SELVAS PHOTOGRAPHICS LIMITED CHAIRMAN'S LETTER TO THE SHAREHOLDERS Dear Selvas Family Members, I shall begin my address to you by paying homage to our brave soldiers who have sacrificed their lives for the nation. The year in retrospect was listless for your Company and for the industry as well. For most part of the year, the economic slowdown had its adverse impact on demand, prices and liquidity. The GDP grew at 5.8% and rate of industrial growth dipped below 4% in FY 98-99. The photogoods industry was no exception in the slowdown which gripped most of the businesses, other than Information Technology, Fast Moving Consumer Goods and Pharmaceuticals. Infact, type drop in demand in the photogoods also led to pressure on prices as the competition moved from quality to price reductions in order to grow the market share. The union budget move of increasing excise duty and not allowing modvat recovery to the fullest extent added to the woes of the photogoods industry. Also, it should not be forgotten that this industry has to survive in a time period of volatile exchange rate scenario, as it imports all its raw material. Thus, the year gone by was one of the most difficult witnessed in the Company's history, where all the negative factors co-existed. Your Company continued to focus on the strategic improvements, as outlined last year. We took initiatives in broadbasing the Clientele in the Private as well as Public Sector in the Medical X-Ray films segment. The efforts on increasing presence among the Doctors and Radiologists community were strengthened by various programs. This enabled us to sustain the market share in a difficult time period. The industrial X-Ray film market is largely dependent on investment in the economy and the current level of investments in the economy are a cause of concern. Despite sluggish market, we did relatively better in the industrial X-Ray segment also. As we move forward in the new year, 1999-2000, there is a brisk improvement in the Indian Economy. The GDP growth rate is estimated at 6.1% by the CII. The agricultural and industrial production rate are inching up. The liquidity problems are soon becoming a matter of past. These should have a positive impact on the demand for photogoods and in particular for the Medical and Industrial X-Ray films. Hopefully, a new stable government would also bring the much needed insurance reforms opening up the mega future for your Company's products in the Medical X-Ray films. We therefore, look forward to a better current year, in terms of sales and profit growth. We have kept, shareholder value as uppermost factor and despite a not so encouraging performance have proposed a reasonable dividend and shall look at all avenues which would lead to betterment of shareholder wealth in time to come. Place: Mumbai ANIL V. CHOKSI Dated: 2nd August, 1999 Chairman