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Richard Tsang/Iris Lee/Callis Lau
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(Hong Kong, December 8, 1998) -- Leading audio-visual ODM and OEM manufacturer Tonic Industries Holdings Limited ("Tonic") celebrated the Grand Opening of its sixth factory block in Dongguan, the People's Republic of China (the "PRC") today.

The factory block is located within the main factory complex of Tonic in Dongguan, PRC with a total floor area of 360,000 square feet and Tonic has invested approximately HK$70 million in this factory. Currently, Tonic operates 26 production lines, including 4 new production lines in the new factory block to produce high quality MD systems. After the completion of the whole factory block, the Group's total production capacity will be increased by 50%, employing more than 6,000 employees.

Mr Simon Ling, Chairman of Tonic said, "I am pleased to see the completion of our new factory block, which symbolizes yet another milestone for Tonic. Since our listing, we have been committed to expand our production capacity and now our plans have been realised. We believe that the new plant will enable us to meet the continuous growth in production demand, also increasing our production capacity and leaving room for the development of new product collections."

Mr Ling continued, "We have utilized the proceeds from our listing to expand our factory, set up more production lines and enhance our marketing network as well as new products research. Recently, we have also taken an important step towards improving vertical integration in the manufacturing process by acquiring a component factory. We believe this will greatly improve the Group's profit margins and product quality."

In October, 1998, the Group acquired the component factory Dongguan Gold Beam Electronics Limited, which produces plastic components, metal components, printed circuit boards and adaptors. Currently, most of the finished products are supplied for Tonic's use. In addition, this factory has extra capacity in developing new business other than audio-visual products manufacturing.

Despite severe competition in the audio products industry, Tonic has continued to maintain and enhance its market position as a competitive supplier by developing and manufacturing new products through its strong design and development team. With a team of over 30 designers and engineers including consultants from Japan, Tonic is able to cater for changes in consumer trends as well as technical innovations. The newly developed MD products are targeted to be launched in the market in the first quarter of 1999. Apart from the newly developed models, Tonic continues to expand its market share. The Group is currently marketing 8 categories of products, comprising over 30 models to its established customer base all over the world. The Group has its orders booked till March 1999.

Mr Ling concluded, "Our market strategy and resource diversification have enabled us to minimize the adverse effects of the Asian financial turmoil since October last year. Instead, as a result of the instability of other Asian countries, buyers from Europe and America have favoured our timely delivery and product quality. In the future, we will continue to build on our already diversified customers base and to develop new audio products, in order to sustain healthy growth in our business."

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 and music centres. Products are sold on an ODM and/or OEM basis to overseas importers (excluding those from Japan) and Japanese manufacturers with well known brandnames such as Alba, Bush, Emerson, GPX, Kenwood, RCA, Thomson and Sanyo.

Tonic will be announcing its 2nd interim results since listing on 16th December, 1998.