Talent Property Group Limited — Proxy Solicitation & Information Statement 2003

Apr 7, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all of your securities in Tomorrow International Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

==> picture [85 x 51] intentionally omitted <==

Tomorrow International Holdings Limited

(incorporated in Bermuda with limited liability)

CONNECTED TRANSACTIONS

Independent financial adviser to the independent board committee of Tomorrow International Holdings Limited

Barits Securities (Hong Kong) Limited

A letter from the independent board committee of Tomorrow International Holdings Limited containing its recommendation in respect of the Transactions (as defined in this circular) is set out on page 16 of this circular. A letter from Barits Securities (Hong Kong) Limited containing its advice to the independent board committee of Tomorrow International Holdings Limited in respect of the Transactions is set out on pages 17 to 21 of this circular.

7th April, 2003

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Asset Disposal Agreement . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Loan Restructuring Agreement	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Shareholding and group structures	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Reasons for the Transactions . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
General . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Recommendations . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		16
Letter of advice from Barits . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix — General information . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22

— i —

DEFINITIONS

‘‘Asset Disposal	the conditional agreement dated 4th March, 2003 entered into between
Agreement’’	Swank, Probest and Tomorrow relating to the disposal by Swank of a 30%
	equity interest in the BVI Holdco and 30% of the BVI Loan owing on
	Completion to Probest
‘‘associate(s)’’	has the meaning ascribed to it in the Listing Rules
‘‘Barits’’	Barits Securities (Hong Kong) Limited, independent financial adviser to the
	Independent Board Committee and an investment adviser and a dealer
	registered under the SFO
‘‘Board’’	the board of Directors
‘‘BVI Holdco’’	Profitown Investment Corporation, a company incorporated in the British
	Virgin Islands with limited liability on 19th November, 2002 and a wholly-
	owned subsidiary of Swank
‘‘BVI Loan’’	the shareholder’s loan which may from time to time be owing by BVI
	Holdco to Swank after completion of the Reorganisation and which shall be
	unsecured, interest-free and has no fixed repayment terms
‘‘Capital Increase’’	the creation of an additional 2,985,000,000,000 Reduced Shares to restore
	the authorised share capital of Swank after the Capital Reduction to the
	original amount of HK$3,000,000,000
‘‘Capital Reduction’’	the proposed reduction of capital of Swank by way of the cancellation of the
	paid-up capital to the extent of HK$0.199 on each existing issued shares and
	the reduction of the nominal value of all the issued and unissued shares from
	HK$0.20 each to HK$0.001 each
‘‘Capital Reorganisation’’	the capital reorganisation of Swank involving the Capital Reduction, the
	Capital Increase and the Share Consolidation
‘‘Companies Ordinance’’	Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
‘‘Completion’’	completion of the Asset Disposal Agreement
‘‘Consolidated Share(s)’’	share(s) of HK$0.01 each in the share capital of Swank upon the Capital
	Reorganisation taking effect
‘‘Conversion Shares’’	the ordinary shares of Swank to be issued by Swank upon the exercise of
	conversion rights attaching to the Convertible Note by the holder(s) thereof
‘‘Convertible Note’’	the convertible note with face value of HK$200 million to be issued by
	Swank to Probest pursuant to the terms of the Loan Restructuring Agreement
‘‘Directors’’	the directors of Tomorrow
‘‘EGM’’	an extraordinary general meeting of Swank to be convened to consider and,
	if thought fit, approve the Capital Reorganisation and the Transactions

— 1 —

DEFINITIONS

‘‘Independent Board	an independent board committee of Tomorrow comprising Ng Wai Hung and
Committee’’	Cheung Chung Leung, Richard, both being independent non-executive
	Directors
‘‘Latest Practicable Date’’	4th April, 2003, being the latest practicable date prior to the printing of this
	circular for the purpose of ascertaining certain information for inclusion in
	this circular
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Loan’’	the unsecured loan with an aggregate principal amount of HK$250 million
	owing by Swank to Probest as at the date of the Asset Disposal Agreement
	and the Loan Restructuring Agreement
‘‘Loan Restructuring	the conditional agreement dated 4th March, 2003 entered into between
Agreement’’	Swank and Probest relating to the restructuring of the remaining principal of
	the Loan of HK$247 million after Completion
‘‘Long Stop Date’’	5: 00 p.m. on 9th May, 2003 or such later date as Swank and Probest may
	agree in writing
‘‘PRC’’	the People’s Republic of China
‘‘Probest’’	Probest Holdings Inc, a company incorporated in the British Virgin Islands
	with limited liability which is interested in approximately 57.9% of the
	existing issued shares of Swank and a wholly-owned subsidiary of
	Tomorrow
‘‘Reduced Share(s)’’	new share(s) of HK$0.001 each in the share capital of Swank immediately
	after the Capital Reduction
‘‘Reorganisation’’	the reorganisation pursuant to which (i) BVI Holdco will become the
	intermediate holding company of all the existing subsidiaries and associated
	companies of Swank engaging in the design, manufacture and marketing of
	optical products, and (ii) all intra-company indebtedness between Swank and
	its subsidiaries and associated companies will be transferred to BVI Holdco
‘‘SFO’’	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
	Kong)
‘‘Share(s)’’	ordinary share(s) of HK$0.10 each in the existing capital of Tomorrow
‘‘Share Consolidation’’	the proposed consolidation of 10 Reduced Shares of HK$0.001 each of
	Swank created from the Capital Reduction into one Consolidated Share of
	HK$0.01 each
‘‘Share Mortgage’’	the deed to be executed by Swank in favour of Probest incorporating a
	charge over 70% of the equity interest in BVI Holdco and the BVI Loan
	from time to time held by Swank after Completion
‘‘Shareholder(s)’’	holder(s) of the Shares

— 2 —

DEFINITIONS

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Swank’’ Swank International Manufacturing Company Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• ‘‘Swank Group’’ Swank and its subsidiaries ‘‘Tomorrow’’ Tomorrow International Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

• ‘‘Tomorrow Group’’ Tomorrow and its subsidiaries other than the Swank Group ‘‘Transactions’’ together, (i) the sale by Swank of the 30% equity interest in BVI Holdco and 30% of the BVI Loan under the Asset Disposal Agreement; and (ii) the debt restructuring pursuant to the Loan Restructuring Agreement, including, among others, the issue of the Convertible Note and the execution of the Share Mortgage by Swank in favour of Probest, under which Probest, as mortgagee, has the right to dispose of or foreclose the 70% interest in BVI Holdco and the BVI Loan if an event of default under the Convertible Note shall occur

• ‘‘Winspark’’ Winspark Venture Limited, a company incorporated in the British Virgin Islands with limited liability and the controlling shareholder of Tomorrow holding approximately 58.0% of the issued shares of Tomorrow

• ‘‘HK$’’ Hong Kong Dollars, the lawful currency of Hong Kong ‘‘%’’ per cent.

— 3 —

LETTER FROM THE BOARD

==> picture [85 x 50] intentionally omitted <==

Tomorrow International Holdings Limited

(incorporated in Bermuda with limited liability)

Directors:

Executive Directors:

Yau Tak Wah, Paul (Chairman) Louie Mei Po Wong Shin Ling, Irene Tam Wing Kin Tam Ping Wah

Independent non-executive Directors:

Ng Wai Hung Cheung Chung Leung, Richard

Registered Office: Clarendon House Church Street Hamilton HM11 Bermuda

Principle Place of Business: 27th Floor Henley Building 5 Queen’s Road Central Hong Kong

7th April, 2003

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS

INTRODUCTION

On 4th March, 2003, Swank and Tomorrow jointly announced that, on the same date, they and Probest entered into the conditional Asset Disposal Agreement under which Swank conditionally agreed to sell to Probest 30% equity interest in the BVI Holdco and 30% of the BVI Loan at an aggregate consideration of HK$3 million. Such consideration will be satisfied by Probest upon Completion by offsetting an equivalent amount of HK$3 million outstanding principal of the Loan of HK$250 million due from Swank to Probest.

On 4th March, 2003, Swank and Probest also entered into the conditional Loan Restructuring Agreement relating to the remaining principal of the Loan of HK$247 million after Completion, pursuant to which:

• (1) Probest agrees to waive the repayment of the outstanding principal of HK$47 million of the Loan and the normal and default interest accrued on the Loan since 1st March, 2002 up to the effective date of the Loan Restructuring Agreement (which amounted to approximately HK$17.1 million up to the Latest Practicable Date);

• (2) the remaining principal balance of HK$200 million of the Loan outstanding after Completion shall be restructured on terms to be governed by the Convertible Note; and

— 4 —

LETTER FROM THE BOARD

• (3) Swank shall execute the Share Mortgage in favour of Probest over the remaining 70% equity interest in the BVI Holdco and the BVI Loan held by Swank from time to time after Completion as security for the performance by Swank of its obligations under the Convertible Note.

As at the date of the Asset Disposal Agreement and the Loan Restructuring Agreement, Probest, which is a wholly owned subsidiary of Tomorrow, is interested in approximately 57.9% of the issued shares in Swank. Accordingly, the Transactions constitute connected transactions for Tomorrow under the Listing Rules, which will be subject to the approval by the independent shareholders of Tomorrow. As none of the directors, chief executive or substantial shareholder of Tomorrow has any direct interest in Swank and in the Transactions (save for the indirect interest in Swank through Probest), no shareholders of Tomorrow is required to abstain from voting on the Transactions. Winspark, the controlling shareholder of Tomorrow holding approximately 58.0% of the issued shares in Tomorrow, has given a written certificate approving the Transactions. The written certificate has been submitted to the Stock Exchange and as such, a shareholders’ meeting to approve the Transactions is not required pursuant to the Listing Rules. The Independent Board Committee has been formed to consider the terms of the Transactions and to advise the Shareholders thereon. Barits has been appointed as the independent financial adviser to the Independent Board Committee in such regard.

The purpose of this circular is to provide you with further information regarding the Asset Disposal Agreement and the Loan Restructuring Agreement, and to set out the advice of the Independent Board Committee on the terms of the Transactions.

THE ASSET DISPOSAL AGREEMENT

Date

4th March, 2003

Parties

Vendor : Swank Purchaser : Probest Guarantor for the obligations of Probest as purchaser : Tomorrow

Principal terms of the Asset Disposal Agreement

Pursuant to the Asset Disposal Agreement, Swank conditionally agreed to sell to Probest a 30% equity interest in the BVI Holdco and 30% of the BVI Loan owing on completion at an aggregate consideration of HK$3 million. Such consideration shall be satisfied by Probest upon Completion by offsetting an equivalent amount of HK$3 million outstanding principal of the Loan due from Swank to Probest.

Under the Asset Disposal Agreement, Swank has undertaken to Probest to implement the Reorganisation pursuant to which BVI Holdco, a wholly-owned subsidiary of Swank, will become the intermediate holding company of all the existing operating subsidiaries and associated companies of Swank. After implementation of the Reorganisation and upon Completion and the Loan Restructuring Agreement taking effect, the principal assets of Swank would be its 70% interest in the issued shares of BVI Holdco and the BVI Loan, and the principal liabilities of Swank would be the debt of HK$200 million owed to Probest pursuant to the Convertible Note. There will be no principal assets or liabilities held by Swank other than the aforesaid. The 70% attributable value of the sum of the proforma unaudited consolidated net tangible liabilities of BVI Holdco and the BVI Loan amounted to approximately HK$116.8 million as at 30th June, 2002. The BVI Loan is unsecured, interest free and has no fixed repayment terms.

— 5 —

LETTER FROM THE BOARD

The consideration under the Asset Disposal Agreement of HK$3 million was determined after arm’s length negotiations among the parties taking into account the waiver of the Loan principal of HK$47 million by Probest pursuant to the Loan Restructuring Agreement (as described below) and with reference to the 30% attributable value of the sum of the proforma unaudited consolidated net tangible liabilities of BVI Holdco and the BVI Loan of approximately HK$50 million as at 30th June, 2002.

Conditions of the Asset Disposal Agreement

Completion of the Asset Disposal Agreement is conditional upon:

• (1) the approval by the shareholders of Swank other than Probest and its associates of the Asset Disposal Agreement by way of an ordinary resolution to be passed at the EGM, and all other consents and acts required under the Listing Rules having been obtained;

• (2) the approval by the shareholders of Tomorrow of the Asset Disposal Agreement by way of an ordinary resolution to be passed at a special general meeting of Tomorrow or, if permitted by the Stock Exchange, by way of a written certificate of approval from Winspark given in lieu of a special general meeting, and all other consents and acts required under the Listing Rules having been obtained;

• (3) the Reorganisation having been implemented;

• (4) all governmental or other necessary authorisations, approvals and consents in connection with the implementation of the Reorganisation in the PRC and other applicable jurisdictions having been obtained; and

• (5) the Loan Restructuring Agreement becoming unconditional, save for any condition therein requiring the Asset Disposal Agreement to become unconditional or having been completed.

Probest may at its discretion waive conditions (3) and (4) stated above. If any of these conditions are not fulfilled or waived on or before the Long Stop Date, the Asset Disposal Agreement shall lapse and be of no further effect, and no party to the Asset Disposal Agreement shall have any claim against or liability to the other parties thereunder, save in respect of any antecedent breaches thereof.

Completion shall take place on the first business day after the fulfilment or waiver of the above conditions (which is expected to be in or around May 2003), or such other date as the parties may agree in writing. A further announcement will be made by Tomorrow and Swank on Completion.

Information on BVI Holdco

Pursuant to the Reorganisation, all the interest of Swank in its operating subsidiaries and associated companies and all intra-company indebtedness between Swank and its operating subsidiaries and associated companies will be transferred to BVI Holdco. If any such transfer has not been completed before the Long Stop Date, Swank shall hold such interests in the operating subsidiaries and associated companies in trust of BVI Holdco. As a result, all the businesses currently carried on by the Swank Group, namely, the design, manufacture and marketing of optical products, will be conducted by BVI Holdco and its subsidiaries and associated companies. The board of directors of Swank confirms that there will be no material change to the management and employees of the Swank’s subsidiaries by reason only of the Transactions. The board of directors of Swank also expects that there will be no material adverse effect on the operation of these subsidiaries of Swank as a result of the Transactions.

— 6 —

LETTER FROM THE BOARD

Swank and Tomorrow have undertaken to each other that following Completion, to the extent that no external borrowing or funding is obtained, any further funding which may be required to be provided to BVI Holdco shall be made in the form of shareholders’ loans in proportion to their respective percentage holding in BVI Holdco.

The composition of the board of directors of BVI Holdco currently comprises 7 members, all of whom are appointed by Swank and are members of the board of directors of Swank. 5 out of the 7 members, namely Mr. Yau Tak Wah, Paul, Ms. Louie Mei Po, Ms. Wong Shin Ling, Irene, Mr. Tam Wing Kin and Mr. Tam Ping Wah, are also the existing executive directors of Tomorrow. Tomorrow and Swank have undertaken to each other that the composition of the board of directors of BVI Holdco shall remain unchanged after Completion, except with the prior written consent of both Swank and Tomorrow. BVI Holdco has also undertaken to Swank that surplus cash, if any, generated from the businesses carried out by the subsidiaries and associated companies of BVI Holdco shall, after appropriating a sum for operating expenses, be applied to repay the BVI Loan or to make advances to Swank on the same terms of the BVI Loan for the purposes of enabling Swank to repay the amounts due under Convertible Note.

The proforma unaudited consolidated net tangible liabilities of BVI Holdco and the BVI Loan as at 30th June, 2002 were HK$12.0 million and HK$178.8 million respectively. The proforma unaudited consolidated net losses before and after taxation of the BVI Holdco (prepared on the basis of the respective audited accounts of the subsidiaries and associated companies to be transferred to BVI Holdco upon the Reorganisation taking effect for the years ended 31st December, 2000 and 2001 and the unaudited management accounts of the subsidiaries and associated companies to be transferred to BVI Holdco upon the Reorganisation taking effect for the six months ended 30th June, 2002 and on the assumption that the Reorganisation has taken place as at 30th June, 2002) are summarised as follows:

		Six months
		ended	Year	ended
		30th June,	31st December,
		2002	2001		2000
		HK$ million	HK$ million	HK$	million
		(unaudited)	(unaudited)	(unaudited)
Profit/(Loss)	before taxation and minority interests	9.2	(58.8)		(102.3)
Profit/(Loss)	after taxation but before minority interests	9.2	(59.1)		(102.5)
Profit/(Loss)	attributable to shareholders	9.2	(58.9)		(102.3)

Note: Included in the above figures were finance costs of approximately HK$25.5 million and HK$21.5 million for each of the years ended 31st December, 2000 and 2001 respectively and HK$8.4 million for the 6 months ended 30th June, 2002, which had been written back during the 6 months period ended 30th June, 2002, to the extent of approximately HK$16.9 million, as a result of the completion of a debt restructuring of the Swank Group which was announced by Swank on 31st January, 2002 and completed on 1st March, 2002.

— 7 —

LETTER FROM THE BOARD

THE LOAN RESTRUCTURING AGREEMENT

Date

4th March, 2003

Parties

Lender : Probest Borrower : Swank

Principal terms of the Loan Restructuring Agreement

Pursuant to the Loan Restructuring Agreement, Probest conditionally agreed that the remaining principal of the Loan of HK$247 million due from Swank to Probest after Completion will be settled and restructured in the following manner:

• (1) Probest agrees to waive the repayment of the outstanding principal of HK$47 million of the Loan and the normal and default interest accrued on the Loan since 1st March, 2002 up to the date of the Loan Restructuring Agreement taking effect (which is expected to be in or around May 2003);

• (2) the balance of principal sum of HK$200 million of the Loan shall be restructured on terms to be governed solely by the Convertible Note; and

• (3) Swank will execute the Share Mortgage as security for the performance by Swank of its obligations under the Convertible Note.

The accrued interest amounted to approximately HK$17.1 million since 1st March, 2002 up to the Latest Practicable Date.

Principal terms of the Convertible Note and the Share Mortgage

Principal amount: HK$200 million.

Issue price: 100% of the principal amount of the Convertible Note.

Conversion price: Average closing price of the shares of Swank as quoted on the Stock Exchange over the five trading days prior to the date of the delivery of the conversion notice to the registered office of Swank, which shall, in any event, be not lower than the par value of the shares at the time of conversion.

Final maturity date: 30th June, 2006.

Interest: The Convertible Note will bear normal interest which is calculated at 3% per annum on the principal balance outstanding and is payable in full on maturity. Default interest is calculated at 2% above normal interest rate.

Repayment of Swank is required to repay the principal due under the Convertible Note by principal: installments as set out below.

— 8 —

LETTER FROM THE BOARD

Prepayment: In addition to the repayment by installments as described below, Swank is entitled to prepay at any time before the maturity date in whole or in part (in amount of not less than HK$1 million or a whole multiple thereof) the principal due under the Convertible Note. The principal balance so prepaid shall be applied towards reduction of the outstanding principal due under the installments in order of priority of their respective repayment dates.

Conversion: Holder(s) of the Convertible Note will have the right to convert the outstanding principal balance due under the Convertible Note in whole or in part (in amount of not less than HK$1 million or a whole multiple thereof) into shares of Swank at any time from the date of issue of the Convertible Note until the business day (excluding Saturdays) immediately prior to the maturity date at the conversion price described above. The principal balance so converted shall be applied towards reduction of the outstanding principal due under the installments in order of priority of their respective repayment dates.

The Conversion Shares shall, when issued, rank pari passu in all respects with all other shares of Swank then in issue on the date of issue and allotment of such Conversion Shares, including the right to any dividends or distributions, the record date of which falls on a date on or after the date of issue and allotment of such Conversion Shares.

Transferability: The Convertible Note may be transferable in whole or in part from the date of issue.

Voting: Holder(s) of the Convertible Note will not be entitled to attend or vote at any meetings of Swank by reason of it being a holder of the Convertible Note.

Listing: The Convertible Note will not be listed on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of and permission to deal in the Conversion Shares, subject to the Shareholders having approved the issue and allotment of the Conversion Shares.

Events of default: Events of default include, among others, failure to repay any portion of the principal due under the Convertible Note, default in performance of covenants or undertakings, or material adverse change in the financial condition of the Swank Group.

The Convertible Note shall replace the existing loan agreement governing the Loan. The effect of the Transactions on the Loan is as follows:

Outstanding principal of the Loan Set off against the consideration under the Asset Disposal Agreement Waived by Tomorrow pursuant to the Loan Restructuring Agreement Principal balance due under the Convertible Note	HK$’million 250.0 (3.0) (47.0) 200.0

— 9 —

LETTER FROM THE BOARD

The Loan is unsecured and currently bears normal interest at 1% above prime rate per annum and default interest at 2% above normal rate. The principal repayment schedules of the Loan and that of the Convertible Note are as follows:

The Loan Principal amount Repayment date HK$’ million 25.0 1st June, 2002 37.5 1st June, 2003 50.0 1st June, 2004 62.5 1st June, 2005 75.0 1st June, 2006 250.0	The Convertible Note Principal amount Repayment date HK$’ million 12.5 31st December, 2003 25.0 1st June, 2004 25.0 31st December, 2004 62.5 1st June, 2005 75.0 30th June, 2006 200.0

The Board of Swank expects that the financial obligations of Swank pursuant to the Convertible Note shall be settled by the internal resources of BVI Holdco generated from the operating activities of its subsidiaries and associates and distributed to Swank by way of repayment of the BVI Loan or advances by BVI Holdco to Swank.

The Share Mortgage

If an event of default under the Convertible Note shall occur, Probest may exercise its rights to enforce the security created by the Share Mortgage to sell or foreclose the 70% interest in BVI Holdco and the BVI Loan held by Swank from time to time after Completion. In case of a sale of the security created by the Share Mortgage, Probest may at its sole discretion apply the proceeds of such sale towards the discharge of the costs incurred and the amount then due by Swank under the Convertible Note. Swank shall be required to make up the shortfall, if any, between the sale proceeds of the security and the amount then due to Probest. If there exists any surplus of the sale proceeds over the amount then due to Probest, Swank shall be entitled to receive such surplus from Probest. In case of a foreclosure of the security, the foreclosure shall be a full and final settlement of all amounts then due by Swank to Probest under the Convertible Note irrespective of the amount thereof.

Conditions of the Loan Restructuring Agreement

The Loan Restructuring Agreement shall take effect on the date when the last of the following conditions shall have been satisfied:

• (1) the approval by the shareholders of Swank other than Probest and its associates of the Loan Restructuring Agreement (including the Convertible Note and the issue and allotment of the Conversion Shares and the Share Mortgage) having been obtained;

• (2) the approval by the shareholders of Tomorrow of the Loan Restructuring Agreement (including the Convertible Note and the Share Mortgage) by way of an ordinary resolution to be passed at a special general meeting of Tomorrow or; if permitted by the Stock Exchange, by way of a written certificate of approval from Winspark given in lieu of a special general meeting, having been obtained;

— 10 —

LETTER FROM THE BOARD

• (3) all other consents and acts, if any, required of Swank/Tomorrow in connection with the Loan Restructuring Agreement, the Convertible Note and the Share Mortgage under the Listing Rules having been obtained and completed or, as the case may be, the relevant waiver from compliance with any of such rules having been obtained from the Stock Exchange, including the grant by the Stock Exchange of listing of and permission to deal in the Conversion Shares;

• (4) completion of the Reorganisation;

• (5) the Asset Disposal Agreement becoming unconditional, save for any condition therein requiring the Loan Restructuring Agreement to become unconditional or having taken effect, and having been completed; and

• (6) Probest having received the following documents in forms and substance satisfactory to it; (a) the Convertible Note and the Share Mortgage contemplated under the Loan Restructuring Agreement duly executed by Swank; and (b) the certified true copies of resolutions of the Board of Swank approving the aforesaid documents.

Probest may at its discretion waive conditions (4) and (6) stated above. If any of these conditions are not waived or fulfilled on or before the Long Stop Date, unless an extension of time has been granted by Probest, the Loan Restructuring Agreement shall lapse and be of no further effect, and no party to the Loan Restructuring Agreement shall have any claim against or liability to the other parties thereunder, save in respect of any antecedent breaches thereof.

SHAREHOLDING AND GROUP STRUCTURES

Set out below are the group structures of the Tomorrow Group and the Swank Group before and after completion of the Transactions:

Before completion of the Transactions

==> picture [186 x 208] intentionally omitted <==

----- Start of picture text -----

Tomorrow
100%
Probest
Loan
57.9%
HK$250 million
Swank
Inter-company
balances
Subsidiaries and
associated companies
engaged in the
spectacle business
----- End of picture text -----

— 11 —

LETTER FROM THE BOARD

After completion of the Transactions

==> picture [353 x 282] intentionally omitted <==

----- Start of picture text -----

Tomorrow
100%
Probest
Convertible Note
57.9%
HK$200 million
Swank 30%
30%
BVI Loan
70%
70%
BVI Loan
BVI Holdco
Inter-
company
Subsidiaries and balances
associated companies
engaged in the
spectacle business
----- End of picture text -----

On the basis of the existing shareholding structure of Swank and the average closing price per share of Swank of HK$0.01 (the ‘‘Average Price’’) for the 5 trading days up to and including the Latest Practicable Date, and on the assumption that the Capital Reorganisation has taken effect, the shareholding structures of Swank before and after the exercise in full of the conversion rights attaching to the Convertible Note by Probest are set out below for illustration purposes only:

Probest Conversion Shares Public	Before issue of Conversion Shares No. of Consolidated Shares (in million) % 129.2 57.9 — — 129.2 57.9 94.0 42.1 223.2 100.0	After issue of Conversion Shares assuming conversion at Average Price No. of Consolidated Shares (in million) % 129.2 5.8 2,000.0 90.0 2,129.2 95.8 94.0 4.2 2,223.2 100.0	After issue of Conversion Shares assuming conversion at par No. of Consolidated Shares (in million) % 129.2 0.6 20,000.0 98.9 20,129.2 99.5 94.0 0.5 20,223.2 100.0	After issue of Conversion Shares assuming conversion at par No. of Consolidated Shares (in million) % 129.2 0.6 20,000.0 98.9 20,129.2 99.5 94.0 0.5 20,223.2 100.0
				99.5 0.5
				100.0

It should be noted that the actual shareholding structure of Swank after the exercise of the conversion rights attaching to the Convertible Note may be different from that set out above, as the conversion price and accordingly the number of Conversion Shares to be issued upon conversion of the Convertible Note

— 12 —

LETTER FROM THE BOARD

cannot be ascertained at present. The Board confirmed that it has no intention to apply the provisions of section 168 of the Companies Ordinance to acquire compulsorily any shares of Swank if, after conversion of the Convertible Note, Probest’s shareholding in Swank exceeds 90%.

After implementation of the Reorganisation and upon Completion and the Loan Restructuring Agreement taking effect, all the interest of Swank in its subsidiaries and associated companies, including all the businesses currently carried on by the Swank Group, together with all intra-company indebtedness between Swank and its subsidiaries and associated companies will be transferred to BVI Holdco. The principal assets of Swank would be its 70% interest in the issued shares of BVI Holdco and the BVI Loan, and the principal liabilities of Swank would be the debt of HK$200 million owed to Probest pursuant to the Convertible Note. Swank intends to maintain its existing business. If an event of default under the Convertible Note shall occur, Probest may exercise its rights to enforce the security created by the Share Mortgage to sell or foreclose the 70% interest in BVI Holdco and the BVI Loan held by Swank from time to time after Completion. In such case, there will be no asset or business remaining in Swank unless acquisition of assets or businesses are made by Swank prior thereto. The Stock Exchange may review whether Swank is able to comply with the requirements of paragraph 38 of the Listing Agreement which requires Swank to have sufficient level of operations or tangible assets of sufficient value and/or intangible assets for which a sufficient potential value can be demonstrated to the Stock Exchange to warrant the continued listing of the shares of Swank. In the event that Swank is not able to demonstrate compliance with the requirements of paragraph 38 of the Listing Agreement, trading in the shares of Swank will be suspended immediately and the delisting procedures as set out in Practice Note 17 of the Listing Rules will then commence accordingly.

The Stock Exchange has stated that, if Swank remains a public company listed on the Stock Exchange, any acquisitions or disposals of assets by Swank will be subject to the provisions of the Listing Rules. Pursuant to the Listing Rules, the Stock Exchange has the discretion to require Swank to issue a circular to its shareholders where acquisition or disposal by Swank is proposed, irrespective of the size of such acquisition or disposal and in particular where such acquisition or disposal represents a departure from the principal activities of Swank. The Stock Exchange also has the power, pursuant to the Listing Rules, to aggregate a series of acquisitions or disposals by Swank and any such acquisitions or disposals may, in any event, result in Swank being treated as a new applicant for listing and subject to the requirements for new applicants as set out in the Listing Rules.

Upon conversion by Probest of the Convertible Note, Probest’s percentage holding in Swank will increase, which percentage depends on the conversion price and is not ascertainable at present. The Stock Exchange has stated that if, after completion of the Transactions and the conversion of all or part of the Convertible Note, less than 25% of the shares of Swank are held by the public, or if the Stock Exchange believes that a false market exists or may exist in the shares of Swank, or there are too few shares of Swank in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the shares of Swank. Swank and Probest have undertaken to the Stock Exchange to take appropriate steps (which may include further issue of new shares in Swank or arrange for sale of shares in Swank by Probest) to ensure that as soon as possible following conversion of the Convertible Note, not less than 25% of Swank’s issued share capital will be held by the public.

REASONS FOR THE TRANSACTIONS

The Tomorrow Group is principally engaged in the design, development, manufacture and sale of electronic products, the manufacture and sale of printed circuit boards, the trading and distribution of electronic parts and components, the trading of listed equity investment and the provision of loan financing.

— 13 —

LETTER FROM THE BOARD

As disclosed in the joint announcement of Tomorrow and Swank dated 31st January, 2002, pursuant to a sale and purchase agreement dated 31st January, 2002, Tomorrow acquired (i) 1,605 million shares of Swank, representing approximately 71.9% of the total issued share capital of Swank, at a consideration of HK$10 million; and (ii) bank debt of an aggregate principal amount of HK$250 million then owed by the Swank Group to 26 banks and financial creditors (i.e. the Loan) for a consideration of HK$58 million. The aforesaid restructuring of the Swank Group was completed on 1st March, 2002. Save for the Loan, there has been no other advances made by the Tomorrow Group to the Swank Group.

Following the acquisition of the controlling stake in Swank by Tomorrow, the Swank Group had made a turnaround in its financial results. Notwithstanding this, the Swank Group is under a tight cashflow position to make principal repayments and interest payments for the Loan. Swank has not been able to fulfill its legal obligation under the loan agreement governing the Loan to make repayment of the first installment due under the Loan on 30th June, 2002 of HK$25 million and payment of accrued interests from 1st March, 2002 up to the Latest Practicable Date of approximately HK$17.1 million. Having considered the fact that Swank is a subsidiary of Tomorrow, the Board of Tomorrow is of the view that it would be in the interests of both the Tomorrow Group and the Swank Group to arrive at a restructuring plan of the Loan on terms which are mutually agreed between Tomorrow and Swank. The Transactions are intended for Tomorrow to partially recover the Loan from Swank to the extent of HK$50 million in kind (i.e. 30% interest in BVI Holdco and BVI Loan owing on Completion) and to enable Tomorrow to obtain securities on the remaining portion of the Loan. The Tomorrow Group will write off the interest receivable from Swank which amounted to approximately HK$17.1 million from 1st March, 2002 up to the Latest Practicable Date. The Board of Tomorrow considers that the Transactions protect the rights of Probest as a creditor of Swank while allowing financial flexibility for the Swank Group to continue its operation. The Tomorrow Group would also have an opportunity to increase its equity holding in Swank through the exercise of the conversion rights attaching to the Convertible Note should it considers it in the interest of the Tomorrow Group to do so. In addition, the Transactions would result in an increase in the direct interest in the spectacle business of Swank (through Tomorrow’s direct interest of 30% in BVI Holdco and the indirect interest through Probest’s 57.9% interest in Swank).

The Directors are of the view that the Loan of HK$250 million can be regarded as equivalent to (i) 30% equity interest in BVI Holdco and 30% of BVI Loan owing on Completion with total attributable value of HK$50 million; and (ii) Convertible Note of HK$200 million. The Directors also consider that the only anticipated material financial loss for Tomorrow on company level due to the Transactions shall be the write-off of the interest receivable from Swank of approximately HK$17.1 million from 1st March, 2002 up to the Latest Practicable Date, after having taken into account the delayed repayment from Swank for the Loan as mentioned above. Having reviewed the Swank Group’s cash flow position, the Directors considered that Swank is able to repay the Convertible Note under the new repayment schedule.

GENERAL

As at the date of the Asset Disposal Agreement and the Loan Restructuring Agreement, Probest, which is a wholly owned subsidiary of Tomorrow, is interested in approximately 57.9% of the issued shares in Swank. Accordingly, the Transactions constitute connected transactions for Tomorrow under Chapter 14 of the Listing Rules, which will be subject to the approval by the independent shareholders of Tomorrow.

As none of the directors, chief executive or substantial shareholder of Tomorrow has any direct interest in Swank and in the Transactions (save for the indirect interest in Swank through Probest), no shareholders of Tomorrow is required to abstain from voting on the Transactions. Winspark, the controlling shareholder of Tomorrow holding approximately 58.0% of the issued shares in Tomorrow, has given a written certificate approving the Transactions. The written certificate has been submitted to the Stock

— 14 —

LETTER FROM THE BOARD

Exchange and as such, a shareholders’ meeting to approve the Transactions is not required. Barits has been appointed as the independent financial adviser to give an opinion on the terms of the Transactions which is included in this circular.

RECOMMENDATION

The text of a letter to the Shareholders from the Independent Board Committee, containing its recommendation in relation to the Transactions, is set out in this circular. Having considered the advice from Barits, the independent financial adviser to the Independent Board committee, in relation to the Transactions, which is set out in this circular, the Independent Board Committee is of the opinion that the Transactions are in the interests of Tomorrow and the Shareholders and the terms of the Transactions are fair and reasonable so far as the Shareholders as a whole are concerned.

Yours faithfully,

By order of the board of Tomorrow International Holdings Limited Yau Tak Wah, Paul Chairman

— 15 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [85 x 50] intentionally omitted <==

Tomorrow International Holdings Limited

(incorporated in Bermuda with limited liability)

7th April, 2003

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS

We have been appointed as the Independent Board Committee to advise you in connection with the Transactions, details of which are set out in the letter from the Board included in the circular to the Shareholders dated 7th April, 2003 (the ‘‘Circular’’), of which this letter forms a part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Having considered the terms and conditions of the Transactions, and the principal factors, reasons and opinion of Barits as set out in the Circular, we are of the view that the terms of the Transactions are fair and reasonable so far as Tomorrow and the Shareholders as a whole are concerned.

Yours faithfully, For and on behalf of the Independent Board Committee Ng Wai Hung Cheung Chung Leung, Richard

— 16 —

LETTER OF ADVICE FROM BARITS

The following is the text of a letter of advice from Barits to the Independent Board Committee in respect of the Transactions, and is prepared for inclusion in this circular.

Barits Securities (Hong Kong) Limited Rooms 3403–3407,

34/F Edinburgh Tower, The Landmark 15 Queen’s Road Central Hong Kong

7th April, 2003

To the Independent Board Committee of Tomorrow International Holdings Limited

Dear Sir or Madam,

CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the Transactions, details of which are set out in this circular, of which this letter forms a part. Unless the context otherwise requires, terms used in this letter have the same meanings as those defined in this circular. We recommend the Independent Board Committee to advise the Shareholders to read this circular carefully before they decide whether the terms of the Transactions are fair and reasonable.

On 4th March, 2003, Swank and Tomorrow jointly announced that, on the same day, they and Probest entered into the conditional Asset Disposal Agreement and the Loan Restructuring Agreement. As at the date of the Asset Disposal Agreement and the Loan Restructuring Agreement, Probest, which is a wholly owned subsidiary of Tomorrow, is interested in approximately 57.9% of the issued shares in Swank. Accordingly, the Transactions constitute connected transactions for Tomorrow under the Listing Rules, which is subject to the approval by the independent Shareholders. As none of the directors, chief executive or substantial shareholder of Tomorrow has any direct interest in Swank and in the Transactions (save for the indirect interest in Swank through Probest), no shareholders of Tomorrow is required to abstain from voting on the Transactions. Winspark, the controlling shareholder of Tomorrow holding approximately 58.0% of the issued shares in Tomorrow, has given a written certificate approving the Transactions. The written certificate has been submitted to the Stock Exchange and as such, a shareholders’ meeting to approve the Transactions is not required.

In formulating our opinion and advice, we have relied upon accuracy of the information and representations contained in this circular and information provided to us by Tomorrow and the Director(s). We have assumed that all statements and representations made or referred to in this circular were true at the time they were made, and all statements of belief, opinion and intention made by the Director(s) in this

— 17 —

LETTER OF ADVICE FROM BARITS

circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by Tomorrow and the Director(s) and have no reason to doubt that any relevant material facts have been withheld or omitted.

We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in this circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an in-depth investigation into the business and affairs of the Tomorrow Group, nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS CONSIDERED

In giving our advice to the Independent Board Committee, we have taken into account the following factors in considering whether or not the terms of the Transactions are fair and reasonable.

Asset Disposal Agreement

Pursuant to the Asset Disposal Agreement, Swank conditionally agreed to sell to Probest a 30% equity interest in the BVI Holdco and 30% of the BVI Loan owing on Completion at an aggregate consideration of HK$3 million. Such consideration will be satisfied by Probest upon Completion by offsetting an equivalent amount of HK$3 million outstanding principal of the Loan of HK$250 million due from Swank to Probest. The Transactions would result in an increase in the direct interest in the spectacle business of Swank (through Tomorrow’s direct interest of 30% in BVI Holdco and the indirect interest through Probest’s 57.9% interest in Swank).

As stated in the letter from the Board, the consideration under the Asset Disposal Agreement of HK$3 million was determined taking into account the waiver of the Loan principal of HK$47 million by Probest pursuant to the Loan Restructuring Agreement and with reference to the 30% attributable value of the sum of the pro forma unaudited consolidated net tangible liabilities of BVI Holdco and the BVI Loan of approximately HK$50 million as at 30th June, 2002. Accordingly, the consideration was equivalent to the net amount between the HK$47 million of principal value of Loan waived and HK$50 million attributable to 30% of BVI Holdco and the BVI Loan.

Loan Restructuring Agreement

Waiver of outstanding Loan principal of HK$47 million

Swank has not been able to fulfill its legal obligation under the loan agreement governing the Loan to make repayment of the first installment due under the Loan on 30th June, 2002 of HK$25 million and payment of accrued interests from 1st March, 2002 up to the Latest Practicable Date of approximately HK$17.1 million. In such regard, we wish to remind the Shareholders to note that Swank may or may not be able to fulfill its obligations under the Convertible Note.

Pursuant to the Loan Restructuring Agreement, Probest agrees to waive the repayment of the outstanding principal of HK$47 million of the Loan and the normal and default interest accrued on the Loan since 1st March, 2002 up to the date of the Loan Restructuring Agreement taking effect, which is expected to be in or around May 2003 (the accrued interest amounted to approximately HK$15.6 million up to the date of the Loan Restructuring Agreement). The Tomorrow Group will write off the interest receivable from Swank which amounted to approximately HK$17.1 million from 1st March, 2002 up to the Latest Practicable Date.

— 18 —

LETTER OF ADVICE FROM BARITS

However, as stated above, the waiver of outstanding Loan principal of HK$47 million pursuant to the Loan Restructuring Agreement was part and partial to the Asset Disposal Agreement, under which the 30% attributable value of BVI Holdco and the BVI Loan amounting to HK$50 million will be transferred from Swank to Tomorrow and hence will net off the loss to Tomorrow under such waiver of the Loan principal.

Issue of Convertible Note and execution of Share Mortgage

Pursuant to the Loan Restructuring Agreement, the remaining principal balance of HK$200 million of the Loan outstanding after Completion shall be restructured on terms to be governed by the Convertible Note. Swank shall execute the Share Mortgage in favour of Probest over the remaining 70% equity interest in the BVI Holdco and the BVI Loan held by Swank from time to time after Completion as security for the performance by Swank of its obligations under the Convertible Note.

The Loan bears normal interest at 1% above prime rate per annum (equivalent to 6% given 5% prime rate as at Latest Practicable Date) while the Convertible Note bears interest at 3% per annum. Accordingly, upon replacement of the Loan by the Convertible Note for a face value of HK$200 million after completion of the Loan Restructuring Agreement, the amount of interest income entitled to Tomorrow will be lowered by an estimated amount of HK$28.1 million after taken into account the original interest income from the Loan of HK$41.5 million (for the period 1st March, 2002 to 1st June, 2006 and based on the assumptions of constant prime rate of 5%, nil event of default and due repayments throughout the period) and the interest income from the Convertible Note of HK$13.4 million (for the period 1st May, 2003 to 30th June, 2006 and based on the assumptions of the Loan Restructuring Agreement taking effect on 1st May, 2003, non-exercised conversion right, nil event of default and due repayments throughout the period). However, we consider that such restructuring shall relieve the tight cash flow position of Swank which will be positive to the financial performance of Swank, being a subsidiary of Tomorrow, in the long run.

The repayment schedule of the Convertible Note in comparison with that of the Loan is set out as follows:

The Loan Principal amount Repayment date HK$’ million 25.0 1st June, 2002 37.5 1st June, 2003 50.0 1st June, 2004 62.5 1st June, 2005 75.0 1st June, 2006 250.0	The Convertible Note Principal amount Repayment date HK$’ million 12.5 31st December, 2003 25.0 1st June, 2004 25.0 31st December, 2004 62.5 1st June, 2005 75.0 30th June, 2006 200.0

We noted that the repayment dates for the first three installments under the Convertible Note were shifted by approximately 1.5 years, 1 year and 6 months respectively as compared to the corresponding repayment dates of the Loan. Accordingly, the repayment schedule of the Convertible Note allows more financial flexibility for Swank while the due date for the last installment lies in June 2006 for both the Loan and the Convertible Note. Notwithstanding that Tomorrow shall encounter postponed repayments from Swank, taking into account that Swank is a subsidiary of Tomorrow, we consider that the enhanced financial flexibility of Swank shall be beneficial to the Tomorrow Group and the Swank Group as a whole. However, having considered that Swank was unable to repay the principal amount and interest of the Loan, we consider that there is no guarantee to Tomorrow as to whether Swank will be able to repay the Convertible Note pursuant to the above said schedule.

— 19 —

LETTER OF ADVICE FROM BARITS

A major benefit of the Convertible Note over the Loan was the option granted by the Convertible Note to Tomorrow to increase its equity stake in Swank through the exercise of the conversion rights attaching to the Convertible Note should Tomorrow consider it in its interest and in favour of its financial performance to do so notwithstanding that the increase of equity interest in Swank may or may not be positive to the financial performance of Tomorrow in the long run.

The Loan was unsecured whilst the Share Mortgage was executed in favor of Probest over the remaining 70% equity interest in the BVI Holdco and the BVI Loan owing from time to time after Completion as security for the performance by Swank of its obligations under the Convertible Note. If an event of default under the Convertible Note shall occur, Probest may exercise its rights to enforce the security created by the Share Mortgage to sell or foreclose the 70% interest in BVI Holdco and the BVI Loan held by Swank from time to time. In case of a sale of the security created by the Share Mortgage, Probest may at its sole discretion apply the proceeds of such sale towards the discharge of the costs incurred and the amount then due by Swank under the Convertible Note. Swank shall be required to make up the shortfall, if any, between the sale proceeds of the security and the amount then due to Probest. Comparing the unsecured Loan to the secured Convertible Note, Tomorrow as a creditor was better protected under the Convertible Note than under the Loan as a result of the Share Mortgage and the non-recoverable risk faced by Tomorrow shall be lowered under the Convertible Note with security.

As stated in the letter from the Board, BVI Holdco has undertaken to Swank that surplus cash of corresponding repayment amount, if any, generated from the businesses carried out by the subsidiaries and associated companies of BVI Holdco shall, after appropriating a sum for operating expenses, be applied to repay the BVI Loan or to make advances to Swank on the same terms as the BVI Loan for the purposes of facilitating Swank to repay the amounts due under the Convertible Note. As advised by the Directors, no capital commitment is currently expected and foreseeable for BVI Holdco. We consider such undertaking favorable to the Tomorrow Group by providing it further assurance as to the repayment of the Convertible Note by BVI Holdco, provided that BVI Holdco is able to generate net operating cash flow in the future.

Financial effects to the Tomorrow Group

Earnings and working capital

Pursuant to both Asset Disposal Agreement and Loan Restructuring Agreement, there is no cash inflow into or outflow from the Tomorrow Group. Accordingly, the Directors consider that the Transactions exert no material and immediate impact to the working capital position of Tomorrow Group. However, given the waiver of HK$47 million of the Loan out of the principal amount of HK$250 million and waiver of approximately HK$17.1 million interest accrued up to the Latest Practicable Date, the cash resources which are originally available for use by Tomorrow itself would be reduced by approximately HK$64.1 million. In such regard, we consider that on company level, Tomorrow shall bear a negative cashflow effect. Notwithstanding the postponed repayment schedule under the Convertible Note, we are of the view that such arrangement shall relieve of cash flow pressure of Swank and given that Swank is a subsidiary of Tomorrow, the enhanced financial condition of Swank shall be favourable to the Tomorrow Group and the Swank Group as a whole.

We consider that on company level, Tomorrow may incur a financial loss of approximately HK$17.1 million, which represented the waived interest accrued under the Loan up to the Latest Practicable Date, as a result of the Transactions. However, in view that Swank is a subsidiary of Tomorrow, the interest income of Tomorrow and the interest expense of Swank arising from the Transactions would be set off against each other on group level upon consolidation in the financial statements of Tomorrow. Accordingly, the Directors anticipate that solely as a result of the Transactions, the profit and loss account of Tomorrow will not be materially affected on a consolidated basis.

— 20 —

LETTER OF ADVICE FROM BARITS

Based on the terms of the Asset Disposal Agreement and the Loan Restructuring Agreement, we concur with the Directors that the Loan of HK$250 million can be regarded as equivalent to (i) 30% equity interest in BVI Holdco and 30% of the BVI Loan owing on Completion with total attributable value of HK$50 million; and (ii) Convertible Note of HK$200 million.

As stated above, the Transactions would result in an increase in the direct interest in the optical products business of Swank (through Tomorrow’s direct interest of 30% in BVI Holdco and the indirect interest through Probest’s 57.9% interest in Swank). However, given the loss making track record of Swank, we are of the view that there is no guarantee as to whether Tomorrow will benefit from such increase in direct interest in the optical products business of Swank.

Net asset value

In view that Swank is a subsidiary of Tomorrow, the receivables of Tomorrow and the payables of Swank as a result of the Transactions would be set off against each other upon consolidation in the balance sheet of Tomorrow. Accordingly, the Directors anticipate that solely as a result of the Transactions, the net asset position of Tomorrow will not be materially affected on a consolidated basis.

RECOMMENDATION

Having considered the abovementioned principal factors, we consider that the terms and conditions of the Transactions are fair and reasonable and are in the interests of the Company so far as the Shareholders as a whole are concerned. Accordingly, we recommend the Independent Board Committee to advise the Shareholders that the terms of the Transactions are fair and reasonable.

Yours faithfully, For and on behalf of Barits Securities (Hong Kong) Limited Terence Hong Alfred Wong Executive Director Director

— 21 —

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to Tomorrow. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the circular have been arrived at after due and careful consideration and that there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, the interests of the Directors and Tomorrow’s chief executives in the equity or debt securities of Tomorrow or any associated corporation (within the meaning of the SFO) which were required to be notified to Tomorrow and the Stock Exchange pursuant to section 347 of the SFO (including interests which they were deemed or taken to have under section 344 and 345 of the SFO) or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, or which were recorded in the register required to be kept under section 352 of the SFO, were as follows:

Tomorrow

		Nature of	Number of
Director	Note	interest	shares
Mr. Yau Tak Wah, Paul	1	Corporate	148,474,000
Mr. Tam Ping Wah	2	Corporate	80,000
Notes:

1. These Shares were held through Pacific Shore Profits Limited, a company beneficially wholly owned by Mr. Yau Tak Wah, Paul.

2. These Shares were held through Strong Trend International Limited, a company beneficially wholly owned by Mr. Tam Ping Wah.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or their associates had any personal, family, corporate or other interest in the equity securities or debentures of, or has a short position in shares in the relevant share capital of Tomorrow or any of its associated corporations (as defined in the SFO) which were required to be notified to Tomorrow and the Stock Exchange pursuant to section 347 of the SFO (including the interests which they were deemed or taken to have under section 344 and 345 of the SFO) or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to herein.

— 22 —

APPENDIX

GENERAL INFORMATION

• (b) As at the Latest Practicable Date, according to the register of interests in shares and short positions kept by Tomorrow pursuant to section 336 of the SFO and so far as is known to, or can be ascertained after reasonable enquiries by the Directors, the following company was directly or indirectly interested in 5 per cent. or more of the issued share capital of Tomorrow:

		Number of	Approximate
	Note	ordinary Shares	Percentage
Winspark	1	1,658,359,630	58.0%
Mr. Yau Tak Wah, Paul	2	148,474,000	5.2%
Notes:

1. Winspark is wholly beneficially owned by Mr. Chan Yuen Ming.

2. These Shares were held through Pacific Shore Profits Limited, a company beneficially wholly owned by Mr. Yau Tak Wah, Paul.

Save as disclosed herein, the Directors are not aware of any person who was directly or indirectly interested in 5 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of Tomorrow or in any options in respect of such capital as at the Latest Practicable Date.

• (c) none of the Directors has any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of Tomorrow were made up, acquired or disposed of by, or leased to Tomorrow or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to Tomorrow or any of its subsidiaries.

• (d) none of the Directors is materially interested in any contract or arrangement entered into with Tomorrow or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Tomorrow.

• (e) Save as disclosed below, none of the Directors has entered or is proposing to enter into a service contract with Tomorrow or any of its subsidiaries (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation):

As disclosed in the circular of Tomorrow dated 28th September, 2001, Mr. Yau Tak Wah, Paul and Mr. Tam Ping Wah have entered into service contracts with Tomorrow for a fixed term of three years from 26th April, 2000 to 25th April, 2003, which thereafter are terminable by either party upon the giving of six months’ notice.

The terms of the contracts are that the remuneration of each Director shall be a fixed salary at the rate of HK$2,600,000 per annum. During the term of the engagement, each Director shall be entitled to an annual management bonus after the end of each financial year in the following amount:

• (i) if the audited consolidated net profit of Electronics Tomorrow International Limited (a wholly owned subsidiary of Tomorrow) and its subsidiaries and associated companies attributable to shareholders before such management bonus (the ‘‘Net Profit’’) for the relevant financial year exceeds HK$16,800,000 but not more than HK$21,000,000, 2.5% of the Net Profit;

— 23 —

GENERAL INFORMATION

APPENDIX

• (ii) if the Net Profit for the relevant financial year exceeds HK$21,000,000 but not more than HK$25,000,000, 5% of the Net Profit;

• (iii) if the Net Profit for the relevant financial year exceeds HK$25,000,000 but not more than HK$29,000,000, 7.5% of the Net Profit;

• (iv) if the Net Profit for the relevant financial year exceeds HK$29,000,000 but not more than HK$33,000,000, 10% of the Net Profit; and

• (v) if the Net Profit for the relevant financial year exceeds HK$33,000,000, 12.5% of the Net Profit.

• (f) Barits is not beneficially interested in the share capital of any member of the Tomorrow Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Tomorrow Group and does not have any interest, either directly or indirectly, in any assets which have been, since the date to which the latest published audited financial statements of Tomorrow were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Tomorrow Group.

3. LITIGATION

(a) Hanmy (Holding) Limited and its related companies (collectively ‘‘Hanmy’’)

The Swank Group commenced its legal proceedings against Hanmy to recover the amounts owed by Hanmy to the Swank Group of approximately HK$96 million, which included issuance of writ and petitions for winding-up. The Swank Group has not yet obtained a judgement due to Hanmy’s defence. Legal proceedings are still in progress.

(b) Litigation against Mr. Lam Yin Sang and Ms. Chan Hoi Wo

The Swank Group instigated legal proceedings against Mr. Lam Yin Sang and Ms. Chan Hoi Wo for the losses of HK$385,800,000 sustained as a result of various alleged breaches of fiduciary and other duties while acting formerly as directors of the Swank Group. In October 1999, the Swank Group filed a claim to the court. Legal proceedings are still in progress.

Save as disclosed above, neither Tomorrow nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against Tomorrow or any of its subsidiaries.

4. QUALIFICATION

The following is the qualification of the expert who has given opinion or advice which is contained in this circular:

Name Qualification Barits an investment adviser and dealer registered under the SFO

— 24 —

GENERAL INFORMATION

APPENDIX

5. CONSENT

Barits has given and has not withdrawn its written consent to the issue of this circular with inclusion of its letter, report or certificate or summary of its opinion (as the case may be) and references to its names in the form and context in which they appear herein.

6. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2001, the date to which the latest published audited financial statements of Tomorrow were made up.

7. GENERAL

• (a) The registered office of Tomorrow is at Clarendon House, Church Street, Hamilton HM11, Bermuda.

• (b) The secretary of Tomorrow is Ma Wing Kuen, Ricky, ACCA.

• (c) The English text of this circular shall prevail over the Chinese text.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal office of Tomorrow at 27th Floor, Hanley Building, 5 Queen’s Road Central, Hong Kong during normal business hours on any weekday, except public holidays up to and including 2nd May, 2003:

• (a) the articles of association of Tomorrow;

• (b) the service contracts referred to in this Appendix;

• (c) the material contracts referred to in this Appendix;

• (d) the consent referred to in this Appendix; and

• (e) the letter of advice from Barits.

— 25 —