recent Uruguay Round Agreement on Textiles and
Clothing, which provides for the gradual and complete integration of garments
and fabric into the General Agreement on Tariffs and Trade ("GATT"). Over a
ten-year transition period which began in January 1995, quotas are scheduled to
be phased out and duties are scheduled to be reduced. With respect to the EC,
this may result in a reduction in the competitive advantage afforded to ACP
States under the Lomé Convention vis à vis non-ACP States (such as China).
Elsewhere, including in the United States, this may result in reduced quotas
and tariffs on exports from other countries which are not parties to NAFTA or
agreements such as the AGOA. There can be no assurance, however, as to the
ultimate effect of any such changes on Novel Denim's results of operations.
Constraints in Production Capacity
The Company has limited production capacity. From inception through late
fiscal 1999, the Company's manufacturing facilities operated at full capacity
and the Company from time to time limited supply to certain customers when
demand for its products exceeded its capacity.
The Company's production capacity is also subject to some seasonal
fluctuations.
During fiscal 2000, the Company's operations in Mauritius, which accounted
for 82% of the Company's total production during fiscal 2000, were adversely
affected by a continued serious drought, which forced the Company to find
alternative water sources necessary for its operations. The drought limited the
Company's washing and dyeing capabilities and caused the Company to operate
both its fabric and garment operations in Mauritius at less than full capacity.
As a result, the Company rescheduled and reduced orders to certain of its
customers, which in-turn resulted in a reduction in sales, and made additional
investments to increase its water resources, including opening a new garment
washing and finishing facility in St. Felix, Mauritius. If severe seasonal
fluctuations or drought conditions occur in the future, the Company's results
of operations could be materially and adversely affected.
In addition, during fiscal 2002, the Company was adversely affected by
production disruptions in Madagascar following disputed presidential elections
as well disruptions in Mauritius resulting from a labor dispute. See Item 5.
"Closure of Madagascar Operations."
Potential Risks in Managing Rapid Growth
Novel Denim has significantly expanded its operations since 1994. As a
result, the Company's sales have grown from $34.1 million in fiscal 1994 to
$158.6 million in fiscal 2002, primarily as a result of significant expansions
in production in Mauritius and other countries as well as through limited
acquisitions. This growth has placed increasing demands on the Company's
management resources and operating systems. The Company has experienced
problems in the past in connection with the integration of local labor at new
facilities. There can be no assurance that Novel Denim will not experience
manufacturing problems and/or product delivery delays in the future as a result
of, among other things, construction delays, the integration and training of
local labor and ramping up production at new facilities.
There can be no assurance that the Company's historical growth rates will
continue in the future. Novel Denim's success will, in part, depend upon the
ability of the Company to continue to manage growth effectively. In particular,
management continues to invest in computer hardware and software to further
integrate its accounting and production systems. There can
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be no assurance that such systems can be implemented within a reasonable time
period without disruption in customer service or deliveries and without
diversion of management's resources.
Possible Fluctuations in Availability and Cost of Raw Materials
Cotton is the primary raw material used in the production of Novel Denim's
products. In fiscal 2002, approximately 45% of the Company's direct costs of
fabric and approximately 24% of the Company's direct costs of garments were
attributable to the cost of cotton. In fiscal 2002, the Company's consumption
of raw cotton was approximately 19,000 metric tons at a cost of approximately
$23 million. The availability and consequently the cost of cotton fluctuates as
a result of a variety of natural and economic factors. In recent years, the
cost of cotton has experienced unusual volatility, which has been reflected in
the Company's gross profit margins.
In order to diversify its sources of cotton, Novel Denim currently
purchases raw cotton from six suppliers. The cotton obtained from these
suppliers is grown in various regions of Africa, primarily West and East
Africa. Any shortage of cotton or material increase in price could materially
and adversely affect the Company's results of operations.
Dependence on Key Personnel
The Company's ability to maintain its competitive position is largely
dependent on the personal efforts and abilities of its senior management,
particularly Silas K.F. Chou, Chairman of the Board, K.C. Chao, Chief Executive
Officer and President, Alain Rey, Chief Financial Officer, Mei-Ling Liu, Senior
Vice President – Operations and Isaacs C.C. Lam, Senior Vice President – Sales
and Marketing. Each of K.C. Chao, Alain Rey, Mei-Ling Liu and Isaacs C.C. Lam
has an employment contract with the Company. Novel Denim believes that the loss
of the services of any of these executives could have a material adverse effect
on the Company. The Company does not currently have "key man" insurance with
respect to any of these individuals.
Competition in the Garment and Fabric Businesses
The denim and chino garment and fabric businesses are highly competitive.
In its garment business, Novel Denim faces competition primarily from
manufacturers within Europe, the associated countries such as Algeria, Tunisia
and Morocco (the "Associated Countries") and the ACP States and more
recently, the Far East and Mexico. In the manufacturing of denim and chino
fabric, Novel Denim faces competition from manufacturers in Europe and the
Associated Countries such as Hellenic in Greece, Legler/T.R.C./C.D.I. in Italy,
Orta in Turkey, Swift in Tunisia, Tavex in Spain and Uco in Belgium. In the
manufacturing of printed and dyed fabrics in China, the Company faces
competition from China Dyeing Holdings, Perfects Enterprise Ltd. and Hing Fung
Printing and Dyeing Pty. Ltd. Some of the Company's fabric competitors are
significantly larger and more diversified than the Company and have
substantially greater resources. In addition, the Company requires a longer
shipping time than many of its competitors. Management believes that Novel
Denim's ability to compete effectively depends upon its continued ability to
offer high-quality garments and fabric at competitive prices.
Rights of Shareholders under British Virgin Islands Law may be Less than
in U.S. Jurisdictions
Novel Denim is organized under the laws of the British Virgin Islands.
Principles of law relating to matters affecting the validity of corporate
procedures, the fiduciary duties of the Company's management, directors and
controlling shareholders and the rights of the Company's shareholders differ
from, and may not be as protective of shareholders as those that would apply if
Novel Denim were incorporated in a jurisdiction within the United States.
Directors of the Company have the power to take certain actions without
shareholder approval, including an amendment of the Company's Memorandum of
Association or Articles of Association, a change in the Company's authorized
capital and certain fundamental corporate transactions, including
reorganizations, certain mergers or consolidations, the sale or transfer of
assets provided such assets form less than 50% of the assets of the Company or
the sale or transfer of such assets is not outside of the usual course of the
Company's business as well as the creation of a lien on the Company's assets.
In addition, there is doubt that the courts of the British Virgin Islands would
enforce liabilities predicated upon United States securities laws. See Item 10.
"Additional Information—Exchange Controls and Other Limitations Affecting
Security Holders—Comparison of United States and British Virgin Islands
Corporate Laws."
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Enforceability of Civil Liabilities
The Company is a British Virgin Islands international business company.
All but one of the Company's directors, all of its executive officers and its
controlling shareholder are residents outside of the United States. See Item 6.
"Directors, Senior Management and Employees." All or a substantial portion of
the assets of such persons may be located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to realize against them upon judgments
of courts of the United States predicated upon civil liability provisions of
the federal securities laws of the United States. The Company has been advised
by its British Virgin Islands counsel that there is doubt as to the
enforceability in the British Virgin Islands in original actions or in actions
for enforcement of judgments of United States courts or of liabilities
predicated upon the federal securities laws of the United States.
Currency and Exchange Rate Fluctuations
The Company has operations in Mauritius, South Africa, China and until
March 2002, Madagascar and is therefore subject to currency and exchange rate
fluctuations with the U.S. dollar. The Mauritian rupee has historically
experienced a devaluation against the U.S. dollar, falling approximately 50%
between March 1990 and March 2002 and approximately 6.5% during fiscal 2002.
Similarly, in Madagascar where the Company operated from May 1998 to March
2002, the Madagascar franc has also experienced a devaluation against the U.S.
dollar, falling 9.7% between April 1999 and March 2002 and by approximately
4.4% during fiscal 2002. The South African rand has also experienced a
devaluation against the U.S. dollar falling approximately 85% between September
1998 and March 2002 and approximately 43% during fiscal 2002. The Chinese yuan
has been relatively stable against the U.S. dollar having devalued 0.5% from
1996 to 2002 and held stable during 2002. Although Novel Denim's labor and
certain other operating costs and local borrowings are denominated in Mauritian
rupees, Madagascar francs and South African rands, the devaluations have not
had a material adverse effect on the Company's overall financial performance
because all of its garment and fabric sales are denominated in either U.S.
dollars or European currencies, which have generally appreciated against these
local currencies. In addition, the price of raw cotton, the Company's principal
raw material, is denominated in U.S. dollars. Nevertheless, changes in exchange
rates could adversely affect the Company's results of operations in the future.
Novel Denim currently enters into forward foreign exchange contracts to hedge
certain foreign currency denominated firm commitments. See Item 5. "Operating
and Financial Review and Prospects—Inflation and Exchange Rates."
Control by Principal Shareholder; Conflicts of Interest
As of March 31, 2002, Novel Apparel (BVI) Limited ("Novel Apparel")
owned 49.8% of the outstanding Ordinary Shares of the Company, net of treasury
stock, and is able to effectively control the election of the Board of
Directors of the Company and approve or disapprove any other matters submitted
to the shareholders. In December 1998, Novel Enterprises Limited ("NEL"), a
Hong Kong corporation and a wholly owned subsidiary of Westleigh Limited
("Westleigh"), transferred its 80% interest in Novel Apparel to Novel
Holdings (BVI) Limited ("NHL"), another wholly owned subsidiary of Westleigh.
Westleigh is privately owned by members of the Chao family, including Messrs.
Silas Chou and Ronald Chao and Ms. Susana Chou. The Chao family thereby
indirectly controls the Company. In addition, during fiscal 2000, Mr. K.C.
Chao individually purchased, through open market transactions, 505,000 Ordinary
Shares of the Company. None of the shareholders of the Chao family reside in or
is a citizen of the United States. Certain affiliates of NEL produce fabric and
garments in the ordinary course for customers in the Far East. While these
products do not compete with those of the Company, there can be no assurance
that conflicts of interest with respect to business opportunities will not
arise in the future or that any such conflicts will be resolved in favor of the
Company.
The Company's customers include Pepe Jeans Europe B.V. and its affiliates
("Pepe Europe"), Tommy Hilfiger, Tommy Hilfiger Europe B.V. ("Tommy
Europe") which was acquired by Tommy Hilfiger in July 2001, and certain other
affiliates of NEL. Mr. Silas K.F. Chou, a member of the Chao family and
Chairman of the Board of Directors of the Company, is also Co-Chairman of the
Board of Tommy Hilfiger and a Director of NEL and certain of its affiliates.
Certain other officers and directors of the Company are also officers and/or
directors of Tommy Hilfiger, Pepe Europe, NEL and certain of its affiliates.
See Item 6. "Directors, Senior Management and Employees." In addition, the
Chao family has an approximately 27% indirect ownership interest in Pepe Europe
and a small indirect ownership interest in Tommy Hilfiger.
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If any conflicts of interest between the Company and Pepe Europe, Tommy
Hilfiger or certain other affiliates of NEL arise, such disputes will be
resolved by the Company's independent directors. See Item 7. "Major
Shareholders and Related Party Transactions."
Taxation of Foreign Corporations; Potential Changes in Circumstances Affecting U.S. Shareholders
Because Novel Denim is a British Virgin Islands international business
company, the income of the Company and its foreign subsidiaries generally is
not subject to United States federal income taxation. However, various
provisions of the Internal Revenue Code of 1986, as amended, impose special
taxes in certain circumstances on non-United States corporations and their
shareholders. See Item 10. "Additional Information—Taxation—United States
Federal Income Taxation."
ITEM 4. INFORMATION ON THE COMPANY
Overview
Novel Denim is a leading, world-class, vertically-integrated supplier of
high-quality denim and chino garments and fabric as well as knitted garments to
the European Community ("EC") and the United States. The Company was
incorporated in 1989 in the British Virgin Islands as an international business
company under the International Business Companies Act. The Company initially
was a denim fabric manufacturer, and became a vertically-integrated producer of
basic and value-added denim garments to complement its fabric production in
1990 with the addition of sewing and finishing facilities. In August 1998, the
Company further expanded into the production of chino fabric and garments. In
February 2001, the Company further introduced knitted shirts to its garment
product range through its manufacturing operations in Madagascar. Following the
political and operational instability in Madagascar, the Company announced in
March 2002 that it was shipping its equipment from Madagascar to Mauritius and
ceasing production of knitted shirts. In October 2001, the Company further
expanded into the production of dyed and printed fabrics through the
acquisition of an existing business in Shenhzen, China.
Novel Denim offers a wide range of high-quality basic and value-added
garments and fabric in accordance with customer specifications. The Company
produces a wide variation of garments, including jeans, chinos, shirts, skirts,
shorts and jackets in a variety of styles, colors and finishes, such as
overdyed, stonewashed, sandblasted and stretch. The Company also produces an
extensive range of different kinds of denim and chino fabrics, including
lighter-weight fabrics, fabrics made with alternative weaves and treatments and
specialty colors and finishes. Novel Denim's customers include major
manufacturers, retailers and licensees that market under proprietary labels and
trademarks such as Dockers
®
, DYNAM™,
Fila
®
, the Gap
®
,
Nico
®
, Pepe
®
and Tommy
Hilfiger
®
.
The Company's principal executive offices are located at 1/F Novel
Industrial Building, 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong
Kong. Its telephone number is 011-852-2785-5988.
The Company
The Company's principal manufacturing facilities are currently located in
Mauritius, an island nation located in the southwest Indian Ocean, 1,100 miles
east of the African coastline. In May 1998, the Company expanded its sewing
production capabilities by opening a new facility adjoining its existing fabric
mill and laundry facility in Mauritius. In August 1998, the Company further
expanded into South Africa with the acquisition of an existing textile
manufacturing facility in Cape Town. See Item 7. "Major Shareholders and
Related Party Transactions—Acquisition of Novel Spinners and Novel Weavers.''
The Company's yarn and fabric operations in South Africa serve as a foundation
to support the Company's fabric and garment operations in Mauritius. In October
2001, the Company expanded its manufacturing operations outside of Africa
through the acquisition of NDP Holdings Limited ("NDP"). See Item 7. "Major
Shareholders and Related Party Transactions—Acquisition of NDP Holdings
Limited". The Company historically has benefited from relatively low labor
costs as compared to its competitors in Europe and the Associated Countries. In
addition, Mauritius' laws and regulations relating to its Export Processing
Zone ("EPZ") currently exempt Novel Denim from import duties on raw materials
and machinery.
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The Company has benefited from favorable trade relationships between the
countries in which it manufactures its products and the United States and EC.
Because Mauritius is a member of the Lomé Convention, the Company benefits from
quota-free and duty-free access to the EC for its products shipped from
Mauritius. During fiscal 2001 the United States passed into law the AGOA which
provides qualified countries (Mauritius and South Africa qualified in late
fiscal 2001) to ship qualified apparel products into the United States on a
duty-free and quota-free basis, subject to certain restrictions. See Item 3.
"Key Information—Risk Factors—Changes in International Trade Policies
Affecting Import Duties and Quotas." The Company has ceased producing knitted
garments after closing its operations in Madagascar because these products
would be subject to additional import restrictions if manufactured in another
location, significantly increasing the costs to produce such goods.
Since inception, Novel Denim has continued to increase its manufacturing
capacity to meet customer demands. The Company increased its production of
garments from 1.8 million pieces in fiscal 1994 to 15.4 million pieces in
fiscal 2002 and its production of fabric from 7.7 million meters to 33.3
million meters during the same period. The Company believes that there is
potential for increased customer demand and the Company plans to expand its
production capacity in order to satisfy this demand. In fiscal 2003, the
Company expects to benefit from the opening of a new woven garment facility in
Cape Town, South Africa which is expected to be able to produce in excess of
250,000 garments a month.
Historically, the Company's sales of garments and fabric have grown
primarily through the addition of new equipment, which has allowed the Company
to expand its production in response to increasing demand from its European and
U.S. customers.
Growth Strategies
The Company's principal growth strategies are to: (i) utilize its
vertically-integrated production to increase flexibility and improve margins
and to broaden its product range; (ii) further expand production capacity and
reduce labor and other costs; (iii) geographic diversification; and (iv)
increase sales to existing customers and expand sales to new customers in
existing markets.
•
Utilize its Vertically-Integrated Production to Increase Flexibility
and Improve Margins and to Broaden its Product Range.
The Company's
ability to manufacture a broad range of fabrics that can be sold to
third parties or used internally to produce high-quality garments
provides the company with flexibility to shift garment production to
make those products (whether chino or denim) in higher demand and
therefore improve overall margins. The Company expects to continually
expand its fabric operations as it gradually expands its garment
operations. The Company has expanded its garment operations from 4.7
million garments in fiscal 1997 to 15.4 million garments in fiscal 2002
and its fabric production capabilities from 15.8 million meters to 33.3
million meters during the same periods. The Company has broadened its
garment product range from denim in fiscal 1998 to chino garments and
fabrics in fiscal 1999. In fiscal 2001, the Company further expanded
its product range to include the production of knitted shirts, through
its Madagascar facilities, but subsequently ceased production of those
products at the end of fiscal 2002. In fiscal 2002, the Company
expanded its fabric offering with the addition of printed fabrics and
more sophisticated fabric dyeing abilities through the acquisition of
NDP, which through its subsidiaries, owns and operates an integrated
fabric dyeing, printing and finishing facility in the Shenzhen region of
the People's Republic of China ("PRC"), near Hong Kong, capable of
processing 40 million meters of fabric annually. NDP sells primarily to
fabric converters in Hong Kong, South-east Asia and the PRC for eventual
sales into the United States, Europe and Japan. The Company expects to
integrate the marketing of these products into its garment operations as
well as market NDP's fabrics to the Company's existing fabric customers.
The Company also believes that NDP could serve as a fabric foundation
for the Company to expand its garment manufacturing operations in China.
See Item 7. "Major Shareholders and Related Party
Transactions—Acquisition of NDP Holdings Limited." During fiscal 2002,
garment sales were comprised of approximately 64% denim, 28% chino and
8% knits. During the same period third party fabric sales were
comprised of approximately 37% denim, 38% chino, and 25% printed
fabrics.
•
Further Expand Production Capacity and Reduce Labor and Other Costs.
In order to reduce its labor costs and benefit from favorable trade
relationships with the United States and Europe, the Company has taken a
number actions to expand production and enhance its competitiveness. In
1998 the Company expanded its operations into South Africa through the
acquisition of an existing fabric spinning facility in Cape Town, South
Africa. The Company subsequently expanded this facility to include
weaving capabilities and denim fabric dyeing capabilities.
10
Table of Contents
The Company expects garment operations to begin during the third quarter
of fiscal 2003. The facility's location allows the Company to benefit from
the close proximity to the Company's raw cotton sources, Cape Town's
established infrastructure and the area's relatively low electricity
costs. In fiscal 2002, the Company expanded beyond Africa with the
acquisition of NDP in China which it expects to serve as a foundation for
future fabric and possibly garment expansion within China. China
currently benefits from favorable labor costs and quality standards at
least as high as Mauritius, however without the favorable trade
arrangements that the Company's African operations have with respect to
the EU and the United States. In fiscal 2003, the Company intends to
continue to invest and expand its garment and fabric production capacity
to meet the continuing demand in its primary markets, including further
expanding the Company's product range.
•
Geographic Diversification.
The Company believes that in order to
maintain its competitiveness in increasingly difficult global garment
and fabric markets, it needs to focus on diversifying its production.
The Company plans to develop operations in markets that provide
favorable labor or trade relationships with the Company's customers in
the United States and Europe. For example, the Company has already
expanded from production solely in Mauritius into South Africa and
China.
•
Increase Sales to Existing Customers and Expand Sales to New
Customers in Existing Markets.
The Company believes there is potential
for further growth by expanding sales to existing garment and fabric
customers as Novel Denim increases its production and broadens its
product range. In particular, the Company believes there is an
opportunity to expand its sales to U.S. customers as a result of the
AGOA. See Item 3. "Key Information—Risk Factors—Changes in
International Trade Policies Affecting Import Duties and Quotas."
Although there can be no assurance, the Company believes that sales to
such accounts can be increased as its customers benefit from the
continuing demand for products. The Company also intends to expand its
customer base in its existing markets. The Company believes that this
expansion can be accomplished by leveraging its customer portfolio and
extensive industry contacts to attract new customers particularly with
respect to NDP where the Company is introducing a broader fabric range
for its existing customers.
Products
Novel Denim manufactures denim garments and fabric and in August 1998
began the production of chino fabric and garments and from March 2001 until
approximately March 2002 produced knitted shirts. Net sales represented by each
of the Company's segments from fiscal 1998 to 2002 are set forth below:
Fiscal Year Ended March 31,
1998
1999
2000
2001
2002
(in thousands)
Garments
$
57,809
$
77,197
$
81,650
$
109,971
$
118,460
Fabric (including inter-divisional sales)
45,589
45,502
48,714
63,308
84,273
Inter-divisional sales
(17,683
)
(24,997
)
(25,263
)
(35,233
)
(44,148
)
Total
$
85,715
$
97,702
$
105,101
$
138,046
$
158,585
Garments
In 1990, Novel Denim began manufacturing high-quality denim garments
following the addition of sewing and finishing facilities to its existing
fabric manufacturing plant. As a result of these additions, the Company
established a vertically-integrated facility encompassing all manufacturing
processes necessary to convert raw cotton into high-quality garments. In 1998,
the Company expanded its product offering with the development of a
vertically-integrated chino fabric and garment operation. Vertical integration
allows Novel Denim to produce both denim and chino garments cost-effectively
because: (i) the quality of the fabric supplied is assured; (ii) less fabric
inventory is required; (iii) packaging costs are greatly reduced; and (iv)
certain transportation costs are eliminated. This vertically-integrated process
also provides the Company with the flexibility to manufacture a variety of
garments and fabric according to customers' specifications and delivery
requirements. During fiscal 2002, Novel Denim used approximately 58% of the
fabric it produced for the production of garments, as compared with
approximately 53% in fiscal 2001 and approximately 48% in fiscal 2000.
11
Table of Contents
Novel Denim produces a broad and diverse range of garment types including
a variety of jeans, chinos, shirts, shorts, skirts and jackets. For fiscal
2002, the Company's chino, denim and knitted garments represented approximately
64%, 28% and 8%, respectively, of total garment sales. Among these items, denim
jeans are the most popular and accounted for approximately 5.7 million pairs or
37% of the Company's total garment sales in fiscal 2002. Novel Denim
manufactures its jeans in a variety of colors, weights and finishes. The
Company's basic jeans are stonewashed, indigo blue denim,
14 1/2 ounce,
five-pocket jeans that are commonly worn by both teenagers and adults. The
remaining 63% of its garment production consisted of value-added chino pants,
denim jackets, shirts, shorts and skirts. By varying colors, accessories and
finishes, the Company has been able to command higher prices and achieve a
higher gross profit margin for these value-added garments.
Fabric
Since its inception in 1988, the Company has been a manufacturer of denim
fabric and currently produces an extensive range of denim fabrics. Novel
Denim's core denim fabric is an indigo blue 14 1/2 ounce fabric. In order to
take advantage of changing fashion trends, the Company complements its core
denim fabric with a variety of other denim fabrics which differ in weight,
finish and color. In early fiscal 2002, the Company completed the construction
of a new denim dyeing facility within its South African facility to further
expand it fabric capacity. In August 1998, the Company expanded its fabric
product offering to include chino fabric with the acquisition of an existing
textile facility in Cape Town, South Africa, which at the time of the
acquisition had only yarn production capabilities. Using the facility as its
foundation, the Company added weaving capacity in the new plant as well as in
its existing facilities in Mauritius, thereby expanding its total fabric
production capacity. In March 1999, the Company completed the construction of a
new dyeing and weaving facility in Mauritius to process the raw undyed chino
fabric for sale to third parties as well as for the manufacturing of chino
garments. During fiscal 2000, in response to the significant reduction in
demand for denim fabrics, the Company upgraded certain of its denim weaving
equipment to allow for conversion to weaving chino fabrics. In October 2001,
the Company significantly increased its fabric production capabilities through
the acquisition of NDP, a large fabric printing and dyeing plant in Shenhzen
China capable of processing over 30 million meters a year. See Item 7. "Major
Shareholders and Related Party Transactions—Acquisition of NDP Holdings
Limited." The Company's current production capabilities allow for varying the
weaving capacity between chino and denim fabrics, thereby increasing the
flexibility of the Company's production abilities. In fiscal 2002, the
Company's fabric production was comprised of approximately 37% denim, 38% chino
and 25% printed fabrics. The Company expects to continue to develop its fabric
production capabilities to better service its garment operations as well as to
provide its third-party fabric customers with high-quality and a broader range
of denim and other fabrics.
Customers
Novel Denim sells its garments to over 50 customers and its fabric to
approximately 180 customers. Novel Denim's major garment customers include The
Burton Group plc ("Burton"), The Gap, Mi-Temps and Tommy Hilfiger. The
Company's major fabric customers are VF Corporation and Jordache International
and fabric converters such as Cogimex (France) and China Point (Asia) Limited.
In fiscal 2002, approximately 51% of the Company's total sales were to U.S.
customers, approximately 27% of the Company's total sales were directly to
European customers (primarily in Belgium, France, The Netherlands and the
United Kingdom), approximately 11% of total sales were to customers in African
countries for further conversion and sale to Europe and approximately 11% of
total sales were to customers in other countries including those in Asia. For
the same period, the Company's top three customers, Tommy Hilfiger, The Gap and
Mi-Temps, accounted for approximately 52% of its total sales. During the past
two fiscal years, The Gap and Tommy Hilfiger each accounted for more than 10%
of the Company's total sales. The Gap, accounted for approximately 31% and 23%
of the Company's total sales in fiscal 2002 and fiscal 2001, respectively, and
Tommy Hilfiger accounted for approximately 15% of the Company's total sales in
fiscal 2002 compared to approximately 16% in fiscal 2001.
Tommy Hilfiger designs, sources and markets men's and women's sportswear,
jeanswear and childrenswear under the Tommy Hilfiger
®
and related labels and
trademarks in the United States and Europe. The Gap is an international
specialty retailer selling casual apparel, personal care and other accessories
for men, women and children. The Gap sells its products under a number of
brands including the Gap, Banana Republic and Old Navy. Mi-Temps is a
French-based discount retailer of value-oriented footwear and apparel with
stores throughout Europe. It sells denim products under the private label name
"DYNAM™". Pepe Europe designs, sources and markets men's and women's jeans
and jeans-related products to retailers in Europe under the
Pepe
®
label and
trademarks.
The Company does not have any long-term contracts with its customers.
Nevertheless, due to its reliable customer service, its high-quality denim and
chino products and its competitive pricing, the Company has maintained
long-term
12
Table of Contents
relationships with many of its customers such as Bonnit, Burton, The Gap,
Mi-Temps, Tommy Hilfiger and VF Europe, who have been customers for more than
five years. Novel Denim's garment customers generally submit and reserve their
preliminary indications of potential order quantity six months in advance. The
orders are then confirmed by the customers three to four months prior to the
beginning of the manufacturing process by specifying colors, styles and sizes.
Because of this order time lag, the Company can assess accurately its garment
production capacity on a monthly basis to satisfy its customers' requirements.
The Company's regular fabric customers place their fabric orders and secure
them with a letter of credit approximately one month in advance.
Marketing and Sales; Distribution
The Company sells its products primarily in the United States, Belgium,
France, Germany, The Netherlands and the United Kingdom to well-known designers
of denim and chino garments, popular retailers of fashionable denim and chino
garments as well as to other manufacturers. Novel Denim's sales and marketing
staff of 125 individuals is divided into garment and fabric groups, with 90
individuals specializing in garments and 35 individuals specializing in fabric.
These two teams are responsible for: (i) soliciting and obtaining purchase
orders from customers; (ii) translating customer specifications into guidelines
for the production of high-quality products; (iii) in the case of garments,
purchasing accessories; and (iv) arranging for shipment. The Company's sales
group operates from Hong Kong, Mauritius, Macau and London. Novel Denim's
fabric sales team coordinates all of the Company's fabric sales from Mauritius.
In addition to the Company's own marketing and sales teams, Novel Denim
employs three sales agencies whose sales agents frequently visit the Company's
customers in France, The Netherlands and the United Kingdom to maintain strong
working relationships. The sales agencies receive a commission on sales of
Novel Denim's products. The agencies do not market any other denim
manufacturer's products.
Novel Denim distributes its products to its customers directly from its
manufacturing facilities in Mauritius, Madagascar and South Africa, primarily
by sea. The time required for the Company to manufacture a customer's order is
approximately 45 days. In addition, the Company requires approximately one
month to ship its products to its customers. Although Novel Denim has a longer
shipping time than many of its competitors, this has not had an adverse effect
on the Company's sales because denim and chino garments are typically worn
year-round and, as a result, customers typically order garments six months in
advance.
Manufacturing and Capital Expenditures
The Company's vertically-integrated facilities provide Novel Denim with
the flexibility and efficiency necessary to offer its customers a variety of
denim and chino products tailored to their design and delivery requirements.
These facilities encompass every aspect of the production process, from the
spinning, weaving, dyeing and finishing of fabric and the manufacturing of
garments. In addition, because its facilities are vertically integrated, the
Company can strictly enforce quality control throughout the entire
manufacturing process.
Novel Denim's textile facilities clean and spin cotton into yarn through
the use of spinning machinery which produces quality yarns at high speeds. The
Company produces both the traditional open-end yarn and the value-added ring
spun yarn. The yarn is then woven into fabric on weaving machines.
After the yarn has been woven into fabric, the fabric is forwarded to the
fabric finishing lines. It is then dyed and treated by applying special
chemicals and/or resins to give it a smooth quality as well as certain other
properties. The Company may also dye its fabric again to produce an overdyed
look in blue, black or a variety of other colors. In the case of denim fabrics,
the yarn is dyed before being woven into fabric. Novel Denim stores
approximately 60 days of fabric in inventory.
The Company's garment production strategy has been to modernize its sewing
plants in order to minimize production costs and cycle times while maximizing
design flexibility and improving quality. The Company has invested in automated
sewing and computerized cutting machines which offer several advantages over
conventional machines, including faster sewing speed, higher quality and lower
production costs. Novel Denim also utilizes automated machines to sew delicate
and more intricate embroidery patterns. The Company's garments are then
finished to provide them with a variety of special qualities such as
stonewashed, bleached or overdyed. The Company's production lines enable it to
produce varying styles of
13
Table of Contents
garments and thus fill multiple orders simultaneously. The Company manufactures
garments according to specific customer purchase orders which prevents an
unnecessary, costly accumulation of inventory.
Production and capital expenditures from fiscal 1998 to fiscal 2002 are
set forth below:
Fiscal Year Ended March 31,
1998
1999
2000
2001
2002
Garment Products (thousands of pieces)
5,878
7,708
8,711
12,395
15,391
Fabric (thousands of meters)
15,858
15,228
19,190
24,716
49,184
Capital
Expenditures (thousands of dollars)
Garments
$
4,082
$
6,925
$
3,844
$
10,824
$
3,755
Fabric
4,415
16,959
6,313
5,462
7,228
Total
$
8,497
$
23,885
$
10,157
$
16,286
$
10,983
In February 2002, the Company announced that it was experiencing
significant production disruptions at its Madagascar plants due to events
following the country's disputed presidential elections. See Item 3. "Key
Information—Risk Factors—Foreign Operations in Mauritius, Madagascar and South
Africa." The Company started operations in Madagascar in 1998 and prior to the
production disruptions was producing approximately 200,000 woven garments a
month and approximately 300,000 knitted garments a month for shipment primarily
to the United States. For fiscal year 2002, the Company shipped approximately
5.1 million garments from Madagascar representing 36% of total garments and 28%
of total sales. As a result of the operational instability caused by these
events, the Company announced the closure of these facilities, the ceasing of
production of knitted shirts, and the transfer of assets to its existing
operations in Mauritius and South Africa. At March 31, 2002, the Company took
an impairment charge of $2.4 million, wrote-down inventories and provided for
redundancy costs for the fourth quarter of fiscal 2002.
During fiscal 2002, the Company invested to expand its fabric production
capabilities in South Africa and China following the acquisition of NDP in
October 2001 as well as upgraded its existing capabilities. In South Africa,
the Company completed the construction of a new denim fabric dyeing facility
providing it the capabilities to dye and finish over 6 million meters of fabric
a year. In addition, the Company began construction of a modern garment
manufacturing facility adjacent to its existing fabric operations in Cape Town.
The facility, expected to open in October 2002, is planned to produce over
250,000 garments a month for export primarily to the U.S. For additional
information see Item 5. "Operating and Financial Review And
Prospects—Liquidity and Capital Resources."
14
Table of Contents
Geographic breakdown of sales by location from fiscal 2000 to fiscal 2002
is set forth below:
Fiscal Year Ended March 31,
2000
2001
2002
U.S
Garments
$
29,451
$
56,127
$
78,679
Fabric
65
65
1,725
Total
$
29,516
$
56,192
$
80,404
Europe
Garments
$
50,237
$
49,521
$
37,043
Fabric
2,939
1,531
6,784
Total
$
53,176
$
51,052
$
43,827
Asia
Garments
$
164
$
1,322
$
512
Fabric
2,772
1,973
14,803
Total
$
2,936
$
3,295
$
15,315
Other
Garments
$
1,798
$
3,001
$
2,226
Fabric
17,675
24,506
16,813
Total
$
19,473
$
27,507
$
19,039
Total
Garments
$
81,650
$
109,971
$
118,460
Fabric
23,451
28,075
40,125
Total
$
105,101
$
138,046
$
158,585
Quality Control
Novel Denim's quality control team has adopted strict standards at each
stage of garment and fabric production to ensure the quality of its products.
The Company monitors the quality of its products throughout the manufacturing
process beginning with the raw cotton fiber and ending with the final garment.
In its garment manufacturing facilities, a quality control team consisting of
80 members, under the leadership of an operations director and manager,
inspects a sample of the garment production on a daily basis. Novel Denim
employs a quality control staff of 20 people in its fabric manufacturing
facilities. The Company tests the quality of the raw cotton it purchases and
also tests intermediate yarn products along the spinning process to ensure
strong, high-quality spun yarn. As a result, the Company has not experienced
any significant quality claims from its customers.
Raw Materials
Cotton is the primary raw material used in the production of Novel Denim's
products. In fiscal 2002, approximately 45% of the Company's direct costs of
fabric and approximately 24% of the Company's direct costs of garments were
attributable to the cost of cotton. In fiscal 2002, the Company's consumption
of raw cotton was approximately 19,000 metric tons at a cost of approximately
$23 million. The availability and consequently the cost of cotton fluctuates as
a result of a variety of natural and economic factors. In recent years, the
cost of cotton has experienced unusual volatility, which has been reflected in
the Company's gross profit margins.
In order to diversify its sources of cotton, Novel Denim currently
purchases raw cotton from six suppliers. The Company uses cotton which is
hand-picked and grown in various regions of Africa, primarily West and East
Africa. Because its cotton is grown in Africa in close proximity to Mauritius
and South Africa, the Company benefits from low transportation costs. Novel
Denim enters into purchase contracts with its cotton suppliers six to eight
months in advance of delivery to provide for a continuous supply of cotton and
to limit the effect of short-term fluctuations in cotton prices.
The Company also purchases dyes, chemicals and garment accessories from a
variety of suppliers. These raw materials have historically been available in
adequate supply.
15
Table of Contents
Management Information Systems
The Company has invested in computer hardware, systems applications and
software to: (i) enhance the speed and efficiency of its garment design and
manufacturing and its denim fabric production; (ii) support the sale and
distribution of denim products to its customers; and (iii) improve the
integration and efficiency of its Mauritius, Madagascar, South African and Hong
Kong operations. Currently, the Company has compiled a database of its
production data ranging from raw cotton quality checks to garment washing
processes, as well as spare parts and warehouse inventory figures. The
Company's computer network facilitates quick, secure and accurate data transfer
and communications. The Company's production control system is comparable to
that of other denim garment and fabric manufacturers. However, because the
Company recognizes that expansion and increased production may burden its
current system, it intends to continue to invest in existing and new systems in
conjunction with its increased production and expansion.
Research and Development
The Company employs a team of 15 people in its research and development
("R&D") department. Members of the Company's R&D team are highly skilled and
experienced. Their primary functions are to research and review production
programs and processing methods to meet increasingly stringent customer demands
while maintaining the Company's high quality standards. As a result of the
efforts of its R&D team, Novel Denim has been able to replicate and refine
special dyeing and spinning techniques requested by its customers, such as
overdyeing and the ring spun process. Ultimately their work leads to the
development of new fabrics.
Governmental Regulation
Federal, state and local regulations relating to the workplace and the
discharge of materials into the environment are continually changing;
therefore, it is difficult to gauge the total future impact of such regulations
on the Company. However, existing government regulations are not expected to
have a material effect on the Company's financial position, operating results
or planned capital expenditures. The Company currently has an active
environmental protection committee and an active workplace safety organization.
Competition
The garment and fabric businesses are highly competitive. In its garment
business, Novel Denim faces competition primarily from manufacturers within
Europe, the Associated Countries and the ACP States and more recently Mexico
and the Far East for U.S. customers. In the manufacturing of fabric, Novel
Denim faces competition from manufacturers in Europe and the Associated
Countries such as Hellenic in Greece, Legler/T.R.C./C.D.I. in Italy, Orta in
Turkey, Swift in Tunisia, Tavex in Spain and Uco in Belgium. In the
manufacturing of printed and dyed fabrics in China, the Company faces
competition from China Dyeing Holdings, Perfects Enterprise Ltd. And Hing Fung
Printing and Dyeing Pty. Ltd. Some of the Company's fabric competitors are
significantly larger and more diversified than the Company and have
substantially greater resources. The major competitive factors among
manufacturers of products include price, quality and flexibility, product
styling and differentiation and customer service, with the significance of each
factor depending upon the particular needs of the customer and the product
involved.
Novel Denim competes primarily on the basis of quality, price, flexibility
and service. By manufacturing garments in Mauritius and South Africa (fiscal
2003) which have relatively low labor costs, the Company maintains a
comparative cost advantage over its competitors who manufacture in Europe and
the Associated Countries and, as a result, can provide its products at
attractive prices. In addition, Mauritius's EPZ currently exempts Novel Denim
from import duties on raw materials and machinery. Because Mauritius is a
member of the Lomé Convention, Novel Denim also benefits from quota-free and
duty-free access for its products to the EC. Compared to its competitors who
manufacture in Lomé Convention countries, management believes the Company
offers high-quality products at competitive prices. Similarly, Mauritius and
South Africa are approved to benefit from the U.S. AGOA. The Company's
vertically-integrated garments operation permits it to produce its garments
from its own fabric, thereby maximizing margins, reducing transportation costs
and enabling it to monitor quality. The Company, however, requires a longer
shipping time than many of its competitors. See Item 3. "Key Information—Risk
Factors— Changes in International Trade Policies Affecting Import Duties and
Quotas."
16
Table of Contents
Backlog
Novel Denim's garment customers generally submit their preliminary
indications of potential order quantity six to eight months in advance. The
orders are then confirmed by the customers three to four months prior to the
beginning of the manufacturing process by specifying colors, styles and sizes.
Because of this order time lag, the Company can assess accurately its garment
production capacity on a monthly basis to satisfy its customers' requirements.
The Company's backlog in garments as of March 31, 2001 and March 31, 2002 was
8.0 million and 6.0 million pieces, respectively. Because the fabric business
is a commodity type business, the Company does not have significant backlog in
fabric.
Properties
The principal executive offices of Novel Denim are located at 1/F, Novel
Industrial Building, 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong
Kong. The general location, use and approximate size of the Company's principal
properties are set forth below. All properties are leased except where
otherwise specified.
Approximate Area
Location
Use
in Square Feet
Hong Kong
Executive office
(1)
21,500
Port Louis, Mauritius
Executive office
12,800
Ile d'Ambre, Mauritius
Fabric factory
(1,2)
,
laundry
(1)
, sewing factory
636,000
Coromandel, Mauritius
Sewing factory, laundry and
executive office
95,000
Montagne Longue, Mauritius
Sewing factory
70,000
Grand Bois, Mauritius
Sewing factory
50,000
St. Felix, Mauritius
Laundry, sewing factory
165,000
Antananarivo, Madagascar
Sewing factory
200,000
Cape Town, South Africa
Fabric, laundry and
sewing factory
(3)
305,000
Shenhzen, China
Fabric factory and
executive offices
(4)
550,000
(1)
Properties leased from affiliates of NEL.
(2)
200,000 square feet owned freehold.
(3)
100,000 square feet owned freehold.
(4)
Land owned under a ground lease expiring in 2038. Property owned.
Novel Denim leases the space for its executive offices in Hong Kong and
the land for certain of its operations in Mauritius from affiliates of NEL. See
Item 7. "Major Shareholders and Related Party Transactions." The Company
believes that its existing facilities are well maintained and in good operating
condition and are adequate for its present level of operations.
17
Table of Contents
Organization Structure
The following is a list of all of Novel Denim's significant subsidiaries
as of March 31, 2002, including the name, country of incorporation or residence
and of ownership interest and voting power held.
Country of
Percentage
incorporation
of ownership,
Name of Subsidiary
or residence
voting interest
Novel Textiles Ltd.
Mauritius
98.7
%
Novel Denim (HK) Ltd.
Hong Kong
100.0
%
Novel Garments (Mauritius) Ltd.
Mauritius
100.0
%
Nomacotex Ltd.
Jersey
100.0
%
Novel Garments International Ltd.
Jersey
100.0
%
Byren Trading Ltd.
Jersey
100.0
%
Novel Garments (Madagascar) S.A.
Madagascar
100.0
%
Novel Spinner (S.A.)(Pty) Ltd.
South Africa
100.0
%
Novel Weavers (S.A.)(Pty) Ltd.
South Africa
100.0
%
Battel Ltd.
British Virgin Islands
100.0
%
Kotten Ltd.
British Virgin Islands
100.0
%
Good Port Finance Ltd.
British Virgin Islands
100.0
%
Novel Dyers (Pty) Ltd.
South Africa
100.0
%
Novel Garments (S.A.) (Pty) Ltd.
South Africa
100.0
%
NDP Holdings Limited
British Virgin Islands
100.0
%
NDP Investment Limited
British Virgin Islands
100.0
%
Noveltex Trading Limited
Hong Kong
100.0
%
NDP Trading Limited
Hong Kong
100.0
%
NDP Fabrics Limited
Hong Kong
100.0
%
Income Pearl Limited
Hong Kong
100.0
%
Novel Dyeing and Printing Mills
Limited
China
100.0
%
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Operating Results
The information should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto included elsewhere
in this Annual Report.
Cotton is the single largest component of the Company's cost of goods
sold. The Company enters into purchase contracts with its cotton suppliers six
to eight months in advance of delivery to provide for a continuous supply of
cotton and to limit the effect of short-term fluctuations in cotton prices.
During fiscal 2000, the Company was adversely affected by the significant
(approximately 20%) reduction in cotton pricing which resulted in the Company
using above market cost of cotton. This in turn significantly reduced the
Company's gross margins during fiscal 2000. In fiscal 2001 and 2002, cotton
costs were more in line with current market values which assisted in the
improvement of the Company's gross margin over the prior year.
Another component of the Company's cost of goods sold is labor costs,
which are primarily denominated in Mauritian rupees. As a result of near
full-employment in Mauritius over the last several years, general wage rates
have been subject to upward pressures. Labor costs historically have not had a
significant effect on the Company's results of operations because of the
devaluation of the rupee against the U.S. dollar (which declined over 50%
between March 1992 and March 2002 and approximately 6.5% in fiscal 2002).
However, in fiscal 2002 the Company's operations in Mauritius were adversely
affected by a labor dispute, now resolved, which is likely to result in higher
labor costs for the Company.
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Table of Contents
Management believes that in a relatively stable cotton price environment,
the steady increase in higher margin garment production, coupled with reduced
labor costs and a continued commitment to increasing efficiency, should result
in relatively stable gross margins for the Company in a price competitive
environment.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of selected items as summarized from the Company's
Consolidated Financial Statements and accounting books and records:
Fiscal Year Ended March 31,
2000
2001
2002
Net sales
100.0
%
100.0
%
100.0
%
Cost of goods sold
80.4
77.8
83.4
Gross profit
19.6
22.1
16.6
Other revenues
.6
.3
.5
Selling, general and administrative expenses
11.6
11.0
11.8
Impairment loss
—
—
1.5
Other expenses
—
.4
—
Operating income
8.6
11.0
3.8
Interest expense, net
2.5
2.3
2.5
Minority interest
—
—
—
Taxation
—
—
.2
Cumulative effect of accounting change
—
—
.2
Net income
6.1
%
8.7
%
1.3
%
Year Ended March 31, 2002 Compared to Year Ended March 31, 2001
Net sales
increased 14.9% to $158.6 million in fiscal 2002 from $138.1
million in fiscal 2001. Net sales in the garment division were $118.5 million
in fiscal 2002 compared to $110.0 million in fiscal 2001, an increase of 7.7%.
The increase in garment sales was primarily the result of an increase in
garment production capacity in the Company's sewing plants in Mauritius and
Madagascar. The garment division sold 15.4 million pieces in fiscal 2002 as
compared to 12.4 million pieces in fiscal 2001, an increase of 24.2%. Net sales
in the fabric division (including inter-divisional sales) increased 33.1% to
$84.3 million in fiscal 2002 from $63.3 million in fiscal 2001, primarily due
to an increase in production capacity after the acquisition of a dyeing and
printing company in China in October 2001. The fabric division sold 32 million
meters of fabric in fiscal 2002 as compared to 24.7 million meters in fiscal
2001, an increase of 29.4%. Third party fabric sales were $40.1 million in
fiscal 2002 compared to $28.1 million in fiscal 2001, an increase of 42.9%.
This increase in third party fabric sales was primarily due to the increase in
production capacity after the acquisition of a dyeing and printing company in
China in October 2001.
Gross profit
decreased 13.7% to $26.4 million in fiscal 2002 from $30.6
million in fiscal 2001. Gross profit as a percentage of net sales decreased to
16.6% in fiscal 2002 from 22.2% in fiscal 2001. This decrease in gross profit
margin was primarily due to the political deadlock in the Madagascar
presidential elections which caused national strikes and other severe
disruptions to production resulting in the write down of cancelled orders and
raw materials, partially offset by higher margins associated with the Company's
newly acquired NDP operations.
Other revenues
increased to $790,000 in fiscal 2002 from $440,000 in
fiscal 2001. Other revenues consisted of net gains on disposal of property,
plant and equipment, claims received from third parties, proceeds from sales of
scrap materials, a government grant received in South Africa and a recognized
gain on financial instruments, relating to the Company's de-designated currency
contracts for sales in non-U.S. denominated currencies.
Selling, general and administrative expenses
as a percentage of net sales
increased to 11.8% in fiscal 2002 compared to 11.0% in fiscal 2001. Selling,
general and administrative expenses increased 23.1% to $18.69 million in fiscal
2002 from $15.19 million in fiscal 2001. The increases were mainly related to
the newly acquired operations in China and increases in selling and marketing
expenses associated with the increase in sales, partially offset by the
exchange gain from borrowings
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denominated in Mauritius rupees and South African rand amounting to
approximately $2.73 million in fiscal 2002 compared to a gain of approximately
$1.95 million in the fiscal 2001.
Impairment losses
amounting to $2.38 million in fiscal 2002 represented a
partial write off of fixed assets in Madagascar related to the closure of the
Madagascar operations
.
Other expenses
of $589,000 in fiscal 2001 represented the write off of
start-up costs associated with the plant expansion in Madagascar
.
Operating income
decreased 60.0% to $6.1 million in fiscal 2002 from $15.2
million in fiscal 2001. Operating income as a percentage of net sales decreased
to 3.8% in fiscal 2002 from 11.0% in fiscal 2001, primarily as a result of the
decrease in gross profit margin. In the garment division, the Company reported
an operating loss of $7.8 million in fiscal 2002 compared to an operating
profit of $11.6 million in fiscal 2001. Operating income as a percentage of net
sales for the garment division decreased to (6.6)% in fiscal 2002 from 10.6% in
fiscal 2001, primarily due to production disruptions in Madagascar and
Mauritius in the fourth quarter of fiscal 2002, events of September 11 and
continued pricing pressure. In the fabric division, operating income increased
significantly to $13.3 million in fiscal 2002 from $6.4 million in fiscal 2001,
primarily due to an improvement in the average fabric selling price as well as
operating efficiencies. Operating income as a percentage of net sales for the
fabric division increased to 15.8% in fiscal 2002 from 10.1% in fiscal 2001.
Interest expense, net
in fiscal 2002 increased 24.8% to $4.0 million from
$3.2 million in fiscal 2001, primarily due to the increase in working capital
required to operate the Company's expanding operations and the borrowings
associated with the acquisition of NDP. Interest expense, net as a percentage
of net sales increased to 2.5% in fiscal 2002 from 2.3% in fiscal 2001.
Cumulative effect of accounting change
amounting to $308,000 in fiscal
2002 was the cumulative gain resulting from the adoption on April 1, 2001 of
Statement of Financial Accounting Standards (SFAS) No.133, Accounting for
Derivative Instruments and Hedging Activities which contributes $0.03 in both
basic and diluted earnings per share in fiscal 2002.
Net income
decreased 82.7% to $2.1 million in fiscal 2002 from $12.0
million in fiscal 2001. Such decrease was primarily attributable to lower
operating income and an increase in interest expense as described above.
Year Ended March 31, 2001 Compared to Year Ended March 31, 2000
Net sales
increased 31.3% to $138.05 million in fiscal 2001 from $105.10
million in fiscal 2000. Net sales in the garment division were $109.97 million
in fiscal 2001 compared to $81.65 million in fiscal 2000, an increase of 34.7%.
The increase in garment sales was primarily the result of an increase in
garment production capacity in the Company's sewing plants in Mauritius and
Madagascar. The garment division sold 12.4 million pieces in fiscal 2001 as
compared to 8.7 million pieces in fiscal 2000, an increase of 42%. Net sales in
the fabric division (including inter-divisional sales) increased 30.0% to
$63.31 million in fiscal 2001 from $48.71 million in fiscal 2000, primarily due
to an increase in production and some improvement in basic denim fabric prices.
The fabric division sold 24.7 million meters of fabric in fiscal 2001 as
compared to 19.2 million meters in fiscal 2000, an increase of 29%. Third party
fabric sales were $28.0 million in fiscal 2001 compared to $23.5 million in
fiscal 2000, an increase of 20%. This increase in third party fabric sales was
primarily due to the additional production capacity provided by the Company's
South Africa weaving operation. The Company's fabric conversion rate (the
percentage of total fabric produced by the Company which was used by the
garment division) was 52.8% in fiscal 2001 compared to 47.9% in fiscal 2000.
Gross profit
increased 48.1% to $30.58 million in fiscal 2001 from $20.65
million in fiscal 2000. Gross profit as a percentage of net sales increased to
22.1% in fiscal 2001 from 19.6% in fiscal 2000. This increase in gross profit
margin was primarily due to reduced cotton unit costs and increased production
efficiencies, partially offset by a decrease in the average selling price of
garments.
Other revenues
decreased to $440,000 in fiscal 2001 from $638,000 in
fiscal 2000. Other revenues consisted of net gains on disposal of property,
plant and equipment, claims received from third parties, proceeds from sales of
scrap materials and a government grant received in South Africa.
Selling, general and administrative expenses
as a percentage of net sales
declined to 11.0% in fiscal 2001 from approximately 11.6% in fiscal 2000,
principally due to the leveraging of expenses over a higher sales base.
Selling, general
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and administrative expenses increased 24.0% to $15.19 million in fiscal 2001
from $12.25 million in fiscal 2000. The increase was mainly related to the
increases in selling and marketing expenses associated with the increase in
sales, and additional expenses incurred by the Company's London sales office
which opened during the third quarter of fiscal 2000, partially offset by a net
exchange gain on South African and Mauritian borrowings denominated in South
African rand and Mauritian rupee, and other net exchange gains totaling
approximately $1.9 million compared to approximately $412,000 in fiscal 2000.
Other expenses
were $589,000 in fiscal 2001 compared to $0 in fiscal 2000.
Other expenses represented the write off of start-up costs associated with the
Company's plant expansion in Madagascar.
Operating income
increased 68.7% to $15.25 million in fiscal 2001 from
$9.04 million in fiscal 2000. Operating income as a percentage of net sales
increased to 11.0% in fiscal 2001 from 8.6% in fiscal 2000, primarily as a
result of the increase in gross profit margin. In the garment division,
operating income increased 10% to $11.64 million in fiscal 2001 from $10.58
million in fiscal 2000. Operating income as a percentage of net sales for the
garment division decreased to 10.6% in fiscal 2001 from 13.0% in fiscal 2000,
primarily due to a reduction in the average garment price and higher operating
costs associated with the Company's garment operations in Madagascar. In the
fabric division, operating income increased significantly to $6.42 million in
fiscal 2001 from a loss of $1.15 million in fiscal 2000, primarily due to an
improvement in the average fabric selling price as well as operating
efficiencies. Operating income as a percentage of net sales for the fabric
division increased to 10.1% in fiscal 2001 from (2.4)% in fiscal 2000.
Interest expense, net
in fiscal 2001 increased 16.5% to $3.17 million from
$2.72 million in fiscal 2000, primarily due to the increase in working capital
required to operate the Company's expanding operations and to fund the
Company's share repurchase program. Interest expense, net as a percentage of
net sales decreased to 2.3% in fiscal 2001 from 2.5% in fiscal 2000.
Net income
increased 89.0% to $12.03 million in fiscal 2001 from $6.36
million in fiscal 2000. Such increase was primarily attributable to higher
operating income, partially offset by an increase in interest expense as
described above.
Liquidity and Capital Resources
In fiscal 2002, the Company's primary funding requirements related to the
financing of capital expenditure and working capital (principally the purchase
of raw cotton and the financing of receivables). The Company's current sources
of liquidity are cash on hand, cash from operations and available credit. The
Company believes that its available capital resources and working capital are
sufficient for the Company's present requirements.
As of March 31, 2002, the Company had approximately $13 million of cash
and cash equivalents compared to $2.4 million at March 31, 2001. This increase
was the net effect of an increase in cash provided by operating and financing
activities, partially offset by a reduction in cash provided by investing
activities.
Net cash from operating activities in fiscal 2002 was $3.6 million. This
amount was comprised primarily of cash generated from net earnings offset, in
part, by an increase in working capital. The increase in working capital was
principally due to a higher inventory level, which increased 22.7% to $50.9
million at March 31, 2002 from $41.4 million at March 31, 2001. Higher
inventory levels at March 31, 2002 were attributable to the increase in the
Company's work-in-process inventory following the acquisition of NDP and the
increase in garment productions, as well as additional raw material inventory.
The Company maintains working capital, overdraft and other short-term
facilities with various commercial banks in Mauritius, Madagascar, South Africa
and Hong Kong. Credit available under such arrangements totaled $71.3 million
as of March 31, 2002 and there was $52.5 million outstanding as of March 31,
2002. These facilities bear interest at rates based on the respective
Mauritius, Madagascar and South African base rates, the Hong Kong prime rate
and lending rates available on other non-U.S. dollar currencies and ranged from
3.3% to 16.5% in fiscal 2002. The weighted average interest rate for the
Company's short-term borrowings at and for the fiscal year ended March 31, 2002
was 6.56% and 7.24% respectively.
The short-term credit facilities available in Mauritius require one of the
Company's subsidiaries in Mauritius to maintain a certain maximum debt/equity
ratio. The Company was in compliance with this covenant as of March 31, 2002.
In addition, these short-term facilities are secured by the assets of the
Company's Mauritius subsidiaries.
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Table of Contents
In connection with the acquisition of NDP in October 2001, the Company
incurred long-term loans to partially fund the acquisition. As of March 31,
2002, the Company had $13.9 million of long-term debt comprised of two notes.
The first note is for $9 million with no amortization during the first year and
then quarterly amortization during the next 4 years. The second note is for
approximately 51 million Mauritian rupees (approximately $4.9 million) with no
amortization and then monthly amortization during the next 4 years. During
fiscal 2002 the Company also repaid approximately $350,000 in long-term debt.
Capital expenditures, primarily for construction of industrial buildings,
purchases of equipment, machinery and leasehold improvements, were
approximately $11.0 million in fiscal 2002. Capital expenditures in fiscal 2002
were financed principally through operating cash flows of the Company and
short-term borrowings. The Company intends to incur capital expenditure of
approximately $12.0 million in fiscal 2003, primarily to upgrade its dyeing and
weaving facilities in the fabric division and to expand the garment division
with a new garment facility in Cape Town, South Africa. Management expects
these future capital expenditure will be financed by internally generated funds
and available credit facilities. Funds may also be required to finance the
Company's share repurchase program, announced June 5, 2000, in which the Board
of Directors authorized the repurchase of up to $5 million of its outstanding
shares in the open market from time to time. Since the inception of the share
repurchase program through March 31, 2002 the Company has repurchased 440,300
shares at an aggregate cost of approximately $3.3 million.
The Company generally does not extend credit to its customers. However,
for certain major customers, the Company does extend credit for periods of up
to 120 days. A majority of the Company's sales are guaranteed by letters of
credit or other bank guarantees. The Company has credit policies and procedures
which it uses to manage its credit risk. Over the past three fiscal years, the
Company has had no bad-debt write-offs.
The Company conducts much of its business in various non-U.S. dollar
currencies. As a result, it is subject to the transaction exposures that arise
from foreign exchange rate movements between the dates that foreign currency
transactions are entered into and the date they are consummated. In response to
this exposure, the Company entered forward foreign exchange contracts to hedge
approximately 70% of its foreign currency denominated firm commitments for
fiscal 2002, primarily consisting of sales to customers invoiced in currencies
other than the U.S. dollar. Assets expressed in foreign currencies which are
hedged by these forward contracts are reported at appropriate contract rates.
Forward foreign exchange contracts as of March 31, 2002 generally had
maturities of less than five months and related to major European currencies.
Counterparties to the transactions are typically large international financial
institutions.
Critical Accounting Policies
The preparation of consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to cash equivalents, inventories, income taxes,
financing operations, claims, pensions and other post-retirement benefits,
impairment cost, and contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Inventories
. Stocks and work in progress are stated at the lower of cost
or net realizable value. Cost, calculated on a weighted average basis,
comprises the cost of raw materials, direct labor and an appropriate portion of
production overhead. The Company continually reviews the value of its
inventories and makes adjustments when it believes the likely realizable value
is below cost.
The Company enters into commitments for the purchase of raw cotton which
is a component of the finished goods it manufactures. In determining the net
realizable value of such finished goods, the Company considers the effect of
changes in the price of raw cotton between the date it enters into the purchase
commitments and the balance sheet date. Where such changes result in a
reduction in the estimated net realizable value of inventory to less than cost,
appropriate provisions are made.
Property, plant and equipment.
Property, plant and equipment is stated at
cost less accumulated depreciation. Interest costs incurred during the
construction period of certain long term assets are capitalized. No interest
was capitalized in the
22
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years ended March 31, 2000, 2001 and 2002. The Company calculates the
estimated useful lives of assets based on industry practice and determines its
ability to fully utilize these assets. Depreciation of property, plant and
equipment is calculated to write off the cost of individual assets in equal
annual installments over their estimated useful lives which range from 3 1/3 to
50 years.
Transfers of accounts receivable with recourse
. The Company has entered
into an agreement with a financial institution pursuant to which the financial
institution has agreed to make advances to it which are secured by accounts
receivable. The advances are made with recourse to the Company and are
accounted for as financing transactions in accordance with the provisions of
SFAS No.140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", since the Company has not effectively
surrendered control of the receivables.
Costs of Start-Up Activities
. The Company early adopted Statement of
Position ("SOP") No. 98-5, Reporting on the Costs of Start-Up Activities. SOP
No. 98-5 requires that costs of start-up activities and organization costs, as
defined, be expensed as incurred. For the year ended March 31, 2001 and 2002,
the Company recognized a charge of $588,709 and nil, respectively. This charge
is included in other expense in the consolidated statement of income.
Forward Foreign Exchange Contracts.
The Company conducts certain
transactions in various non-U.S. dollar currencies. As a result, it is subject
to the transaction exposures that arise from foreign exchange rate movements
between the dates that foreign currency transactions are entered into and the
date they are consummated. In response to this exposure, the Company enters
into forward foreign exchange contracts to hedge certain foreign currency
denominated firm commitments, primarily sales to customers invoiced in
currencies other than the U.S. dollar. The primary purpose of the Company's
foreign currency hedging activities is to manage the volatility associated with
foreign currency revenues and the other assets and liabilities created in the
normal course of business. The Company does not hold or issue financial
instruments for trading purposes. On April 1, 2001, the company adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities". Under SFAS No. 133, all derivative instruments
(including certain derivative instruments embedded in other contracts) are
recognized in the balance sheet at their fair values and changes in fair value
are recognized immediately in earnings, unless the derivatives qualifies as
hedges of future cash flows. For derivatives qualifying as hedges of future
cash flows, the effective portion of changes in fair value is recorded
temporarily, in equity, then recognized in earnings along with the related
effects of the hedged items. Any ineffective portion of hedges is reported in
earnings as it occurs.
Recoverability of Long-lived Assets.
Long-lived assets are reviewed for
impairment whenever events of changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Assets are grouped and
evaluated at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated results in its
evaluation of potential impairment. The Company measures the amount of the
impairment by comparing the carrying amount of the assets to its fair value.
The Company estimates fair value based on the best information available making
whatever estimates, judgments and projections are considered necessary. The
estimation of fair value is generally measured by determining the net selling
price or by discounting expected future cash flows at discount rates
commensurate with the risk involved. The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" in the year
ended March 31, 1997.
Inflation and Exchange Rates
Local expenses incurred in Mauritius mainly relate to wages, salaries and
short-term borrowings. Wage rates are reviewed on a yearly basis to take
account of inflation and other price increases. Wage rate increases in fiscal
year 2002 were approximately 5.5%. However, these increases have been more than
offset by an approximate 6.5% devaluation of the Mauritian rupee against the
U.S. dollar during fiscal 2002.
Local expenses incurred in Madagascar mainly relate to wages and salaries.
Since the Company began operations in Madagascar, there have been no government
imposed wage or salary increases. During fiscal 2002, the Madagascar franc
devalued approximately 4.4% against the U.S. dollar.
Local expenses incurred in South Africa mainly relate to local borrowings,
the purchase of raw materials, electricity costs and wages and salaries. During
fiscal 2002, the South African rand devalued approximately 43% against the U.S.
dollar.
23
Table of Contents
Local expenses incurred in China mainly relate to local borrowings, the
purchase of raw materials, electricity costs and wages and salaries. During
fiscal 2002, the Chinese yuan held constant against the U.S. dollar. Wage rate
increases in the Shenzhen region in fiscal year 2002 were approximately 10.0%.
The Company has also been able to offset the effects of inflation it
experienced in recent years by increases in productivity through investments in
modern and cost-effective manufacturing facilities. As a result, inflation has
not had a material impact on the Company's results of operations in recent
years.
Seasonality of Business
Garments are worn year-round and, as such, demand for Novel Denim's
products and the level of its sales fluctuate only moderately throughout the
year.
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established permanent, fixed conversion rates between their existing currencies
and the European Union's common currency called the
"euro".
The transition period for the introduction of the euro was phased in over
a period ending January 1, 2002, with the existing currencies being completely
removed from circulation on July 1, 2002. The Company has been preparing for
the use of the euro. The timing of the Company's phasing out all uses of the
existing currencies complied with applicable legal requirements and also was
scheduled to facilitate optimal coordination with the plans of our vendors.
The Company believes the introduction of the euro and the phasing out of
the other currencies did not have a material impact on the Company's
consolidated financial statements.
Taxation
The Company operates in four jurisdictions where it is subject to profits
taxes; namely Mauritius, South Africa, China and Hong Kong. The Company became
subject to tax in Mauritius effective April 1, 2000. No tax charge has been
recorded during the year ended March 31, 2002, in respect of the Mauritian
operations, as the Company had sufficient tax losses carried forward to off-set
taxable profits.
The Company's subsidiaries incorporated in South Africa are subject to tax
at a rate of 30%. During the year ended March 31, 2002, the Company's South
African subsidiaries had taxable income and a provision amounting to $20,891
has been provided in the financial statements. During the year ended March 31,
2002, a deferred tax provision amounting to $111,258 has been provided in the
financial statements in respect of temporary differences within the South
African subsidiaries.
The Company's subsidiaries incorporated in Hong Kong are subject to tax at
a rate of 16%. During the year ended March 31, 2002, the Company's Hong Kong
subsidiaries had taxable income and a provision amounting to $16,430 has been
provided in the financial statements.
The Company's subsidiary incorporated in China, is subject to tax at a
rate of 15%. During the year ended March 31, 2002, the Company's China
subsidiary had taxation income and a provision amounting to $149,626 has been
provided in the financial statements.
Closure of Madagascar Operations
Following a strategic review of the Company's operations in Madagascar,
the Company announced on March 28, 2002 its intention to close its Madagascar
operations after more than three months of significant political and social
unrest in the country and severe disruptions to the business caused by national
strikes, road and port blockages and fuel shortages. As a result, the Company
recorded an impairment charge to its fixed assets totaling $2.4 million
reflecting a write-down in the value of equipment relating to its knitwear
business as well as the write-off of other equipment and tools, leasehold
24
Table of Contents
improvement and furniture and fixtures. For the woven and laundry machinery and
computer equipment, no provision has been made based on the Company's
expectation and assumption that the machinery and equipment can be successfully
relocated. In addition, the Company made a provision for inventories of $3.8
million and redundancy costs of $0.4 million. During the first quarter of
fiscal 2003, the Company incurred additional expenses associated with the
closure and shipment of equipment from Madagascar.
Expansion into China
On August 7, 2001, the Company entered into an agreement to acquire NDP
for $18.97 million in cash from a subsidiary of Novel Enterprises Limited, an
affiliate of Novel Apparel Limited, the principal shareholder of the Company.
NDP, through its subsidiaries, owns and operates an integrated fabric dyeing,
printing and finishing facility in the Shenzhen region of the People's Republic
of China (''PRC''), near Hong Kong, capable of processing 40 million meters of
fabric annually. NDP sells primarily to fabric converters in Hong Kong,
South-east Asia and the PRC for eventual sales into the United States, Europe
and Japan. The transaction closed on October 1, 2001. The acquired business
contributed revenues of $14,088,680 and operating profit of $1,779,645 to the
Company for the period from October 1, 2001 to March 31, 2002. The acquisition
has been accounted for using purchase accounting, negative goodwill amounting
to $6.9 million arose on acquisition, which was primarily derived from the fair
value of NDP's property, plant and equipment, at the time of the acquisition,
being higher than the purchase price. The negative goodwill has been allocated
to reduce proportionally the values assigned to noncurrent assets.
Accordingly, the operating results of NDP have been included in
the Company's consolidated financial statement since the date of acquisition.
Recently Issued Accounting Standards
On April 1, 2001, the Company adopted Statement of Financial Accounting
Standards (''SFAS'') No. 133, "Accounting for Derivative Instruments and
Hedging Activities", as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". SFAS No. 133, as
amended, establishes accounting and reporting standards for derivative
instruments. Specifically, SFAS No. 133 requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. Additionally, the
fair value adjustments will affect either stockholders' equity or net income
depending on whether the derivative instrument qualifies as a hedge for
accounting purposes and, if so, the nature of the hedging activity. As of
April 1, 2001, the adoption of the new standard resulted in an unrealized gain
of $307,991. This transition adjustment has been recognized in fiscal 2002's
net income in accordance with the transitional provisions of SFAS No. 133.
In connection with the acquisition of NDP, the Company adopted SFAS
No.141 Business Combinations ("SFAS 141") and SFAS No. 142 Goodwill and Other
Intangible Assets ("SFAS 142"). In July 2001, the Financial Accounting
Standards Board (the "Board") issued Statement of Financial Accounting
Standards SFAS 141 and SFAS 142. SFAS No. 141 (a) requires that the purchase
method of accounting be used for all business combinations initiated after
June, 30 2001; (i) establishes specific criteria for the recognition of
intangible assets separately from goodwill; and (ii) requires unallocated
negative goodwill to be written off. The Company has applied SFAS 141 to the
acquisition of NDP during the year. SFAS No. 142 (a) addresses financial
accounting and reporting for goodwill and intangible assets; (b) provides
guidance on the amortization of intangible assets other than goodwill; (c)
requires that goodwill not be amortized; and (d) requires an annual evaluation
of goodwill and certain intangible assets for impairment. SFAS 141 is
effective for all business combinations initiated after June 30, 2001. Most
provisions of SFAS No. 142 are effective for fiscal years beginning after
December 15, 2001.
In July 2001, the Board issued SFAS 143 which requires entities to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
assets. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The
Company is currently assessing the impact of the adoption of this statement.
In October 2001, the Board issued SFAS No. 144 which requires that those
long-lived assets to be sold be measured at the lower of carrying amount or
fair value less cost to sell, whether reported in continued operations or in
discontinued
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Table of Contents
operations. Under this statement, discontinued operations will no longer be
measured at net realizable value or include amounts for operating leases that
have not yet occurred. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company is currently assessing the impact of the
adoption of this statement.
Trend Information
Since the end of fiscal 2002, the Company's operations have partially
recovered from the events during the fourth quarter of 2002 which included the
production disruptions in Madagascar and the subsequent closure of the
Company's operations in that country as well as the labor dispute in Mauritius.
The overall production disruptions are likely to continue to impact the
company's shipments and margins during the next few quarters. The anticipated
improvement of the global garment and fabric market will also influence the
Company's financial performance in fiscal 2003.
Customer development continues to be a primary focus of the Company
particularly as the Company concentrates on maintaining its long-standing
customer relationships and further developing new customers particularly in the
U.S. The Company's garment production should benefit from expansion into South
Africa, which should help to compensate for lost production from Madagascar.
In addition, the Company expects to continue to develop its fabric business and
plans to further benefit from the acquisition of NDP which both increases
fabric production capacity and broadens the Company's product range. Given the
continued difficulties within the global apparel market due to the overall
consumer market, increasing supply and shorter product cycles, it is difficult
to determine what impact a weakening global economy will have on the Company's
results.
As of March 31, 2002, the Company had a garment order backlog of
approximately 6 million pieces, representing approximately 7 months of garment
production. The shorter backlog, compared to prior years, is reflective of the
Company's production disruptions. Order backlog includes both specific orders
as well as production bookings.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The directors and executive officers of the Company are:
Year in Which
Current Director
Name
Age
Position
Term Expires
Silas K.F. Chou
56
Director, Chairman of the Board
2004
K.C. Chao
53
Director, Chief Executive Officer and President
2002
Alain Rey
42
Director, Chief Financial Officer and
Senior Vice President—Finance
2004
Lester M.Y. Ma
55
Director and Treasurer
2003
Mei-Ling Liu
55
Senior Vice President—Operations
NA
Isaacs C.C. Lam
43
Senior Vice President—Sales and Marketing
NA
Ronald K.Y. Chao
63
Director
2003
Susana Chou
60
Director
2002
Noel Jervis
57
Director
2004
Leavitt B. Ahrens, Jr.
58
Director
2003
Lawrence T.S. Lok
45
Secretary
NA
Silas K.F. Chou
—Mr. Chou is a founder of the Company and has been the
Company's Chairman of the Board since 1996 and a Director since 1990. In 1996,
Mr. Chou was Managing Director of NEL from 1996 to 2002 and currently serves as
a Director. In addition, Mr. Chou is Chairman of the Board of Directors of
Tommy Hilfiger, an apparel company listed on the New York Stock Exchange, a
position he has held as either Chairman or Co-Chairman of the Board from 1992.
In addition, Mr. Chou was Chairman of the Board of Pepe Jeans London
Corporation and its predecessors from 1992 to 1998. Mr. Chou devotes a
significant portion of his time to matters other than those relating to the
Company, including those relating to NEL and its affiliates, Pepe Europe and
Tommy Hilfiger.
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Table of Contents
K.C. Chao
—Mr. Chao is a founder of the Company and has been the Chief
Executive Officer and President of Novel Denim since February 1996. Mr. Chao is
responsible for the overall activities of the Company. He also has been a
Director of the Company since 1990. Mr. Chao has also been a Director of NEL
since 1996. He is a national of the Republic of Mauritius.
Alain Rey
—Mr. Rey has been the Chief Financial Officer since 1996 and was
promoted to Senior Vice President—Finance in September 1998. He also has been a
Director of the Company since 1997. Mr. Rey is an associate member of the
Institute of Chartered Accountants in England and Wales. For more than five
years prior to joining the Company in 1996, Mr. Rey held various senior
managerial positions with textile companies in Mauritius. From 1986 to 1988,
Mr. Rey was the head of the audit division for France and Monaco in the
consumer services department of Citibank and prior to that performed audit, tax
and consulting services for Coopers & Lybrand in London. He is a national of
the Republic of Mauritius.
Lester M.Y. Ma
—Mr. Ma has been a Director of the Company since 1992 and
the Treasurer of the Company since 1997. He has also been a director of Tommy
Hilfiger since 1992. Mr. Ma has also served as an Executive Director and Group
Chief Accountant of NEL for more than five years.
Mei-Ling Liu
—Ms. Liu was promoted to Senior Vice President—Operations of
the Company in September 1998, having served as Vice President—Operations since
1993, prior to which she was the Production Manager at one of the Company's
subsidiaries. Prior to joining Novel Denim, Ms. Liu was first a technical
manager and later general manager for ten years at a cotton mill in Shanghai
where her responsibilities included product design. She is a national of the
Republic of Mauritius.
Isaacs C.C. Lam
—Mr. Lam was promoted to Senior Vice President—Sales and
Marketing of the Company in April 2000, having served as Vice President and
General Merchandising Manager for the Company's garment division since January
2000. Mr. Lam has almost 20 years of sales experience in the garment
manufacturing, and served most recently as General Merchandising Manager for a
leading Hong Kong-based manufacturer of trousers and knitwear for branded
customers in the United States and Europe.
Ronald K.Y. Chao
—Mr. Chao was a Director of the Company from 1989 to 1990
and from 1997 to present. He also has been a director of Tommy Hilfiger since
1992. In 1996, Mr. Chao resigned as Managing Director of NEL, a position he
held for more than five years prior thereto, and was appointed as Vice Chairman
of NEL.
Susana Chou
—Ms. Chou has been a Director of the Company since 1997. In
1996, she was appointed as Vice Chairman of NEL, and for more than five years
prior thereto she was an Executive Director of NEL. Ms. Chou also serves as the
President of H. Nolasco and Company Limited, a diversified trading company
based in Macau. In addition to her business activities, Ms. Chou is President
of the Legislative Assembly of Macau and a member of China's National Committee
of the Chinese People's Political Consultative Conference.
Noel Jervis
—Mr. Jervis has been a Director of the Company since 1997. From
1993 to 1996, he served as the Chief Executive Officer of Courtaulds Textiles
plc (''Courtaulds''), Europe's second largest textile manufacturer. For more
than 25 years prior thereto, Mr. Jervis held various senior finance positions
at Courtaulds, followed by an appointment as Chairman of its International
Fabrics Group from 1988 to 1993. Mr. Jervis also serves as Chairman of
Interfloor Group Ltd, Europe's largest manufacturer of carpet underlays,
specialist rubber flooring and carpet fitting accessories and as Chairman of
Sherwood Group plc, a designer and distributor of women's intimate apparel and
manufacturer of lace.
Leavitt B. Ahrens, Jr.
—Mr. Ahrens has been a Director of the Company
since 1997. Mr. Ahrens served as Senior Vice President, International at
Rubbermaid Incorporated, a leading brand manufacturer and marketer of consumer
and commercial products, where he was responsible for the company's global
growth strategy from April 1996 to April 1999. Prior to joining Rubbermaid,
Mr. Ahrens was with VF Corporation for over 10 years, where he most recently
served as President-VF Asia-Pacific after serving as President-VF Europe:
Jeanswear, where he managed the Lee
®
,
Wrangler
®
and Maverick
®
brands.
Lawrence T.S. Lok
—Mr. Lok has been the Secretary of Novel Denim since
1997. He has also been the Secretary of Tommy Hilfiger and NEL since 1994. In
addition, Mr. Lok also has been Deputy Financial Controller of NEL since 1998
and for more than five years prior thereto was Deputy Group Chief Accountant of
NEL. He is a fellow of the Chartered Association of Certified Accountants.
Messrs. Silas K.F. Chou, K.C. Chao, Ronald K.Y. Chao and Ms. Susana Chou
are siblings.
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Committees of the Board of Directors
The Company's Board of Directors has standing Audit and Compensation
committees which meet at least twice a year.
The Audit Committee recommends to the Board of Directors an accounting
firm to serve as the Company's independent accountants, reviews the scope and
results of the annual audit of the Company's consolidated financial statements,
reviews non-audit services provided to the Company by the Company's independent
accountants, monitors transactions among the Company and its affiliates and
other similar and customary functions. The Audit Committee currently consists
of Messrs. Jervis, who serves as Chairman, and Ahrens.
The Compensation Committee is charged with supervising the Company's
compensation policies, administering the employee incentive plans, reviewing
officers' salaries and bonuses, approving significant changes in employee
benefits and recommending to the Board of Directors such other forms of
remuneration as it deems appropriate. The Compensation Committee currently
consists of Messrs. Silas Chou, who serves as Chairman, Jervis and Ahrens.
Compensation of Directors And Officers
In fiscal 2002, the aggregate salary and bonus compensation paid by the
Company and its subsidiaries to all directors and officers of the Company as a
group (8 persons) for services in all capacities was $1,045,219, including nil
pursuant to an informal bonus arrangement. Under the informal bonus
arrangement, the Company distributes up to 5% of Novel Denim's income before
bonuses and minority interests each year as bonuses to executive officers and
employees. In addition, under a deferred employee benefit plan, the aggregate
amount accrued in fiscal 2002 by the Company for all of Novel Denim's directors
and officers for long service benefits, which the Company is obligated by
statute to provide, was $70,058.
Certain Employment Agreements
Novel Denim has employment agreements with K.C. Chao, Alain Rey, Mei-Ling
Liu and Isaacs Lam.
The employment agreement with Mr. Chao provides for his employment as
Chief Executive Officer and President of Novel Denim. The term of his
employment agreement is until March 31, 2004.
The employment agreement with Mr. Rey provides for his employment as Chief
Financial Officer and Senior Vice President of Novel Denim. The term of his
employment agreement is until March 31, 2004.
The employment agreement with Ms. Liu provides for her employment as
Senior Vice President—Operations of Novel Denim. The term of her employment
agreement is until March 31, 2004.
The employment agreement with Mr. Lam provides for his employment as Vice
President of Novel Denim and General Merchandising Manager of the Company's
garment division. The term of his employment agreement is until December 31,
2002.
Each of the employment agreements provides that if the executive
terminates his or her employment with the Company, other than at the end of the
employment term or for ''good reason'' (as defined in the agreements), the
executive may not compete with the Company for a period of one year thereafter.
Employees
As of March 31, 2002, Novel Denim had approximately 14,300 full-time
employees compared to 10,900 at March 31, 2001 and 6,800 at March 31, 2000.
Approximately 51% are located in Mauritius, 42% in Madagascar, 3% South Africa,
3% China and 1% in other regions including Hong Kong. Because Mauritius is near
full employment, the country permits the importation of foreign labor.
Approximately 24% of the Company's work force in Mauritius now consists of
skilled workers from China. These non-Mauritian workers have three-year
employment contracts with the Company and are paid the same wages as Novel
Denim's Mauritian labor force. In addition, Novel Denim has recruited highly
educated engineers and technicians from Hong Kong and Europe. With the
exception of approximately 400 employees in South Africa, none of the
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Company's employees is a member of a union and the Company provides its workers
with a clean and modern working environment as well as job training. In fiscal
2002, Novel Denim's employee turnover rate was less than 10% for its local
workers and de minimus for workers recruited from outside Mauritius. The
Company seeks to maintain excellent relations with its employees.
Share Ownership
The only directors and executive officers of Novel Denim who are deemed to
have beneficial ownership of more than 1% of Novel Denim's outstanding Ordinary
Shares are Messrs. Silas Chou, Ronald Chou, K.C. Chao and Ms. Susana Chou, all
of whom are related to Novel Apparel, Novel Denim's major shareholder. For
details please see Footnotes 1 and 3 to the share ownership table and the notes
thereto in Item 7. "Major Shareholders and Related Party Transactions."
As of July 31, 2002, Novel Denim's directors and executive officers, in
the aggregate, held options under its stock option plans to purchase up to
384,000 Ordinary Shares. 364,000 of these, which were granted under the
Employee Plan (defined herein), have an average exercise price of $11.47 and
will expire 10 years from the date of grant. 20,000 of these, which were
granted under the Non-Employee Director Plan (defined herein), have an average
exercise price of $14.63 and will expire 10 years from the date of grant.
Stock Option Plans
Employee Plan
In
August 1997, the Company adopted a stock incentive plan (the "Employee
Plan'') authorizing the issuance of an aggregate of up to 450,000 Ordinary
Shares to directors, officers and employees of the Company and its
subsidiaries. In September 1999, the Company amended the Employee Plan to
increase the number of Ordinary Shares authorized for issuance thereunder to
900,000. Messrs. Silas K.F. Chou, K.C. Chao, Ronald K.Y. Chao and Ms. Susana
Chou are not eligible for grants under the Employee Plan.
The Employee Plan is administered by the Compensation Committee of the
Board of Directors of the Company. The Compensation Committee determines the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms and conditions of each grant, subject to the provisions of
the Employee Plan.
Non-Employee Directors Stock Option Plan
In July 1997, the Company adopted a non-employee directors stock option
plan (the "Non-Employee Directors Plan'') authorizing the issuance of an
aggregate of up to 50,000 Ordinary Shares to directors who are not officers or
employees of the Company or any subsidiary of the Company. The Non-Employee
Directors Plan is administered by the Compensation Committee of the Company.
Adjustments in the aggregate number and kind of shares reserved for issuance
and subject to options granted under the Non-Employee Directors Plan are made
by the Compensation Committee in the event of a merger, consolidation,
recapitalization, reorganization, stock split, stock dividend, extraordinary
distribution with respect to the Ordinary Shares or other change in corporate
structure affecting the shares.
Under the Non-Employee Directors Plan, subject to adjustment as described
above, each non-employee director (other than Mr. Ronald Chao and Ms. Susana
Chou who are not eligible for grants under this plan) will receive an initial
grant of options to purchase 6,000 Ordinary Shares and subsequent annual grants
of options to purchase 1,000 Ordinary Shares. All grants will have an exercise
price equal to the fair market value of the Ordinary Shares at the date of
grant.
Outstanding Options
As of July 31, 2002, 661,960 options, net of cancellations, have been
granted and remain unexercised under the Employee Plan. The average exercise
price of such options is $11.16 per share.
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As of July 31, 2002, 20,000 options, net of cancellations, have been
granted and remain unexercised under the Non-Employee Directors Plan. The
average exercise price of such options is $14.63 per share.
The term, under both plans, of each stock option is 10 years, unless
terminated earlier in accordance with the terms of the relevant plan. Such
stock options have varied vesting schedules.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
As of July 31, 2002, the Company was effectively controlled by its 50.0%
shareholder, Novel Apparel, an affiliate of NEL. All shareholders have the
same voting rights. As of July 31, 2002, there were 9,107,300 outstanding
Ordinary Shares and approximately 50% of the outstanding Ordinary Shares were
held by approximately 28 record holders (excluding Novel Apparel) in the United
States. The following table sets forth as of June 30, 2002 (i) the persons
owning more than 5% of the Ordinary Shares and (ii) the share ownership and
exerciseable share options of all the directors and officers of the Company as
a group:
Ordinary Shares (1)
Number
Percent
Novel Apparel (BVI) Limited (2)
4,550,000
50.0
%
Capital Group International, Inc.
1,109,700
12.2
%
FMR Corporation
964,670
10.6
%
K.C. Chao (3)
505,000
5.5
%
All directors and officers as a group (other
than as set forth in relation to Novel Apparel
and K.C. Chao)
(9 persons) (4)
395,700
4.3
%
(1)
Based upon 9,107,300 Ordinary Shares, net of treasury stock. Does not
reflect the dilution arising from the exercise of stock options.
(2)
NHL owns 80% of the Ordinary Shares of Novel Apparel with K.C. Chao, the
Company's Chief Executive Officer and President, owning the remaining 20%.
NHL is indirectly wholly owned by members of the Chao family (including
Messrs. Silas Chou, Ronald Chao and Ms. Susana Chou).
(3)
Not including Ordinary Shares held by Novel Apparel.
(4)
Does not include 15,100 Ordinary Shares held by a spouse of a member of
the Board of Directors. Includes options to purchase Ordinary Shares held
by certain officers and directors, exercisable within 60 days of the date
of this Annual Report and 8,500 Ordinary Shares held by two directors, and
does not include Ordinary Shares held by Novel Apparel which may be deemed
beneficially owned by certain officers and directors as described in note
2 above.
Transactions with Affiliates
As described below, the Company has engaged in certain related party
transactions with NEL and its affiliates in fiscal 2002.
Sales Agencies
In The Netherlands and France, Novel Denim employs the marketing and sales
services of two agencies which are affiliates of the Chao family. The sales
agencies receive a commission based on sales of Novel Denim products. The
Company incurred $512,692 of sales commissions under these agreements during
fiscal 2002. The agencies do not market any other denim manufacturer's
products.
Sales of Products and Services
Novel Denim's customers include Tommy Hilfiger, Pepe Europe and certain
other affiliates of NEL. The Chao family has an approximately 27% indirect
ownership interest in Pepe Europe and a small indirect ownership interest in
Tommy
30
Table of Contents
Hilfiger. In addition, Mr. Silas K.F. Chou, the Company's Chairman of the
Board, is also Co-Chairman of the Board of Tommy Hilfiger. Messrs. Ronald Chao,
Lester Ma and Lawrence Lok, directors and/or officers of the Company, are also
directors and/or officers of Tommy Hilfiger, Pepe Europe and/or NEL and its
affiliates. See Item 6. "Directors, Senior Management and Employees.'' Tommy
Hilfiger and Pepe Europe purchased $23.9 million and $1.0 million, respectively
of products from the Company during fiscal 2002. Novel Denim intends to
continue to sell products to Tommy Hilfiger and Pepe Europe. See
Item 3. "Key
Information—Risk Factors—Control by Principal Shareholder; Conflicts of
Interest.''
Purchases of Materials and Services
The Company purchases certain raw materials and other inventory items from
certain affiliates of NEL. During fiscal 2002, purchases from these companies
amounted to approximately $25,000.
The Company receives certain services from NEL and its affiliates,
including information systems, staff resources, office space and related
overheads. The Company paid $134,783 in fiscal 2002 for such services. The cost
of such services is apportioned based on usage.
Leases of Office Space and Land
Novel Denim leases office space from an affiliate of NEL. The Company paid
rent of $173,432 in fiscal 2002, under leases covering approximately 14,500
square feet. In addition, the Company leases 422,830 square feet of land, which
includes a 380,000 square foot factory and laundry facility, in Mauritius from
an NEL affiliate under a 50-year arrangement which began in 1989. Annual rental
payments under this lease arrangement are not material.
Each of the transactions undertaken with related parties has been
negotiated on an arms-length basis and the Company believes that the terms of
such transactions are no less favorable to the Company than could be obtained
from unaffiliated parties. The Audit Committee of the Board of Directors, which
is comprised of two non-employee directors who are not affiliated with NEL or
Novel Apparel, reviews transactions between the Company and its affiliates to
provide that such transactions are on terms which are no less favorable as a
whole to the Company than could be obtained from unaffiliated parties and that
such transactions are properly reported. See Item 6. "Directors, Senior
Management and Employees.''
Acquisition of Novel Spinners and Novel Weavers
On August 9, 1998, Novel Denim entered into a Share Purchase Agreement
with Novel Apparel to purchase all the outstanding shares of Novel Spinners
(S.A.) (Pty) Ltd. and Novel Weavers (S.A.) (Pty) Ltd. Novel Spinners owns and
operates an existing 215,000 square foot state-of-the-art spinning facility in
Cape Town, South Africa. Novel Weavers was a dormant company. On August 31,
1998, the Company acquired Novel Spinners and Novel Weavers for approximately
$8.8 million in cash and the assumption of debt. The transaction was negotiated
and approved by an independent committee of the Company's Board of Directors.
Messrs. Silas Chou, Ronald Chao, K.C. Chao, Lester Ma and Ms. Susana Chou are
directors and/or officers of Novel Apparel and Novel Denim.
Acquisition of NDP Holdings Limited
On August 7, 2001, the Company entered into an agreement to acquire NDP
for $18.97 million in cash from a subsidiary of Novel Enterprises Limited, an
affiliate of Novel Apparel. NDP, through its subsidiaries, owns and operates
an integrated fabric dyeing, printing and finishing facility in the Shenzhen
region of the PRC, close to Hong Kong, capable of processing 40 million meters
of fabric annually. The transaction closed on October 1, 2001. The
transaction was negotiated and approved by an independent committee of the
Company's Board of Directors. Messrs. Silas Chou, Ronald Chao, K.C. Chao,
Lester Ma and Ms. Susana Chou are directors and/or officers of Novel Apparel
and Novel Denim.
Registration Rights Agreement
Under a registration rights agreement between Novel Apparel and the
Company entered into prior to the Company's initial public offering, Novel
Apparel has the right, subject to certain conditions, to require the Company to
register under the
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Securities Act of 1933, as amended, Ordinary Shares held by it. Pursuant to the
registration rights agreement, Novel Apparel was granted unlimited demand and
piggy-back registration rights. The Company has agreed to pay all expenses
incurred in connection with all piggy-back registrations and with the first
four demand registrations, and will share expenses ratably with Novel Apparel
in connection with any additional such demand registrations. The registration
rights agreement provides for indemnities between the Company and Novel Apparel
for certain liabilities under the Securities Act of 1933.
ITEM 8. FINANCIAL INFORMATION
Consolidated Statements and Other Financial Information
See "Item 17. Financial Statements" and pages F-1 through F-23.
Legal Proceedings
There are no material legal proceedings pending against the Company.
Dividend Distributions
The Company does not have a stated dividend policy and has not declared or
paid any dividends since the Company's IPO in 1997.
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ITEM 9. THE OFFER AND LISTING
The Company's Ordinary Shares, par value U.S. $1.00, are listed and traded
on the National Market Tier of the Nasdaq Stock Market (''Nasdaq'') under the
symbol "NVLD''.
The following table sets forth, for each of the periods indicated, the
reported high and low sales prices per Ordinary Share as reported on Nasdaq:
High
Low
Annual Information
Fiscal Year ended March 31, 2002
$
15.500
$
6.250
Fiscal Year ended March 31, 2001
$
10.625
$
3.250
Fiscal Year ended March 31, 2000
$
10.625
$
2.750
Fiscal Year ended March 31, 1999
$
28.250
$
8.875
Quarterly Information
Fiscal Year ended March 31, 2003
First quarter
$
10.000
$
7.150
Fiscal Year ended March 31, 2002
Fourth quarter
$
12.000
$
9.250
Third quarter
$
12.890
$
7.300
Second quarter
$
15.500
$
6.260
First quarter
$
15.500
$
8.760
Fiscal Year ended March 31, 2001
Fourth quarter
$
10.000
$
8.000
Third quarter
$
10.625
$
6.625
Second quarter
$
9.125
$
4.338
First quarter
$
6.000
$
3.250
Monthly Information
August 2002
$
6.500
$
5.190
July 2002
$
7.390
$
5.500
June 2002
$
9.340
$
7.150
May 2002
$
10.000
$
8.300
April 2002
$
7.560
$
10.000
March 2002
$
12.000
$
9.250
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ITEM 10. ADDITIONAL INFORMATION
Objects and Purposes
The objects and powers of the Company are set forth in clause 4 of its
Memorandum and Articles of Association. The Company has a broad range of
corporate powers and the powers of the Company may be exercised irrespective of
whether it derives corporate benefit from its actions. The Company may borrow
money and mortgage or charge any of its property and undertakings as security
for such borrowings or the borrowings of a third party. It may also issue
debentures, debenture stock and other securities whenever money is borrowed.
Directors
Regulation 77 of the Memorandum and Articles of Association allows the
directors to compensate themselves by way of a board resolution. No approval
by the member is required.
Where a conflict of interest exists on the part of a director of the
Company, that director is not prohibited from voting with respect to the matter
and the matter may be validly approved under BVI law if that director declares
his or her interest in the transaction to the other directors and the
transaction is then approved by the other disinterested directors. A director
may borrow from the Company, if the disinterested directors approve the
transaction in accordance with the provisions of this paragraph. Directors are
not required to own any of the Company's shares.
A director holds office until conclusion of office, death, removal or
resignation. Directors stand for reelection at staggered annual intervals. At
meetings at which directors are to be elected, the successors of the retiring
directors are elected by a plurality vote of all votes cast at the meeting.
Share Capital
The Company has an authorized share capital of US$28,000,000 which
consists of 23,000,000 Ordinary Shares, US$1.00 par value ("Ordinary
Shares''), and 5,000,000 preference shares, par value
US$1.00 ("Preference
Shares''). At March 31, 2002, the Company had 9,138,900 Ordinary Shares issued
and outstanding, of which 298,600 Ordinary Shares were repurchased by the
Company and held at cost as treasury shares, all of which were fully paid.
Share rights may be varied with the written consent of the holders of a
majority of each class or series of shares to be affected by the variation.
Dividends which remain unclaimed three years after having been declared may be
forfeited at the option of the directors for the benefit of the Company. No
Preference Shares have been issued.
The Ordinary Shares have one vote each, are subject to redemption,
purchase or acquisition by the Company for fair value and have the right to
receive dividends and distributions upon the liquidation of the Company. The
rights of the Preference Shares are to be determined by the directors of the
Company by way of a duly passed resolution of directors prior to the Company's
issuance of any preference shares. Neither the Ordinary Shares nor the
Preference Shares have pre-emption rights or restrictions on their transfer.
Meeting of Members
The directors of the Company are required to convene an annual meeting of
members to consider the election of directors and any other matters which the
directors propose to be considered. The directors may also convene such other
meetings of members at such times as the directors consider necessary or
desirable. The directors are also required to convene a meeting of members on
the request of the members holding 50% or more of the outstanding voting
shares in the Company. The affirmative vote of more than 50% of all the votes
of the shares at the members' meeting entitled to vote is required to pass any
resolution.
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Material Contracts
The Company believes it has no material contracts which occurred outside
of its normal course of business during the past two fiscal years. All material
contracts which occurred in the ordinary course of business are attached to
this registration statement as exhibits.
Exchange Controls and Other Limitations Affecting Security Holders
Exchange Controls
There are currently no exchange control restrictions on remittances of
dividends on the Company's Ordinary Shares or on the conduct of the Company's
operations either in Hong Kong, where the Company's principal executive office
is located, Mauritius, where its principal manufacturing operations are
located, or the British Virgin Islands, where it is incorporated. There are
currently no limitations imposed by British Virgin Islands law or by the
Company's Memorandum of Association and Articles of Association on the right of
non-resident or foreign owners to hold or vote the Company's Ordinary Shares.
Comparison of United States and British Virgin Islands Corporate Laws
Under the laws of most jurisdictions in the United States, majority and
controlling shareholders generally have certain "fiduciary'' responsibilities
to the minority shareholders. Shareholder action must be taken in good faith
and actions by controlling shareholders which are obviously unreasonable may be
declared null and void. British Virgin Islands law protecting the interests of
minority shareholders may not be as protective in all circumstances as the law
protecting minority shareholders in United States jurisdictions. Under
applicable British Virgin Islands law, majority shareholders do not owe direct
fiduciary duties to minority shareholders.
While British Virgin Islands law does permit a shareholder of a British
Virgin Islands company to sue its directors derivatively (i.e., in the name of
and for the benefit of the company) and to sue the company and its directors
for his benefit and for the benefit of others similarly situated, the
circumstances in which any such action may be brought, and the procedures and
defenses that may be available in respect of any such action, may result in the
rights of shareholders of a British Virgin Islands international business
company being more limited than those of shareholders of a company organized in
the United States.
Directors of the Company have the power to take certain actions without
shareholder approval, including an amendment of the Company's Memorandum of
Association or Articles of Association, an increase or reduction in the
Company's authorized capital or a change in the Company's name, which would
require shareholder approval under the laws of most United States
jurisdictions. In addition, the directors of a British Virgin Islands
international business company may, without shareholder approval among other
things, implement a sale, transfer, exchange or disposition of less than 50% of
any assets, property, part of the business, or securities of the international
business company, the winding up or dissolution of the company, or any
combination thereof, if they determine it is in the best interests of the
corporation, its creditors, or its shareholders.
As in most United States jurisdictions, the board of directors of a
British Virgin Islands international business company is charged with the
management of the affairs of the company. In most United States jurisdictions,
directors owe a fiduciary duty to the corporation and its shareholders,
including a duty of care, pursuant to which directors must properly apprise
themselves of all reasonably available information, and a duty of loyalty,
pursuant to which they must protect the interest of the company and refrain
from conduct that injures the corporation or its stockholders or that deprives
the corporation or its stockholders of any profit or advantage. Many United
States jurisdictions have enacted various statutory provisions which permit the
monetary liability of directors to be eliminated or limited. Under British
Virgin Islands law, a director owes a fiduciary duty to the company, but
liability of a director to the company is primarily limited to cases of willful
malfeasance in the performance of his duties or to cases where the director has
not acted honestly and in good faith and with a view to the best interest of
the corporation. However, under its Articles of Association, the Company is
authorized to indemnify any person who is made or threatened to be made a party
to a legal, administrative or investigative proceeding by virtue of being a
director, officer or liquidator of the Company, provided such person acted
honestly and in good faith and with a view to the best interest of the Company
and, in the case of a criminal proceeding, such person had no reasonable cause
to believe that
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his conduct was unlawful. The Company's Articles of Association also obligate
the Company to indemnify any director, officer or liquidator of the Company who
was successful in any such proceedings against expenses and judgments, fines
and amounts paid in settlement and reasonably incurred in connection with the
proceedings, where such person met the standard of conduct described in the
preceding sentence.
The foregoing description of certain differences between British Virgin
Islands and United States corporate laws is only a summary and does not purport
to be complete or to address every applicable aspect of such laws. See Item 3.
"Key Information—Risk Factors—Enforceability of Civil Liabilities'' and
"—Rights of Shareholders under British Virgin Islands Law may be Less than in
U.S. Jurisdictions.''
Taxation
The following section does not deal with all possible tax consequences
relating to an investment in the Ordinary Shares and does not purport to deal
with the tax consequences applicable to all categories of investors, some of
which (such as dealers in securities or currencies, insurance companies and
tax-exempt entities) may be subject to special rules. In particular, the
discussion does not address the tax consequences under state, local and other
national (e.g., non-United States, non-British Virgin Islands and non-Hong
Kong) tax laws. Accordingly, each prospective investor should consult its own
tax advisor regarding the particular tax consequences to it of an investment in
the Ordinary Shares. The following discussion is based upon laws, regulations
and relevant interpretations thereof in effect as of the date of this Annual
Report, all of which are subject to change, possibly retroactively.
United States Federal Income Taxation
The following presents the material United States federal income tax
consequences of the acquisition, ownership and disposition of Ordinary Shares
and does not purport to be a complete analysis or listing of all possible tax
considerations. The discussion deals only with Ordinary Shares held as capital
assets and does not address any special United States tax consequences that may
be applicable to U.S. Holders (as defined below) that are subject to special
treatment under the United States Internal Revenue Code of 1986, as amended
(the "Code''), such as dealers in securities or currencies, traders in
securities that elect to use a mark-to-market method for their securities
holdings, financial institutions, tax exempt entities, regulated investment
companies, real estate investment trusts, insurance companies, investors liable
for alternative minimum tax, persons holding Ordinary Shares as part of a
hedging, conversion, constructive sale or integrated transaction or a straddle,
persons owning directly or indirectly 10% or more of the total combined voting
power of all classes of voting stock of the Company, investors in pass-through
entities or persons whose functional currency is not the United States dollar.
Furthermore, the discussion below is based upon the provisions of the Code, and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
United States federal income tax consequences different from those described
below. Prospective purchasers who are U.S. Holders are urged to satisfy
themselves as to the overall United States federal, state and local tax
consequences of their ownership of the Ordinary Shares by consulting their own
tax advisors.
As
used herein, a "U.S. Holder'' of an Ordinary Share means a holder that
is for U.S. federal income tax purposes, a citizen or resident of the United
States, a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof, an estate the income
of which is subject to United States federal income taxation regardless of its
source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one or more
United States persons have the authority to control all substantial decisions
of such trust or the trust has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States person.
If a partnership holds Ordinary Shares, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. Prospective purchasers who are partners of a partnership holding
Ordinary Shares should consult their own tax advisors.
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Taxation of Dividend
s
The gross amount of dividends paid to U.S. Holders of Ordinary Shares will
be treated as dividend income to such Holders, to the extent paid out of
current or accumulated earnings and profits, as determined under United States
federal income tax principles. Such income will be includable in the gross
income of a U.S. Holder as ordinary income on the day received by the U.S.
Holder. Such dividends will not be eligible for the dividends received
deduction allowed to corporations under the Code.
For purposes of calculating the foreign tax credit, dividends paid on the
Ordinary Shares will be treated as income from sources outside the United
States and will generally constitute "passive income'' or, in the case of
certain U.S. Holders, "financial services income.''
To the extent that the amount of any distribution exceeds the Company's
current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in the adjusted basis of the Ordinary Shares (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the Ordinary Shares), and the balance
in excess of adjusted basis will be taxed as capital gain recognized on a sale
or exchange.
Foreign Personal Holding Company Status
A foreign corporation will be classified as a foreign personal holding
company (an "FPHC'') if (i) at any time during the Company's taxable year,
five or fewer individuals, who are United States citizens or residents,
directly or indirectly own more than 50% of the corporation's stock (by either
voting power or value) (the "shareholder test'') and (ii) the corporation
receives at least 60% of its gross income (regardless of source), as adjusted,
from certain passive sources (the "income test''). After its initial year of
qualification as an FPHC, a corporation may remain an FPHC even if only 50% of
its gross income is FPHC income (i.e., passive income such as interest,
dividends, etc.).
Because the Company will derive most of its income from dividends paid by
its subsidiaries, the Company believes that it satisfies, and expects that it
will continue to satisfy, the income test. The Company believes that the
shareholder test was not met prior to the Company's initial public offering and
has not been met at any time after such offering. However, due to a number of
factors (including the FPHC stock attribution rules, possible change in
residence by current indirect shareholders and possible acquisition of Ordinary
Shares by purchase, gift, or bequest by individuals related to or partners of
current indirect shareholders), there can be no assurance that the Company will
not become an FPHC in the future.
If the Company were classified as an FPHC, U.S. Holders (including certain
indirect holders) would be required to include in income their pro rata share
of the Company's undistributed FPHC income if they were holders on the last day
of the Company's taxable year (or if earlier, the last day on which the Company
satisfies the shareholder test). Such income would be taxable to such persons
as a dividend, even if no cash dividend were actually paid. In such a case, a
U.S. Holder would be entitled to increase its tax basis in the Ordinary Shares
by the amount of such deemed FPHC dividend. U.S. Holders who dispose of their
Ordinary Shares prior to the date discussed above would not be subject to these
rules. Moreover, if the Company became an FPHC, United States persons who
acquire Ordinary Shares from decedents would not receive a "stepped-up'' basis
in such Ordinary Shares. Instead, such a holder would have a tax basis equal to
the lower of fair market value or the decedent's basis.
The Company will notify U.S. Holders in the event that it concludes that
it is classified as an FPHC for any taxable year.
Personal Holding Company Tax
A
corporation will be classified as a personal holding company (a "PHC'')
if (i) at any time during the last half of the Company's taxable year, five or
fewer individuals own more than 50% of the corporation's stock (by value)
directly or indirectly and (ii) the corporation receives at least 60% of its
gross income, as adjusted, from certain passive sources. However, if a
corporation is an FPHC (see above) it cannot be a PHC. A corporation classified
as a PHC is subject to a 39.6% tax on its undistributed personal holding
company income. Foreign corporations (such as the Company) determine their
liability for PHC tax by considering only (a) gross income derived from United
States sources and (b) gross income which is effectively connected with a
United States trade or business (collectively, "U.S. Taxable Income'').
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While more than 50% of the Ordinary Shares is currently owned, directly or
indirectly, by five or fewer individuals, the Company does not currently have,
or expect to have in the future, any U.S. Taxable Income. Accordingly, the
Company does not expect to have any PHC tax liability.
Passive Foreign Investment Company Status
The Company does not believe that it is, for United States federal tax
purposes, a passive foreign investment company (a "PFIC''), and expects to
continue its operations in such a manner that it will not be a PFIC. If,
however, the Company is or does become a PFIC, U.S. Holders could be subject to
additional federal income taxes on certain distributions or gains with respect
to Ordinary Shares plus an interest charge on certain taxes treated as having
been deferred by the U.S. Holder under the PFIC rules of the United States
federal income tax laws.
Taxation of Capital Gains
For United States federal income tax purposes, a U.S. Holder will
recognize taxable gain or loss on any sale or exchange of an Ordinary Share in
an amount equal to the difference between the amount realized for the Ordinary
Share and the U.S. Holder's basis in the Ordinary Share. Such gain or loss will
be capital gain or loss. Capital gains of individuals derived with respect to
capital assets held for more than one year are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations. Any
gain or loss recognized by a U.S. Holder will generally be treated as United
States source gain or loss.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to dividends
paid in respect of the Ordinary Shares or the proceeds received on the sale,
exchange, or redemption of the Ordinary Shares paid within the United States
(and, in certain cases, outside the United States) by U.S. Holders other than
certain exempt recipients (such as corporations) and backup withholding may
apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer
identification number or to report interest and dividends required to be shown
on its federal income tax returns. A U.S. Holder who does not provide a correct
taxpayer identification number may be subject to penalties imposed by the
Internal Revenue Service. Backup withholding will not apply with respect to
payments made to certain exempt recipients, such as corporations and tax-exempt
organizations. The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a credit against the U.S. Holder's United States
federal income tax liability and may entitle such U.S. Holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
British Virgin Islands Taxation
Under the laws of the British Virgin Islands as currently in effect, a
holder of Ordinary Shares who is not a resident of the British Virgin Islands
is exempt from British Virgin Islands income tax on dividends paid with respect
to the Ordinary Shares and no holder of Ordinary Shares is liable for British
Virgin Islands income tax on gains realized on sale or disposition of such
Ordinary Shares. In addition, the British Virgin Islands does not impose a
withholding tax on dividends paid by the Company. A company incorporated under
the International Business Companies Act is deemed not to be a resident for
this purpose.
There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands with respect to the Company. In addition, the Ordinary
Shares are not subject to any transfer taxes, stamp duties or similar charges.
There is no income tax treaty or convention currently in effect between
the United States and the British Virgin Islands.
Hong Kong Taxation
Under the laws of Hong Kong, as currently in effect, a holder of Ordinary
Shares who is not a resident of Hong Kong is exempt from Hong Kong income tax
on dividends paid with respect to such shares and no holder of Ordinary Shares
is liable for Hong Kong income tax on gains realized on sale or other
disposition of such Ordinary Shares. Hong Kong does not
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impose a withholding tax on dividends paid by the Company or its subsidiaries.
In addition, the Company will not be subject to Hong Kong taxes as a result of
its receipt of dividends from any of its subsidiaries.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks relating to fluctuations in the
price of raw cotton, interest rates on its borrowings and exchange rates of
foreign currencies in which the Company transacts business.
Cotton Commodity Exposure
Commodity price risk relates to the fluctuations in world prices of raw
cotton. Cotton is the primary raw material used in the production of the
Company's products. The Company has a purchasing policy designed to ensure
uninterrupted supplies of cotton of appropriate quality for its fabric
production. The Company purchases cotton by way of forward contracts,
denominated in U.S. dollars, typically amounting to approximately six to eight
months of planned consumption. Price risk in this period is partially mitigated
by the Company's garment order backlog, where the Company enters into
agreements with its garment customers for deliveries which spread over a
corresponding period to the consumption of the cotton contracts. These
purchases are therefore not sensitive to changes in the market price of cotton.
However, increases or decreases in the market price of cotton may affect the
fair value of cotton commodity purchase contracts.
As of March 31, 2002, the Company had outstanding contracted commitments
to purchase cotton for delivery over the next six to eight months at a
contracted amount of $10.4 million. A 10% decline in the market price of cotton
would have a negative impact of approximately $1.0 million on the fair value of
the existing contracts.
Interest Rate Exposure
The Company partially finances its working capital requirements by way of
short-term borrowings. The borrowings are made mainly in the Mauritian rupee
and the U.S. dollar. The interest rates on borrowings in these currencies are
traditionally more volatile than for U.S. dollar loans.
The table below represents the U.S. dollar equivalent of short-term
borrowings outstanding in each currency together with the Company's weighted
average rate of borrowings as of March 31, 2002.
Outstanding at
Currency
March 31, 2002
Mauritian rupee
$15.1 million
United States dollar
$16.8 million
French franc
$0.7 million
Madagascar franc
$1.4 million
Other currencies
$18.5 million
Total short-term borrowings
$52.5 million
Weighted-average interest rate
6.56
%
During fiscal year 2002, the Company's weighted average short-term
borrowings were $40.98 million at a weighted average interest rate of 7.24%. A
one percent increase in the Company's cost of borrowing would have resulted in
a $0.41 million decrease in earnings during fiscal year 2002.
The Company attempts to mitigate the risk associated with unfavorable
movements in interest rates by balancing its local requirements with overall
funding in U.S. dollars, while also taking into account foreign exchange rate
historical trends.
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Foreign Currency Exposures
The U.S. dollar represents the functional currency of the Company,
including the subsidiaries incorporated in Mauritius, South Africa, Madagascar
and Jersey. However, the Company's earnings are affected by fluctuations in the
value of: (i) local currencies of the countries in which the subsidiaries
operate; (ii) the currencies in which the raw materials are purchased; and
(iii) the currencies in which its products are sold.
The Company attempts to mitigate the risks of adverse movements in foreign
exchange rates, by: (i) purchasing its raw materials in U.S. dollars whenever
possible (during fiscal 2002 approximately 90% of the Company's cotton
purchases were made in U.S. dollars); (ii) restricting its borrowings in local
currencies to the minimum levels required to finance its working capital and
leasing requirements in the relevant country; and (iii) entering into forward
foreign exchange contracts, with maturities of up to one year, to hedge certain
foreign currency denominated firm commitments, primarily consisting of sales to
customers invoiced in currencies other than the U.S. dollar.
As of March 31, 2002, the total value of forward contracts in hand were
valued at $9.89 million, hedging part of anticipated cash flows from sales.
Assuming a 10% adverse movement in each of the respective non-U.S. currencies,
the Company's earnings would be reduced by approximately $0.99 million,
representing reduced cash flows from anticipated sales less gains on forward
contracts hedging such sales.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not Applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not Applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not Applicable.
PART III
ITEM 15. [RESERVED]
ITEM 16. [RESERVED]
PART IV
ITEM 17. FINANCIAL STATEMENTS
See pages F-1 through F-23, incorporated herein by reference.
ITEM 18. FINANCIAL STATEMENTS
Not Applicable.
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ITEM 19. EXHIBITS
EXHIBIT INDEX
Exhibit
Number
Description
1
—
Amended and Restated Memorandum of Association and Articles of Association of the
Company (previously filed as Exhibit 3 to Registration No. 333-7184 and incorporated
herein by reference)
4.1
—
Employment Agreement dated as of April 1, 2002 between the Company and K.C. Chao
4.2
—
Employment Agreement dated as of April 1, 2002 between the Company and Mei-Ling Liu
4.3
—
Employment Agreement dated as of April 1, 2002 between the Company and Alain Rey
4.4
—
Employment Agreement dated as of January 1, 2000 between the Company and Isaacs Lam
(previously filed as Exhibit 2.4 to Form 20-F for the fiscal year ended March 31, 2000
and incorporated herein by reference)
4.5
—
Lease dated as of February 15, 1989 between Novel Textiles Limited (formerly known as
''Union Textiles Limited'') and Summit Textiles Limited (previously filed as Exhibit
10.5 to Registration No. 333-7184 and incorporated herein by reference)
4.6
—
Lease dated as of July 19, 1990 between Novel Garments (Mauritius) Limited and Fatvan
Industrial Ltd. (previously filed as Exhibit 10.6 to Registration No. 333-7184 and
incorporated herein by reference)
4.7
—
Lease dated as of May 19, 1993 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.7 to Registration No. 333-7184 and incorporated herein by reference)
4.8
—
Lease dated as of May 19, 1993 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.8 to Registration No. 333-7184 and incorporated herein by reference)
4.9
—
Lease dated as of March 31, 1997 between Novel Denim (HK) Limited and Swanco Limited
(previously filed as Exhibit 10.9 to Registration No. 333-7184 and incorporated herein
by reference)
4.10
—
Lease dated as of March 31, 1997 between Novel Denim (HK) Limited and Swanco Limited
(previously filed as Exhibit 10.10 to Registration No. 333-7184 and incorporated
herein by reference)
4.11
—
Lease dated as of March 31, 1997 between Novel Denim (HK) Limited and Swanco Limited
(previously filed as Exhibit 10.11 to Registration No. 333-7184 and incorporated
herein by reference)
4.12
—
Lease dated as of March 31, 1997 between Novel Denim (HK) Limited and Swanco Limited
(previously filed as Exhibit 10.12 to Registration No. 333-7184 and incorporated
herein by reference)
4.13
—
Lease dated as of January 30, 1996 between Novel Garments (Mauritius) Limited and
Development Bank of Mauritius Ltd. (previously filed as Exhibit 10.13 to Registration
No. 333-7184 and incorporated herein by reference)
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Exhibit
Number
Description
4.14
—
Lease dated as of October 29, 1996 between Novel Garments (Mauritius) Limited and
Development Bank of Mauritius Ltd. (previously filed as Exhibit 10.14 to Registration
No. 333-7184 and incorporated herein by reference)
4.15
—
Lease dated as of January 1997 between Novel Garments (Mauritius) Limited and the
Mauritius Export Development and Investment Authority (previously filed as Exhibit
10.15 to Registration No. 333-7184 and incorporated herein by reference)
4.16
—
Lease dated May 28, 1996 between Industrial Development Corporation of South Africa
Limited and Novel Spinners SA (Proprietary) Limited and Novel Weavers SA (Proprietary)
Limited (previously filed as Exhibit 2.3 to Form 20-F for the fiscal year ended March
31, 1999 and incorporated herein by reference)
4.17
—
Lease dated as of October 19, 1999 between Byren Trading Limited and Cayuga Estates
Limited (previously filed as Exhibit 2.5 to Form 20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)
4.18
—
Lease dated as of September 1, 1999 between Novel Garments (Mauritius) Ltd and Didi
Industrial Limited (previously filed as Exhibit 2.6 to Form 20-F for the fiscal year
ended March 31, 2000 and incorporated herein by reference)
4.19
—
Amended Lease Agreement dated April 1, 1999 between Novel Denim (HKD) Ltd and Swanco
Limited (previously filed as Exhibit 2.7 to Form 20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)
4.20
—
Lease Agreement dated April 13, 2000 between Novel Garments (Madagascar) S.A. and
Filatex S.A. (previously filed as Exhibit 4.20 to Form 20-F for the fiscal year ended
March 31, 2001 and incorporated herein by reference)
4.21
—
Lease Agreement dated April 13, 2000 between Novel Garments (Madagascar) S.A. and
Filatex S.A. (previously filed as Exhibit 4.21 to Form 20-F for the fiscal year ended
March 31, 2001 and incorporated herein by reference)
4.22
—
Amended and Restated Employee Stock Option Plan of the Company and its subsidiaries
(previously filed as Exhibit 4.1 to Form S-8 (Registration No. 333-10796), as filed on
September 14, 1999 and incorporated herein by reference)
4.23
—
Non-Employee Directors Stock Option Plan of the Company (previously filed as Exhibit
10.24 to Registration No. 333-7184 and incorporated herein by reference)
8.1
—
List of Subsidiaries
10.1
—
Land Purchase Agreement dated as of April 18, 1995 between Novel Textiles Limited and
Rajman Prayag (previously filed as Exhibit 10.16 to Registration No. 333-7184 and
incorporated herein by reference)
10.2
—
Credit Agreement dated as of March 18, 1996 between Novel Textiles Limited and
Finlease Company Limited (previously filed as Exhibit 10.17 to Registration No.
333-7184 and incorporated herein by reference)
10.3
—
Credit Agreement dated as of May 13, 1996 between Novel Textiles Limited and The
Mauritius Commercial Bank Ltd. (previously filed as Exhibit 10.18 to Registration No.
333-7184 and incorporated herein by reference)
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Exhibit
Number
Description
10.4
—
Credit Agreement dated as of August 6, 1996 between Novel Garments (Mauritius)
Limited and The Mauritius Commercial Bank Ltd. (previously filed as Exhibit 10.19 to
Registration No. 333-7184 and incorporated herein by reference)
10.5
—
Credit Agreement dated as of August 6, 1996 between Novel Textiles Limited and The
Mauritius Commercial Bank Ltd. (previously filed as Exhibit 10.20 to Registration No.
333-7184 and incorporated herein by reference)
10.6
—
Credit Agreement dated as of October 7, 1996 between Novel Garments (Mauritius)
Limited and The Hongkong and Shanghai Banking Corporation Limited (previously filed as
Exhibit 10.21 to Registration No. 333-7184 and incorporated herein by reference)
10.7
—
Credit Agreement dated as of February 28, 1997 between Novel Textiles Limited and
Banque Nationale De Paris Intercontinentale (previously filed as Exhibit 10.22 to
Registration No. 333-7184 and incorporated herein by reference)
10.8
—
Credit Agreement dated as of May 21, 2001 between Novel Textiles Limited and Banque
Nationale De Paris Intercontinentale
10.9
—
Credit Agreement dated as of May 25, 2001 between Novel Spinners (SA)(Pty)Ltd, Novel
Weavers (SA)(Pty)Ltd, Seawind Investments 4 (Pty) Ltd and Nedcor Bank Limited
10.10
—
Credit Agreement dated as of August 23, 2001 between Novel Spinners (SA)(Pty)Ltd and
Nedcor Bank Limited
10.11
—
Credit Agreement dated as of March 27, 2002 between Novel Denim Holdings Limited and
The Hongkong and Shanghai Banking Corporation Limited
10.12
—
Credit Agreement dated as of March 27, 2002 between Novel Denim (HK) Ltd and The
Hongkong and Shanghai Banking Corporation Limited
10.13
—
Credit Agreement dated as of March 28, 2002 between Novel Garments International Ltd
and The Hongkong and Shanghai Banking Corporation Limited
10.14
—
Registration Rights Agreement dated as of May 13, 1997 between the Company and Novel
Apparel (BVI) Limited (previously filed as Exhibit 10.25 to Registration No. 333-7184
and incorporated herein by reference)
10.15
—
Redemption Agreement dated as of April 25, 1997 between the Company and Novel Apparel
(BVI) Limited (previously filed as Exhibit 10.26 to Registration No. 333-7184 and
incorporated herein by reference)
10.16
—
Share Purchase Agreement dated August 9, 1998 by and among Novel Textiles (BVI)
Limited, Novel Denim Holdings Limited and Novel Enterprises Limited (previously filed
as Exhibit 2.1 to Form 20-F for the fiscal year ended March 31, 1999 and incorporated
herein by reference)
10.17
—
Share Purchase Agreement dated August 7, 2001 by and among Novel Investment Holdings
Limited, Novel Denim Holdings Limited and Novel Enterprises Limited
10.18
—
Suspensive Sale Agreement dated May 6, 1996 between Findevco (Proprietary) Limited
and Novel Spinners SA (Proprietary) Limited and Novel Weavers SA (Proprietary) Limited
(previously filed as Exhibit 2.4 to Form 20-F for the fiscal year ended March 31, 1999
and incorporated herein by reference)
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Exhibit
Number
Description
10.19
—
Credit Agreement and Guarantee dated June 23, 1999 between Novel Denim Holdings
Limited and Certain of its Subsidiaries and The Hongkong and Shanghai Banking
Corporation Limited (previously filed as Exhibit 2.9 to Form 20-F for the fiscal year
ended March 31, 2000 and incorporated herein by reference)
10.20
—
Credit Agreement and Guarantee dated August 11, 1999 between Novel Denim Holdings
Limited and Certain of its Subsidiaries and The Hongkong and Shanghai Banking
Corporation Limited (previously filed as Exhibit 2.10 to Form 20-F for the fiscal year
ended March 31, 2000 and incorporated herein by reference)
10.21
—
Credit Agreement dated May 25, 2000 between Novel Denim Holdings Limited and Certain
of its Subsidiaries and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit 10.15 to Form 20-F for the fiscal year ended March 31,
2001 and incorporated herein by reference)
10.22
—
Consent of PricewaterhouseCoopers
99.1
—
Section 906 Certification
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SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that its has duly caused and authorized the undersigned
to sign this Annual Report on its behalf.
NOVEL DENIM HOLDINGS LIMITED
/s/ Silas K.F. Chou
Silas K.F. Chou, Chairman of the Board
Date: September 25, 2002
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CERTIFICATIONS
I, K.C. Chao, certify that:
1.     I have reviewed this annual report on Form 20-F of Novel Denim Holdings
Limited;
2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
/s/
K.C. CHAO
Name:
Title:
Date:
K.C. Chao
Chief Executive Officer and President
September 25, 2002
I, Alain Rey, certify that:
1.     I have reviewed this annual report on Form 20-F of Novel Denim Holdings
Limited;
2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
/s/
ALAIN REY
Name:
Title:
Date:
Alain Rey
Chief Financial Officer
September 25, 2002
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants
F-2
Consolidated Statements of Income for the years ended March 31, 2000, 2001 and 2002
F-3
Consolidated Balance Sheets as of March 31, 2001 and 2002
F-4
Consolidated Statements of Cash Flows for the years ended March 31, 2000, 2001 and 2002
F-5
Consolidated Statements of Changes in Shareholders' Equity for the years ended March 31, 2000, 2001 and 2002
F-6
Notes to Consolidated Financial Statements
F-7 to F-28
$ = United States Dollars
F-1
Table of Contents
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Novel Denim Holdings Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Novel Denim Holdings Limited and its subsidiaries (the "Company") as of March
31, 2001 and 2002 and the results of their operations and their cash flows for
each of the three years ended March 31, 2000, 2001 and 2002 in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 3(q) and 18 to the financial statements, the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities".
PricewaterhouseCoopers
Hong Kong
June 10, 2002
F-2
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended March 31,
2002
2001
2000
Net sales
$
158,585,168
$
138,046,191
$
105,100,924
Cost of goods sold
(132,201,378
)
(107,465,596
)
(84,455,752
)
Gross profit
26,383,790
30,580,595
20,645,172
Other revenues
789,562
440,196
638,028
Selling, general and administrative expenses
(18,693,399
)
(15,186,886
)
(12,248,521
)
Impairment loss
(2,375,295
)
—
—
Other expenses
—
(588,709
)
—
Operating income
6,104,658
15,245,196
9,034,679
Interest expense, net
(3,955,121
)
(3,168,750
)
(2,722,587
)
Income before minority interest, tax and
effect of accounting change
2,149,537
12,076,446
6,312,092
Taxation
(298,205
)
—
—
Minority interest
(81,544
)
(47,653
)
51,595
Income before effect of accounting change
$
1,769,788
$
12,028,793
$
6,363,687
Cumulative effect of accounting change
307,997
—
—
Net income
$
2,077,785
$
12,028,793
$
6,363,687
Earnings per share before accounting change
Basic
$
0.19
$
1.30
$
0.67
Diluted
$
0.19
$
1.29
$
0.67
Earnings per share after accounting change
Basic
$
0.23
$
1.30
$
0.67
Diluted
$
0.22
$
1.29
$
0.67
See accompanying notes to these Consolidated Financial Statements.
F-3
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
As of March 31,
2002
2001
ASSETS
Current assets:
Cash and cash equivalents
$
12,995,472
$
2,360,748
Accounts receivable
28,342,886
25,581,613
Inventories
50,885,767
41,472,565
Spare parts
3,651,802
3,293,682
Other current assets
3,579,775
1,179,340
Total current assets
99,455,702
73,887,948
Property, plant and equipment, net
89,924,400
75,231,737
Total Assets
$
189,380,102
$
149,119,685
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and bank overdrafts
$
52,532,174
$
27,680,949
Current portion of long-term debt
1,924,104
247,081
Current portion of capital leases
506,275
398,122
Accounts payable
3,785,626
6,137,345
Accrued salaries and wages and other accrued liabilities
14,558,394
15,372,176
Due to related parties
23,539
9,122
Total current liabilities
73,330,112
49,844,795
Long-term debt
12,029,661
102,950
Long-term portion of capital leases
5,512,814
3,507,092
Other liabilities
762,289
330,000
Minority interest
536,187
454,643
Total liabilities
92,171,063
54,239,480
Shareholders' equity:
Preferred Shares, $1 par value, 5,000,000 shares authorized, no
shares issued and outstanding
—
—
Ordinary Shares $1 par value, 23,000,000 shares authorized,
9,437,500 issued and outstanding
9,437,500
9,437,500
Additional paid-in capital
15,568,016
15,823,128
Treasury stock, at cost (shares : 2002 – 298,600; 2001 – 367,700)
(2,247,176
)
(2,733,953
)
Retained earnings
74,431,315
72,353,530
Other Comprehensive Income
19,384
—
Total shareholders' equity
97,209,039
94,880,205
Commitments
and contingencies (note 13)
Total Liabilities and Shareholders' Equity
$
189,380,102
$
149,119,685
See accompanying notes to these Consolidated Financial Statements.
F-4
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOW
Fiscal Year Ended March 31,
2002
2001
2000
Operating activities
Net income
$
2,077,785
$
12,028,793
$
6,363,687
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation
11,852,612
9,702,489
8,832,375
Gain on disposition of fixed assets
(68,649
)
(56,171
)
(123,289
)
Impairment loss
2,375,295
—
—
Other changes that provided (used) cash
Decrease (increase) in accounts receivable
707,211
(7,225,651
)
840,743
Increase in inventories
(5,217,638
)
(9,622,632
)
(7,234,661
)
Decrease (increase) in spare parts
311,954
(429,956
)
162,895
Increase in other current assets
(1,597,303
)
(550,703
)
(93,231
)
Increase (decrease) in accounts payable
(4,556,323
)
1,985,681
(447,207
)
Increase (decrease) in accrued liabilities
(2,268,591
)
5,601,955
1,265,213
Increase (decrease) in other long term liabilities
(11,218
)
95,000
(56,595
)
Increase (decrease) in amount due to related parties
(47,427
)
(215,600
)
213,649
Net cash provided by operating activities
3,557,708
11,313,205
9,723,579
Investing activities
Investment in property, plant and equipment
(10,983,278
)
(16,286,173
)
(10,157,054
)
Investment in subsidiaries
(16,158,489
)
—
—
Proceeds from disposition of property, plant and
equipment
192,913
402,128
859,888
Net cash used in investing activities
(26,948,854
)
(15,884,045
)
(9,297,166
)
Financing activities
Increase (decrease) in short term borrowings and
bank overdrafts
22,287,122
9,582,323
(154,063
)
Proceeds from long-term debt
13,953,765
—
—
Payment of long-term debt
(350,031
)
(382,705
)
(358,075
)
Payment of current maturities of capital leases
(2,096,651
)
(1,386,790
)
(772,829
)
Payment of repurchase of ordinary shares
(178,410
)
(3,117,040
)
—
Proceeds from exercise of share options
410,075
218,441
—
Net cash provided by (used in) financing activities
34,025,870
4,914,229
(1,284,967
)
Increase (decrease) in cash and cash equivalents
10,634,724
343,389
(858,554
)
Cash and cash equivalents at beginning of year
2,360,748
2,017,359
2,875,913
Cash and cash equivalents at end of year
$
12,995,472
$
2,360,748
$
2,017,359
Cash and cash equivalents are comprised of:
Cash and cash equivalents
$
12,995,472
$
2,360,748
$
2,017,359
Supplemental cash flow disclosure
Interest paid
$
4,165,037
$
3,240,373
$
3,137,861
Income tax paid
$
152,623
—
—
See accompanying notes to these Consolidated Financial Statements.
F-5
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Additional
Other
Total
Ordinary
Retained
Paid-in
Treasury
Comprehensive
Shareholders'
Shares
Earnings
Capital
Stock
Income
Equity
Balance as of March 31, 1999
$
9,437,500
$
53,961,050
$
15,987,774
—
—
$
79,386,324
Net income
—
6,363,687
—
—
—
6,363,687
Balance as of March 31, 2000
9,437,500
60,324,737
15,987,774
—
—
85,750,011
Net income
—
12,028,793
—
—
—
12,028,793
Share repurchase, not
retired (number of shares: 420,200)
—
—
—
(3,117,040
)
—
(3,117,040
)
Exercise of share option
(number of shares: 52,500)
—
—
(164,646
)
383,087
—
218,441
Balance as of March 31, 2001
9,437,500
72,353,530
15,823,128
(2,733,953
)
—
94,880,205
Net income
—
2,077,785
—
—
—
2,077,785
Share repurchase, not retired
(number of shares: 20,100)
—
—
—
(178,410
)
—
(178,410
)
Exercise of share options
(number of shares: 89,200)
—
—
(255,112
)
665,187
—
410,075
Derivatives qualifying as
hedges
—
—
—
—
19,384
19,384
Balance as of March 31, 2002
$
9,437,500
$
74,431,315
$
15,568,016
($2,247,176
)
$
19,384
$
97,209,039
See accompanying notes to these Consolidated Financial Statements.
F-6
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Business and Basis of Presentation
(a)
Organization and business
Novel Denim Holdings Limited (hereinafter "Novel Denim" or the "Company";
references include all subsidiaries unless the context otherwise
requires) was incorporated in the British Virgin Islands in November
1989. During the year ended March 31, 1996, the Company was reorganized
and acquired certain denim fabric production and related operations from
its then controlling shareholder, Novel Enterprises Limited ("NEL").
In December 1998, NEL sold its entire interest in Novel Denim to an
affiliate company. Further to this transaction, this affiliate company
has an indirect interest in NEL and Novel Denim.
The Company is a holding company with no independent operations. As of
March 31, 2002, the Company has twenty one subsidiaries, two of which are
incorporated in Mauritius, one of which is incorporated in Madagascar,
three of which are incorporated in the Channel Islands, four of which are
incorporated in South Africa, five of which are incorporated in the
British Virgin Islands, five of which are incorporated in Hong Kong, and
one of which is incorporated in Peoples Republic of China ("China"). The
Mauritius subsidiaries are Novel Textiles Limited ("NTL") and Novel
Garments (Mauritius) Limited ("NGML"). NTL is mainly engaged in the
manufacture and sale of fabric while NGML's main business is garment
production. The subsidiary incorporated in Madagascar is Novel Garments
(Madagascar) Limited ("NGMAD"). NGMAD's main business is garment
production. The subsidiaries incorporated in the Channel Islands are
Nomacotex Limited ("NL"), Novel Garments International Limited ("NGIL")
and Byren Trading Limited ("BTL"). NL and NGIL are involved in the
purchase and supply of raw cotton to NTL and the sale of garments
manufactured by NGML and NGMAD, respectively. BTL has a branch office in
London acting as a sales office for the European Market. The South Africa
subsidiaries are Novel Spinners (SA) (Pty) Limited ("NSL"), Novel Dyers
(SA) (Pty) Limited ("NDL"), Novel Weavers (SA) (Pty) Limited ("NWL") and
Novel Garments (SA) (Pty) Ltd. ("NGSAL"). NSL is engaged in the
manufacture of cotton yarn, NDL is engaged in the dying process of cotton
yarn, NWL is engaged in the manufacture of fabrics and NGSAL will be
engaged in garment production which is expected to commence in mid fiscal
2003. The British Virgin Islands subsidiaries are Kotten Limited
("Kotten"), Battel Limited ("Battel"), Good Port Finance Limited
("GPFL"), NDP Holdings Limited ("NDPHL") and NDP Investment Limited
("NDPIL"). Kotten and Battel are engaged in marketing activities for
NGML and NGIL, GPFL is engaged in group internal funding activities,
NDPHL and NDPIL are investment holding companies. The company
incorporated in China is Novel Dyeing and Printing Mills Ltd (NDPML)
which is engaged in the dyeing and printing of fabrics. The companies
incorporated in Hong Kong are Novel Denim (HK) Limited ("ND-HK"), NDP
Fabrics Limited ("NDPFL"), Noveltex Trading Limited ("NTXL"), NDP Trading
Limited ("NDPTL") and Income Pearl Limited ("IPL"). ND-HK is engaged in
the provision of sourcing, marketing and logistical support to NGML and
NGMAD as well as being a sales office in South East Asia for fabrics
manufactured by NTL and NWL, NTXL is engaged in the sourcing activities
for NDPML, NDPFL is a engaged in sales and providing logistical support
to NDPML, NDPTL and IPL are both investment holding companies.
With the exception of NTL, which is 98.65% owned by the Company, all
other subsidiaries are wholly owned by the Company.
On July 23, 1997, the Company completed its initial public offering of
its Ordinary Shares (the "Offering") pursuant to which the Company sold
937,500 shares at an offering price of $18.00 per share. The Company's
controlling shareholder also participated in the Offering by selling
3,950,000 shares of the Company (including 637,500 shares sold pursuant
to the exercise of the underwriters' over allotment option). Proceeds to
the Company, net of associated costs amounting to $2,949,726, were
$13,925,274.
On August 31, 1998, the Company completed its acquisition of NSL and NWL
from an affiliate of the Company for a consideration of $8,777,584 plus
the assumption of debt. The transaction was negotiated and approved by
the independent committee of the Company's Board of Directors.
F-7
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Business and Basis of Presentation (continued)
(a)
Organization and business (continued)
On October 1, 2001, the Company completed its acquisition of
NDPHL from an affiliate of the Company for a consideration of
$16,158,489 plus the assumption of debt. The transaction was
negotiated and approved by the independent committee of the
Company's Board of Directors.
On March 28, 2002 the Company announced its intention to close
its Madagascar operations after more than three months of
significant political and social unrest in the country and severe
disruption to the business. A review has been carried out for fixed
assets located in Madagascar to ensure that the carrying amount of
fixed assets does not exceed the fair value. As a result, an
impairment loss of $2,375,295 has been recorded in the year ended
March 31, 2002.
(b)
Basis of presentation
The Consolidated Financial Statements include the accounts of Novel Denim
and all of its subsidiary companies and have been prepared in accordance
with principles generally accepted in the United States of America.
2.
Critical Accounting Policies
The preparation of consolidated financial statements requires the Company
to make estimates and judgements that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company
evaluates its estimates, including those related to cash equivalents,
inventories, income taxes, financing operations, claims, impairment cost,
and contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
3.
Significant Accounting Policies
(a)
Cash and cash equivalents
Cash includes cash equivalents. Highly liquid investments with
maturities of three months or less when purchased are considered to be
cash equivalents. Because of the short maturities of these instruments,
the carrying amount is a reasonable estimate of fair value.
(b)
Inventories
Inventories and work in progress are stated at the lower of cost or net
realizable value. Cost, calculated on a weighted average basis,
comprises the cost of raw materials, direct labor and an appropriate
portion of production overheads.
The Company enters into commitments for the purchase of raw cotton which
is a component of the finished goods it manufactures. In determining the
net realizable value of such finished goods, the Company considers the
effect of changes in the price of raw cotton between the date it enters
into the purchase commitments and the balance sheet date. Where such
changes result in a reduction in the estimated net realizable value of
inventory to less than cost, appropriate provisions are made.
(c)
Spare parts
Spare parts for property, plant and equipment are carried at the lower of
cost or net realizable value. The cost of spare parts is charged to
expense when the spare parts are placed into service.
F-8
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
Significant Accounting Policies (continued)
(d)
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Interest costs incurred during the construction period of
certain long term assets are capitalized. No interest was capitalized in
the years ended March 31, 2000, 2001 and 2002. Depreciation of property,
plant and equipment is calculated to write off the cost of individual
assets in equal annual installments over their estimated useful lives
which are as follows:
Years
Buildings
50
Leasehold improvements
6
2
/3
Furniture and fixtures
6
2
/3
Equipment and tools
6
2
/3
Plant and machinery
6
2
/3-10
Motor vehicles
3
1
/3
Computer equipment
3
1
/3
No depreciation is provided on construction in progress until it is
completed and becomes operational.
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" in the year ended March
31 1997. The Statement requires management to review the carrying
values of certain assets when circumstances indicate that such
carrying values may not be recoverable.
(e)
Leases
Leases where substantially all the rewards and risks of ownership of
assets remain with the leasing company are accounted for as operating
leases. Rental payments applicable to such operating leases are
recognized over the lease term.
Leases which meet the capital lease criteria specified in SFAS No. 13 are
accounted for as capital leases. Interest costs associated with such
leases are recognized on an effective yield basis.
(f)
Income taxes
The Company is subject to taxation on earnings derived from its
Mauritius, South African, Hong Kong and China operations, but is not
subject to taxation in other jurisdictions in which it operates (note 5).
To the extent the Company's earnings are taxable, related deferred tax
assets and liabilities are determined in accordance with SFAS No. 109,
"Accounting for Income Taxes," and result from revenues and expenses
being recognized in different time periods for financial reporting
purposes and for income tax purposes. Under SFAS No. 109, deferred
income taxes arise from temporary differences and losses carried forward
which are tax-effected at the tax rates in effect at the end of the
period.
(g)
Foreign currency
The U.S. dollar represents the functional currency of Novel Denim,
including the subsidiaries incorporated in Mauritius, South Africa, the
Channel Islands, the British Virgin Islands and Madagascar. Transactions
in currencies other than U.S. dollars ("Foreign currencies") are
translated into U.S. dollars at exchange rates in effect at the
transaction dates. Assets expressed in foreign currencies which are
covered by forward contracts are translated at contract rates. Gains and
losses on forward contracts intended to hedge, and effective as hedges
of, firm foreign currency commitments are deferred. All other monetary
assets and liabilities expressed in foreign currencies are translated at
exchange rates at the balance sheet date. All such exchange differences
are dealt with in the income statement. Net foreign currency translation
gains included in net income for the years ended March 31, 2000, 2001
and 2002 were $411,292, $1,948,100 and $2,997,020, respectively.
F-9
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
Significant Accounting Policies (continued)
(g)
Foreign currency (continued)
For subsidiary companies which use U.S. dollars as their
functional currency, translation of their foreign currency accounts
is dealt with as follows:
(i)
Property, plant and equipment and related depreciation and
inventories are translated into U.S. dollars at amounts which
approximate historical rates of exchange.
(ii)
Other assets and liabilities, representing monetary items,
are translated at exchange rates at the balance sheet date and
income and expense items at amounts which approximate historical
rates of exchange.
All translation gains and losses arising from remeasurement are included
in net income.
The functional currency of ND-HK, NDPML, NTXL and NDPFL is the Hong Kong
dollar. The effect on the Company's equity of translating the accounts
of these companies into U.S. dollars is not material.
(h)
Revenue recognition
The company has reviewed its accounting policies in accordance with
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements".
SAB No. 101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. The company's
policies for revenue recognition are consistent with the views expressed
in SAB No. 101.
Sales are recognized when goods are delivered and title has been passed
to customers. Due provision has been made for sales returns.
(i)
Earnings per share
In 1998, the Company adopted SFAS No. 128, "Earnings per Share". SFAS
No. 128 requires that companies present basic and diluted per share
amounts for income from continuing operations and net income on the face
of the income statement, regardless of the magnitude of their difference.
Basic earnings per share is computed by dividing income available to
holders of Ordinary Shares by the weighted average number of Ordinary
Shares outstanding during the period.
Diluted earnings per share gives effect to all dilutive potential
Ordinary Shares outstanding during the period. The weighted average
number of Ordinary Shares outstanding is adjusted to include the number
of additional Ordinary Shares that would have been outstanding if the
dilutive potential Ordinary Shares had been issued.
In computing the dilutive effect of potential Ordinary Shares, the
average stock price for the period is used in determining the number of
treasury shares assumed to be purchased with the proceeds from exercise
of warrants and options.
(j)
Stock options
SFAS No. 123 allows companies which have stock-based compensation
arrangements with employees to adopt a fair-value basis of accounting for
stock options and other equity instruments, or to continue to apply the
existing accounting rules under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", but with
additional financial statement disclosure. The Company plans to continue
to account for stock-based compensation arrangements under APB Opinion
No. 25 and provides additional disclosure to that effect in note 16.
F-10
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
Significant Accounting Policies (continued)
(k)
Treasury Stock
Treasury stock is accounted for using the cost method. When treasury
stock is reissued, the value is computed and recorded using a
weighted-average basis.
(l)
Transfers of accounts receivable with recourse
The Company has entered into an agreement with a financial institution
pursuant to which the financial institution has agreed to make advances
to it which are secured by accounts receivable. The advances are made
with recourse to the Company and are accounted for as financing
transactions in accordance with the provisions of SFAS No.140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", since the Company has not effectively
surrendered control of the receivables.
(m)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect
the reported amount of assets, liabilities, sales and expenses. Actual
results could differ from those estimates.
(n)
Comprehensive Income
On April 1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income." Other
comprehensive income refers to revenue, expenses, gains and losses that
under accounting principles generally accepted in the United States are
included in comprehensive income but are excluded from net income as
these amounts are recorded directly as an adjustment to shareholders'
equity, net of tax. The Company's other comprehensive income is composed
of unrealized gains and losses on cash flow hedge adjustments.
Statement 130 requires unrealized gains or losses on the Company's
foreign currency translation adjustments to be included in comprehensive
income. However, as noted in note 2 (g), the effect on the Company's
equity of translating the accounts of ND-HK, NDPML, NTXL and NDPFL into
US dollars is not material.
(o)
Segment and Geographic Information
On April 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 established
interim and annual report standards for an enterprise's operating
segments and related disclosures about its products, services, geographic
areas and major customers. The Company has two reportable segments: the
manufacturing and sales of garments and fabric products. The information
for these segments is the information used by the Company's chief
operating decision-maker to evaluate operating performance. See "Segment
Information" (note 12) for further information regarding SFAS 131.
(p)
Costs of Start-Up Activities
The Company early adopted Statement of Position ("SOP") No. 98-5,
Reporting on the Costs of Start-Up Activities. SOP No. 98-5 requires
that costs of start-up activities and organization costs, as defined, be
expensed as incurred. For the years ended March 31, 2001 and 2002, the
Company recognized a charge of $588,709 and nil, respectively. This
charge is included in other expense in the consolidated statement of
income.
F-11
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
Significant Accounting Policies (continued)
(q)
Derivative Financial Instruments
On April 1, 2001, the company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities". Under SFAS No. 133, all derivative instruments (including
certain derivative instruments embedded in other contracts) are
recognized in the balance sheet at their fair values and changes in fair
value are recognized immediately in earnings, unless the derivatives
qualifies as hedges of future cash flows. For derivatives qualifying as
hedges of future cash flows, the effective portion of changes in fair
value is recorded temporarily, in equity, then recognized in earnings
along with the related effects of the hedged items. Any ineffective
portion of hedges is reported in earnings as it occurs. Further
information about derivatives and hedging is provided in note 18.
The cumulative effect of adopting this accounting change at April
1, 2001, was the recognition in the consolidated statement of income
of an unrealized gain amounting to $307,991.
(r)
Recoverability of Long-lived Assess
Long-lived assets are reviewed for impairment whenever events of changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Assets are grouped and evaluated at the lowest
level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. The
Company considers historical performance and future estimated
results in its evaluation of potential impairment. The Company
measures the amount of the impairment by comparing the carrying
amount of the assets to its fair value. The Company estimates fair
value based on the best information available making whatever
estimates, judgements and projections are considered necessary. The
estimation of fair value is generally measured by determining the
net selling price or by discounting expected future cash flows at
discount rates commensurate with the risk involved.
(s)
New Accounting Pronouncements
(i)
SFAS No.141 Business Combinations ("SFAS 141") and SFAS No
142 Goodwill and Other Intangible Assets ("SFAS142")
In July 2001, the Financial Accounting Standards Board (the "Board")
issued Statement of Financial Accounting Standards SFAS 141 and SFAS
142
SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after 30 June 2001; (i)
establishes specific criteria for the recognition of intangible
assets separately from goodwill; and (ii) requires unallocated
negative goodwill to be written off. The Company has appropriately
applied SFAS 141 to the acquisition of NDP during the year.
SFAS No. 142 (a) addresses financial accounting and reporting for
goodwill and intangible assets; (b) provides guidance on the
amortization of intangible assets other than goodwill; (c) requires
that goodwill not be amortized; and (d) requires an annual evaluation
of goodwill and certain intangible assets for impairment. SFAS 141
is effective for all business combinations initiated after 30 June,
2001. Most provisions of SFAS No. 142 are effective for fiscal years
beginning after 15 December 2001.
(ii)
SFAS No 143 Accounting for Asset Retirement Obligations
("SFAS 143")
In July 2001, the Board issued SFAS 143 which requires entities to
record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability
is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived assets. Over time, the
liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon
settlement. SFAS 143 is effective for fiscal years beginning after
15 June 2002.
F-12
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3.
Significant Accounting Policies (continued)
(t)
New Accounting Pronouncements (continued)
(iii)
SFAS No 144 Accounting for the Impairment or Disposal of
Long-Lived Assets ("SFAS 144")
In October 2001, the Board issued SFAS 144 which requires that
those long-lived assets to be sold be measured at the lower of
carrying amount or fair value less cost to sell, whether reported
in continued operations or in discontinued operations. Under this
statement, discontinued operations will no longer be measured at
net realizable value or include amounts for operating leases that
have not yet occurred. SFAS 144 is effective for fiscal years
beginning after 15 December 2001.
Except for SFAS 141, which has already been adopted, the Company is
currently assessing the impact of the adoption of these statements.
4.
Inventories
Inventories consist of the following:
As of March 31,
2002
2001
Raw materials
$
20,816,918
$
20,329,419
Work in progress
22,163,156
17,121,730
Finished goods
7,905,693
4,021,416
$
50,885,767
$
41,472,565
5.
Property, Plant and Equipment
Property, plant and equipment consist of the following:
As of March 31,
2002
2001
Land and buildings
$
37,820,882
$
25,073,781
Land use rights
1,187,549
—
Leasehold improvements
1,507,555
1,865,810
Plant and machinery
104,029,974
74,051,063
Equipment and tools
16,488,533
15,795,392
Furniture and fixtures
1,791,997
1,653,922
Computer equipment
1,422,163
1,127,068
Motor vehicles
2,598,776
2,024,215
Construction in progress
5,195,848
1,007,436
172,043,277
122,598,687
Less : Accumulated depreciation
82,118,882
47,366,950
$
89,924,395
$
75,231,737
F-13
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5.
Property, Plant and Equipment (continued)
Plant and machinery includes leased equipment with a cost of $6,489,930
and $11,711,984 at March 31, 2001 and 2002. Depreciation charged during
the years ended March 31, 2001 and 2002 amounted to $841,869 and
$977,780, respectively. Accumulated depreciation in respect of such
equipment amounted to $2,183,328 and $3,756,078 at March 31, 2001 and
2002, respectively.
Land and buildings includes leased buildings with a cost of $4,253,800
and $4,100,848 at March 31, 2001 and 2002, respectively. Depreciation
charged during the year ended March 31, 2001 and 2002 amounted to $82,851
and $82,671, respectively. Accumulated depreciation in respect of such
building amounted to $266,991 and $355,752 at March 31, 2001 and 2002,
respectively.
Property, plant and equipment with a net book value of $54,648,333 as of
March 31, 2002 has been pledged as collateral for certain bank borrowings
(notes 7 and 8).
6.
Income Taxes
Novel Denim has in place various tax strategies to minimize tax
liabilities in the jurisdictions in which it operates. The company is
not taxed on income in the British Virgin Islands where it is
incorporated.
The subsidiaries which are incorporated in the Channel Islands are not
subject to income tax because they are non-resident in the Channel
Islands.
The subsidiary which is incorporated in Madagascar is exempt from income
tax for a period of 5 years starting in calendar year 1998.
Effective from April 1, 2000 the Mauritius subsidiaries are subject to
tax at a rate of 15%.
The subsidiaries which are incorporated in Hong Kong were subject to tax
at a rate of 16% on income arising in Hong Kong during the years ended
March 31, 1999, 2001 and 2002 or have unutilised tax losses to offset
against the assessable profit during the years.
The subsidiaries which are incorporated in South Africa were
subject to tax at a rate of 30% on income during the year ended
March 31, 2000, 2001 and 2002. The subsidiaries, however, had no
taxable income or have unutilised tax losses to offset against the
assessable profit during these years.
The subsidiaries which are incorporated in the British Virgin Islands are
not subject to income tax because they are non-resident in the British
Virgin Islands.
The subsidiary which is incorporated in China is subject to tax
at a rate of 15%.
Fiscal Year Ended March 31,
2002
2001
2000
Reconciliation of Effective Income Tax Charge
Income tax charge at applicable rate
$
734,004
$
1,061,441
$
228,802
Tax losses not recognized
1,279,803
298,334
—
Utilisation of previously unrecognised losses
(680,626
)
(1,022,781
)
(83,606
)
Income not subject to tax
(195,740
)
(104,926
)
(76,334
)
Expenses not deductible for tax purposes
159,757
55,182
39,279
Effect of exchange rate changes
(998,993
)
(287,250
)
(108,141
)
$
298,205
—
—
The applicable tax rate represents the weighted average of the rates of
taxation prevailing in the territories in which the Company operates.
F-14
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6.
Income Taxes (continued)
Income before income taxes consists of:
Year Ended March 31,
2002
2001
2000
British Virgin Islands
2,006,527
259,743
(1,782,378
)
Foreign
143,010
11,816,703
8,094,470
2,149,537
12,076,446
6,312,092
The provision for income taxes consists of:
Year Ended March 31,
2002
2001
2000
Current tax expenses:
British Virgin Islands
—
—
—
Foreign
186,947
—
—
Total current provision
186,947
—
—
Deferred tax expenses:
British Virgin Islands
—
—
—
Foreign
111,258
—
—
Total deferred provision
111,258
—
—
Total provision
298,205
—
—
Deferred tax assets / (liabilities) comprises the following:
As of March 31,
2002
2001
Deferred tax assets :
Loss carry forward
3,311,170
3,345,615
Other temporary difference
1,919,650
653,643
Total deferred tax assets
5,230,820
3,999,258
Deferred tax liabilities
Fixed assets
(2,535,902
)
(1,583,602
)
Total deferred tax liabilities
(2,535,902
)
(1,583,602
)
Valuation allowance
(2,806,176
)
(2,415,656
)
Net deferred tax liabilities
(111,258
)
—
The Company recorded a valuation allowance for the deferred tax
assets based on the uncertainty as to their ultimate realization.
F-15
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7.
Short-Term Borrowings
The Company maintains working capital, overdraft and other credit
facilities with various commercial bank groups in Mauritius, South
Africa, Madagascar, Hong Kong and China. Such facilities bear interest
at rates based on the Mauritius, South Africa and Madagascar base rate,
the Hong Kong prime rate and lending rates on other non-U.S. dollar
currencies and ranged from 3.381% to 16.500% during the year ended March
31, 2002. Information relating to the Company's short-term credit
facilities is summarized as follows:
As of March 31,
2002
2001
Total credit facilities available
$
71,272,542
$
35,669,283
Balance at end of the year
52,532,174
27,680,949
Maximum amount outstanding during the year
52,532,174
33,280,378
Average borrowings during the year
40,984,608
26,195,693
Weighted average interest rate:
On average borrowings, computed monthly
7.24
%
9.57
%
At year end
6.56
%
9.41
%
The balance at the end of the year and maximum amount outstanding during
the year include amounts in respect of receivables discounted with banks
(note 3(l)).
Interest expense on short-term credit facilities amounted to $2,180,625,
$2,506,597 and $2,857,009 for the years ended March 31, 2000, 2001 and
2002, respectively. The Company's credit facilities are subject to
periodic review by the lenders and are payable on demand. A portion of
the Company's short-term facilities is secured by liens on the assets of
NTL, NGML and NGMAD.
8.
Long-Term Debt
(a)
Long-term debt
Long term borrowing arrangements are comprised of three loans which were
arranged by NDHL, NTL Mauritius and NSL with various commercial bank
groups. Information relating to the Company's long-term debt facilities
is summarized as follows:
As of March 31,
2002
2001
Loan 2
Loan 3
Total
Loan 1
Total credit facilities available
$
9,000,000
$
4,978,427
$
13,978,427
$
350,031
Balance at end of the year
9,000,000
4,953,765
13,953,765
350,031
Maximum amount outstanding during
the year
9,000,000
4,978,427
13,978,427
732,736
Average borrowings during the year
4,846,154
2,458,620
7,441,550
531,349
Weighted average interest rate:
On average borrowings, computed
monthly
2.94
%
10.37
%
5.63
%
13.07
%
At year end
2.62
%
10.75
%
5.51
%
13.95
%
Interest expense on long-term debt amounted to $122,914, $69,436 and
$530,134 for the years ended March 31, 2000, 2001 and 2002, respectively.
Loan 1 was arranged with NEDBANK in South Africa and was fully repaid in
August 2001.
Loan 2 was arranged with The Hongkong & Shanghai Banking Corporation Ltd
in Hong Kong. The loan period is for five years from October 2001 with no
principal repayment during the first year and then followed by equal
quarterly repayments during the rest of the loan period.
F-16
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8.
Long-Term Debt (continued)
(a)
Long-term debt (continued)
Loan 3 is arranged with BNPI Ltd and Mauritius Commercial Bank Ltd
in Mauritius amounting to Mauritian Rupees ("Rs") Rs50,000,000 and
Rs1,000,000 respectively. The loan period is for five years from October
2001 with no principal repayment during the first year and then followed
by equal monthly repayments during the rest of the loan period.
(b)
Scheduled maturities
The aggregate amounts of long-term debt maturing in the next five years
and thereafter are as follows:
Fiscal Year Ending March 31,
As of March 31, 2002
2003
$
1,924,104
2004
3,729,395
2005
3,985,390
2006
3,189,876
2007
1,125,000
13,953,765
Less:
Amounts repayable within one year included in current liabilities
(1,924,104
)
$
12,029,661
9.
Closure of Madagascar Operation
On March 28, 2002 the Company announced its intention to close
its Madagascar operations after more than three months of
significant political and social unrest in the country and severe
disruption to the business.
(a)
Impairment of long-lived assets
A review of the long-lived assets located in Madagascar has
been carried out to ensure that the carrying amount of the assets
does not exceed their fair value.
For the woven and laundry machinery and computer equipment, no
provision has been made based on the Company's expectation and
assumption that the machinery and equipment can be successfully
relocated, not withstanding the ongoing political and social
instability within Madagascar, to the Company's other operations in
Mauritius, South Africa and China, the Company can fully utilize the
capacity transferred, and the transferred assets can generate
sufficient cash flows to support the assets' carrying value.
For the knit plant, machinery and equipment, an impairment loss
of $577,295 was recorded, based on the Company's estimate of the net
selling price of the assets. This also assumes that the machinery
and equipment can be successfully relocated to the Company's other
operations in Mauritius, South Africa and China.
For other equipment and tools, leasehold improvement and
furniture and fixtures, the Company estimate that the fair value of
these assets is nil since these assets will not be relocated out of
Madagascar and can not generate any future benefit to the Company.
As a result a total impairment loss of $2,375,295 has been
recorded for the year ended March 31, 2002.
F-17
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9.
Closure of Madagascar Operation (continued)
(b)
Provisions for inventories
A review has been carried out in respect of inventories located in
Madagascar and provisions have been made based on the full physical
inventory count and the Company's estimate of the inventories' net
realizable value after the inclusion of future freight, transportation,
packing and related costs, to ensure that the carrying amount of
inventories does not exceed their net realizable value.
As a result, an inventory provision of $3,824,000 has been recorded in
the cost of goods sold for the year ended March 31, 2002.
(c)
Redundancy costs
Redundancy cost of $405,000 has been provided and written off in the cost
of goods sold for the year ended March 31 2002, based on the minimum
amount required by local Madagascar regulation. Such costs were paid in
April 2002.
All the costs related to the closure of the Company's closure of
Madagascar operation were attributable to the results of the garments
division in the segment information (note 12).
10.
Related Party Transactions
At March 31, 2002, an affiliate of Novel Enterprises Ltd. ("NEL") held
49.79% of the issued and outstanding ordinary shares of the Company.
Amounts due from related parties comprised trade receivables, management
and service fees and commissions due from affiliates of NEL to which
denim fabric was sold (see (a) and (b) below).
Amounts due to related parties comprise balances with affiliates of NEL.
The balances relate to purchases of raw materials and other inventory
items, general and administrative expenses (including commissions) and
leases (see (d) below).
(a)
Sales to related parties
The Company's customers include Tommy Hilfiger U.S.A., Inc., Pepe Jeans
Europe B.V., Tommy Hilfiger Wholesale, Inc., Tommy Hilfiger Europe B.V.
and certain other affiliates of NEL. Tommy Hilfiger U.S.A., Inc.
("THUSA") and Tommy Hilfiger Europe B.V are subsidiaries of Tommy
Hilfiger Corporation ("Tommy Hilfiger"). Tommy Hilfiger Wholesale, Inc.
("THWS") is a subsidiary of THUSA. Pepe Jeans Europe B.V. is a
subsidiary of Pepe Holdings Limited ("Pepe Holdings"). Affiliates of the
Company have indirect interests in Tommy Hilfiger and Pepe Holdings.
Additionally, the Company's Chairman is the Co-Chairman of Tommy
Hilfiger.
Sales to these related companies are summarized as follows:
Fiscal Year Ended March 31,
2002
2001
2000
Tommy Hilfiger U.S.A., Inc.
$
5,517,983
$
1,620,085
$
50,595
Tommy Hilfiger Wholesale, Inc.
18,318,967
20,490,742
12,920,620
Pepe Jeans Europe B.V.
1,013,366
2,079,043
1,727,836
Tommy Hilfiger Europe B.V.
58,328
68,113
1,133,959
$
24,908,644
$
24,257,983
$
15,833,010
F-18
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
10.
Related Party Transactions (continued)
Amounts receivable from these companies which are included in accounts
receivable are as follows:
As of March 31,
2002
2001
Tommy Hilfiger U.S.A., Inc.
$
708,010
$
1,143,444
Tommy Hilfiger Wholesale, Inc.
2,659,319
5,391,676
Pepe Jeans Europe B.V.
92,621
313,346
Tommy Hilfiger Europe B.V.
37,588
20,390
$
3,497,538
$
6,868,856
(b)
Purchases from related parties
The Company purchases certain raw materials and other inventory items
from affiliates of NEL. Purchases from these companies amounted to
$920,394, $993,993 and $24,608 for the years ended March 31, 2000, 2001
and 2002, respectively.
(c)
Selling, general and administrative expenses
During 1997, the Company received certain services from NEL and its
affiliates, including provision of information systems, staff resources,
office space and related overheads. In fiscal 2001 and 2002, such
services were limited to the provision of certain company secretarial
services. Charges to the Company for these services amounted to
$132,075, $132,029 and $134,783 for the years ended March 31, 2000, 2001
and 2002, respectively. The charges are based on apportionment of
services provided based on estimated or actual usage. Management
believes this apportionment to be a reasonable allocation method.
The Company pays commissions to companies affiliated with NEL which act
as selling agents on the Company's behalf. Total commission expense
amounted to $608,795, $629,205 and $512,692 for the years ended March 31,
2000, 2001 and 2002, respectively.
Had the Company operated on a stand-alone basis, management believes that
selling, general and administrative expenses would not have varied
materially from amounts recognized in the years presented.
(d)
Leases
The Company leases office space from a company which is a subsidiary of
NEL. Rental charges to the Company for the years ended March 31, 2000,
2001 and 2002 amounted to $88,555, $136,543 and $173,432, respectively.
In addition, the Company leases land in Mauritius from a subsidiary of
NEL under a long term arrangement. The lease commenced in 1989 and has a
term of 50 years. Annual rental charges under the lease arrangement are
not material.
F-19
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11.
Acquisition
On October 1, 2001 the Company acquired 100% of the share capital of
NDP Holdings Ltd. from a subsidiary of NEL. NDPHL, through its
subsidiaries, owns and operates an integrated fabric dyeing, printing and
finishing facility in the Shenzhen region of China. In addition to
significantly expanding the Company's overall fabric capacity, the
acquisition brings the Company: (i) a much broader and more sophisticated
range of fabric products to offer existing and new customers; (ii) a
highly experienced and well trained technical fabric management team; and
(iii) a platform for future growth within Asia. The acquired business
contributed revenues of $14,088,680 and operating profit of $1,779,645 to
the Company for the period from October 1, 2001 to March 31, 2002.
The fair value of assets and liabilities arising from the acquisition
are as follows:
As of October 1, 2001
Cash and cash equivalents
$
3,278,511
Accounts receivable
3,468,484
Inventories
4,195,564
Spare Parts
670,074
Other current assets
803,132
Property, plant and equipment, net
20,768,597
Short-term borrowing and bank overdrafts
(2,564,103
)
Accounts payable
(2,204,604
)
Accrued salaries and wages and other accrued liabilities
(1,555,737
)
Due to related parties
(61,844
)
Long-term liabilities
(443,507
)
Fair value of net assets acquired
26,354,567
Negative goodwill arising on acquisition
(6,917,567
)
Total purchase consideration
19,437,000
Less: Cash and cash equivalents in subsidiary acquired
(3,278,511
)
Cash outflow on acquisition
$
16,158,489
The acquisition has been accounted for using purchase accounting,
negative goodwill arising on acquisition was primarily derived from the
fair value of NDPHL's property, plant and equipment, at the time of the
acquisition, being higher than the purchase price. The negative goodwill
has been allocated to reduce proportionately the values assigned to
noncurrent assets. Accordingly, the operating results of NDP Holdings
Ltd have been included in the Company's consolidated financial statement
since the date of acquisition.
The following unaudited pro forma consolidated results of operations
for the years ended March 31, 2001 and 2002 assume the NDP Holdings Ltd
acquisition occurred as of April 1, 2000:
Fiscal Year Ended March 31,
2002
2001
Net sales
$
170,029,958
$
168,388,821
Net earnings
$
1,875,918
$
15,296,085
Earnings per share:
- Primary
$
0.21
$
1.68
- Fully-diluted
$
0.20
$
1.65
There were no acquisitions in fiscal 2000 or 2001.
F-20
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
12.
Segment Information and Sales to Major Customers
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," during the fourth quarter of fiscal
1998. SFAS No. 131 establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers.
The Company generates substantially all of its operating income through
the export of garments and fabric from Mauritius, Madagascar, South
Africa and PRC to its customers in Europe, U.S. and elsewhere.
The Company has two business segments, the manufacture and sale of
garments and the manufacture and sale of fabric. The fabric division
sells both to third parties and to the garments division. Overheads in
respect of common services provided to these segments but not directly
attributable to either segment are allocated on the basis of an estimate
of the benefit received by each segment. Overheads not allocated to
either of these segments are included within "Corporate and other" in the
analysis of operating income by segment presented below.
(a)
Segment Information
The following sets out sales by business segment:
Fiscal Year Ended March 31,
2002
2001
2000
Garments—third parties
$
118,459,721
$
109,971,378
$
81,649,900
Fabric—garments division and third parties
84,273,576
63,307,713
48,713,644
Inter-divisional sales
(44,148,129
)
(35,232,900
)
(25,262,620
)
$
158,585,168
$
138,046,191
$
105,100,924
The following sets out operating income by business segment and a
reconciliation to income before minority interest:
Fiscal Year Ended March 31,
2002
2001
2000
Garments
$
(7,808,978
)
$
11,641,050
$
10,583,574
Fabric
13,339,339
6,416,910
(1,154,311
)
Corporate and other
(478,275
)
(926,921
)
(786,886
)
Elimination of unrealized profit
1,052,573
(1,885,843
)
392,302
Operating income
$
6,104,659
$
15,245,196
$
9,034,679
Interest expense, net
(3,955,121
)
(3,168,750
)
(2,722,587
)
Income before minority interest and taxation
$
2,149,538
$
12,076,446
$
6,312,092
Eliminations comprise elimination of unrealized (profit) / loss on
inter-divisional sales of inventory.
F-21
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
12.
Segment Information and Sales to Major Customers (continued)
(a)
Segment Information (continued)
The following sets out capital expenditure and depreciation expense by
segment:
Fiscal Year Ended March 31,
2002
2001
2000
Capital expenditure:
Garments
$
3,754,706
$
10,824,021
$
3,843,801
Fabric
7,228,572
5,462,152
6,313,253
$
10,983,278
$
16,286,173
$
10,157,054
Depreciation:
Garments
$
4,708,208
$
3,769,577
$
2,835,494
Fabric
7,144,404
5,932,915
5,996,881
$
11,852,612
$
9,702,492
$
8,832,375
The following sets out identifiable assets between segments:
As of March 31,
2002
2001
Garments
$
63,186,358
$
62,041,901
Fabric
123,670,758
86,625,977
Corporate and other
2,522,986
451,807
$
189,380,102
$
149,119,685
Included in corporate and other identifiable assets are certain cash and
cash equivalents, and certain related party balances.
The following sets out long-lived assets by country:
As of March 31,
2002
2001
Mauritius
$
50,942,526
$
51,710,374
Madagascar
5,783,708
8,283,939
South Africa
18,198,109
14,541,778
China
14,342,303
—
Others
657,729
695,646
$
89,924,395
$
75,231,737
(b)
Major customers
The Company sells garments to THWS and The Gap Inc., which individually
comprise more than 10% of the Company's sales during the year. Sales to
THWS are disclosed in note 10 above. Sales to The Gap Inc. amounted to
$14,259,558, $31,604,398 and $48,926,829 for the years ended March 31,
2000, 2001 and 2002, respectively.
F-22
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
12.
Segment Information and Sales to Major Customers (continued)
(c)
Export sales
The following sets out sales by country:
Fiscal Year Ended March 31,
2002
2001
2000
Europe
- France
$
10,947,979
$
12,763,386
$
12,075,836
- Britain
19,573,500
29,875,202
21,956,251
- Netherlands
2,455,742
5,701,237
14,153,718
- Belgium
2,191,667
103,035
1,959,242
Africa
- Mauritius
9,615,116
8,256,374
4,794,449
- Madagascar
1,682,411
2,282,400
4,075,859
- Zimbabwe
2,475,932
2,093,033
1,511,832
USA
80,403,837
56,191,891
29,516,307
Others
29,238,984
20,779,633
15,057,430
$
158,585,168
$
138,046,191
$
105,100,924
13.
Commitments and Contingencies
(a)
Operating leases
The Company enters into noncancellable lease agreements for premises
and equipment used in the normal course of business. The following
table shows the future minimum obligations under operating lease
commitments:
Fiscal Year Ending March 31,
As of March 31, 2002
2003
$
1,999,008
2004
1,497,143
2005
1,310,004
2006
44,315
2007
660
Thereafter
21,120
$
4,872,250
(b)
Capital leases
Future minimum obligations for assets held under capital lease
arrangements are as follows:
Fiscal Year Ending March 31,
As of March 31, 2002
2003
$
574,364
2004
1,683,627
2005
748,146
2006
710,541
2007
788,950
Thereafter
1,615,257
6,120,885
Less: interest costs
(101,796
)
$
6,019,089
F-23
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
13.
Commitments and Contingencies (continued)
(c)
Letters of credit
The Company is contingently liable for unexpired bank letters of credit
as of March 31, 2002 of $4,426,049 related to commitments for the
purchase of inventories, spare parts and machinery.
(d)
Purchase commitments
In the normal course of business the Company enters into contractual
arrangements for future purchases of raw cotton to ensure availability
and timely delivery. As of March 31, 2002, the Company had outstanding
purchase commitments for inventory of $10,360,307. The amount the
Company was required to pay in respect of these commitments was less than
the spot price, as at March 31, 2002, for such inventory by $502,989.
No provision is required in respect of this amount since the
estimated net realizable value of the related finished goods
inventory exceeds estimated cost.
The Company also enters into contractual arrangements for the purchase of
plant and machinery and factory premises construction. As of March 31,
2002, the Company had such outstanding commitments of $1,477,341.
14.
Employee Benefits
Other liabilities comprise a provision for deferred employee benefits
amounting to $330,000 and $651,031 as of March 31, 2001 and 2002,
respectively. The provision represents an estimate of long service
payments payable to employees in Hong Kong in the future and is
calculated based on the applicable laws of Hong Kong.
The Company also distributes up to 5% of its income before bonuses and
minority interest each year as bonuses to executives and other employees
under an informal arrangement. All amounts payable under this
arrangement up to March 31, 2002 have been provided for in the financial
statements.
15.
Stock Repurchases
From time to time, the Board of Directors authorizes the company to
repurchase the ordinary shares of Novel Denim Holdings Limited. The
company repurchased 20,100 common shares at a cost of $178,410 in 2002
(2001: 420,200 common shares at a cost of $3,117,040). In 2002, the
company did not retire the shares it repurchased. In 2002, the Company
issued 89,200 treasury shares, as a result of exercises of stock options
by employees. At March 31, 2002, 298,600 (2001: 367,700) of treasury
stock is retained. The Company plans to continue to purchase shares on
the open market from time to time, depending on market conditions.
F-24
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16.
Stock-based Compensation Plans
In August 1997, the Company adopted an Employee Stock Incentive Plan and
a Non-Employee Directors Stock Option Plan (collectively, the "Plans"),
which made available for grant, until December 31, 2007, up to 950,000
common shares. The Plans permit the granting of incentive stock options,
restricted stock and stock appreciation rights.
Stock options are granted to purchase stock at a price not less than the
fair market value on the date of grant, vest over a period of five years,
and may be outstanding for any period up to 15 years from the date of
grant. Generally, no stock option may be exercised until the employee
has remained in the continuous employment of the Company for one year
after the option is granted.
The following is a summary of stock option transactions which occurred
during the year ended March 31, 2002:
Weighted Average
Options
Exercise Price Per Share
Outstanding as of April 1, 2001
728,160
$
10.34
Granted
75,000
11.03
Cancelled
(16,000
)
4.75
Exercised
(89,200
)
4.60
Outstanding as of March 31, 2002
697,960
$
11.28
The following table summarizes information concerning currently
outstanding and exercisable options:
Options Outstanding
Options Exercisable
Weighted Average
Weighted
Weighted
Range of
Number
Remaining
Average Exercise
Number
Average Price
exercise prices
Outstanding
Contractual Life
Price Per Share
Exercisable
Per Share
$3.5625 - $20.25
697,960
6.92
$
11.28
384,440
$
11.95
The Company applies APB No. 25, in accounting for its stock options.
Under APB No. 25, because the exercise price of the Company stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
F-25
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16.
Stock-based Compensation Plans (continued)
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of SFAS No.
123. The weighted average fair value of options granted was estimated at
$4.7539 in 2001 and $5.2892 in 2002. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 2001 and 2002,
respectively: risk-free interest rate of 5.69% and 5.59%; dividend yields
of 0%; volatility factors of the expected market price of the Company
Ordinary Shares of 39% and 40%; and a weighted-average expected lives of
the options of 6 years.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company pro forma information is as follows:
Net income / (loss):
As reported
$
2,077,785
Pro forma
($19,674
)
Basic earnings / (loss) per share:
As reported
$
0.23
Pro forma
($0.00
)
Diluted earnings / (loss) per share:
As reported
$
0.22
Pro forma
($0.00
)
Because compensation expense associated with an option is recognized over
the vesting period, the current year impact on pro forma net income may
not be representative of compensation expense in future years, when the
effect of the amortization of multiple awards would be reflected in the
income statement.
F-26
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17.
Earnings Per Share
Basic earnings per share and diluted earnings per share have been
calculated in accordance with SFAS No. 128, as follows:
2002
2001
2000
Net income (Numerator for
basic and diluted earnings per
share-income available to
holders of Ordinary Shares)
$
2,077,785
$
12,028,793
$
6,363,687
Denominator for basic earnings
per share-weighted-average
shares
9,110,485
9,220,684
9,437,500
Effect of dilutive securities
145,966
95,257
1,823
Denominator for diluted
earnings per
share-weighted-average number
of Ordinary Shares and
dilutive potential Ordinary
Shares
9,256,451
9,315,941
9,439,323
Basic earnings per share
$
0.23
$
1.30
$
0.67
Diluted earnings per share
$
0.22
$
1.29
$
0.67
Stock options to purchase 329,000 common share in 2002 and 279,000 common
shares in 2001 were outstanding, but were not included in the computation
of diluted earnings per share because the exercise price of the options
was greater than the average market price of the common shares and,
therefore, the effect would have been antidilutive.
18.
Financial Instruments
(a)
Concentrations of credit risk
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist primarily of cash on
deposit with financial institutions and accounts receivable.
The Company maintains cash and cash equivalents and certain other
financial instruments with various financial institutions in Hong Kong,
China, Singapore, Madagascar, South Africa and Mauritius and the
Company's exposure to any one institution is limited.
Concentrations of credit risk with respect to accounts receivable arise
due to a significant portion of the Company's sales deriving from
relatively few customers. As of March 31, 2002, accounts receivable
included $20,368,042 attributable to the Company's ten largest
receivables balances. The Company manages its risk by securing letters
of credit for the majority of its sales.
(b)
Forward foreign exchange contracts
The Company conducts certain transactions in various non-U.S. dollar
currencies. As a result, it is subject to the transaction exposures that
arise from foreign exchange rate movements between the dates that foreign
currency transactions are entered into and the date they are consummated.
In response to this exposure, the Company enters into forward foreign
exchange contracts to hedge certain foreign currency denominated firm
commitments, primarily sales to customers invoiced in currencies other
than the U.S. dollar. The primary purpose of the Company's foreign
currency hedging activities is to manage the volatility associated with
foreign currency revenues and the other assets and liabilities created in
the normal course of business. The Company does not hold or issue
financial instruments for trading purposes.
F-27
Table of Contents
NOVEL DENIM HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
18.
Financial Instruments (continued)
(b)
Forward foreign exchange contracts (continued)
Principal currencies hedged include the Euro and British pound. At March
31, 2002 such forward exchange contracts were recorded at their fair
value with gains of $61,260 and losses of $55,465, which are reflected in
other current assets and other accrued liabilities in the Company's
consolidated balance sheet, respectively. The maturity dates of the
forward exchange contracts outstanding at March 31, 2002 ranged from 1
month to 5 months.
For forward exchange contracts designated as cash flow hedges, gains and
losses are recorded in other comprehensive income until the foreign
currency denominated sales transactions are recognized in earnings. For
the year ended March 31, 2002 forward exchange contracts with contract
values amounting to $6,698,879 were de-designated from cash flow hedge
and a net loss on these derivatives of $13,589 was reclassified to net
revenues. Hedge ineffectiveness had no material impact on earnings for
the year ended March 31, 2002. The Company estimates that net derivative
gains of $19,384 included in accumulated other comprehensive income at
March 31, 2002 will be reclassified into earnings during the next twelve
months.
The Company enters into various other types of financial instruments in
the normal course of business. Fair values for these financial
instruments are based on quoted market price.
(c)
Cash and cash equivalents
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value because of the relatively short
maturities of these assets and liabilities. The carrying value of
short-term borrowings approximates fair value as the loans have variable
interest rates.
F-28
Table of Contents
EXHIBIT INDEX
Exhibit
Page
Number
Description
Number
1
—
Amended and Restated Memorandum of Association and Articles
of Association of the Company (previously filed as Exhibit 3
to Registration No. 333-7184 and incorporated herein by
reference)
4.1
—
Employment Agreement dated as of April 1, 2002 between the
Company and K.C. Chao
4.2
—
Employment Agreement dated as of April 1, 2002 between the
Company and Mei-Ling Liu
4.3
—
Employment Agreement dated as of April 1, 2002 between the
Company and Alain Rey
4.4
—
Employment Agreement dated as of January 1, 2000 between the
Company and Isaacs Lam (previously filed as Exhibit 2.4 to
Form 20-F for the fiscal year ended March 31, 2000 and
incorporated herein by reference)
4.5
—
Lease dated as of February 15, 1989 between Novel Textiles
Limited (formerly known as "Union Textiles Limited") and
Summit Textiles Limited (previously filed as Exhibit 10.5 to
Registration No. 333-7184 and incorporated herein by
reference)
4.6
—
Lease dated as of July 19, 1990 between Novel Garments
(Mauritius) Limited and Fatvan Industrial Ltd. (previously
filed as Exhibit 10.6 to Registration No. 333-7184 and
incorporated herein by reference)
4.7
—
Lease dated as of May 19, 1993 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.7 to
Registration No. 333-7184 and incorporated herein by
reference)
4.8
—
Lease dated as of May 19, 1993 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.8 to
Registration No. 333-7184 and incorporated herein by
reference)
4.9
—
Lease dated as of March 31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit 10.9
to Registration No. 333-7184 and incorporated herein by
reference)
4.10
—
Lease dated as of March 31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit 10.10
to Registration No. 333-7184 and incorporated herein by
reference)
4.11
—
Lease dated as of March 31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit 10.11
to Registration No. 333-7184 and incorporated herein by
reference)
4.12
—
Lease dated as of March 31, 1997 between Novel Denim (HK)
Limited and Swanco Limited (previously filed as Exhibit 10.12
to Registration No. 333-7184 and incorporated herein by
reference)
4.13
—
Lease dated as of January 30, 1996 between Novel Garments
(Mauritius) Limited and Development Bank of Mauritius Ltd.
(previously filed as Exhibit 10.13 to Registration No.
333-7184 and incorporated herein by reference)
Table of Contents
Exhibit
Page
Number
Description
Number
4.14
—
Lease dated as of October 29, 1996 between Novel Garments
(Mauritius) Limited and Development Bank of Mauritius Ltd.
(previously filed as Exhibit 10.14 to Registration No.
333-7184 and incorporated herein by reference)
4.15
—
Lease dated as of January 1997 between Novel Garments
(Mauritius) Limited and the Mauritius Export Development and
Investment Authority (previously filed as Exhibit 10.15 to
Registration No. 333-7184 and incorporated herein by
reference)
4.16
—
Lease dated May 28, 1996 between Industrial Development
Corporation of South Africa Limited and Novel Spinners SA
(Proprietary) Limited and Novel Weavers SA (Proprietary)
Limited (previously filed as Exhibit 2.3 to Form 20-F for the
fiscal year ended March 31, 1999 and incorporated herein by
reference)
4.17
—
Lease dated as of October 19, 1999 between Byren Trading
Limited and Cayuga Estates Limited (previously filed as
Exhibit 2.5 to Form 20-F for the fiscal year ended March 31,
2000 and incorporated herein by reference)
4.18
—
Lease dated as of September 1, 1999 between Novel Garments
(Mauritius) Ltd and Didi Industrial Limited (previously filed
as Exhibit 2.6 to Form 20-F for the fiscal year ended March
31, 2000 and incorporated herein by reference)
4.19
—
Amended Lease Agreement dated April 1, 1999 between Novel
Denim (HKD) Ltd and Swanco Limited (previously filed as
Exhibit 2.7 to Form 20-F for the fiscal year ended March 31,
2000 and incorporated herein by reference)
4.20
—
Lease Agreement dated April 13, 2000 between Novel Garments
(Madagascar) S.A. and Filatex S.A. (previously filed as
Exhibit 4.20 to Form 20-F for the fiscal year ended March 31,
2001 and incorporated herein by reference)
4.21
—
Lease Agreement dated April 13, 2000 between Novel Garments
(Madagascar) S.A. and Filatex S.A. (previously filed as
Exhibit 4.21 to Form 20-F for the fiscal year ended March 31,
2001 and incorporated herein by reference)
4.22
—
Amended and Restated Employee Stock Option Plan of the
Company and its subsidiaries (previously filed as Exhibit 4.1
to Form S-8 (Registration No. 333-10796), as filed on
September 14, 1999 and incorporated herein by reference)
4.23
—
Non-Employee Directors Stock Option Plan of the Company
(previously filed as Exhibit 10.24 to Registration No.
333-7184 and incorporated herein by reference)
8.1
—
List of Subsidiaries
10.1
—
Land Purchase Agreement dated as of April 18, 1995 between
Novel Textiles Limited and Rajman Prayag (previously filed as
Exhibit 10.16 to Registration No. 333-7184 and incorporated
herein by reference)
10.2
—
Credit Agreement dated as of March 18, 1996 between Novel
Textiles Limited and Finlease Company Limited (previously
filed as Exhibit 10.17 to Registration No. 333-7184 and
incorporated herein by reference)
10.3
—
Credit Agreement dated as of May 13, 1996 between Novel
Textiles Limited and The Mauritius Commercial Bank Ltd.
(previously filed as Exhibit 10.18 to Registration No.
333-7184 and incorporated herein by reference)
Table of Contents
Exhibit
Page
Number
Description
Number
10.4
—
Credit Agreement dated as of August 6, 1996 between Novel
Garments (Mauritius) Limited and The Mauritius Commercial
Bank Ltd. (previously filed as Exhibit 10.19 to Registration
No. 333-7184 and incorporated herein by reference)
10.5
—
Credit Agreement dated as of August 6, 1996 between Novel
Textiles Limited and The Mauritius Commercial Bank Ltd.
(previously filed as Exhibit 10.20 to Registration No.
333-7184 and incorporated herein by reference)
10.6
—
Credit Agreement dated as of October 7, 1996 between Novel
Garments (Mauritius) Limited and The Hongkong and Shanghai
Banking Corporation Limited (previously filed as Exhibit
10.21 to Registration No. 333-7184 and incorporated herein by
reference)
10.7
—
Credit Agreement dated as of February 28, 1997 between Novel
Textiles Limited and Banque Nationale De Paris
Intercontinentale (previously filed as Exhibit 10.22 to
Registration No. 333-7184 and incorporated herein by
reference)
10.8
—
Credit Agreement dated as of May 21, 2001 between Novel
Textiles Limited and Banque Nationale De Paris
Intercontinentale
10.9
—
Credit Agreement dated as of May 25, 2001 between Novel
Spinners (SA)(Pty)Ltd, Novel Weavers (SA)(Pty)Ltd, Seawind
Investments 4 (Pty) Ltd and Nedcor Bank Limited
10.10
—
Credit Agreement dated as of August 23, 2001 between Novel
Spinners (SA)(Pty)Ltd and Nedcor Bank Limited
10.11
—
Credit Agreement dated as of March 27, 2002 between Novel
Denim Holdings Limited and The Hongkong and Shanghai Banking
Corporation Limited
10.12
—
Credit Agreement dated as of March 27, 2002 between Novel
Denim (HK) Ltd and The Hongkong and Shanghai Banking
Corporation Limited
10.13
—
Credit Agreement dated as of March 28, 2002 between Novel
Garments International Ltd and The Hongkong and Shanghai
Banking Corporation Limited
10.14
—
Registration Rights Agreement dated as of May 13, 1997
between the Company and Novel Apparel (BVI) Limited
(previously filed as Exhibit 10.25 to Registration No.
333-7184 and incorporated herein by reference)
10.15
—
Redemption Agreement dated as of April 25, 1997 between the
Company and Novel Apparel (BVI) Limited (previously filed as
Exhibit 10.26 to Registration No. 333-7184 and incorporated
herein by reference)
10.16
—
Share Purchase Agreement dated August 9, 1998 by and among
Novel Textiles (BVI) Limited, Novel Denim Holdings Limited
and Novel Enterprises Limited (previously filed as Exhibit
2.1 to Form 20-F for the fiscal year ended March 31, 1999 and
incorporated herein by reference)
10.17
—
Share Purchase Agreement dated August 7, 2001 by and among
Novel Investment Holdings Limited, Novel Denim Holdings
Limited and Novel Enterprises Limited
Table of Contents
Exhibit
Page
Number
Description
Number
10.18
—
Suspensive Sale Agreement dated May 6, 1996 between Findevco
(Proprietary) Limited and Novel Spinners SA (Proprietary)
Limited and Novel Weavers SA (Proprietary) Limited
(previously filed as Exhibit 2.4 to Form 20-F for the fiscal
year ended March 31, 1999 and incorporated herein by
reference)
10.19
—
Credit Agreement and Guarantee dated June 23, 1999 between
Novel Denim Holdings Limited and Certain of its Subsidiaries
and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit 2.9 to Form 20-F for the fiscal
year ended March 31, 2000 and incorporated herein by
reference)
10.20
—
Credit Agreement and Guarantee dated August 11, 1999 between
Novel Denim Holdings Limited and Certain of its Subsidiaries
and The Hongkong and Shanghai Banking Corporation Limited
(previously filed as Exhibit 2.10 to Form 20-F for the fiscal
year ended March 31, 2000 and incorporated herein by
reference)
10.21
—
Credit Agreement dated May 25, 2000 between Novel Denim
Holdings Limited and Certain of its Subsidiaries and The
Hongkong and Shanghai Banking Corporation Limited (previously
filed as Exhibit 10.15 to Form 20-F for the fiscal year ended
March 31, 2001 and incorporated herein by reference)
10.22
—
Consent of PricewaterhouseCoopers
99.1
—
Section 906 Certification