For Immediate Release

HONG KONG, 18 February 1998 --- Yue Yuen Industrial (Holdings) Limited ("Yue Yuen") (HKSE: 551), announced today a profit attributable to shareholders of US$158 million for the year ended 30 September 1997 as compared to US$99 million for the previous fiscal year. The company said that it had benefited from investment in additional production capacity to serve new and existing customers and to expand its product categories.

Turnover rose from US$543 million to US$1,414 million. Earnings per share were 23.6 US cents (HK$1.83), an increase of approximately 20%. The results reflect both strong growth in the Group's business and the effect of the acquisition of the remaining 55% of Pou Yuen Industrial (Holdings) Limited ("Pou Yuen") which was completed in September 1996.

Assuming Yue Yuen had acquired Pou Yuen at the beginning of the 1996 fiscal year, the increase in turnover on an unaudited pro forma basis for the period under review was 38%, and the growth in profit attributable to shareholders was 32%.

The Board of Directors recommended a final dividend of HK35 cents per share. Together with an interim dividend of HK20 cents, the total dividend for the year is HK55 cents.

Yue Yuen Chairman, Mr. TSAI Chi Neng, said: "As a principal supplier to all of the major athletic shoe brands in the world, Yue Yuen has benefited from healthy growth in demand for athletic shoes over the year. At the same time, we have diversified our revenue base and upgraded our production facilities. As the industry changes in response to market demand, we have continued to deliver impressive results and enhance value for shareholders."

During the year, Yue Yuen added 37 production lines, giving a total of 160 lines located in China, Indonesia and Vietnam. This provides Yue Yuen with the flexibility to move production around the region according to market requirements.

Total production of shoes for the year reached 74 million pairs as compared with 57 million pairs in the previous year. Product categories have been expanded to include specialty sport shoes, casual, outdoor and designer brand shoe lines as well as athletic shoes.

Yue Yuen foresees that the footwear industry will continue to grow in 1998 with the casual and outdoor shoe sectors offering attractive prospects. Production of casual shoes rose from 6.2 million to 10.2 million pairs in 1997, an increase of 65%.

Mr Tsai remarked "As the world's largest athletic shoe manufacturer, we can flexibly adjust our facilities to accommodate changes in industry trends. The breadth of our manufacturing operations - and the economies of scale that we enjoy - have been key to our achievements in building on existing customers and adding new customers over the past year. Together with our expanded capacity, this positions us well for continued growth."

Commenting on the impact of the currency turmoil in the region, Mr. Tsai said currency exposure is minimal since the Group uses US dollars as its primary operating currency and appropriately matches the currencies of revenue and liabilities. He explained that 97% of Yue Yuen's revenue is received in US dollars whilst certain cost components are transacted in Hong Kong dollars, Chinese Renminbi as well as US dollars.

Mr. Tsai added that the company's accounts have been converted into US dollars starting this year reflecting the fact that the US dollar has always been the functional currency at Yue Yuen.

Yue Yuen was established in 1988 and was listed in Hong Kong in 1992. Today it is the world's largest manufacturer of branded athletic shoes and one of the largest industrial companies listed on The Stock Exchange of Hong Kong. It produces sports shoes, outdoor, casual and designer brand shoe lines for the leading branded shoe companies around the world.

Consolidated profit & loss account attached

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