The Limited, Inc., and Consolidated Subsidiaries - Page 14

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          Organization and Operation of MFE and MFE N.V.                              
               In 1970, Mast Industries, Inc. (MII) organized Mast                    
          Industries (Far East) Ltd. (MFE) as a Hong Kong corporation.  At            
          all times here pertinent, MFE had its headquarters and principal            
          place of business in Hong Kong.  MFE is a “controlled foreign               
          corporation” (of petitioner) within the meaning of section                  
               MFE is a contract manufacturer for petitioner.  It operates            
          throughout Asia, manufacturing or contracting for the manufacture           
          of garments to be sold by petitioner's stores.                              
               MFE declared no significant dividends from the early 1980s             
          through 1993, resulting in accumulated earnings and profits in              
          excess of $330 million at the end of 1993.                                  
               On January 12, 1993, the directors of MFE resolved to                  
          organize and capitalize MFE N.V.  Among the stated purposes were:           
          “engaging in group financing activities and providing for a means           
          of investing and reinvesting liquid assets and funds.”  The                 
          directors of MFE further resolved to make a capital contribution            
          to MFE N.V. of $175 million.  MFE N.V. had no employees during              
          January 1993.  On January 28, 1993, MFE transferred $175 million            
          by wire to MFE N.V.  That $175 million was used to purchase the             
          MFE N.V. CDs.                                                               

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