SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F
(Mark One)

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [Fee Required]

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [Fee Required]

                   For the Fiscal Year Ended December 31, 1996

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [No Fee Required]

        For the transition period from                to            .
                                      ----------------  ------------

                           Commission File No. 0-25108

                               IWI HOLDING LIMITED
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                             British Virgin Islands
                 -----------------------------------------------
                 (Jurisdiction of Incorporation or Organization)

   P.O. Box 3340, Dawson Building, Road Town, Tortola, British Virgin Islands
   --------------------------------------------------------------------------
                     Address of Principal Executive Offices


Securities Registered Pursuant to Section 12(b) of the Act:

  Title of Each Class                  Name of Each Exchange on Which Registered
  -------------------                  -----------------------------------------

       None                                             None

Securities Registered Pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

Securities for which there is a reporting  obligation  pursuant to Section 15(d)
of the Act:

                                      None
                                ----------------
                                (Title of Class)

     As of June 2, 1997,  the  Registrant had  outstanding  2,554,700  shares of
Common Stock and 3,644,880 shares of Preferred Stock.

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Exchange Act during the past
twelve (12) months (or for such shorter  period that the registrant was required
to file such reports);  and (2) has been subject to such filing requirements for
the past ninety (90) days. Yes  X  No
                              -----  -----

     Indicate by check mark which  financial  statement  item the registrant has
elected to follow.

         Item  17      Item  18
             -----         -----

<PAGE>
                                TABLE OF CONTENTS

                                                                       Page
                                                                       ----

PART I

         ITEM 1.  DESCRIPTION OF BUSINESS..............................  3
         ITEM 2.  DESCRIPTION OF PROPERTY..............................  5
         ITEM 3.  LEGAL PROCEEDINGS....................................  6
         ITEM 4.  CONTROL OF REGISTRANT................................  6
         ITEM 5.  NATURE OF TRADING MARKET.............................  7
         ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS 
                  AFFECTING SECURITY HOLDERS...........................  7
         ITEM 7.  TAXATION.............................................  8
         ITEM 8.  SELECTED CONSOLIDATED FINANCIAL DATA.................  8
         ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS........  9
         ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT................. 14
         ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS............... 16
         ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT
                  OR SUBSIDIARIES...................................... 17
         ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS....... 17

PART II

         ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED........... 18

PART III

         ITEM 15. DEFAULTS UPON SENIOR SECURITIES...................... 18
         ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY
                  FOR REGISTERED SECURITIES............................ 18

PART IV

         ITEM 17. FINANCIAL STATEMENTS................................. 18
         ITEM 18. FINANCIAL STATEMENTS................................. 18
         ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.................... 18

                  SIGNATURES........................................... 21

<PAGE>
                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

This report contains  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of Securities  Exchange Act of
1934.  Actual  results  could  differ  materially  from those  projected  in the
forward-looking  statements  as a result of the risk  factors  set forth in this
report.

General

     The Company,  through its wholly-owned  subsidiaries,  Imperial World, Inc.
("Imperial") and DACO  Manufacturing  Ltd.  ("DACO"),  is engaged in the design,
assembly,  merchandising  and  wholesale  distribution  of jewelry.  The Company
provides a broad range of  fashionable  jewelry  targeted at consumers  who seek
fine jewelry at moderate  prices and costume  jewelry for every day wear.  These
customers are likely to purchase  jewelry at frequent  intervals as fashions and
styles change. The majority of the Company's U.S. sales are under the trade name
of "World Pacific Jewelry"  through  Imperial,  while DACO sells  principally in
Canada  under its own name or through  the  manufacturing  and  distribution  of
licensed  products.  Customers  of the  Company  are  principally  large  retail
establishments  with jewelry  departments and mass media marketers.  Despite the
recent downturn in its U.S. sales, the Company believes that it is competitively
positioned in the jewelry industry.

Products and Pricing

     The Company's principal products are rings, pendants, earrings,  bracelets,
necklaces,  pins and brooches made of diamonds,  other precious or semi-precious
stones,  pearls, silver and gold in addition to the more moderately priced gold,
silver and costume  jewelry.  The Company's  products are currently sold in over
7,000 retail outlets. For the majority of products,  the average wholesale price
is  approximately  $60 with the prices ranging from  approximately  $35 to $450.
DACO's  products  start  as  low  as $3  with  an  average  wholesale  price  of
approximately $11.

Purchasing

     The Company imports most of its jewelry from the People's Republic of China
("PRC"),  Hong Kong and Thailand.  Cultured pearls are imported from Japan,  the
PRC and Hong Kong and freshwater  pearls are imported from the PRC. The imported
pearls are  assembled by the Company into various pearl  jewelry  products.  The
Company purchases  jewelry from a number of suppliers based on quality,  pricing
and available quantities. Rhine Jewellery, an affiliate of the Company, supplied
approximately $4.6 million of the Company's purchases, or approximately 20%, for
the fiscal  year ended  December  31,  1996.  The  Company  believes it has good
relationships  with its  suppliers,  most of whom have  supplied the Company for
many years.

     Although  purchases of material are made from a relatively  small number of
suppliers,  the Company believes there are numerous  alternative sources for all
materials,  and that the  failure  of any  principal  supplier  would not have a
material adverse effect on operations or the Company's financial condition.  The
Company has not experienced any difficulty in securing product.

     The Company engages in limited hedging  activities with respect to possible
fluctuations in the price of precious,  semi-precious  gemstones or metals.  The


                                        3
<PAGE>
Company  believes the risk of not engaging in such activities is minimal,  since
historically the Company has been able to adjust prices as material fluctuations
have  occurred.  The  Company  believes  that a downward  trend in the prices of
stones or metals  would have  little,  if any,  impact on the  valuation  of the
Company's inventories.

Manufacturing and Assembly

     DACO  manufactures most of their costume jewelry and some of their precious
jewelry in a modern  40,000 square foot  capacity  outside of Toronto,  Ontario,
Canada. DACO makes its own castings and has a state of the art plating facility.
The Company  manufactures  fashion  jewelry with the Sarah  Coventry  name under
exclusive licenses for the Canadian and U.S. market.

     Since  Imperial  imports  most of its  jewelry in an  assembled  state from
suppliers in the PRC, Hong Kong, Thailand and Japan,  manufacturing and assembly
operations  conducted by the Company are primarily  limited to designing jewelry
and  assembly of pearl  products.  Upon  completing  a design,  the Company will
provide such design to its  suppliers,  including  Rhine  Jewellery,  which will
purchase the raw materials,  such as diamonds,  other precious stones,  gold and
silver, and manufacture the product or subcontract for its manufacture. Although
the Company receives  priority in the processing and shipping of its orders,  it
does not  receive  any  price  concessions  from  Rhine  Jewellery,  but  rather
purchases  on the same basis as other third party  purchasers.  The use of third
party  manufacturers  enables the Company to shift the risk and capital  cost of
manufacturing.

     Imperial  maintains a light  manufacturing  and  assembly  operation in the
United States for the stringing of pearls.  This enables the Company to assemble
pearls specifically to customer order and to provide shipment within two days of
the order date.

Marketing

     The  primary  marketing  efforts are product  design and  customer  support
services.   The   productpresentatives   on  a  commission  basis.   While  such
representatives  may also sell other  products,  they do not sell products which
compete  with  those  of the  Company.  The  Company  supports  the  independent
representatives  with internal  account  executives who have selling and account
management responsibilities.

     The Company has an agreement with its affiliates to market in non-competing
geographic areas.

Customers

     The  Company's   customers   consist  of  jewelry   retail   stores,   mass
merchandisers,  such as Wal- Mart Stores, Inc.,  department stores, such as J.C.
Penney Company,  Inc., catalog showrooms and various specialty markets including
The Home  Shopping  Network,  Inc.  J.C.  Penney  Company,  Inc.  accounted  for
approximately  19% of net sales in 1996. The Company has no long-term  contracts
with any  customers,  however,  each of its large  volume  purchasers  have been
customers  for  at  least  five  years.  The  following  table  sets  forth  the
approximate  percentage  of net  sales  for the major  market  segments  for the
periods indicated.


                                        4
<PAGE>
                             Year Ended December 31,
                                   1994       1995       1996
                                   -----      -----     -----

Jewelry retail stores........      17.7%      12.3%     15.9%
Specialty markets............      25.6       37.0      20.2
Mass merchandisers...........      24.2       14.4      22.6
Department stores............      26.4       25.3      35.2
Catalog showrooms............       6.1       11.0       6.1
                                  ------     ------    ------
      Total..................     100.0%     100.0%    100.0%
                                  ======     ======    ======

Competition

     The jewelry industry in the United States is highly fragmented, with little
significant brand name recognition or consumer loyalty. Selection is generally a
function  of design  appeal,  perceived  high value and  quality in  relation to
price.

     Jewelry  stores alone  account for an estimated $15 billion in annual sales
in the United States. Retail jewelry sales have historically increased at a rate
in excess of the inflation  rate.  This increase is principally  attributable to
the growth in the number of dual working  households which in turn has increased
the  amount of  disposable  income  for  women,  the  largest  group of  jewelry
purchasers.  The rise in  number of women in the  workforce  has  increased  the
demand for women's business attire, including jewelry.

     While many  competitors  may have a wider  selection of products or greater
financial  resources,  the Company believes its competitive position is enhanced
by its  information  system and its close  relationship  with its  customers and
vendors. Therefore, although the competition is intense, the Company believes it
is well positioned in the jewelry industry.

Employees

     As of June 2, 1997,  the Company had 151  employees,  including 6 executive
officers, 17 persons in sales and merchandising,  100 persons in operations, and
28 persons in  administrative  and support  functions.  None of the employees is
governed by a collective  bargaining  agreement  and the Company  considers  its
relations with its employees to be satisfactory.

ITEM 2.  DESCRIPTION OF PROPERTY

     The Company  maintains is registered  offices in the BVI;  Imperial  leases
approximately  25,000 square feet of space for  operations and pearl assembly in
Westmont,  Illinois;  and  DACO  leases  approximately  40,000  square  feet for
manufacturing and distribution near Toronto,  Ontario, Canada. Under the 10 year
lease which  commenced in November,  1993,  future minimum annual lease payments
with  respect  to  the  Company's  Westmont,   Illinois  facilities  range  from
approximately  $225,000 to $300,000. At the expiration of the lease, the Company
has the  option to renew for an  additional  five  years.  The  facility,  which


                                        5
<PAGE>
provides state of the art security, has, in the opinion of management,  capacity
to more then double the current  sales  volume.  It was designed to maximize the
efficiency of the Company's current  operations and to provide for the Company's
anticipated growth.

     The DACO  facilities are leased through July,  2002 with an option to renew
for an additional  five years.  Future  minimum  annual  rentals under the lease
range from  $113,000  to  $133,000.  Management  believes  such  facilities  are
adequate to meet the needs of DACO for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a  codefendant  in a lawsuit  brought by a  shareholder  who
alleges the Company  misrepresented  its financial position in interim financial
statements.  The  shareholder  has filed for class actions status and is seeking
damages of $11 million. The Company believes the allegation is without merit and
intends to vigorously defend the claim.

ITEM 4.  CONTROL OF REGISTRANT

     The following table is furnished as of June 2, 1997, to indicate beneficial
ownership of shares of the  Company's  Common Stock and  Preferred  Stock by (1)
each  shareholder  of the Company who is known by the Company to be a beneficial
owner of more than 10% of the Company's  Common Stock or Preferred Stock and (2)
all officers and  directors of the Company as a group.  The  information  in the
following table was provided by such persons.

                                  Amount and                             Percent
                                   Nature of                               of
Name and Addresses of             Beneficial     Title        Percent   Voting
Beneficial Owner                 Ownership (1)   of Class    of Class    Power
---------------------            -------------   --------    --------    -------

David Chui(2)                      523,700(3)    Common        20.5%      12.0%
Lillian Chui(2)                    523,700(3)    Common        20.5%      12.0%
Sherman Chui                       523,700(3)    Common        20.5%      12.0%
Rhine Investment Holdings
 Company Limited(2)                918,750(3)    Common        36.0%      21.0%
Rhine Jewellery Limited(2)       3,644,880(3)    Preferred    100.0%      41.6%
White Angel Holdings Ltd.(2)       523,700(3)    Common        20.5%      12.0%

All executive officers and
 directors as a group              590,700       Common        23.1%      13.5%
 (8 persons)                     2,077,582       Preferred     57.0%      23.7%

------------------------
(1)  The persons named in the table have sole voting and  investment  power with
     respect  to all  shares  of  Common  Stock  and  Preferred  Stock  shown as
     beneficially  owned by them,  subject to  community  property  laws,  where
     applicable, and the information contained in the footnotes to the table.
(2)  Address is 2nd Floor, One Harbourfront,  18 Tak Fung Street,  Hunghom, Hong
     Kong.

(3)  All shares of Common Stock and Preferred Stock indicated are held of record
     by Rhine Investment  Holdings Company Limited and Rhine Jewellery  Limited,
     respectively. Rhine Jewellery Limited is a wholly owned subsidiary of Rhine


                                        6
<PAGE>
     Investment  Holdings  Company Limited.  Rhine  Investment  Holdings Company
     Limited is wholly owned by Rhine Holdings Limited which is owned in part by
     a series of  trusts,  including  a trust  for the  benefit  of David  Chui,
     Lillian  Chui  and  Sherman  Chui  which  owns  approximately  57%  of  the
     outstanding securities of Rhine Holdings Limited. White Angel Holdings Ltd.
     Has the power to vote and dispose of the shares held by these trusts. David
     Chui,  Lillian  Chui and  Sherman  Chui may be deemed to hold,  but  hereby
     disclaim,  beneficial  ownership of all  securities  of the Company held by
     Rhine  Investment  Holdings  Company Limited and Rhine  Jewellery  Limited.
     However, the table above reflects any possible beneficial ownership as well
     as the holdings of White Angel  Holdings Ltd.  because the ownership of 57%
     of the stock of Rhine  Holdings gives the Chui family  absolute  control of
     the Company.

ITEM 5. NATURE OF TRADING MARKET

     There is no non-U.S.  trading  market for the Common  Stock of the Company.
Within  the  United  States,  the  Company's  Common  Stock  is  traded  in  the
over-the-counter  market.  The  Company's  Common  Stock is quoted on the NASDAQ
Small Cap under the symbol "JEWLF".

     The following table sets forth the high and low bid price per share for the
Company's  Common Stock for each  quarterly  period since the  completion of the
Company's IPO on December 16, 1994.

                          1996                    1995
                   ----------------       ----------------
                    High       Low         High       Low
                   ------    ------       ------    ------

First Quarter      $3.250    $2.250       $10.25    $6.750
Second Quarter      2.625     1.000         9.00     4.375
Third Quarter       1.625      .500         6.25     4.375
Fourth Quarter      1.875      .500        5.125     1.875


     The quotations reflect  inter-dealer  prices without mark-up,  mark-down or
commission and may not represent actual transactions.

     At June 2, 1997, the bid price at the Common Stock was $.5625.

     As of June 2, 1997, there were  approximately  1,470 beneficial  holders of
the Common Stock of the  Company,  nearly all of which are believed to be in the
United States.

ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY-HOLDERS

     The Company is not subject to any governmental laws, decrees or regulations
in the BVI which restrict the export or import of capital, including any foreign
exchange  controls,  or which affect the  remittance of  dividends,  interest or
other payments to non-resident holders of the Company's Common Stock.

     Additionally,  neither the laws of the BVI nor the Company's Charter impose
any limitations on the right of non-resident  foreign owners to hold or vote the
Common Stock of the Company.


                                        7
<PAGE>
ITEM 7.  TAXATION

     The BVI imposes no  withholding  taxes and holders of Common  Stock who are
not resident in the BVI will not be subject to BVI tax on any dividends received
from the Company or on gains  realized from a sale or other  disposition  of the
Common Stock. The United States does not have a tax treaty with the BVI.

ITEM. 8 SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>

(In thousands, except share data)
                                                             Year Ended December 31,
                                            -------------------------------------------------------
                                              1992       1993      1994         1995         1996
                                            -------    -------    -------    ---------    ---------
<S>                                         <C>        <C>        <C>        <C>          <C>
Statement of Income Data:

Net Sales...............................    $33,402    $35,616    $41,902    $  41,710    $  30,840
Cost of sales...........................     25,001     27,643     32,725       34,024       25,809
                                            -------    -------    -------    ---------    ---------
Gross profit............................      8,401      7,973      9,177        7,686        5,031
Operating expenses......................      6,378      5,120      5,831        8,798       10,221
                                            -------    -------    -------    ---------    ---------
Income (loss) from operations...........      2,023      2,853      3,346       (1,112)      (5,190)
Other income (expense) - net............       (796)      (579)      (267)        (901)      (1,053)
                                            -------    -------    -------    ---------    ---------
Income (loss) before income taxes.......      1,227      2,274      3,079       (2,013)      (6,243)
Income data (1992 - 1993 Pro Forma)(2):
  Income taxes (benefit)................        476        767        788         (629)        (307)
                                            -------    -------    -------    ---------    ---------
  Net income (loss).....................    $   751    $ 1,507    $ 2,291    $  (1,384)   $  (5,936)
                                            =======    =======    =======    =========    =========
  Net income (loss) per common share (1)    $   .87    $  1.65    $  2.34    $    (.53)   $   (2.25)
                                            =======    =======    =======    =========    =========
Cash distributions per common share (1)     $  3.95    $     -    $     -    $       -    $       -
                                            =======    =======    =======    =========    =========
Weighted average number of common
 shares outstanding (1).................    863,778    911,400    980,394    2,625,873    2,635,830
                                            =======    =======    =======    =========    =========
</TABLE>

                                         Year Ended December 31,
                         ------------------------------------------------------
                           1992       1993       1994        1995        1996
                         -------    -------    --------    --------    --------
Balance Sheet Data:

Working capital.......   $ 5,751    $ 7,341    $ 16,064    $ 16,682    $ 12,038
Total assets..........    22,144     19,652      31,695      44,137      29,768
Long-term debt........     4,345      3,645           0         556         204
Shareholders' equity..     1,631      4,205      20,035      20,288      14,287

------------------------
(1)  Per share amounts  reflect  retroactively  for the periods  indicated,  the
     March 21, 1994  reorganization  involving  an exchange of  1,225,000  newly
     issued Common Shares for the previously  issued share of $1U.S.  Common and
     the return and retirement of 306,250 of such shares on October 27, 1994.

(2)  For the years prior to the year ended  December  31,  1993,  the  Company's
     subsidiary, Imperial World, was an S corporation as defined in Sec. 1361 of
     the Internal  Revenue Code of 1986, as amended,  and  accordingly,  was not
     subject  to  federal  income  taxes.  The pro  forma  information  has been
     computed as if Imperial  World were subject to  corporate  income taxes for


                                        8
<PAGE>
     all periods  presented,  based on tax laws in effect during the  respective
     periods.  As a result of  Imperial  World  changing to a C  corporation,  a
     nonrecurring  tax benefit was  recognized on January 1, 1993.  Such benefit
     has been excluded from the 1993 Pro Forma Income Data shown above, since it
     would not have resulted had Imperial World always been subject to corporate
     income taxes.

ITEM 9. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Results of Operations

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
information  derived from the Consolidated  Statements of Income of the Company.
All dollar and share amounts are set forth in thousands, except per share data.

<TABLE>
<CAPTION>

                                           1994                           1995                          1996
                               ---------------------------    ---------------------------   ---------------------------
                                         Percent   Percent              Percent   Percent              Percent  Percent
                                Amount    Sales    Change      Amount    Sales    Change     Amount     Sales   Change
                               -------   -------   -------    -------   -------   ------    -------    -------  -------
<S>                             <C>      <C>        <C>       <C>       <C>       <C>       <C>        <C>      <C>
Net sales....................  $41,902    100.0     + 17.6    $41,710    100.0    -  0.5    $30,840    100.0    - 26.1
Gross Profit.................    9,177     21.9     + 15.1      7,686     18.4    - 16.2      5,031     16.3    - 34.5
Operating expenses...........    5,831     13.9     + 13.9      8,798     21.1    + 50.9     10,221     33.1    + 16.2
Income (loss) from
 operations..................    3,346      8.0     + 17.3     (1,112)    (2.7)   -133.2     (5,190)   (16.8)   -366.7
Income (loss) before income
 taxes.......................    3,079      7.4     + 35.4     (2,013)    (4.8)   -165.4     (6,243)   (20.2)   - 10.1
Income taxes (benefit).......      788      1.9     +  2.7       (629)    (1.5)   -179.8       (307)    (1.0)   - 51.2
Net income (loss)............    2,291      5.5     + 52.0     (1,384)    (3.3)   -160.4     (5,936)   (19.2)   -328.9
Net income (loss) per
 common share................  $ (2.34)                       $  (.53)                      $ (2.25)
Weighted average number of
 shares outstanding..........      980                          2,626                         2,636
</TABLE>

     The  Company's  operating  results  during  1995  and 1996  were  adversely
impacted  by a weak  jewelry  market,  particularly  for  semi-precious  colored
stones, which resulted in sales that were much lower than anticipated.

     At December 31, 1995,  management  determined that the Company's  inventory
was in excess of its requirements measured by its existing and anticipated level
of sales. A reserve of $1.5 million was recorded for anticipated losses required
to reduce  inventories  to desired  levels  over the near term.  This  inventory
reduction plan was substantially completed as anticipated.


                                        9
<PAGE>
     Net  sales  during  1996  continued  at a lower  level  than  expected.  An
aggressive  inventory  reduction  plan was  initiated to maintain  liquidity and
reduce  inventory  to desired  levels.  Approximately  $3 million of losses were
recorded during 1996 from the reduction of inventory under this plan,  including
$1.6 million in reserves for the completion of the plan during 1997.

     The Company  incurred  significant  operating  losses during 1995 and 1996,
principally from the reduction of inventories. The Company has reduced operating
expenses and continues to aggressively reduce inventory.  Management is actively
seeking to obtain a commitment for continuation of its bank operating facilities
for at least another year, as well as considering  raising  capital  through the
issuance of  equity-related  securities.  Management  expects that these efforts
will result in maintaining  liquidity.  However,  no assurance can be given that
the Company will be successful  in  accomplishing  these  objectives or that the
Company will again achieve profitability.  The Company's continuation as a going
concern is dependent upon attaining  future  profitable  operations and upon its
ability to obtain adequate financing or capital.

     The  Company's  sales are  generated  through  the  wholesaling  of jewelry
products to the following distinct groups:

                           1992     1993     1994     1995     1996
                          ------   ------   ------   ------   ------

Jewelry retail stores...   19.6%    17.4%    17.7%    12.3%    15.9%
Specialty markets.......   31.7     40.1     25.6     37.0     20.2
Mass merchandisers......   25.0     16.2     24.2     14.4     22.6
Department stores.......   16.7     19.1     26.4     25.3     35.2
Catalog showrooms.......    7.0      7.2      6.1     11.0      6.1
                          ------   ------   ------   ------   ------
Total...................  100.0%   100.0%   100.0%   100.0%   100.0%

     The Company raised approximately $11.5 million of net proceeds from its IPO
in December of 1994 and January,  1995. The proceeds were utilized primarily for
acquisitions  and internal  expansion.  Certain assets of Ullenberg  Corp.  were
acquired in February of 1995 for approximately $300,000. Effective July 1, 1995,
the Company completed the acquisition of DACO for approximately $500,000 in cash
and note payable of $1,435,000.  DACO  manufactures  and distributes  moderately
priced gold, silver and costume jewelry in Canada.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     Net Sales. Net sales decreased by $10.9 million,  or 26.1% to $30.8 million
in 1996, $1.8 million of the decline in net sales was  attributable to DACO. The
return of in excess of $1 million of  inventory  by a Canadian  customer  facing
bankruptcy, contributed to the low volume. The decline in domestic sales of $9.1
million  related   primarily  to  a  decrease  in  sales  to  specialty  markets
(principally military and television).


                                       10
<PAGE>
     Gross Profit. Gross profit decreased by $2.7 million to $5 million in 1996.
The 1996 level  reflects a lower  sales  volume and  includes  approximately  $3
million of losses from an aggressive inventory reduction plan.

     Loss from Operations. The loss from operations increased by $4.1 million to
a loss of $5.2 million in 1996. In addition to the decline in gross profit, 1996
includes  a full year of  DACO's  operating  expenses,  or an  increase  of $1.4
million  over the amount  included in 1995  operations.  The Company has reduced
operating expenses to more closely match the current operating level.

     Net  Loss.  The net loss for 1996 was  $5.9  million  as  compared  to $1.4
million in 1995. The increase in the 1996 net loss was principally  attributable
to the increased  operating loss described  above. In addition,  the increase of
$0.1  million in  interest  expense is the  result of  including  a full year of
DACO's interest expense in 1996. The 1996 income tax benefit  resulting from the
carryback of net operating losses was $0.3 million less than the amount realized
in 1995. Earnings attributable to Haupia were approximately $0.2 million in both
1995 and 1996. In August, 1996, the Company exercised its put option to sell its
remaining interest in Haupia to Rhine Holdings.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

     Net Sales.  Net sales  decreased by $0.2 million,  or 0.5% from 1994 record
levels to $41.7  million in 1995.  The  decline in sales to  domestic  customers
amounted to $10.9 million,  including a decrease in sales to mass  merchandisers
of $6 million,  jewelry retail stores of $2.2 million and  department  stores of
$1.9 million.  This decline was almost  entirely  offset by the$10.7  million in
sales to the  Canadian  market  during the last six months of 1995,  through the
newly acquired DACO.

     Gross  Profit.  Gross  profit  decreased  by $1.5  million  in 1995 to $7.7
million.  The decrease is principally tome (loss) from  Operations.  Income from
operations  decreased by $4.5  million to a loss of $1.1 million in 1995,  or by
133.2% from 1994.  In addition  to the decline in gross  profit,  the balance of
this decrease is almost entirely  attributable  to the $3.0 million  increase in
operating expenses of $1.8 million. Additional operating personnel were added at
a cost of $0.7 million for anticipated  volume that did not  materialize.  These
positions were  subsequently  eliminated.  Also  contributing to the increase in
operating  expenses was a $0.4 million increase in professional fees relating to
the increased  acquisition  activity and the Company's  requirements as a public
company.

     Net Loss.  The Company  reported a net loss of $1.4 million  during 1995 as
compared  to net  income  of $2.3  million  in  1994.  The  adverse  change  was
attributable to higher interest expense in 1995 of $1.1 million compared to $0.7
million in 1994 and reduced equity in the income of Haupia totaling $0.2 million
in 1995  compared to $0.4  million in 1994  combined  with a sharp  reduction in
operating  income as described  above.  The increase in interest expense of $0.4
million during 1995 resulted from higher  borrowings under the Company's line of
credit to support  higher  inventory  levels.  $0.2  million of the  increase in
interest   expense  was   attributable   to  DACO.  The  reduction  in  earnings
attributable to Haupia  resulted from lower operating  results in its PRC retail
jewelry  stores in 1995. The stores were opened just prior to the peak season in
1994. As noted elsewhere, the Company has exercised its option to put 50% of its
interest  in Haupia  to Rhine  Holdings.  Accordingly,  future  results  are not
expected to be materially affected by Haupia's operations.


                                       11
<PAGE>
Analysis of Financial Position, Liquidity and Capital Resources

     The Company's primary  liquidity needs are to fund accounts  receivable and
inventories.   The  Company  has  historically   financed  its  working  capital
requirements through a combin-term  borrowings under bank lines of credit, loans
from  affiliates  and in 1994 and 1995,  the proceeds from an IPO. The Company's
working  capital at  December  31,  1996 was $12.0  million as compared to $16.7
million at December 31, 1995.

     The  following  table  summarizes  cash provided by (used in) the Company's
business activities for the past three years:

(Dollars in thousands)            1994        1995     1996
                                --------   --------   -------

Operating activities..........  $(2,841)   $(6,713)   $6,773
Investing activities..........   (1,199)    (2,883)        -
Financing activities..........    4,247      9,357    (6,763)
Increase (decrease) in cash...      207       (239)       10

     Operating Activities. The net cash generated in 1996 was principally due to
the  decrease in accounts  receivable  of $8.1 million and  inventories  of $3.9
million, of which approximately $5.2 million funded the net loss for the year.

     Investing  Activities.  Cash used in 1996 for capital  expenditures of $0.2
million was generated from the sale of equipment at DACO.

     Financing Activities.  During 1996, the Company reduced amounts outstanding
under its lines of credit by $6.2  million to $8 million at December  31,  1996.
Notes payable from the 1995  acquisition of DACO were reduced by $0.5 million to
$0.9 million. In addition,  the Company repurchased and retired 60,850 shares of
common stock at a cost of $65 thousand.

     Imperial has an agreement with a bank,  through various credit  facilities,
whereby  Imperial  can borrow up to $10  million,  payable on demand.  The total
credit  facility is governed by a formula,  as defined in the  agreement,  based
principally on accounts  receivable and inventory levels.  The credit facilities
are  collaterized by  substantially  all assets of Imperial and bore interest at
10.25% at December 31, 1996, 2% over the bank's  reference  rate. As of the date
of this Form 20-F the  Company  was not in  compliance  with  certain  reporting
covenants of the agreement.

     Included  in the  Company's  bank  credit  facility  is a gold  consignment
financing agreement,  which is common in the jewelry industry.  Pursuant to such
agreement,  the Company may transfer  ownership of gold content in its inventory
at fair market value to the bank. Simultaneously, the bank cosigns the gold back
to the Company. The Company is charged a consignment fee at an annual percentage
rate of 6% of the market value of the cosigned gold. The term of the consignment
is indefinite,  as long as the Company has  sufficient  gold in its inventory to
cover the consignment or the total credit facility has not been terminated. Upon


                                       12
<PAGE>
either event, the Company has the option to satisfy its obthe then-quoted market
price  of  the  gold.  Market  price  fluctuations  between  the  borrowing  and
repurchase  dates are borne by the  Company  and may  result in either a gain or
loss.   Unless  required  to  repurchase  the  gold  upon   termination  of  the
consignment,  as described previously, the Company's policy is to not repurchase
the gold unless it is favorable to the company.

     At December 31, 1996, total borrowings under Imperial's  credit  facilities
were $6.7  million,  including  4,450 troy ounces of gold,  having a fair market
value of $1,643,200 which were held on consignment by the Company.

     DACO entered into a similar credit  agreement to Imperial's with a Canadian
bank. DACO can borrow up to approximately  $6.9 million in United States dollars
through similar credit facilities.  The line of credit bears interest at 5.0% at
December 31, 1996 (0.25% over the bank's prime rate) and precious  metals bear a
consignment  fee of $3.35%.  The  agreement is secured by  substantially  all of
DACO's assets and is guaranteed by the Company.  This agreement expired on April
30, 1997.

     Management is actively  seeking to obtain a commitment for  continuation of
its bank operating  facilities for at least another year, as well as considering
raising capital through the issuance of equity-related securities.

Seasonality

     The jewelry business is highly seasonal,  with the fourth calendar quarter,
which includes the Christmas  shopping  season,  historically  contributing  the
highest sales of any quarter  during the year.  Net sales in the third and forth
quarter of 1995 include the results from DACO which was acquired  effective July
1, 1995. Seasonality cannot be predicted or counted upon, and the results of any
interim  period are not  necessarily  indicative  of the  results  that might be
expected during a full fiscal year.

     The following  table sets forth the  Company's  unaudited net sales for the
periods indicated (dollar amounts are in thousands):

                                      Year Ended December 31,
                  -----------------------------------------------------------
                         1994                 1995                1996
                  -----------------   ------------------   ------------------
                   Amount   Percent    Amount    Percent    Amount    Percent
                  -------   -------   -------    -------   -------    -------
First Quarter     $10,221     24.4    $ 7,877      18.9    $ 8,415      27.3
Second Quarter      8,091     19.3      8,093      19.4      7,286      23.6
Third Quarter      10,270     24.5     12,686      30.4      4,085      13.3
Fourth Quarter     13,320     31.8     13,054      31.3     11,054      35.8
                  -------    -----    -------     -----    -------     -----
Total             $41,902    100.0    $41,710     100.0    $30,840     100.0
                  =======    =====    =======     =====    =======     =====

Inflation

     Inflation  has  historically  not had a  material  effect on the  Company's
operations. When the price of gold or precious stones has increased, these costs
historically  have been  passed on to the  customer.  Furthermore,  because  the
Company does not have either long-term  supply contracts or long-term  contracts


                                       13
<PAGE>
with  customers,  prices are  quoted  based on the  prevailing  prices for semi-
precious  gemstones  or  metals.  Accordingly,  the  Company  does  not  believe
inflation will have a material effect on its future operations.

ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT

Directors and Executive Officers

     The following  table sets forth certain  information  as of the date hereof
with respect to the directors and executive officers of the Company.

      Name            Age                       Position
-------------------   ---  -----------------------------------------------------
David F. Chui         56   Chairman of the Board of Directors
Bruce W. Anderson     45   President, Chief Executive Officer and Director
Richard J. Mick       55   Vice President - Sales and Director
Joseph K. Lau         49   Senior Vice President, Chief Operating Officer,
                            Secretary and Director
Richard W. Sigman     57   Vice President - Finance, Chief Financial Officer and
                            Director
James B. McCarthy     46   Director
James W. Pierpont     53   Director
Jack Reiff            70   Director

     Each director is serving a one-year term that expires after the next annual
meeting of the Company's shareholders, or until their successors are elected and
qualified.  Executive  officers  of the Company are elected by, and serve at the
discretion of , the Board of Directors.

     David F. Chui and Joseph K. Lau are brothers-in-law.

     David F. Chui co-founded  Imperial World in 1975 and has served as Chairman
of the  Board  of  Directors  since  inception.  Mr.  Chui  has over 30 years of
experience  in the jewelry  industry and is presently the Chairman and President
of Rhine  Holdings.  He was the  associate  chairman of the Hong Kong  Jewellery
Manufacturers  Association  for  1992/1993  and  was  awarded  with  a  National
Entrepreneur   of  the  Year  Award  in  1990  by  the   Institute  of  American
Entrepreneurs.

     Bruce W.  Anderson  joined the Company in July,  1996 as  President,  Chief
Executive Officer and Director.  Prior to joining the Company,  Mr. Anderson was
Vice  President  of  marketing  for  Donald  Bruce & Co.,  a  wholesale  jewelry
manufacturer in Chicago, Illinois.

     Richard J. Mick joined the Company in  February,  1996 as Vice  President -
Sales and Director. For 6 years prior to joining the Company he was President of
a sales and marketing firm selling jewelry and related products.  Prior thereto,
Mr. Mick was employed by J.C. Penney Company, Inc. for 26 years.

     Joseph K. Lau joined the Company in November,  1982 and was elected  Senior
Vice  President,  Chief Executive  Officer,  Secretary and Director in February,
1986.  For the 11 years  prior to  joining  the  Company,  he held a  management
position in the restaurant industry and owned a trading company in Hong Kong.


                                       14
<PAGE>
     Richard W.  Sigman  joined the Company in March,  1994 as Vice  President -
Finance, Chief Financial Officer and Director. For the 22 years prior to joining
the Company,  Mr. Sigman served as the Chief Financial  Officer and/or the Chief
Executive Officer of various privately held companies as well as a self-employed
Financial Consultant.  Prior thereto, Mr. Sigman was employed by Arthur Andersen
& Co.

     James.  B. McCarthy has served as a Director of the Company since  October,
1996. Mr. McCarthy is the President of Gemini  Consulting  Group,  Inc. a health
care consulting company.

     James W. Pierpont has served as a Director of the Company since May,  1995.
Mr. Pierpont is Managing Director and Group Vice President for ABN AMRO bank.

     Jack Reiff has served as a Director of the  Company  since May,  1995.  Mr.
Reiff served as Chief Executive Officer of William  Schneider  Incorporated from
1970 to 1991 and as Chairman until 1993 when he retired.

     For the period of three (3) years after the date of the Company's  IPO, the
Company has agreed to use its best efforts to cause one  (1)individual  selected
by Sands Brothers & Co., Ltd., the  underwriter of its IPO, to be elected to the
Board,  if requested by Sands  Brothers,  which  individual  shall be reasonably
acceptable to the Board. Such individual may be a director, officer, employee or
affiliate of Sands Brothers.

Key Managers

     Stephen  E.  Klopp  joined  the  Company  in  March,  1989  as the  Product
Development  Manager.  Prior to joining the Company, Mr. Klopp had nine years of
experience in jewelry buying and merchandising.

     Connie S. Yui joined the Company in March, 1985 as the Production  Manager.
She is responsible for inventory control and for all pearl assembly.

     Ted Woyslaw  joined the Company  effective  July,  1995.  Mr. Woyslaw was a
prior  shareholder  and officer of DACO and  continues  to serve as President of
DACO.

     David Wong joined the Company  effective  July,  1995. Mr. Wong was a prior
shareholder  and officer of DACO and  continues to serve as a Vice  President of
DACO.

Employment Contracts

     The Company has employment  contracts with two officers of Imperial and two
officers of DACO.


                                       15
<PAGE>
     Bruce W. Anderson is employed by Imperial  pursuant to a five year contract
expiring  June 30,  2001 at a base salary of $300,000  per year,  an  automobile
allowance of $1,000 per month and bonuses all as determined by the  Compensation
Committee of the Board of Directors.

     Richard W. Sigman is employed by Imperial  pursuant to a contract  expiring
December  31, 1998.  The contract  provides for at a base salary of $142,800 per
year, an automobile allowance of $600 per month and bonuses as determined by the
Compensation Committee of the Board of Directors. Mr. Sigman is also employed by
Rhine Holdings, the ultimate controlling shareholder of the Company at an annual
salary of $50,000.

     Ted Woyslaw is employed by DACO pursuant to a three year contract  expiring
August 31 1998. The contract  provides for a base salary of $250,000  (Canadian)
(approximately  US$183,825),  a commission of one and one-half percent (1.5%) of
sales of DACO in excess of $22,000,000  (Canadian),  an automobile  allowance of
$900 (U.S.) per month and bonuses as determined by the Board of Directors.

     David Wong is employed by DACO pursuant to a three year  contract  expiring
August 31, 1998. The contract provides for a base salary of $130,000  (Canadian)
(approximately  US$95,600), an automobile allowance of $900 (U.S.) per month and
bonuses as determined by the Board of Directors.

ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS

     The aggregate  cash  compensation  paid by the Company to all directors and
officers as a group during 1996 was approximately $852,000.

     Certain  officers  of the  Company  will be  entitled  to bonuses  from the
Company based on  performance  criteria to be  established  by the  Compensation
Committee of the Board of Directors of the Company.  Additionally,  in December,
1993, the Company  adopted a Stock Option Plan (the "Option Plan") to assist the
Company and its  subsidiaries  in  retaining  the service of current  employees,
motivating selected key management  personnel,  and attracting new management by
providing the opportunity  for such personnel to acquire a proprietary  interest
in the Company and thereby share in its growth and success. Participation in the
Option Plan and the  granting  of options  under the Option Plan are made by the
Compensation Committee of the Board of Directors, subject to ratification by the
Board.  Pursuant to the Option Plan,  a total of 150,000  shares of Common Stock
are reserved for issuance.  The Option Plan requires that the exercise  price of
the option be the fair market  value of the  Company's  stock on the date of the
grant of the option but not less than $8.50 per share. The fair market value for
purposes  of the  Option  Plan is for so long as  Common  Stock is quoted on the
NASDAQ  Small Cap,  the final  closing  sales price per share on the date of the
grant. The exercise price with respect to any option must be paid in cash. As of
the date  hereof,  options to purchase  80,000  shares of Common  Stock had been
granted under the Option Plan.

     The Company,  during 1995, also adopted a  Non-Qualified  Stock Option Plan
(the "Non- Qualified Plan"). A total of 600,000 shares are reserved for issuance
under the Non-Qualified  Plan. The Non-Qualified  Stock Option Plan provides for
the granting of options and stock appreciation rights to non-employee directors,


                                       16
<PAGE>
key management employees and consultants and is administered by the Compensation
Committee.  The terms of any options  and/or stock  appreciation  rights granted
under the Non-Qualified  Plan shall be determined by the Compensation  Committee
provided  that options may not be  exercisable  for a term longer than ten years
and may not be  exercisable  at a price less than the stated value of the Common
Stock.  No  options or stock  appreciation  rights  had been  granted  under the
Non-Qualified Stock Option Plan as of December 31, 1996.

     In addition,  the Company  maintains a defined  contribution plan which has
both a profit sharing feature and a 401(k) savings  feature (the "Plan").  Under
the profit sharing portion of the Plan,  contributions  are an amount determined
by the Company's Board of Directors.  Subject to certain limitations required by
law, the Company's contribution is allocated to each participant who is employed
by the  Company  at the end of the Plan  year in the  proportion  that the total
compensation  paid by the  Company to each  participant  bears to the  aggregate
compensation  paid by the  Company to all  participants  during  such Plan year.
Under the 401(k)  savings  feature,  eligible  employees  may elect,  subject to
certain  limitations  required  by law,  to defer  payment of up to 15% of their
compensation.  The Plan provides that if an employee defers payment, the Company
will contribute 50% of the first 2% of compensation  deferred,  by making a cash
payment to the Plan on behalf of such participant.  Contributions by the Company
to the profit sharing feature of the plan, and earnings  thereon,  vest based on
the participant's years of service with the Company,  vesting 20% per year after
one year of service and being fully vested after six years of service.  Employee
contributions are always 100% vested. Contributions by the Company to the 401(k)
savings feature vest on the employees first day of employment. All contributions
vest,  regardless of years of service,  upon termination of employment by reason
of death of  disability,  attainment of age 62 or the  termination  of the Plan.
After  termination  of  employment,  an  employee  is  entitled  to receive  the
distribution  of his or her entire vested interest in the Plan in a lump sum, in
installments  for a specific period of time, or an annuity for life. The amounts
held  under  the  Plan  are  invested  according  to  the  instructions  of  the
participant in investment funds designated by the plan administrator. The during
1996 and 1995 of $10,000 and $16,000, respectively.

ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

     Pursuant  to  the  Company's   Option  Plan,  the  Company   presently  has
outstanding  incentive  stock options to purchase 80,000 shares of the Company's
Common Stock,  of which options to purchase 60,000 shares are held by an officer
of the  Company,  are  exercisable  at $8.50 per share and  expire in January of
2000.

ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

     The Company  purchases  products from an affiliate,  Rhine  Jewellery ($4.6
million  in 1996 and $7.5  million  in 1995).  The  Company  believes  that such
transactions  are on  terms  at  least  as  favorable  as  those  obtained  from
unaffiliated third parties.  Additionally,  Rhine Jewellery, a corporation under
common control,  holds 3,644,880 shares of Preferred Stock of the Company.  This
Preferred  Stock was received in exchange for a  promissory  note of  $3,644,880
which was  payable to Rhine  Jewellery.  Such  Preferred  Stock is  entitled  to
one-half vote per share.


                                       17
<PAGE>
     All transactions  between the Company, its officers,  directors,  principal
shareholder or affiliates, whether presently existing are, or in the future will
be, in the belief of management,  on terms no less favorable to the Company than
may be obtained from unaffiliated third parties.

     The Company and certain of its Hong Kong  affiliates  engage in overlapping
businesses.  The Company and the other members of the Rhine Holdings  affiliated
group have  entered  into an  agreement  to market in  non-competing  geographic
areas.

     There  is a family  relationship  existing  among  the  management  and key
personnel of the Company.  David F. Chui is the brother in law of Joseph K. Lau.
Although these persons owe a fiduciary duty to the Company and its shareholders,
there can be no assurance that family  relationships and considerations will not
at  times  take  precedence  over the  Company's  interests.  Any such  actions,
however, would likely constitute a breach of fiduciary duty.

                                     PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED

     Not applicable.

                                    PART III

ITEM 15. DEFAULTS UPON SENIOR SECURITIES

     None reportable.

ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

     None reportable.

                                     PART IV

ITEM 17. FINANCIAL STATEMENTS

     Not applicable.

ITEM 18. FINANCIAL STATEMENTS

     Reference is made to the index to Consolidated  Financial Statements of the
Company,  and notes thereto,  appearing  under Item 19 below,  together with the
report of Ernst & Young, LLP thereon.


                                       18
<PAGE>
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS

(a)  Financial Statements Page
                                                                       Page
                                                                       ----
     Report of Independent Auditors...................................  F-1
     Consolidated Balance Sheets as of December 31, 1996 and 1995.....  F-2
     Consolidated Statements of Operations of Each of the Years
      in the Three-Year Period Ended December 31, 1996................  F-3
     Consolidated Statements of Shareholders' Equity for Each of the
      Years in the Three-Year Period Ended December 31, 1996..........  F-4
     Consolidated Statements of Cash Flows for Each of the Years in
      the Three-Year Period Ended December 31, 1996...................  F-5
     Notes to Consolidated Financial Statements.......................  F-7

     Financial Statement Schedules (1)

     I - Condensed Financial Information of Registrant................  F-25
     II - Valuation and Qualifying Accounts...........................  F-28

------------------------
(1)  All other  schedules  are omitted  since the  required  information  is not
     present or is not present in amounts  sufficient  to require  submission of
     the schedule.

(b)  Exhibits

Exhibit
Number                     Description
-------                    -----------

2.1  Bill of Sale dated February 4, 1995 re:  acquisition of assets of Ullenberg
     Corporation (1)
2.2  Stock Purchase Agreement relating to DACO Manufacturing Ltd. (3)
3.1  Amended and Restated  Memorandum of Association and Articles of Association
     of IWI Holding Limited (2)
4.1  Specimen Form of Common Stock certificate (2)
10.1 Lease Agreement between Imperial World, Inc. and American National Bank and
     Trust  Company of Chicago  dated October 15, 1993 for the site in Westmont,
     Illinois (2)
10.2 Stock Option Plan (2)
10.3 Amended and Restated Credit Agreement dated June, 1996 between Rhode Island
     Hospital Trust National Bank and Imperial World, Inc. (2)
10.4 Indemnity Agreement (2)
10.5 Profit Sharing Plan (2)
10.6 Territorial Agreement (2)
10.7 Employment Contract with Richard Sigman (4)
10.8 IWI Holding Limited 1995 Non-Qualified Stock Option Plan (4)


                                       19

<PAGE>

Exhibit
Number                     Description
-------                    -----------

10.9 Lease Agreement relating to facilities of DACO Manufacturing (4)

10.10 Employment Contract with Bruce Anderson

------------------------
(1)  Incorporated by reference to the Company's Report on Form 6-K for the month
     of February, 1995.
(2)  Incorporated by reference to the Company's  Registration  Statement on Form
     F-1 (File No. 33-78904) declared effective December 13, 1994).
(3)  Incorporated by reference to the Company's Report on Form 6-K for the month
     of August, 1995.
(4)  IncorporaDecember  31, ce to the  Company's  Form  20-F for the  year-ended
     1995.


                                       20
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the  registrant  certifies  that it meets all of the  requirements  for
filing on Form 20-F and has duly caused  this annual  report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        IWI HOLDING LIMITED



                                        By:
                                           -------------------------------------
                                           David Chui
                                           Chairman


Dated: June   , 1997
           ---


                                       21
<PAGE>
                        Consolidated Financial Statements

                               IWI Holding Limited

                  Years ended December 31, 1996, 1995, and 1994
                       with Report of Independent Auditors



<PAGE>
                              IWI Holding Limited
                       Consolidated Financial Statements
                 Years ended December 31, 1996, 1995, and 1994

                                    Contents


Report of Independent Auditors............................................1

Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 1996 and 1995..............2

Consolidated  Statements of Operations for Each of the Years
in the  Three-Year Period Ended December 31, 1996.........................3

Consolidated  Statements of Shareholders' Equity for Each of
the Years in the Three-Year Period Ended December 31, 1996................4

Consolidated Statements of Cash Flows for Each of the Years
in the  Three-Year Period Ended December 31, 1996.........................5

Notes to Consolidated Financial Statements................................7

<PAGE>
                         Report of Independent Auditors

The Board of Directors
IWI Holding Limited

We have  audited the  accompanying  consolidated  balance  sheets of IWI Holding
Limited  as of  December  31,  1996  and  1995,  and  the  related  consolidated
statements of operations,  shareholders'  equity, and cash flows for each of the
years in the three-year period ended December 31, 1996. Our audits also included
the  financial  statement  schedules  listed in the index at item  19(a).  These
financial  statements  and  schedules  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  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of IWI Holding
Limited at  December  31,  1996 and 1995,  and the  consolidated  results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles. Also, in our opinion, the related financial statement schedules when
considered  in  relation  to the  basic  financial  statements  taken as a whole
present fairly in all material respects the information set forth therein.

The accompanying  financial  statements have been prepared  assuming IWI Holding
Limited will continue as a going concern. As more fully described in Note 2, the
Company has incurred  operating losses in 1995 and 1996 and has no commitment to
ongoing financing.  These conditions raise substantial doubt about the Company's
ability to continue as a going concern.  The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets and the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.



                                        ERNST & YOUNG, LLP


Chicago, Illinois
May 8, 1997

                                       F-1
<PAGE>
                               IWI Holding Limited

                           Consolidated Balance Sheets
                        (In Thousands, Except Share Data)

                                                           December 31
                                                       -------------------
                                                         1996       1995
                                                       -------     -------
              Assets

Current assets:
  Cash                                                 $   206     $   196
  Accounts receivable, less allowance for doubtful
   accounts of $694 in 1996 and $454 in 1995            10,236      19,043
  Accounts receivable from affiliated company            1,905       1,402
  Inventories                                           14,122      18,060
  Refundable income taxes                                  432         473
  Deferred income taxes                                      -         404
  Prepaid expenses                                         414         397
                                                       -------     -------
Total current assets                                    27,315      39,975

Equity in joint venture                                      -       1,230

Property and equipment                                   3,858       3,858
Less:  Accumulated depreciation                          1,405         926
                                                       -------     -------
Property and equipment-Net                               2,453       2,932
                                                       -------     -------
                                                       $29,768     $44,137
                                                       =======     =======
Liabilities and shareholders' equity
Current liabilities:
  Lines of credit                                      $ 8,049     $14,205
  Notes payable                                            689         879
  Straight acceptances payable                               -         216
  Accounts payable, trade                                3,441       4,021
  Accounts payable to affiliated company                 1,381       1,789
  Accrued liabilities                                    1,717       1,960
  Income taxes payable                                       -         223
                                                       -------     -------
Total current liabilities                               15,277      23,293

Notes payable                                              204         556

Commitments and contingency

Shareholders' equity:
  Preferred stock, $1 par value; 5,000,000 shares
   authorized; 3,644,880 shares issued and
   outstanding                                           3,645       3,645
  Common stock, no par value;  10,000,000  shares
   authorized;  2,582,900 shares issued and 
   outstanding (2,643,750 shares in 1995)                    -           -
  Additional paid-in capital                            12,475      12,540
  Retained earnings (deficit)                           (1,833)      4,103
                                                       -------     -------
Total shareholders' equity                              14,287      20,288
                                                       -------     -------
                                                       $29,768     $44,137
                                                       =======     =======


                See notes to consolidated financial statements.


                                       F-2
<PAGE>
                               IWI Holding Limited

                      Consolidated Statements of Operations
                        (In Thousands, Except Share Data)


                                                   Year ended December 31
                                             ----------------------------------
                                                1996        1995         1994
                                             ----------   ---------    --------
Net sales                                    $   30,840   $  41,710    $ 41,902
Cost of sales                                    25,809      34,024      32,725
                                             ----------   ---------    --------
Gross profit                                      5,031       7,686       9,177
Selling, general, and administrative
 expenses                                        10,221       8,798       5,831
                                             ----------   ---------    --------
Income (loss) from operations                    (5,190)     (1,112)      3,346

Other income (expense):
  Interest expense                               (1,225)     (1,089)       (711)
  Equity in joint venture                           172         188         444
                                             ----------   ---------    --------
Other expense-net                                (1,053)       (901)       (267)
                                             ----------   ---------    --------
Income (loss) before income taxes                (6,243)     (2,013)      3,079
Income taxes (benefit)                             (307)       (629)        788
                                             ----------   ---------    --------
Net income (loss)                            $   (5,936)  $  (1,384)   $  2,291
                                             ==========   =========    ========

Net income (loss) per common share           $    (2.25)  $    (.53)   $   2.34
                                             ==========   =========    ========

Weighted-average number of common
 shares outstanding                           2,635,830   2,625,873     980,394
                                             ==========   =========    ========


                See notes to consolidated financial statements.


                                       F-3
<PAGE>
                               IWI Holding Limited

                 Consolidated Statements of Shareholders' Equity
                        (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                        Preferred Stock          Common Stock
                                      -------------------    ------------------- Additional Retained
                                      Number of              Number of            Paid-in   Earnings
                                       Shares      Amount     Shares      Amount  Capital   (Deficit)    Total
                                      ---------    ------    ---------    ------  -------   --------    -------
<S>                                   <C>          <C>       <C>          <C>     <C>        <C>        <C>
Balance at December 31, 1993                  -    $    -      918,750    $ -     $ 1,009    $ 3,196    $ 4,205
Conversion of note payable to
 affiliated company to preferred
 stock                                3,644,880     3,645            -      -           -          -      3,645
Issuance of common stock, net
 of issuance costs                            -         -    1,500,000      -       9,894          -      9,894
Net income                                    -         -            -      -           -      2,291      2,291
                                      ---------    ------    ---------    ---     -------    -------    -------
Balance at December 31, 1994          3,644,880     3,645    2,418,750      -      10,903      5,487     20,035
Issuance of common stock, net 
 of issuance costs                            -         -      225,000      -       1,637          -      1,637
Net loss                                      -         -            -      -           -     (1,384)    (1,384)
                                      ---------    ------    ---------    ---     -------    -------    -------
Balance at December 31, 1995          3,644,880     3,645    2,643,750      -      12,540      4,103     20,288
Repurchase of common stock                    -         -      (60,850)     -         (65)         -        (65)
Net loss                                      -         -            -      -           -     (5,936)    (5,936)
                                      ---------    ------    ---------    ---     -------    -------    -------
Balance at December 31, 1996          3,644,880    $3,645    2,582,900    $ -     $12,475    $(1,833)   $14,287
                                      =========    ======    =========    ===     =======    =======    =======
</TABLE>


                See notes to consolidated financial statements.


                                       F-4
<PAGE>
                              IWI Holding Limited

                     Consolidated Statements of Cash Flows
                                 (In Thousands)

                                                Year ended December 31,
                                             ----------------------------
                                               1996       1995      1994
                                             -------    -------    ------
Operating activities
Net income (loss)                            $(5,936)   $(1,384)   $ 2,291
Adjustments to reconcile net
 income (loss) to net cash used
 in operating activities:
  Depreciation                                   479        367        181
  Equity in joint venture                       (172)      (188)      (444)
  Provision for doubtful accounts                736        313        184
  Deferred income taxes                          404        (63)       (52)
  Changes in operating assets and 
   liabilities:
    Accounts receivable                        8,071     (1,049)    (7,229)
    Accounts receivable from affiliated
     company                                     899        842        339
    Inventories                                3,938     (5,001)    (1,529)
    Refundable income taxes                       41       (473)         -
    Prepaid expenses                             (17)        56        (87)
    Straight acceptances payable                (216)      (149)      (126)
    Accounts payable, trade                     (580)       368      1,766
    Accounts payable to affiliated company      (408)       (77)     1,838
    Accrued liabilities                         (243)       247        (64)
    Income taxes payable                        (223)      (522)        91
                                              ------    -------    -------
Net cash used in operating activities          6,773     (6,713)    (2,841)

Investing activities
Purchases of property and equipment             (212)      (380)    (1,199)
Proceeds from sale of equipment                  212          -          -
Business acquisitions, net of cash acquired        -     (2,503)         -
                                              ------    -------    -------
Net cash used in investing activities              -     (2,883)    (1,199)

                                       F-5
<PAGE>
                               IWI Holding Limited

                Consolidated Statements of Cash Flows (continued)
                                 (In Thousands)


                                                  Year ended December 31
                                               -----------------------------
                                                 1996      1995       1994
                                               -------    -------    -------
Financing activities
Proceeds from bank for consigned gold          $     -    $   173    $     -
Net proceeds from issuance of common stock           -      1,637      9,894
Proceeds from (payments on) lines of
 credit, net                                    (6,156)     7,547     (3,647)
Payments on notes payable to shareholders
 and payable to affiliate                         (542)         -     (2,000)
Repurchase of common stock                         (65)         -          -
                                               -------    -------    -------
Net cash provided by (used in)
 financing activities                           (6,763)     9,357      4,247
                                               -------    -------    -------
Net increase (decrease) in cash                     10       (239)       207
Cash at beginning of year                          196        435        228
                                               -------    -------    -------
Cash at end of year                            $   206    $   196    $   435
                                               =======    =======    =======


                See notes to consolidated financial statements.


                                       F-6
<PAGE>
                               IWI Holding Limited

                   Notes to Consolidated Financial Statements

                  Years ended December 31, 1996, 1995, and 1994


1.   Description of Business and Acquisitions

IWI Holding Limited  (Holding) was incorporated in the British Virgin Islands on
February 22, 1993.  Prior to December 16, 1994,  the common stock of Holding was
wholly owned by Rhine  Investment  Holdings  Company Limited (RIHC),  which is a
wholly owned subsidiary of Rhine Holdings Limited (RHL), a public company on the
Stock  Exchange of Hong Kong  Limited.  Pursuant  to a  corporate  restructuring
effective  April  28,  1993,  Imperial  World,  Inc.  (Imperial),   an  Illinois
corporation,  became a wholly owned  subsidiary of Holding when its shareholders
transferred  their shares of common stock in Imperial to Holding,  ultimately in
exchange for shares of RHL.  Holding was inactive prior to this date.  Effective
December 16, 1994,  Holding  completed an initial public  offering of its common
stock (Note 6).

Holding  and its wholly  owned  subsidiaries  (together,  the  Company)  import,
manufacture,  and wholesale  fine jewelry.  The Company also imports  pearls for
assembly and resale.  Substantially  all of the Company's  sales are made in the
United States and Canada.

In February  1995,  the Company  purchased the corporate  name, all trade names,
customer lists,  other  intangibles,  and all active dies and molds of Ullenberg
Corp., a distributor of jewelry in the United States for $304,000.

Effective June 30, 1995, the Company  acquired all the outstanding  common stock
of Daco  Manufacturing,  Ltd.,  J.B.  Manufacturing,  and J and B  Manufacturing
Company  (collectively  Daco, a Canadian jewelry  manufacturer and distributor).
The total purchase price consisted of cash of  approximately  $500,000 and notes
payable of $1,435,000 (Note 9).

Each  acquisition  was accounted for as a purchase,  and the purchase  price was
allocated to assets  acquired and  liabilities  assumed based on their estimated
fair  market  value at the date of  acquisition.  Operating  results  have  been
included since the effective date of the acquisition. 


                                       F-7
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


1.   Description of Business and Acquisitions (continued)

Based on  unaudited  data,  the  following  table  presents  selected  financial
information for the Company and its subsidiaries on a pro forma basis,  assuming
the acquired  companies had been consolidated  since January 1, 1994 (dollars in
thousands, except per share amounts):

                                          Year ended December 31,
                                          -----------------------
                                            1995           1994
                                          --------        -------
     Net sales                            $46,040         $55,966
     Net income (loss)                     (1,423)          2,614
     Net income (loss) per share             (.54)           2.67

The pro forma results are not necessarily indicative of future operations or the
actual  results that would have  occurred had the  acquisitions  been made as of
January 1, 1994.

2.   Going Concern

The accompanying  consolidated  financial  statements are prepared in accordance
with generally  accepted  accounting  principles on a going-concern  basis which
contemplates  that the company will be able to realize its assets and  discharge
its liabilities in the normal course of business for the foreseeable future.

The Company has incurred significant  operating losses during 1995 and 1996 and,
in the  opinion of  management,  has  inventory  in excess of desired  levels at
December 31, 1996. The Company's  principal  lenders have not as of May 8, 1997,
committed to ongoing financing for 1997.

The  Company  has  reduced  monthly  operating  expenses  and has  initiated  an
aggressive  inventory  reduction plan to maintain liquidity and reduce inventory
to  desired  levels  (Note  3).  Management  is  actively  seeking  to  obtain a
commitment  for  continuation  of its  bank  operating  facilities  for at least
another year, as well as  considering  raising  capital  through the issuance of
equity-related securities.  Management expects that these efforts will result in
maintaining the liquidity  necessary for the  foreseeable  future.  However,  no
assurances  can be given that the Company will be  successful  in  accomplishing
these  objectives.  Further,  there can be no  assurance  that the Company  will
achieve  profitability.  The  Company's  continuation  as  a  going  concern  is
dependent upon attaining  future  profitable  operations and upon its ability to
obtain adequate  financing or capital.  The financial  statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets and the amounts and classifications of liabilities that
may result  from the  outcome of this  uncertainty.  


                                       F-8
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


3.   Summary of Significant Accounting Policies

Consolidation

All significant intercompany transactions have been eliminated.

Inventories

Inventories,  primarily consisting of finished goods, are stated at the lower of
first in, first out (FIFO) cost or market.

At December 31, 1995,  management determined that the Company's inventory was in
excess of its  requirements  measured by its existing and  anticipated  level of
sales.  Accordingly,  based on the  existing  market  conditions,  an  inventory
valuation  reserve of  $1,500,000  was recorded at December  31,  1995,  for the
anticipated  losses required to reduce inventory to desired levels over the near
term. This inventory reduction plan was substantially completed as anticipated.

Net sales  during  1996  continued  at a level much lower than  anticipated.  An
aggressive  inventory  reduction  plan was  initiated to maintain  liquidity and
reduce the  inventory  to desired  levels.  An  inventory  valuation  reserve of
$1,600,000  was recorded at December 31, 1996, for the  anticipated  losses from
the  completion  of the plan during  1997,  which  management  believes  will be
sufficient  to  provide  for  such  losses.  However,  it is  possible  that the
inventory  reduction  plan will not be  successful  or that  losses in excess of
those recorded in the financial  statements will be incurred.  Approximately  $3
million of losses were  recorded  during 1996 from the  reduction  of  inventory
under this plan.

Property and Equipment

Property and equipment are stated at historical  cost.  Depreciation is computed
over the estimated  useful lives of the related  assets using the  straight-line
method.

Joint Venture

The Company used the equity method of accounting for the investment in the joint
venture (Note 4).

Income Taxes

Deferred  tax assets and  liabilities  are  determined  based on the  difference
between the financial  reporting and tax bases of assets and  liabilities  using
the  enacted  tax rates in  effect  for the year in which  the  differences  are
expected to reverse.


                                       F-9
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


3.   Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The  Company's  financial  instruments  include  accounts  receivable,  accounts
payable,  accrued  liabilities,  and  notes  payable.  The  fair  values  of all
financial instruments were not materially different than their carrying values.

Accounting Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  requires  Company  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying   notes.   Actual  results  could  differ  from  those   estimates.

Stock-Based  Compensation  

The Company has granted  stock options for a fixed number of shares to employees
with an  exercise  price  equal to the fair  value of the  shares at the date of
grant.  The Company  accounts for stock  option  grants in  accordance  with APB
Opinion No. 25,  Accounting  for Stock  Issued to  Employees  and,  accordingly,
recognizes no compensation expense for the stock option grants.

Advertising  Costs  

The Company expenses all advertising  costs as incurred.  Advertising costs were
approximately  $814,000;  $809,000;  and  $527,000  in  1996,  1995,  and  1994,
respectively.

Foreign Currency Translation

The functional currency of the Company is the U.S. dollar.  Transactions arising
in foreign  currencies  have been  translated at rates in effect at the dates of
the  transactions.  Gain or losses  during  the year have been  included  in net
income (loss).  Assets and  liabilities of Daco have been  translated at current
exchange rates,  and revenue and expense  accounts are translated at the average
rates during the period. Related translation  adjustments have not been material
to the financial statements.

Net Income (Loss) Per Common Share

Net income  (loss) per common  share is computed  by dividing  net income by the
weighted-average  number of common  shares  outstanding  during  the  period and
reflects the exchange of common stock (Note 6). When dilutive, stock options and
warrants are included as share  equivalents  using the  treasury  stock  method.
Primary and fully  diluted net income  (loss) per common  share are the same for
all years presented.


                                      F-10
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


3.   Summary of Significant Accounting Policies (continued)

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings per Share,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements  for calculating  earnings per share,  the dilutive effect of stock
options will be excluded.  However, Statement 128 has no impact on the Company's
1996 or 1995 calculation  because common  equivalent  shares are not included in
the net loss per share  calculation since the effect of their inclusion would be
antidilutive.

Reclassifications

Certain  amounts  reported in 1995 have been  reclassified  to conform  with the
presentation  used in 1996. 

4. Equity in Joint Venture

On October 27, 1994, the Company  acquired a 50% interest in Haupia  Corporation
(Haupia), effective September 1, 1994, for $2 million. Previously,  Haupia was a
wholly owned  subsidiary of RHL.  Haupia had entered into  management  contracts
with  companies  in the People's  Republic of China for the  operation of retail
jewelry stores. Under the terms of the joint venture agreement,  the Company had
the option, under certain conditions,  to sell its interest in Haupia to RHL for
an amount at least equal to its total  capital  contributions  plus a guaranteed
return.  

On  December  29,  1995,  the  Company  exercised  its put option for 50% of its
investment.  In  accordance  with the  joint  venture  agreement,  RHL  issued a
promissory note for $1,402,000  representing  one-half of the Company's  initial
interest in Haupia plus the allocable  share of earnings of Haupia subject to an
18% minimum  annual  return  through  December 31, 1995.  The note which accrued
interest at prime was paid in four quarterly  installments ranging from $200,000
to $502,000 commencing April 1, 1996.

On August 15,  1996,  the  Company  exercised  its option to sell its  remaining
interest  to RHL for  $1,402,000  payable  in  four  quarterly  installments  of
approximately $350,000 plus interest, commencing February 1, 1997.


                                      F-11
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


4.   Equity in Joint Venture  (continued)  

     The following table  summarizes the condensed  financial data of Haupia (in
     thousands):


                                                  Period from
                                                  September 1,
                                  Year ended         1994 to
                                 December 31,     December 31,
                                     1995             1994
                                 ------------     ------------
Management fee income              $   419          $   991
Net income                              32              888



                                 December 31,     December 31,
                                     1995             1994
                                 ------------     ------------
Current assets                     $4,997           $7,036
Current liabilities                   530            2,538
Shareholders' equity                4,540            4,508


5.  Credit Arrangements

Imperial has an agreement with a bank through various credit facilities, whereby
Imperial can borrow up to $10 million,  payable on demand.  The agreement can be
terminated without cause by the Company or the bank with 90 days written notice.
The total credit facility is governed by a formula, as defined in the agreement,
based  principally on accounts  receivable and inventory  levels.  The agreement
provides,  among other things,  that the credit facilities are collateralized by
substantially all assets of Imperial.  The agreement  contains certain reporting
and financial covenants which the Company is required to maintain. Under current
covenants,  Imperial may not declare or pay dividends, or make loans or advances
to Holding.  As of May 8, 1997,  the Company is not in  compliance  with certain
reporting  covenants  of  this  agreement.   At  December  31,  1996  and  1995,
respectively,  the amount of restricted net assets of Imperial was approximately
$10.3 and $16.2 million.

The following summarizes the terms of these facilities:

Line of Credit

Under  the  demand  facility,  interest  is  calculated  at 2% over  the  bank's
reference rate. The line of credit bore interest at 10.25% at December 31, 1996,
and 9.25% at  December  31, 1995 (0.75%  over the bank's  reference  rate),  and
borrowings  at December  31,  1996,  were  $5,011,000.  


                                       F-12
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


5.  Credit  Arrangements (continued) 

Straight Acceptances Payable 

The  Company  purchases  certain  goods  for sale by the  issuance  of  straight
acceptances from the bank to foreign vendors.  These instruments have maturities
of no longer than 180 days.

Letters of Credit

In addition to straight  acceptances,  Imperial  also  utilizes  bank letters of
credit when importing goods for sale.  Outstanding balances on letters of credit
at December 31, 1996 and 1995, were not material.

Consigned Gold

Gold consignment  financing  agreements are common in the jewelry industry.  The
Company has such an  agreement  with the bank,  whereby  Imperial  may  transfer
ownership  of gold  content in its  inventory  at fair market value to the bank.
Simultaneously, the bank consigns the gold back to Imperial. Imperial is charged
a consignment fee at an annual percentage rate of 6.0% and 4.75% at December 31,
1996 and 1995, respectively, of the market value of the consigned gold. The term
of any consignment is indefinite, as long as Imperial has sufficient gold in its
inventory to cover the  consignment  or the total  credit  facility has not been
terminated. Upon either event, Imperial has the option to satisfy its obligation
by transferring gold to the bank or paying cash based on the then-quoted  market
price of the gold.  Imperial's policy is to exclude the gold held on consignment
from inventory.

Market price fluctuations between the borrowing and repurchase dates of the gold
consignment  financing agreements are borne by Imperial and may result in either
a gain or a loss. Unless required to repurchase the gold upon termination of the
consignment, as described previously, Imperial's policy is to not repurchase the
gold unless it is favorable to Imperial.

At December 31, 1996,  4,450 troy ounces of gold,  having a fair market value of
$1,643,200,  were held on consignment by Imperial.  Had Imperial repurchased the
gold at December 31, 1996, Imperial would have recorded a gain of $44,200.


                                      F-13
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)

5.  Credit  Arrangements  (continued)  

Daco  Credit  Arrangements  

Daco has a credit  agreement  with a Canadian bank whereby Daco can borrow up to
Canadian  $5  million  (approximately  U.S.  $3.7  million)  under an  operating
facility,  which is payable upon demand,  at the bank's prime rate plus .25% (5%
at December  31,  1996).  Borrowings  under this  facility are limited to 80% of
acceptable  accounts  receivable  plus  35%  of  certain  inventories.  Canadian
$4,132,000  was payable under this facility at December 31, 1996  (approximately
U.S. $3,038,000).

Also under this credit agreement, Daco can borrow up to U.S. $3 million for gold
loans  (7,000  ounces at December 31,  1996) and U.S.  $200  thousand for silver
loans (30,000  ounces at December 31, 1996).  These precious metal loans are due
on demand at a fixed interest rate of 3.35% per annum.  Approximately $1,970,000
was payable under this facility at December 31, 1996,  representing 5,031 ounces
of gold and  20,575  ounces of silver.  The loans are  valued  based on gold and
silver market prices at December 31, 1996.  Daco's policy is to exclude the gold
held on consignment from inventory.

The credit agreement is collateralized by substantially all of Daco's assets and
guaranteed by Holding and Imperial. The agreement expires on April 30, 1997.

The  agreement  contains  certain  restrictive  covenants  with  respect  to the
maintenance  of certain  financial  ratios and use of funds.  As of December 31,
1996,  Daco was in violation of a covenant  relating to interest  coverage.  The
bank waived this violation at December 31, 1996; however,  there is no assurance
that a waiver will be provided with respect to future violations.

6.  Shareholders'  Equity

The 3,644,880  issued  preferred  shares are redeemable at the Company's  option
after March 21, 1997,  at an amount not to exceed 50% of net income in excess of
$15 million for the preceding year. If not redeemed,  the preferred  shares will
begin to accrue a 4%  noncumulative  dividend.  The preferred shares have voting
rights  equivalent  to one-half vote per share,  and a $1 per share  liquidation
preference.  On March 21, 1994, the Directors further authorized the exchange of
1,225,000 shares of the new no-par-value  common stock for the initial one share
of $1 par value common stock which was held by RIHC.  On October 27, 1994,  RIHC
returned and the Company  retired 306,250 shares of common stock of the Company.
All common share and per-share amounts in the consolidated  financial statements
and notes to the consolidated financial statements have been restated to reflect
these stock transactions and increase in authorized shares.


                                      F-14
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


6.   Shareholders' Equity (continued)

On December 16, 1994, the Company issued 1,500,000 shares of its common stock at
$8.50 per share in an initial public offering (IPO). The proceeds received,  net
of commissions and other related expenses, were approximately $9.9 million.

Additionally, the Company granted an option to purchase 225,000 shares of common
stock  at an  exercise  price  of $8.50 to the  underwriters.  This  option  was
exercised  on January 30,  1995,  with the  Company  receiving  net  proceeds of
approximately $1.6 million. In conjunction with the IPO, warrants to purchase an
aggregate of 150,000 shares of common stock at an exercise price of $14.025 were
issued to the  representative  of the  underwriters of the IPO. The warrants are
exercisable for a period of four years beginning December 16, 1995.

In February 1996, the Company's Board of Directors  authorized the repurchase of
up to 350,000 shares of its common stock. As of December 31, 1996, 60,850 common
shares had been repurchased and retired.

7.   Stock Option Plans

The Company has 150,000 shares of common stock reserved for options which may be
granted to  directors,  officers,  and key  employees  under a stock option plan
adopted in 1994.  The exercise  price of the options  shall not be less than the
greater of $8.50 per share or the fair market value of the stock on the date the
option is granted.  The only options  outstanding were options for 80,000 shares
at an exercise price of $8.50 per share granted in 1995.

During 1995, the Company  adopted a  nonqualified  stock option plan under which
600,000  shares of common  stock have been  reserved  for  options  which may be
granted to key employees and  third-party  consultants  at an option price to be
determined by the Compensation  Committee of the Board of Directors.  No options
have been granted under this plan.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
Accounting for Stock Issued to Employees  (APB 25), and related  interpretations
in accounting for its employee stock options  because,  as discussed  below, the
alternative  fair  value  accounting  provided  for under  Financial  Accounting
Standards Board Statement No. 123, Accounting for Stock-Based Compensation (FASB
123), requires use of option valuation models that were not developed for use in
valuing  employee stock  options.  Under APB 25, since the exercise price of the
Company's  employee  stock option grants has equaled the estimated fair value of
the  underlying  stock  on  the  date  of  grant,  no  compensation  expense  is
recognized. 


                                      F-15
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)

7.   Stock Option Plans (continued)

Pro forma  information  regarding  net income and earnings per share is required
under FASB 123 and has been  determined  as if the Company had accounted for its
stock  options  granted  subsequent  to December 31, 1994,  under the fair value
method of that Statement.  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:  risk-free interest rate of 7.8%; a dividend yield
of zero percent; and a weighted-average  expected life of the options of five to
seven years. The volatility factor of the expected market price of the Company's
common stock is 1.2.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  input  assumptions  including the expected  stock price  volatility.
Because the Company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the vesting  period of the respective  option.  The
Company's  pro forma net loss and pro  forma net loss per  share,  respectively,
would be $6,028,000  and $2.29 and  $1,452,000 and $.55 for the years ended 1996
and 1995,  respectively.  Because FASB 123 is applicable only to options granted
subsequent  to  December  31,  1994,  its pro  forma  impact  will  not be fully
reflected until 1999.

The weighted-average  exercise price of options outstanding at December 31, 1996
and 1995, is $8.50. The weighted-average  remaining  contractual life of options
outstanding at December 31, 1996, was 4.5 years. The weighted-average fair value
of options granted in 1995 was $7.70.

8.   Related Party Transactions

Rhine Jewelry Limited (Rhine),  located in Hong Kong and the Company's principal
supplier,  is also a subsidiary  of RIHC (Note 1). For the years ended  December
31, 1996, 1995, and 1994, the Company's  purchases from Rhine were approximately
$4.6 million, $7.5 million, and $8.3 million, respectively.


                                      F-16
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)

9.   Notes Payable

In conjunction with the Daco  acquisition,  Daco issued  promissory notes to the
former shareholders (some of whom are officers). The amounts payable to officers
are due in eight quarterly  installments of approximately  $68,000 plus interest
at the Canadian bank's prime rate (5% at December 31, 1996) commencing  November
30, 1996.  The  remainder  of the notes were due  February  28,  1997,  and bore
interest at 12%.

Subsequent to December 31, 1996, the terms of these notes were renegotiated. One
half of the principal  was paid when due, and the balance  ($209,000) is payable
June 30, 1997, and bears interest at 15% per annum.

All of the notes are  collateralized  by a general  security  agreement over all
assets of Daco,  subordinate to security granted to the bank, and are guaranteed
by Holding.

10.  Income Taxes

The following table summarizes income taxes (benefits):

                                           Year ended December 31,
                                       ------------------------------
                                         1996        1995       1994
                                       --------    --------    ------
                                                (In Thousands)
Current:
  U.S. federal                         $   (48)    $  (782)    $  539
  U.S. state                                 -        (176)       151
  Other                                   (259)        392        150
                                       -------     -------     ------
                                          (307)       (566)       840

Deferred:
  U.S. federal                               -         (51)       (41)
  U.S. state                                 -         (12)       (11)
                                       -------     -------     ------
                                             -         (63)       (52)
                                       -------     -------     ------
Income taxes                           $  (307)    $  (629)    $  788
                                       =======     =======     ======


Income (loss) before income taxes:
  United States                        $(5,818)    $(3,848)    $1,591
  Other                                   (425)      1,835      1,488
                                       -------     -------     ------
                                       $(6,243)    $(2,013)    $3,079
                                       =======     =======     ======


                                      F-17
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


10.  Income Taxes (continued)

The differences  between the U.S.  federal  statutory tax rate and the Company's
effective tax rate are as follows:

                                                Year ended December 31,
                                              ---------------------------
                                               1996      1995       1994
                                              ------    -------   ------

U.S. federal statutory tax rate               (34.0)    (34.0)%    34.0%
Excess foreign income taxes (benefit)          (1.8)    (13.1)    (11.5)
State income taxes (net of U.S. federal
 income tax benefit)                           (1.0)     (5.8)      3.0
Change in valuation allowance                  30.0      24.6         -
Other                                           1.9      (2.9)       .1
                                              -------   -------   ------
Consolidated effective tax rate                (4.9)%   (31.2)%    25.6%
                                              =======   =======   ======

The components of deferred income taxes are as follows:

                                                     December 31,
                                                   -----------------
                                                    1996       1995
                                                   ------     ------
                                                     (In Thousands) 
Deferred tax assets (liabilities):
  Net operating loss carryforward                  $1,872      $  -
  Accounts receivable                                 906       259
  Inventories                                          64       723
  Property and equipment                             (131)     (106)
  Other                                                23        23
                                                  -------      ----
                                                    2,734       899
  Less:  Valuation allowance                       (2,734)     (495)
                                                  -------      ----
Net deferred tax assets                           $     -      $404
                                                  =======      ====


The valuation  allowance  increased in 1996 primarily due to the increase in the
net operating loss carryforward.  For income tax purposes, the Company has a net
operating loss carryforward of approximately $4,800,000, which expires in 2011.


                                      F-18
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


11.  Supplemental Cash Flow Information


                                          Year ended December 31,
                                      -----------------------------
                                        1996        1995       1994
                                      -------     ------      -----
                                              (In Thousands)

Cash paid for income taxes            $    -      $  380     $  756
Cash paid for interest                 1,302       1,027        678

Noncash investing and financing
 activities:  
  Note payable to affiliated company
   converted to preferred  stock           -           -      3,645
  Payable to affiliate to invest
   in joint venture                        -           -      2,000
  Receivable  from  affiliate for
   sale of  investment in joint
   venture                             1,402       1,402          -


12.  Selected Quarterly Financial Data (Unaudited)

Selected  quarterly  financial  data for the years ended  December  31, 1996 and
1995, are as follows:

                                                 Three months ended
                                      ------------------------------------------
                                       March 31 June 30 September 30 December 31
                                       -------- ------- ------------ -----------
                                      (In Thousands, Except Per Share Amounts)
1996:
  Net sales                            $8,415   $7,286    $ 4,085     $11,054
  Gross profit (loss)                   1,580    2,062       (493)      1,882
  Net income (loss)                      (802)    (491)    (3,359)     (1,284)
  Net income (loss) per common share     (.30)    (.19)     (1.27)       (.49)

1995:
  Net sales                            $7,877   $8,093    $12,686     $13,054
  Gross profit                          1,520    1,947      3,192       1,027
  Net income (loss)                       (33)      31        509      (1,891)
  Net income (loss) per common share     (.01)     .01        .19        (.72)

Included in the fourth  quarter in 1996 and 1995  financial  data are  inventory
valuation adjustments (Note 3).


                                      F-19
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


13.  Employee Benefit Plan

Imperial sponsors a  defined-contribution,  profit-sharing  plan (Plan) covering
substantially  all full-time  employees who have  completed one year of service.
Company contributions to the Plan are discretionary,  determined by the Board of
Directors,  and fully vest to employees upon completion of six years of service.
The Plan has a voluntary 401(k) savings feature.  Participants may contribute up
to 15% of their  compensation to the Plan.  Imperial matches 50% of the first 2%
of compensation that a participant contributes. Participant and employer-matched
contributions  to  the  Plan  are  100%  vested.   Company   contributions  were
approximately $10,000,  $16,000, and $40,000,  respectively,  in 1996, 1995, and
1994.

14.  Significant Customers

Significant  customers are those  accounting  for at least 10% of net sales in a
calendar year.  During 1996,  the Company  derived 19% of its net sales from one
customer.  In  1995,  the  Company  derived  45% of its  net  sales  from  three
customers,  and  in  1994,  the  Company  derived  64% of its  sales  from  four
customers.

15.  Commitments and Contingency

Litigation

The Company is a codefendant in a lawsuit  brought by a shareholder  who alleges
the  Company   misrepresented   its  financial  position  in  interim  financial
statements.  The  shareholder  has filed for class action  status and is seeking
damages of $11 million. The Company believes the allegation is without merit and
intends to vigorously defend the claim.

Futures Contracts

At December 31, 1996, the Company had futures contracts  outstanding  obligating
them to  purchase  1,000  ounces of gold at $381.20  per ounce in April 1997 and
10,000  ounces of silver at $5.03 per ounce in July 1997.  The Company  also had
forward contracts  obligating them to purchase 200 ounces of gold at $393.46 per
ounce in June 1997.

Operating Leases

Imperial  is  obligated  under a lease on its  operating  facility  for  minimum
rentals  as well as real  estate  taxes and  other  operating  expenses  through
October  2003,  with an option for an  additional  five years.  Daco has a lease
obligation  with similar  provisions  through  July 2002,  with an option for an
additional five years.


                                      F-20
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


15.  Commitments and Contingency (continued)

The future minimum lease payments required under these leases as of December 31,
1996, approximated the following (in thousands):

     1997                                $  387
     1998                                   391
     1999                                   398
     2000                                   408
     2001                                   417
     Thereafter                             620
                                         -------
     Total minimum lease payments        $2,621
                                         ======

Rent expense included in the accompanying  statements of operations  amounted to
$470,000, $384,000, and $285,000 for 1996, 1995, and 1994, respectively.

Employment Agreements

The Company has various  employment  agreements  with  certain  officers and key
employees  expiring at various dates through July 2001. The  agreements  include
provisions for severance  payments for the longer of one additional  year or any
period for which the employee is required not to compete.

The future minimum annual compensation payments as required under the agreements
as of December 31, 1996, approximated the following (in thousands):

     1997       $  722
     1998          486
     1999          300
     2000          300
     2001          150
                ------
                $1,958
                ======


                                      F-21
<PAGE>
                              IWI Holding Limited

             Notes to Consolidated Financial Statements (continued)


16.  Geographic Segment Information

The Company's  operations in 1994 were conducted primarily in the United States.
Financial  information as of and for the years ended December 31, 1996 and 1995,
summarized by geographic area, is as follows:


                             United 
                             States    Canada    Eliminations   Consolidated
                             -------   ------    ------------   ------------
1996
Total revenues
Unaffiliated customers       $21,945   $8,895      $     -        $30,840
Interarea transfers                -        -            -              -
                             -------   ------      -------        -------
Total revenues               $21,945   $8,895      $     -        $30,840
                             =======   ======      =======        =======

Income (loss) from
 operations                  $(4,828)  $ (488)     $   126        $(5,190)
                             =======   ======      =======        =======
Assets
Identifiable assets          $24,376   $8,360      $(2,968)       $29,768
Corporate assets                   -        -            -              -
                             -------   ------      -------        -------
Total assets                 $24,376   $8,360      $(2,968)       $29,768
                             =======   ======      =======        =======


                             United
                             States    Canada    Eliminations   Consolidated
                             -------   -------   ------------   ------------
1995
Total revenues
Unaffiliated customers       $31,005   $10,705     $     -        $41,710
Interarea transfers            5,065         -      (5,065)             -
                             -------   -------     -------        -------
Total revenues               $36,070   $10,705     $(5,065)       $41,710
                             =======   =======     =======        =======

Income (loss) from
 operations                  $(1,991)  $ 1,005     $  (126)       $(1,112)
                             =======   =======     =======        =======
Assets
Identifiable assets          $37,123   $13,086     $(7,302)       $42,907
Corporate assets               1,230         -           -          1,230
                             -------   -------     -------        -------
Total assets                 $38,353   $13,086     $(7,302)       $44,137
                             =======   =======     =======        =======


Interarea transfers primarily represent shipments of finished goods inventory to
Canada.  These interarea shipments are made at transfer prices which approximate
prices  charged  to  unaffiliated   customers  and  have  been  eliminated  from
consolidated  net  revenues.  Corporate  assets  consist of  investment in joint
venture (Note 4).


                                      F-22
<PAGE>
                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                                 Balance Sheets


                                                       December 31,
                                              -----------------------------
                                                  1996              1995
                                              -----------       -----------
Assets:

Cash                                          $     1,000       $     1,000

Due from affiliate                                500,000           500,000

Investments in wholly owned subsidiaries       13,786,000        19,787,000
                                              -----------       -----------

     Total Assets                             $14,287,000       $20,288,000
                                              ===========       ===========

Shareholders' Equity:

Preferred stock, $1 par value; 5,000,000
  shares authorized; 3,644,880 shares
  issued and outstanding                      $ 3,644,880       $ 3,644,880

Common stock, no par value, 10,000,000
   shares authorized; 2,582,900 shares
  issued and outstanding (2,643,750 shares
  in 1995)

Additional paid-in capital                     14,354,722        14,419,722

Retained earnings (deficit)                    (3,712,602)        2,223,398
                                              -----------       -----------

                                              $14,287,000       $20,288,000
                                              ===========       ===========


                  See note to condensed financial statements.


                                      F-23
<PAGE>
                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                Statements of Income (Loss) and Retained Earnings



                                              For the           For the
                                             Year Ended        Year Ended
                                            December 31,      December 31,
                                                1996              1995
                                            ------------      -----------

Equity in net income (loss) of
 subsidiaries                               $(5,936,000)     $(1,384,000)

Retained earnings beginning of period         2,223,398        3,607,398
                                            -----------      -----------

Retained earnings (deficit) end of period   $(3,712,602)     $ 2,223,398
                                            ===========      ===========


                  See note to condensed financial statements.


                                      F-24
<PAGE>
                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                            Statements of Cash Flows

                                          For the              For the
                                         Year Ended          Year Ended
                                        December 31,        December 31,
                                            1996                1995
                                        ------------        ------------

Investing Activities

  Investment in Imperial World, Inc.      $      -           $(1,636,588)

Financing Activities

  Proceeds from sale of common stock             -              1,636,588
                                          --------           ------------

Net change in cash                               -                      -

Cash at beginning of period                  1,000                  1,000
                                          --------           ------------

Cash at end of period                     $  1,000           $      1,000
                                          --------           ------------


                  See note to condensed financial statements.


                                      F-25
<PAGE>
                               IWI HOLDING LIMITED

           Schedule I - Condensed Financial Information of Registrant

                     Note to Condensed Financial Statements

                 For the Years Ended December 31, 1996 and 1995

1.   Basis of Presentation

The Company's share of net income (loss) of its unconsolidated subsidiaries, all
of which are wholly  owned,  is included in net income  (loss)  using the equity
method.  Parent-company-only  financial statements should be read in conjunction
with the Company's consolidated financial statements.


                                      F-26
<PAGE>
                               IWI HOLDING LIMITED

                 Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

                                         Additions     Additions
                        Balance at      Charged to     Charged to
                       Beginning of     Costs and         Other                       Balance at End
Description               Period         Expenses        Accounts     Deductions        of Period
------------           -----------     ----------      ----------     ----------      --------------
<S>                    <C>             <C>               <C>          <C>             <C>

Year Ended
Decmber 31, 1994

Allowance for
Doubtful Accts         $   100,000     $  184,000        $   -        $   34,000(1)   $  250,000

Year Ended
Decmber 31, 1995

Allowance for
Doubtful Accts         $  250,000      $  313,000        $   -        $  109,000(1)   $  454,000

Inventory Valuation
Allowance              $        -      $1,500,000        $   -        $        -      $1,500,000

Deferred Income Tax
Valuation
Allowance              $        -      $  495,000        $   -        $        -      $  495,000

Year Ended
December 31, 1996

Allowance for
Doubtful Accts         $  454,000      $  736,000        $   -        $  496,000(1)   $  694,000

Inventory Valuation
Allowance              $1,500,000      $2,953,000        $   -        $2,853,000(2)   $1,600,000

Deferred Income Tax
Valuation
Allowance              $  495,000      $2,239,000        $   -        $        -      $2,734,000
</TABLE>

------------------------
(1)  Writeoff of uncollectible accounts
(2)  Inventory losses realized


                                      F-27