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INTERIM REPORT AND ANNOUNCEMENT OF RESULTS
FOR THE SIX MONTHS ENDED 30TH SEPTEMBER 1999

RESULTS

The unaudited consolidated Group results are set out below:-

                                              For Six Months Ended
                                                30th September
                                              1999           1998
                                           HK$'000        HK$'000

TURNOVER                                   550,213        640,759
                                        ==========     ==========
OPERATING LOSS                             (14,297)       (65,123)
EXCEPTIONAL ITEMS (Note 1)                  35,318        (22,579)
                                        ----------     ----------
PROFIT/(LOSS) FROM
  ORDINARY ACTIVITIES                       21,021        (87,702)
TAXATION (Note 2)                             (559)          (514)
                                        ----------     ----------
PROFIT/(LOSS) AFTER TAXATION                20,462        (88,216)
MINORITY INTERESTS                             (83)          (362)
                                        ----------     ----------
PROFIT/(LOSS) ATTRIBUTABLE TO
  SHAREHOLDERS                              20,379        (88,578)
                                        ==========     ==========
EARNINGS/(LOSS) PER SHARE (Note 3)
  Basic                                  2.2 cents     (9.5 cents)
  Diluted                                1.5 cents            N/A
                                        ==========     ==========

Notes:-

1. Exceptional items

Foreign exchange gain/(loss)
  on convertible notes                         7,133      (46,982)
Profit on repurchase of
  convertible notes                           34,580       56,565
Provision written back/(provision)
  for diminution in value of
  marketable securities                        9,015      (33,552)
(Loss)/profit on sales of land
  and buildings                              (15,410)       1,390
                                             -------      -------
                                              35,318      (22,579)
                                             =======      =======

2. Taxation

Hong Kong profits tax has been provided at the rate of 16% (1998: 16%) on the estimated assessable profits for the period less relief for available tax losses. Taxation on overseas profits has been calculated on the estimated assessable profits for the period at the rates of taxation prevailing in the countries in which the Group operates.

3. Earnings/(loss) per share

The calculation of earnings/(loss) per share is based on the Group's profit attributable to shareholders of HK$20,379,000 (1998: loss of HK$88,578,000) and on the weighted average of 936,340,023 shares (1998: 936,340,023 shares) in issue during the period.

The calculation of diluted earnings per share is based on adjusted earnings of HK$14,935,746 on the assumptions that all the convertible notes had been converted into shares on 1st April 1999 with interest saving of HK$3,174,860, convertible notes expenditure written off of HK$1,485,114 and excluding the exchange gain of HK$7,133,000 therefrom and on the weighted average number of 1,018,657,118 shares after adjusting for the effect of dilutive potential ordinary shares. There is no taxation effect because the adjustments are of capital nature (1998: no dilution effect).

INTERIM DIVIDEND

The directors have resolved not to declare an interim dividend for this period (1998 : Nil).

REVIEW OF OPERATIONS

The Group's retail and trading business declined by 18% in turnover compared to the corresponding period last year. Nevertheless, its operating loss reduced to HK$3.8 million from HK$29 million due mainly to general cost cutting measures undertaken. Reduction in rental cost continued during period under review, and further downward adjustment is expected in the ensuing half year.

During past 6 months, local retail business remained sluggish. Our retail outlets have been repositioned to improve the profit margin. Interior layout of City Chain and Optical 88 shops has undergone trendy renovations to promote new brand products, paying more attention to the younger customers. Franchised Optical 88 shops in Hong Kong have increased to 32.

Since September 1999, local consumption sentiment has improved and more overseas tourists arrived. If the positive economic environment can sustain, it is likely that Group's 3 local retail chains, namely City Chain, Optical 88 and Hipo.fant, will report profit in the remaining half of the current financial year.

Watches export business recorded satisfactory progress in North America and Europe markets, reporting an increase of profit by 13% compared to the corresponding period last year. New collections of Adidas sports watches were introduced and well received by the market.

The Stelux House has now leased 95% of the lettable floor area, contributing stable rental income to the Group.

In May 1999, a shop premises at Houston Centre, Tsimshatsui East was disposed of for HK$12 million, booking a loss of HK$15.4 million as a result.

During past 6 months, we repurchased our Convertible Notes (Due in March 2001) with a nominal value of Sfr 13.9 million at an average price of 50%; exceptional gain of HK$34.6 million was made therefrom. As of 30 September, 1999, the Group's outstanding Swiss Franc Convertible Notes were Sfr65.6 million.

OUTLOOK

The recovery of the Asian economies from the financial turmoil has been encouraging. Capital funds from overseas investors have restored. Local businesses expect stimulus, also challenges, following the Sino-American agreement on China's joining WTO.

The Group operates 351 retail outlets in Asia. With the upswing of the Asian economies, we hold an optimistic view of the overall consumers' market in the Region.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

During the period, there was no purchase, sale or redemption by the Company, or any of its subsidiary companies, of the Company's listed securities except that a wholly owned subsidiary company had repurchased Swiss Francs 13.9 million of the unlisted Swiss Francs Convertible Notes issued by the same subsidiary as follows:

                                   Nominal
Issuer           Description       amount repurchased  Consideration paid
------           -----------       ------------------  ------------------
Stelux Holdings  1.75 percent      Swiss Francs        Swiss Francs
  Limited          Swiss Francs      13,900,000         6,862,000 average
                   125,000,000                          of 50 per cent of
                   Convertible                          nominal value
                   Notes due 2001

CODE OF BEST PRACTICE

In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited throughout the period except that the independent non-executive directors of the Company are not appointed for a specific term.

The results for the past 6 months have been reviewed by the Group's Audit Committee.

YEAR 2000 COMPLIANCE

The remedial measures for the Group's computer software and hardware have been completed and tested satisfactorily. However, a contingency plan was prepared to cope with external failures due to Y2000 problems. We expect our operations will not be affected upon the millennium changeover and no such insurance policy has been arranged. The total spending on Y2000 project, which was paid and capitalised, is approximately HK$1.5 million.



On behalf of the Board
Joseph C.C. Wong
Managing Director

HONG KONG, 21st December 1999


Source: STELUX Holdings International Limited
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