It is my pleasure to present the annual results of Lung Kee (Bermuda) Holdings Limited and its subsidiaries (the "Group") for the year ended 31st March, 1999.

On account of adverse general economic conditions, the Group recorded a marginal increase of 3.38% in turnover, though profits sank to HK$66 million, a drop of 35.86% compared with that of the previous year.

Business Review

As the Asian financial turmoil continually hit against each and every Asian company, some customers of the Group were unavoidably affected. In order to help them tide over difficulties, the Group adjusted its product prices downwards accordingly to reduce their production costs. This accounted for the Group's fall in profits for the year.

In view of recent signs of improvement in the overall economy, the Group believed that the worst days have been over and that our product prices as well as profits should presumably stabilize.

With respect to the mould base market, exports to Singapore, Malaysia, Europe and Japan will improve. At the same time, sales to Chinese provinces other than Guangdong are gradually looking up, which in the long run will help reduce our reliance on the Guangdong market.

The plant in Malaysia, the associated company in Japan, and the plants in Shanghai and Guangzhou are getting onto the right track. They are likely to begin making contributions to the Group.

The mould steel trading suffered a downward pressure on prices too. However, through the introduction of a greater variety in mould steel products, and the expansion in the scope of service, the business managed to maintain sustained growth.

Prospects

The plant in Heyuan, the PRC, has partially gone into operation, and is expected to be fully operational by the end of this year. Specializing on the production of standard mould bases, the plant will help reduce costs on the one hand, and boost output and sales on the other hand.

The Group has made every effort to increase its sales in the European and American markets. The PRC market will grow upon increased sales outlets. It is expected that these new markets will contribute to further growth of the Group.

Although adverse economic conditions have begun to subside, the Group will continue to adopt a cautious attitude towards the prospects of an economic recovery. We anticipate that the year ahead will still be a difficult one.

Now that the Group has managed to get through the hurdles of the Asian financial turbulence, the Group will work in concert with its staff to forge ahead and continue to consolidate its leadership in the Asian market.

On behalf of the Directors, I would like to thank our employees for their loyal services and dedication and our suppliers, bankers, business associates and customers for their continued supports.

Siu Tit Lung
Chairman

Hong Kong, 25th June, 1999

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