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(Hong Kong, August 8, 2000) - Leading audio-visual ODM and OEM manufacturer Tonic Industries Holdings Limited ("Tonic") (Stock Code: 978) today announced its annual results for the year ended March 31, 2000.

Consolidated turnover achieved a record high of HK$2,039 million, an increase of 11% over last year. Gross profit for the year was HK$191 million, an increase of 12% over 1999. Profit attributable to shareholders was HK$71 million, a 3% increase over the previous year's figure of HK$69 million. Included in the profit attributable to shareholders was HK$0.2million (1999:HK$12.2 million) exchange gain from forward exchange contracts for hedging. This item was shown as an exceptional item in 1999, but was not separately shown in this year due to the change in Hong Kong Statement of Standard Accounting Practice. Excluding this item, the pre-tax profit attributable to shareholders would record a growth of 22%. This is the seventh-consecutive year of growth for the Group in terms of sales and shareholders' funds.

Basic earnings per share were HK 12.6 cents. The Board of Directors recommended the payment of a final dividend of HK 3.8 cents per share. This will bring the full year dividend to a total of HK 5.3 cents per share, including the interim dividend of HK 1.5 cents per share already paid.

Mr. Simon Ling, Chairman of Tonic said, "We are delighted to report the continuous growth in the Group's business this year owes to the successful launch of new MD product complimented by the stable sales in a broad range of core products, such as discman and portable CD/cassette recorders. "

In March, 1999, the Group commenced the production of MD products for Kenwood, which is a Mini Hi-Fi with MD, CD, cassette and radio. The market responses to these products were overwhelming and the products have contributed approximately 19% to the Group's turnover. During the year, other core products, namely Discmans, Mini Hi-Fi and portable CD/cassette recorders continue to provide a steady and stable turnover in the traditional audio sector.

While the successful launch of MD Hi-Fi products for OEM customers recorded a remarkable contribution. New audio products such as MP3 Discman, CD-RW and DVD are being developed and scheduled to be launched in late 2000. The initial market responses are promising and the potential is tremendous.

Mr. Ling further added, "Our competitive advantage lies in our ability to enhance product variety and quality, our effective cost containment policy, our product research, design and development capability and our reliable relationship with our customers and suppliers."

Effective quality management and internal control systems are key ingredients in the Group's continual success. The Group attained ISO9002 recognition in 1998 and is currently developing an e-procurement plan with a B2B electronic exchange platform to lower its procurement transaction costs and to tape into the suppliers' market to source for cheapest components.

Generally, the export market for the consumer electronic products is still very strong. While the demand from the European countries continue to grow which has definitely brought direct benefit to the Group. Sales to the United States decreased by approximately 20% due to the intense competition. The decrease was compensated by a surge in demand for high-end CD and MD products from Japan with a more attractive profit margin.

In addition to audio manufacturing, Tonic has diversified into home appliance. An innovative 3 in 1 coffee making machine has been launched in the beginning of 2000. Orders for the year are expected to exceed 100,000 sets. An extensive sales network has been established to capture the US and European markets. The positive response from these markets has further stimulated the production of new models and products at the end of 2000.

Capitalizing on the success of its core business, the Group is looking for opportunities to diversify and complement its existing product mix in the digital era. In August 1999, a new division, Tonic Technology Limited was set up to look for the new opportunities.

Mr. Ling concluded, "Our management team has acknowledged the swift development of digital technology and the development of Internet some time ago. We have committed our resources to develop technology-related products, such as Internet set top boxes and digital satellite receivers. These products will be introduced to the market shortly and is expected to bring in substantial revenue to the Group. We are confident that the new business will broaden our product mix and enable us to meet the changing needs of consumers. "

Tonic is principally engaged in the design, manufacture and marketing of a wide range of consumer AV products. These include CD portables, MD systems, Dolby Prologic stereo receivers, portable CD/cassette/radio systems, portable cassette recorders, mini Hi-Fi music centres and equaliser. Products are sold on an ODM and/or OEM basis to overseas importers and manufacturers with well-known brandnames such as Alba, Bush, Emerson, GPX, Kenwood, Medion, Pioneer, Sanyo and Thomson.

This media release and the other corporate information of Tonic Group can also be accessed through the following website:

http://www.irasia.com/listco/hk/tonic

http://www.tonic.com.hk