GROUP ANNUAL RESULTS

The Board of Directors of Tomorrow International Holdings Limited (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (the "Group") for the fourteen months period from 1st November, 1996 to 31st December, 1997.

Notes:

1. The principal activities of the Group are the design, development, manufacture and sale of electronic products, manufacture and sale of printed circuit boards ("PCBs"), and the trading and distribution of electronic components and parts.

2. Turnover represents the invoiced value of goods sold net of returns and allowances.

3. Taxation

Hong Kong profits tax has been provided at the rate of 16.5% (1996: 16.5%) on the estimated assessable profits arising in Hong Kong during the period/year.

In accordance with the applicable enterprise income tax law of the People's Republic of China (the "PRC"), the Group's subsidiaries registered in the PRC, Dongguan Yifu Circuit Board Factory ("Yifu") and Gaojin Electronics (Shenzhen) Co., Ltd, ("Gaojin") are exempt from income tax for the first two profitable years of operation and are entitled to 50% relief on the income tax that would otherwise be charged for the succeeding three years. As Yifu began its first profitable year in 1994, Yifu is entitled to a 50% relief on income tax, at an effective rate of 12% in 1997. Gaojin has yet to achieve profitable operations and so its income tax exemption period has not yet commenced.

4. Dividends

The dividends of prior year represented an interim dividend of 3 cents per ordinary share and a final divdend of 5 cents per ordinary share.

5. Earnings per share

The calculation of basic earnings per share is based on the net profit attributable to shareholders for the period of HK$11,027,000 (1996: HK$71,895,000) and the weighted average of 436,051,211 shares (1996: 403,155,737 shares) in issue during the period.

The fully diluted earnings per share for the period ended 31st December, 1997 is not shown because the impact of any dilution is not material.

The comparative fully diluted earnings per share is based on adjusted earnings of HK$77,278,000 calculated on the assumption that the outstanding warrants were exercised on 1st November, 1995 and the options granted on 14th November, 1995 and 22nd January, 1996 were exercised on the date of grant and that the proceeds of subscription were placed on twelve months Hong Kong dollar fixed deposits earning interest, net of tax, of 4.44% per annum.

DIVIDEND

The Board of Directors do not recommend payment of a dividend for the fourteen months period ended 31st December, 1997.

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from Friday, 5th June, 1998 to Friday, 12th June, 1998, both days inclusive, during which period no transfers of shares will be registered.

BUSINESS REVIEW

The undesirable economic condition in the Asian region including Hong Kong in the second half of 1997 poised negative impacts on the Group's business for the fourteen months ended 31st December, 1997. The Group's total turnover decreased by approximately 3.7% to HK$557.1 million comparing with last year ended 31st October, 1996. As a result of the reorganisation programs and expansion plans within the Group leading to increased overhead costs, the profit margin of the Group declined significantly. Consequently, profit attributable to shareholders dropped by 84.7% to HK$11.0 million. Basic earnings per share for the period amounted to 2.5 cents.

In the period under review, electronic product business maintained its performance. OEM business continued to grow at a healthy rate although not as fast as expected. ODM business in North America and Europe increased slightly but the unfavourable conditions in Asian countries brought a decrease in orders from ODM business.

The trading and distribution business of electronic components and parts suffered a loss as a result of the depressed market environment in Hong Kong.

On the other hand, printed circuit boards (PCB) business continued to grow as buoyed by the increasing demand in the high-value high-growth technology industries.

FUTURE PLANS

In the Electronic Products Division, the Group will continue to place more emphasis on OEM business with contracts being already secured from renowned customers such as Casio, Citizen, Canon and Napolex. The Group currently manufactures approximately 110,000 units of OEM items per month for Casio and the business is expected to expand even further in the next couple of years. In addition, the Group's expanded sales and marketing force is aggressively seeking new customers for OEM business. After the factory expansion program carried out during 1996 and 1997, the Group will aim at strengthening and enhancing the existing production capacity and will take various management control measures to gear up its efficiency.

In the Electronic Components and Parts Division, PCBs has grown from strength to strength and remains the focus of intensive reorganisation and expansion efforts. In April 1998, the second production line for PCB has become fully operational while the first production line will be upgraded. In mid-1998, when both lines will be fully operational, our production capacity for PCB products will be ramped up by 150% provoking a shift to higher margin and higher layer-count products. To match with our reorganisation program, the expansion plan for the third production line has however been postponed till early 1999. The Group will target its marketing and sales efforts in Hong Kong, China, Singapore, Europe and North America.

For the distribution of electronic components and parts, a distributorship agreement has already been signed with a Japanese supplier, Copal Electronics Co., Ltd. in August 1997 for a non-exclusive right to sell its products in the PRC so that the Group's distribution capacity is better utilised. On the other hand, a PRC distributorship right from another internationally well-known Japanese electronics group has also been under discussion.

Research and development has always been one of our key strengths. Our Electronic Products Division is carrying out R&D projects on weather forecast equipment and digital compass which are expected to commence production in the second quarter of 1998. We are also in the process to develop Radio Control Clock on OEM basis and production is scheduled to commence before 1998 year end. In addition, the Group is planning to develop Radio Frequency (RF) products like RF Thermometer and RF Control.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S SECURITIES

During the period, the Company repurchased a total of 772,000 shares of its own shares on The Stock Exchange of Hong Kong Limited. Details of these repurchases are summarised as follows:

All the shares repurchased were subsequently cancelled upon repurchase and accordingly, the issued share capital of the Company was reduced by the nominal value of these shares. The premium paid on repurchases was charged against share premium account and an amount equivalent to the nominal value of the shares cancelled was transferred from retained profits to the capital redemption reserve. Save as disclosed above, there was no purchase, sale or redemption of the Company's listed securities by the Company or any of its subsidiaries during the period.

PLACEMENT OF WARRANTS

In September 1997, the Company has placed, through a placing agent, 86,000,000 warrants (the "Warrant") by way of a private placing at an issue price of HK$0.30 per Warrant. The Warrants entitle the holders thereof to subscribe up to HK$55,900,000 in cash for shares of HK$0.10 each (the "Shares") in the share capital of the Company at an initial subscription price of HK$0.65 per Share, subject to adjustment, at any time from the date of issue to 31st December, 1998. Upon full exercise of the subscription rights attached to the Warrants, 86,000,000 Shares will fall to be issued.

CHANGE OF ACCOUNTING DATE

Pursuant to the directors' resolution on 29th April, 1997, the Group changed its financial year end reporting date from 31st October to 31st December in order to have a coterminous accounting date among all group companies.

CODE OF BEST PRACTICE

None of the Directors is aware of information which would reasonably indicate that the Company was not in compliance with the Code of Best Practice, as set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange at any time during the fourteen months ended 31st December, 1997, except that the independent non-executive directors of the Company are not appointed for specific terms, but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the provision of the Company's Bye-Laws.

By Order of the Board
Yau Tak Wah Paul
Chairman

Hong Kong, 8th May, 1998