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(Hong Kong, August 10, 1999) - Leading audio-visual ODM and OEM manufacturer Tonic Industries Holdings Limited ("Tonic") (Stock Code: 978) today announced its audited annual results for the year ended March 31, 1999. Tonic attained a consolidated turnover of HK$1,841 million, an increase of more than 20 percent over last year's turnover of HK$1,524 million. Net profit attributable to shareholders surged by 66 percent to HK$69 million.

Basic earnings per share were HK 17.1 cents. The Board of Directors recommended the payment of a final dividend of HK 5 cents per share. This will bring the full year dividend to a total of HK 6.5 cents per share, including the interim dividend of HK 1.5 cents per share already paid. Apart from that, the Board of Director also proposed a bonus issue of 2 shares for every 5 shares held, which will provide scope for increasing shareholder base and liquidity.

Mr. Simon Ling, Chairman of Tonic said, "We are extremely encouraged with the substantial growth in the Group's turnover, profit and shareholders' funds, which demonstrate that our products are being very well received by our customers. Our management have also been able to maintain effective internal cost control systems to ensure satisfactory profit despite the intense competition in the audio-visual market."

During the year under review, the Group has maintained a diversified customer portfolio with well-known customers such as Kenwood, Sanyo and Pioneer from Japan; RCA, Emerson and GPX from America and Medion, Alba and Bush from Europe. These customers provided stable income streams and strong product demand for the Group. The percentage of sales to Asia, America and Europe were approximately 21 percent, 51 percent and 26 percent respectively.

In March, 1999, the Group commenced the production of MD products for Kenwood, which included Mini Hi-fi with MD, CD, cassette and radio. The market response to these products was overwhelming and the Group expects MD products to contribute significantly to the Group's profit in the coming year. During the year, other products, namely Discmans, Mini Hi-fi and portable CD/cassette recorders represented 45 percent, 25 percent and 28 percent of the Group turnover respectively.

In October, 1998, the Group acquired a component factory in Qi Shi, Dongguan Gold Beam Electronics Limited, which produces plastic and metal components, printed circuit boards and adapters for the Group's use. The vertical integration acquired with the acquisition of this component factory, enables the Group to save cost, control product quality, ensure timely delivery and shorten the production cycle. Additionally, the Group's production capacity increased nearly 50% after operations of the new factory block commenced in December, 1998. This factory has a total floor area of 360,000 square feet, contributing 3 new production lines to produce MD systems, and which complement the existing 18 production lines.

"To maintain our competitiveness, we have moved forward to pursue comprehensive vertical integration while also upholding a strict quality and cost control system. We are very proud that we were able to achieve ISO9002 Certification within just 5 months. The award was granted in October 1998. This quality award fosters customers' confidence in our product quality and effective management practices. As a result, our order books are already scheduled until January 2000," Mr. Ling said.

Looking ahead, in view of the overwhelming market response to the mini Hi-fi with MD, CD, cassette and radio features, Tonic has signed a licensing agreement with Sony Corporation which entitles Tonic to manufacture its own MD products which enjoy higher profit margins. With the high popularity of MD products in the markets, the Group will endeavour to produce its own MD products with advanced features in order to achieve a better product portfolio and income stream.

Apart from audio manufacturing, Tonic is exploring an opportunity to manufacture high-end kitchen electronic products. A home appliance division has been set up and the Qi Shi factory, with its well-established plastic and metal components manufacturing division, will be in charge of production. The initial target customers will be existing customers as many of them have kitchen electronics divisions.

Mr. Ling concluded, "The new product division will enable us to upgrade our product portfolio and facilitate the broadening of our business horizons. We believe that Tonic is able to cater to changes in consumer trends and technical innovations. We are committed to enhancing our market share through market diversification and to improving profit margins through quality production and effective management."

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, RCA, Sanyo and Thomson.

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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