ANNOUNCEMENT OF 1998 FINAL RESULTS

The Directors of Dah Sing Financial Holdings Limited (the "Company") announce that the audited results of the Company and its subsidiaries (the "Group") for the year ended 31st December 1998 are as follows:

Consolidated Profit and Loss Account

for the year ended 31st December

Other Financial Indicators
Consolidated Balance Sheet

Final Dividend

At the forthcoming annual general meeting of the Company to be held on Thursday, 29th April 1999, the Directors will propose a final dividend of HK$0.30 per share for 1998 with an option to receive newly issued and fully paid shares in lieu of cash dividend to Shareholders whose names are on the Register of Shareholders as at close of business on 8th April 1999. No fractional shares will be issued to Shareholders electing for scrip dividend and shares representing fractional entitlements will be disposed of for the benefit of the Company. Newly issued shares will rank pari passu in all respects with the existing shares except that they will not rank for the 1998 final dividend. New share entitlements will be calculated by reference to the average of the closing prices on The Stock Exchange of Hong Kong Limited of the existing shares of the Company for the five trading days up to and including 26th March 1999. Particulars of the scrip dividend scheme will be detailed in a circular to Shareholders together with an election form to be released on or about 7th April 1999. The issue of new shares pursuant to the proposed scrip dividend is subject to the approval of the Listing Committee of The Stock Exchange of Hong Kong Limited. Dividend warrant in respect of cash dividend, or share certificates in respect of the scrip dividend, will be sent to Shareholders by ordinary mail on or about 3rd May 1999.

Together with the interim dividend of HK$0.30 per share, the total dividend for the year is HK$0.60 per share, down 46.9% from 1997.

Closing of Register of Shareholders

The Register of Shareholders will be closed from Tuesday, 30th March 1999 to Thursday, 8th April 1999, both days inclusive. In order to qualify for the final dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Registrars, Central Registration Hong Kong Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:00 p.m. on Monday, 29th March 1999.

Review of Business

The Asian financial turmoil led to a volatile and difficult operating environment in 1998. The combination of economic recession, volatile and high interest rates, credit contraction, sharp decline in asset prices, and rise in unemployment resulted in a most unfavourable market environment throughout the year. Against that background, the Group achieved a reasonable performance through more prudent asset and liability management, sound credit risk management, continued expansion in life assurance business and cost control. The Group’s operating profit before exceptional items for the year was down 32.4% when compared with 1997.

Higher and volatile interest rates, together with the repeated occurrences of inversion between local prime rate and interbank interest rates in 1998, resulted in a tighter net interest margin. Although we made good use of interest rate swaps to hedge a part of our fixed-rate loans, with about 24% of our loan book in the form of fixed-rate loans, the rise in interest rates negatively affected our net interest income. The Group’s net interest margin dropped to 2.62% in the year, down from the 3.26% in 1997.

Other operating income was up 22.3% mainly on the back of the stronger contribution from our life assurance business due to the continuous growth in new life policies. Non-interest income generated by our banking business also registered satisfactory performance due to stronger performance in our retail banking and treasury businesses.

Operating expenses increased 2.7% over 1997 despite our vigorous rationalisation programmes. The increase was mainly caused by higher information technology spending to support our businesses and higher rental cost on some office premises renewed in 1997. Cost control and reduction will continue to be key objectives of the Group throughout 1999.

The Group’s overall charge for bad and doubtful debts was much higher than 1997 due to the weak economic fundamentals, large drop in property prices and rise in unemployment. The write-back in general provision in 1998 reflected the reduction in our 1998 year-end loan balances relative to 1997. Specific provision charge was up by more than 5 times over 1997. The HK$266 million specific provision charged was around 1% of the average loan balance in the year. At the end of 1998, non-accrual loans were 2.30% of total loans and advances. The Group will continue to pursue a prudent credit policy to preserve sound asset quality.

Total loans and deposits (including certificates of deposits) as at end of the year were down by 9.6% and 1.0% respectively when compared with 1997 year end. One of the reasons contributing to the reductions is the exclusion of Jian Sing Bank’s ("JSB") loans and deposits at the end of 1998, as China Construction Bank exercised its option to acquire an additional shareholding in JSB from the Group at the end of October 1998, reducing the Group’s interest in JSB to 30%. If the exclusion of JSB is normalised, total loans would have dropped by 4% while total deposits would have increased by 6%. In view of the general slowdown in economic activities and deterioration in asset quality, we adopted a more cautious approach in extending new credits. Our prudent balance sheet management contributed to the improvement in the loan to deposit ratio and the maintenance of sound liquidity ratio.

Our life assurance business achieved a strong performance despite the difficult and increasingly competitive market. With the continuous growth in the sales of new policies and the adoption of a balanced investment strategy, our life assurance business generated a net contribution of HK$99.2 million, or 25.7% higher than the HK$78.9 million booked in 1997. Life assurance’s contribution is included in other operating income.

Due to the material fall in the market values of properties in 1998, the Group decided that a revaluation of all properties of the Group at the end of 1998 was appropriate, even though all properties, both investment properties and bank premises, had been revalued at the end of 1997. The latest revaluation exercise conducted by professional valuers indicated a sizeable reduction in the values of our properties over the course of 1998. The exceptional loss in 1998 includes (1) HK$74.3 million investment-property revaluation deficit and (2) revaluation deficit of HK$108.6 million on certain premises used by the Group. At the end of 1998, the total market values of our investment properties and premises used by the Group were HK$435.5 million and HK$832.3 million respectively

Year 2000 Issue

Amongst the operational activities of the Group, resolution of the year 2000 problem remained as one of our highest priorities through 1998. The Group began resolving the year 2000 issue in early 1997. The Group’s definition of year 2000 compliance is that all our critical processes continue to operate into the next century by demonstrating that every supporting information system will continue to function in the year 2000 and beyond. A group-wide compliance programme, headed by the Group’s Managing Director who is supported by a Steering Committee comprising senior officers from different functions in the Group, was established to ensure that the operations of the Group are not adversely affected by the failure of any computer system to correctly process dates before, into and beyond the year 2000; and to limit any risk arising from year 2000 problems experienced by our major business partners and customers.

Our programme is on schedule. By the end of 1998, the Group had tested all critical and required non-critical IT systems, and completed all IT related work in line with the requirements of the Hong Kong Monetary Authority. Good progress had been made on investigating and assessing the readiness of major counterparties and other service providers on their compliance programmes. We will make necessary process adjustments to take account of external year 2000 risks.

Our compliance programme will continue in 1999 during which we will prepare a contingency plan to address any residual year 2000 risks, and take part in industry-wide test programmes. The Year 2000 Programme Team will continue to report to the Managing Director until all aspects of the work are complete.

The total expenditure on the year 2000 programme is anticipated at HK$28.6 million. The total expenditure committed from 1997 and up to the end of 1998 amounted to HK$23.5 million. A total of HK$22.4 million was expensed off in 1998. The final tranche of expenditure, estimated at HK$5.1 million, will be incurred in 1999.

Prospects For 1999

We believe 1999 will be another difficult year for Hong Kong although the interest rate environment is likely to be less volatile. The preservation of sound asset quality will be a key determinant in maintaining profitability, as will control of costs where we expect to see our cost base decline by a meaningful percentage. Our continued diversification into a broader range of financial services should also be helpful in improving profitability.

Dealings in the Company's Shares

There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company’s listed shares during the year ended 31st December 1998.

Hong Kong, Thursday, 4th March 1999

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