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TONIC INDUSTRIES HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)

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

ANNOUNCEMENT OF FINAL RESULTS
FOR THE YEAR ENDED 31 MARCH 1999

FINANCIAL HIGHLIGHTS

                                             1999    1998  Percentage
                                                             increase

Turnover (HK$M)                             1,841   1,524          21

Profit before taxation (HK$M)                  76      45          70

Profit attributable to shareholders (HK$M)     69      41          66

Basic earnings per share (HK cents)          17.1    11.9          44

Dividend per share (HK cents)                 6.5     2.9         124

The directors ("Directors") of Tonic Industries Holdings Limited (the "Company") are pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 1999, together with the comparative figures for the previous year, as follows:

                                                   1999          1998
                                                HK$000       HK$000

Turnover                                      1,840,799     1,524,396
                                            ===========   ===========
Operating profit before exceptional item         63,751        44,604
Exceptional item (note 1)                        12,221             -
                                            -----------   -----------
Profit before taxation                           75,972        44,604
Taxation (note 2)                                (7,027)       (3,121)
                                            -----------   -----------
Net profit attributable to shareholders          68,945        41,483
                                            ===========   ===========
Dividends (note 3)                               26,240        11,520
                                            ===========   ===========
Dividends per share (note 3)                  6.5 cents     2.9 cents
                                            ===========   ===========
Earnings per share (note 4)
  - Basic                                    17.1 cents    11.9 cents
                                            ===========   ===========
  - Diluted                                  16.7 cents           N/A
                                            ===========   ===========

Notes:

1. Exceptional item

During the year, the Group entered into forward exchange contracts to hedge a portion of its sales receipts and generated a net exchange gain of HK$12,221,000.

2. Taxation

Hong Kong profits tax has been provided at the rate of 16% (1998: 16.5%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable in The People's Republic of China (the "PRC") have been provided at the rates of taxation prevailing in the PRC based on existing legislations, interpretations and practices in respect thereof.

Deferred taxation has been provided under the liability method at the rate of 16% (1998: 16%) on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future.

Taxation charged to the Group's profit and loss account comprises:

                                                      1999       1998
                                                   HK$000    HK$000

Hong Kong
  Provision for the year                             3,949      1,743
  Underprovision in prior years                         82          -
  Deferred                                           2,806        769
                                                   -------    -------
                                                     6,837      2,512

The PRC
  Provision for the year                               190        609
                                                   -------    -------
Taxation charge for the year                         7,027      3,121
                                                   =======    =======

3. Dividends

                                                      1999       1998
                                                   HK$000    HK$000

Interim - HK1.5 cents per
  ordinary share (1998: HK1 cent)                    6,048      2,880
Proposed final - HK5 cents per
  ordinary share (1998: HK3 cents)                  20,192      8,640
                                                   -------    -------
                                                    26,240     11,520
                                                   =======    =======

The comparative interim dividend and proposed final dividend per ordinary share would be HK0.7 cent and HK2.2 cents, respectively, on the basis as if the bonus issue of shares of two bonus shares for every five ordinary shares then held by shareholders on 30 September 1998 had been completed during the year ended 31 March 1998.

4. Earnings per share

The calculation of basic earnings per share is based on the net profit attributable to shareholders of HK$68,945,000 (1998: HK$41,483,000) and the weighted average of 403,256,237 shares (1998: 348,519,452 shares) in issue during the year.

The comparative weighted average number of shares in issue and earnings per share have been adjusted to reflect the bonus issue of shares on the basis of two bonus shares for every five ordinary shares then held by shareholders on 30 September 1998.

The calculation of diluted earnings per share is based on the net profit attributable to shareholders of HK$68,945,000 and the weighted average of 412,090,096 shares in issue, adjusted to reflect the effects of all dilutive ordinary potential shares during the year.

Reconciliation of the weighted average number of shares used in the basic earnings per share calculation for the year ended 31 March 1999 to that used in the diluted earnings per share calculation is as follows:

Weighted average number of shares used
  in the basic earnings per share calculation             403,256,237

Weighted average number of shares assumed
  to have been issued at no consideration
  on the deemed exercise of all warrants
  outstanding during the year                               8,833,859
                                                         ------------
Weighted average number of shares used
  in the diluted earnings per share calculation           412,090,096
                                                         ============

Diluted earnings per share for the prior year has not been calculated as no diluting events existed during the prior year.

FINAL DIVIDEND

The Directors have recommended the payment of a final dividend of HK5 cents per share for the year ended 31 March 1999 to shareholders whose names appear on the Company's Register of Members on 28 September 1999 (the "Proposed Final Dividend"). Subject to the approval of the Company's Members at the forthcoming Annual General Meeting, the final dividend will be paid on or before 13 October 1999.

BONUS ISSUE OF SHARES

In addition to the Proposed Final Dividend, the Directors have recommended a bonus issue of new shares (the "Proposed Bonus Share Issue") for the year.

The Proposed Bonus Share Issue will be made on the basis of 2 bonus shares for every 5 existing shares held by shareholders whose names appear on the Register of Members on 28 September 1999. The bonus shares will be credited fully paid at par and will rank pari passu with the existing shares in all respects, except that they will not rank for the Proposed Final Dividend for the year ended 31 March 1999.

The Proposed Bonus Share Issue will result in an adjustment to the subscription price of the Company's outstanding warrants. Subject to the Proposed Bonus Share Issue becoming unconditional, details of the price adjustment will be contained in a press announcement to be issued by the Company as soon as practicable.

CONDITIONS FOR PROPOSED BONUS SHARE ISSUE

The Proposed Bonus Share Issue is conditional upon:

(a) the passing of the relevant ordinary resolution to approve the Proposed Bonus Share Issue at the Annual General Meeting of the Company to be held on 28 September 1999; and

(b) the Listing Committee of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") granting listings of, and permission to deal in, the bonus shares on the Stock Exchange.

Subject to fulfilment of the above conditions, certificates for the bonus shares are expected to be despatched to shareholders on 13 October 1999. A circular setting out further details of the Proposed Bonus Share Issue will be despatched to shareholders and warrantholders (for information only) of the Company as soon as practicable.

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from Friday, 24 September 1999 to Tuesday, 28 September 1999, both days inclusive, during which period no transfer of shares will be effected. All transfer documents accompanied by the relevant share certificates must be lodged with the Company's Branch Registrars in Hong Kong, Tengis Limited at 1601 Hutchison House, 10 Harcourt Road, Hong Kong not later than 4:00 p.m. on Thursday, 23 September 1999 in order to qualify for the Proposed Final Dividend and the Proposed Bonus Share Issue.

BUSINESS REVIEW, OUTLOOK AND YEAR 2000 ("Y2K") COMPLIANCE

The second year result of the Group after listing has shown a remarkable growth, sales and net profit attributable to shareholders for the year ended 31 March 1999 increased by 21% and 66% respectively as compared to 1998. Proposed final dividend per share amounted to HK5 cents, together with the interim dividend already paid of HK1.5 cents, render a total dividend payable of HK6.5 cents per share for the whole year, represent an increase of 124% as compared to 1998.

The audio manufacturing industry is characterised by intense competition and low profit margin, but the Group is able to achieve the predetermined objectives of maintaining a continuous growth in turnover, profit and shareholder's fund. Being a leading manufacturer of high quality audiovisual products, the Group's strength can be examined in terms of its customers, products, manufacturing ability and the vision of management.

The Group's customers include prestigious Japanese audio manufacturers such as Kenwood, Sanyo and Pioneer, these companies possess advance technique in manufacturing audio products and their products lead the trend of the world. Through the cooperation with them, the Group has benefited from obtaining the updated market information and latest technology in audio manufacturing. The Group's other customers are well known American importers such as RCA, Emerson and GPX and European importers such as Medion, Alba and Bush etc. These importers' customers are national chain stores and superstores, the orders from these customers are significant and these customers contribute a steady stream of income flow to the Group. The Group's businesses are appropriately diversified throughout the world and the customers have shown a strong and sustain demand throughout the year. The percentage of sales to America, Europe and the rest of the World are approximately 51%, 26% and 23% respectively.

The products manufactured by the Group are well received for its good quality and innovative design; major items include Discman, mini Hi-Fi and portable CD/cassette recorder. In March 1999, the Group commenced production for its first MD product for Kenwood, a mini Hi Fi with MD, CD, cassette and radio. The market response for this product is very well and we expect this item to contribute significantly to our business for the coming year. We are also planning to manufacture our own MD Hi-Fi and players later this year and have already signed a licensing agreement with Sony Corporation which entitle the Group to manufacture its own MD products. With the more advance features of MD, the selling price and profit margin of the product are much higher.

The Group acquired a new factory in Qi Shi, Dongguan, the PRC last August and this factory has been fully operational now. This factory contributes an additional 300,000 square feet production space, complementing the existing 1,000,000 square feet production space at the Tong Xia factory plant. The Qi Shi factory is primarily manufacturing components for the use of the Group; these components include plastic, metal, printed circuit boards and adaptor. Vertical integration has the advantage of saving cost, controlling of product quality, ensuring timely delivery and shortening the production cycle. The Group has been benefiting from vertical integration and is able to generate a reasonable return.

Quality management and effective internal control system are the key factors for the Group to stay competitive. The Group achieved the recognition of ISO9002 within 5 months and was granted the award in October 1998. ISO9002 is a standard to focus on different aspects such as management responsibility, quality system documentation, and purchasing, inspection, training and corrective action. Management believes that an effective internal control system is the key to an effective management and to the manufacturing of quality products.

In respect of the Y2K compliance, the Group has adopted Y2K conformity requirements issued by the British Standards Institution as the definition of Y2K compliance for the Group's computers and embedded systems. The Group has completed the implementation of the new computer system and which is already Y2K tested. More than 90% of the affected systems and equipment have either been modified, upgraded or replaced to ensure Y2K compliance. The Group commits that full compliant could be achieved on or before September 1999 and is confident that all operations will function properly at the turn of millennium.

Looking forward, management is confident that the MD line of products will become more and more popular in the market as the unit selling price of the item becomes lower. The Group will continue to upgrade its product mix in order to generate higher value and margin products.

The Group has recently set up a home appliance division to explore the opportunity to manufacture high-end kitchen electronics products. The Qi Shi factory, with its well-established plastic and metal components manufacturing division, will be responsible for manufacturing the products. Our existing customers, many of them also have kitchen electronics division, will be our initial target customers. Management believes the Group has a good potential to develop a successful kitchen electronics business.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the year ended 31 March 1999, there was no purchase, sale or redemption of the Shares by the Company or any of its subsidiaries.

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 to the Rules Governing the Listing of Securities on the Stock Exchange throughout the accounting period under review.


By Order of the Board
Simon Ling Siu Man
Chairman & Managing Director

Hong Kong, 10 August 1999


Source: Tonic Industries Holdings Limited
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