1999 ANNUAL REPORT


                                      THE
                                   SMITHFIELD
                                   COMPANIES


                               [BACKGROUND PHOTO]

Above: an original E.M. Todd invoice, dated 1779, for the sale of hams to a
customer in St. Eustatius, West Indies.

<PAGE>


--------------------------------------------------------------------------------
                                  On the Cover
--------------------------------------------------------------------------------

The E. M. Todd Company, America's oldest meat packer, was acquired in 1998 by
The Smithfield Companies. One of its earliest invoices, dated 1779, is shown on
the cover.

                                     [PHOTO]
                               Capt. Mallory Todd

     SOMETIME DURING the early days of the American Revolutionary War, a
Bermudan sea captain named Mallory Todd (1742-1817) left Bermuda and settled in
Isle of Wight County in Virginia at Smithfield. The Todd Family were freeholders
of Southampton Parish, Bermuda and apparently good solid citizens. In 1767 Todd
was married to Angelina Mallory, daughter of Captain John Mallory, a mariner of
Isle of Wight County who is believed to have also come from Bermuda and probably
was a relative.

   TODD BEGAN RAISING HOGS, and it was not long before the Captain learned
from  the  locals  how  to  cure  and  flavor  the  pork.  As he  began  selling
commercially,  he  established  what is  believed  to be the  oldest  firm to be
founded in  Virginia  and one of the oldest in this young  nation.  The  invoice
shown on the cover,  dated April 30, 1779,  indicates  that Captain Todd shipped
hams from  Smithfield  to the  island  of St.  Eustatius  in the West  Indies in
exchange for one two pound cannon (valued at thirteen  pounds six shillings) and
one hat (valued at five shillings four pence).

                                    [PHOTO]
                           THE ORIGINAL TODD KITCHEN

   Their  profitable  trade  enabled  the  Todds  to  build a  handsome  home in
Smithfield known as "The Hill" that still stands on Wharf Hill.  Adjacent to the
Todd home was constructed a meat processing facility. At the foot of Wharf Hill,
square riggers and schooners took cargo for Continental, British and West Indies
ports. Tobacco, cured hams, bacon barrel stoves, hoop poles, and corn were among
Smithfield's early exports.


                                    [PHOTO]
                         AMERICA'S FIRST PACKING HOUSE

     IN THE NINETEENTH CENTURY, the business stayed in the Todd family, trading
under the name J.R. Todd, and ultimately was owned by Captain Todd's grandson,
E.M. Todd, from which the company's current name derives. In 1907, when E.M.
Todd wrote his will, P.D. Gwaltney, Jr. was firmly established in the ham
business, and V.W. Joyner was doing a thriving retail business in his store on
Commerce Street, curing hams in the backyard of his home. Todd's will included
the following: "BY AN AGREEMENT DATED FEBRUARY 8, 1907, by and between myself,
E.M. Todd, trading under the firm name and style of E.M. Todd Company of
Smithfield, Virginia, and W.S. Forbes, trading under the firm name of W.S.
Forbes & Company, of the City of Richmond, Virginia, which agreement in
writing...I have bargained, sold, assigned and granted unto the said W.S. Forbes

<PAGE>


& Company the sole and exclusive right and privilege to use, preserve, cut, cure
and pack and sell hams under my well-known and established brand of `J.R. Todd'.
The said W.S. Forbes Company to pack and sell each year under the aforesaid
brand not less than twenty-thousand (20,000) hams, and to pay me as a royalty
therefore one cent per lb. for all hams packed and sold under said brand..."

   The agreement further granted W.S. Forbes & Company an option to buy the E.M.
Todd Company for $50,000 which it eventually did--thus explaining why Todd moved
to Richmond. At that time, the Commonwealth of Virginia had not enacted the laws
that exist today  limiting the use of the term "genuine  Smithfield" to hams dry
cured only in the town of Smithfield, Virginia.

   THE  ARMISTEAD  CHURCHILL  YOUNG FAMILY of Richmond soon after emerged as the
owners of E.M. Todd Company, Incorporated. The Youngs did much to promote Todd's
Smithfield  style  Virginia hams and bacon  nationwide.  These quality  products
could be found in some of the  nation's  finest  restaurants,  hotels and retail
establishments  from the Royal  Hawaiian  Hotel to New York's Pierre Hotel.  For
three generations, the Young family operated E.M. Todd & Co., Inc.

                                    [PHOTO]
                                  TRADEMARK(R)

     Finally, in 1998, almost 220 years from the first recorded sale of hams
from Smithfield and after a 90 year absence, the Todd ham and bacon business
returns to its roots in Smithfield by way of its acquisition by The Smithfield
Companies, Inc.

     THE SMITHFIELD COMPANIES, INC. is a diversified producer of specialty food
products. The Company markets its products primarily to the retail grocery, food
service and gourmet food industries as well as through its own retail outlets
and consumer catalogs. Its five operating units are The Smithfield Ham and
Products Co., V.W. Joyner & Co., Pruden Packing Co., The E.M. Todd Company and
Williamsburg Foods.

                                  ~ Contents ~

   Letter to Shareholders                 2
   Selected Financial Data                4
   Management's Discussion and Analysis   5
   Consolidated Financial Statements      8
   Report of Independent Accountants     18
   Quarterly Results of Operation        18
   Directors, Executive Officers
     and Management                      19
   Corporate Information                 20





<PAGE>

To Our Fellow Shareholders

[PICTURE]

The past fiscal year was a remarkable one for The Smithfield Companies, by
virtually any measure. All of our operating units performed well and many of the
goals we set as the year began were achieved. Most importantly we continued to
successfully execute our strategic plan of growing branded leadership positions
in multiple specialty food distribution channels.

      On April 22, 1998, a historic event occurred for your Company with the
acquisition of The E. M. Todd Company. Founded in Smithfield, Virginia prior to
1779, Todd is not only America's oldest meat packer but the original curer of
the now renowned Smithfield Ham. Today, Todd markets its hams and bacon under
the Hermitage and E. M. Todd brands. Although this acquisition is not
financially material to our company, the history associated with the Todd name
and Smithfield Ham are significant.

      Many of our core brands and product lines are over a hundred years old.
Their longevity is a testament to your Company's continuing commitment to
tradition, quality and consumer value. As we enter the new millenium, we will
carry forth the best of the past while investing for the future. In April 1999,
construction was completed and we began production in our new 19,000 square
foot frozen food processing plant in Smithfield which will support our
barbecue, chili and stew product lines. This $2.8 million facility replaces an
old and inefficient plant which could not meet current production requirements.
The new state of the art facility accommodates growth by tripling our
production capability and gives Smithfield the capacity to develop and produce
new products.


FINANCIAL PERFORMANCE AND CONDITION


      It was a fine year as our numbers attest. Net sales for the year ended
March 31, 1999 grew 4% to $21.2 million compared to $20.4 million a year
earlier. Net income from operations reached a record $1,462,000, a 36% increase
over $1,077,000 earned in fiscal 1998. Earnings per share increased 38% from
$.45 to $.62 per share.

      The Company's financial position remains strong and capable of supporting
our internal and external growth strategies. Total assets at year end were
$20.2 million of which $9.7 million was cash and cash equivalents. Although
Smithfield has substantial liquid assets to fund capital expenditures, the
Company obtained an Industrial Development Revenue Bond to finance our new
processing facility in order to take advantage of a low interest rate
environment and retain cash.

      In fiscal 1999, Smithfield generated $1.9 million in cash from operating
profits and non-cash expenses. We spent $2.4 million of capital to increase
plant capacity and production efficiencies in our new and existing facilities
which will lead to higher profitability.


ENHANCED SHAREHOLDER RETURN


      The Smithfield Companies' stock again proved to be a good investment this
past fiscal year, providing shareholders with a total return (price
appreciation plus dividends) of 22.0% compared to a 12.7% decline for the S & P
foods group.

      During the year your Board of Directors increased the quarterly dividend
to $.035 from $.03 per share while this past fiscal year marked the seventh
consecutive year that regular quarterly dividends paid have increased.
Additionally, because of your Company's strong cash flow and solid balance
sheet an extra dividend of $.05 per share was declared by the Directors payable
on June 30, 1999. Both Board actions demonstrate confidence in the performance
outlook for our business, near- and long-term.


--------------------------------------------------------------------------------
2         The Smithfield Companies, Inc.

<PAGE>

      Your Company has continued to acquire our stock in the open market and as
of this writing we have repurchased approximately 1.1 million shares since July
1990. Additional shares may be purchased in the future if your Board believes
our shares are undervalued in the marketplace.


DIRECTORS


      We at The Smithfield Companies were very saddened by the death in August
1998 of an original member of the Company's Board of Directors, Edward Acree.
Ed contributed greatly to the Company's success and was always a faithful
promoter and supporter of the Company, its employees and its products. He will
not only be missed as a business associate, but also as a very good friend.

      In January 1999, R. Scott Morgan, President of TowneBank was elected to
the Board of Directors. Scott serves on several other corporate boards and
brings outstanding leadership qualities to Smithfield. We expect to benefit
from his broad business expertise and we look forward to his input in the
coming years.

      In closing, I would like to pay tribute to the people of The Smithfield
Companies -- some 150 strong -- for a job exceptionally well done. It is their
drive, skills and dedication that made it happen and what happened has set the
stage for the new millenium. And finally, I would like to thank our
shareholders for your continued interest and support. I look forward to
visiting with those who will be at our annual meeting on July 30, 1999.


/s/ ILLEGIBLE SIGNATURE


PRESIDENT AND CHIEF EXECUTIVE OFFICER
JUNE 11, 1999

                                    [4 GRAPHS]

                                   1999      1998      1997      1996      1995
                                   ----      ----      ----      ----      ----
Income from continuing
    operations (in thousands)   $ 1,462   $ 1,077   $   911   $   809   $   542

Net sales (in thousands)        $21,195   $20,425   $19,481   $18,180   $17,854

Book Value Per Share            $  6.72   $  6.23   $  5.88   $  5.61   $  4.86

Regular Dividends               $  0.13   $  0.12   $  0.11   $  0.10   $  0.09

--------------------------------------------------------------------------------
                                                    1999 Annual Report        3
<PAGE>

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                                      FOR THE YEAR ENDED MARCH 31
                                                 ----------------------------------------------------------------------
                                                     1999           1998           1997           1996          1995
                                                 ------------   ------------   ------------   ------------   ----------
<S>                                              <C>            <C>            <C>            <C>            <C>
Income Statement Data:
Net sales                                          $ 21,195       $ 20,425       $ 19,481       $ 18,180      $17,854
Cost of goods sold                                   13,773         13,893         12,999         11,527       11,335
-----------------------------------------------------------------------------------------------------------------------
 Gross profit                                         7,422          6,532          6,482          6,653        6,519
Other operating revenue                                  80            100             87             54           59
Selling, general and administrative expenses          5,600          5,293          5,519          5,750        5,524
-----------------------------------------------------------------------------------------------------------------------
 Operating income                                     1,902          1,339          1,050            957        1,054
Interest income (expense), net                          255            243            281            247         (151)
-----------------------------------------------------------------------------------------------------------------------
 Income from continuing operations
   before income taxes                                2,157          1,582          1,331          1,204          903
Income taxes                                            695            505            420            395          361
-----------------------------------------------------------------------------------------------------------------------
 Income from continuing operations                    1,462          1,077            911            809          542
Income from discontinued operations                      --             --             --          1,843          851
-----------------------------------------------------------------------------------------------------------------------
 Net income                                        $  1,462       $  1,077       $    911       $  2,652      $ 1,393
=======================================================================================================================
Diluted earnings per share:
 Continuing operations                             $   0.62       $   0.45       $   0.35       $   0.28      $  0.18
 Discontinued operations                                 --             --             --           0.64         0.29
-----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share                         $   0.62       $   0.45       $   0.35       $   0.92      $  0.47
=======================================================================================================================
Dividends per share of common stock                $   0.13       $   0.12       $   0.11       $   0.16      $  0.09
=======================================================================================================================
Balance Sheet Data (at year end):
Working Capital                                    $ 12,038       $ 10,758       $  9,755       $ 11,980      $ 6,687
Total Assets                                         20,160         15,831         15,909         17,679       17,443
Long-term Debt                                        2,800             --             --             --        1,000
Stockholders' Equity                                 15,741         14,599         14,310         15,894       14,233
</TABLE>

--------------------------------------------------------------------------------
4   The Smithfield Companies, Inc.

<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations

General

     The Company produces and markets branded foods primarily to the retail
grocery, food service and gourmet food industries. The Company also markets its
products through direct mail and its own retail outlets. The Company's business
is somewhat seasonal with its direct mail and gourmet food operations having
disproportionate sales during the Christmas season. This traditionally makes
the Company's third quarter sales and income the highest of the fiscal year.


Results of Operations

     The following table shows, for the periods indicated, items included in
Selected Financial Data as a percentage of sales and the percentage changes in
the dollar amounts of such items compared to the prior period.

<TABLE>
<CAPTION>
                                                                                              PERIOD TO PERIOD
                                                           PERCENTAGE OF SALES                     CHANGE
                                                              FISCAL YEARS                      FISCAL YEARS
                                                             ENDED MARCH 31                    ENDED MARCH 31
                                                 ---------------------------------------   ----------------------
                                                                                            1999 VS      1998 VS
                                                     1999          1998          1997         1998        1997
                                                 -----------   -----------   -----------   ---------   ----------
<S>                                              <C>           <C>           <C>           <C>         <C>
Net sales                                            100.0%        100.0%        100.0%        3.8%         4.8%
Cost of goods sold                                    65.0          68.0          66.7       ( 0.9)         6.9
                                                     -----         -----         -----
Gross profit                                          35.0          32.0          33.3        13.6          0.8
Other operating revenue                                0.4           0.5           0.4       (19.8)        14.3
Selling, general and administrative expenses          26.4          25.9          28.3         5.8        ( 4.1)
                                                     -----         -----         -----
Income from operations                                 9.0           6.6           5.4        42.1         27.4
Interest expense                                     ( 0.0)        ( 0.0)        ( 0.0)      218.8        (16.5)
Other income                                           1.2           1.2           1.5         7.3        (13.3)
                                                     -----         -----         -----
Income before income taxes                            10.2           7.8           6.9        36.3         18.9
Income taxes                                           3.3           2.5           2.2        37.6         20.2
                                                     -----         -----         -----
Net income                                             6.9%          5.3%          4.7%       35.7         18.2
                                                     =====         =====         =====
</TABLE>

Fiscal 1999 Compared to Fiscal 1998

     Net sales in 1999 were $21.2 million compared to $20.4 million in 1998.
The improvement in sales is due to increases in unit sales across most of the
Company's product lines coupled with a significant seasonal sale to a national
club store chain. Unit sales increases were partially offset by lower selling
prices due to lower pork related raw material costs. Cost of sales decreased as
a percentage of net sales to 65.0% for the year ended March 31, 1999 from 68.0%
for the year ended March 31, 1998. The higher gross profit margins were
primarily due to lower costs for pork related products.

     Selling expenses increased as a percentage of net sales to 14.2% for the
year ended March 31, 1999 from 13.3% for the year ended March 31, 1998. The
Company increased some marketing and promotional expenses during the year as a
result of higher margins to help increase sales distribution. These additional
selling expenses helped increase tonnage during the year.

     General and administrative expenses remained relatively constant during
the two years ended March 31, 1999.

     Net interest income increased 4.7% during the year ended March 31, 1999
compared to the prior year. Higher average balances in interest bearing
instruments were somewhat offset by lower interest rates in 1999 compared to
1998.

     Income tax expense as a percentage of income before income taxes was
slightly higher in 1999. Tax-exempt interest income as a percentage of income
before income taxes was lower in 1999 compared to 1998 thereby increasing the
overall average tax rate. Income tax rates are lower than statutory rates
because of income from tax-exempt municipal bond funds.


--------------------------------------------------------------------------------
                                                         1999 Annual Report    5
<PAGE>

     Net income increased to $1,461,710 or $.62 per share in 1999 compared to
$1,077,115 or $.45 per share in 1998. The difference in weighted average shares
outstanding between 1999 and 1998 is due to the repurchase of 2,367 shares in
fiscal 1999. The difference in basic and diluted weighted average shares is due
to exercisable stock options.


Fiscal 1998 Compared to Fiscal 1997

     Net sales in 1998 were $20.4 million compared to $19.5 million in 1997.
The increase in sales was primarily due to the acquisition of the frozen
barbecue and chili product lines from Doughtie's Foods, Inc. on February 28,
1997. The sales increase was partially offset by the sale of the operations of
The New Orleans School of Cooking on July 22, 1997. Cost of sales increased as
a percentage of net sales to 68.0% for the year ended March 31, 1998 from 66.7%
for the year ended March 31, 1997. Higher margins for pork related products
were partially offset by the loss of sales from New Orleans which carried
higher than average margins.

     Selling expenses increased as a percentage of net sales to 13.3% for the
year ended March 31, 1998 from 12.2% for the year ended March 31, 1997. Selling
expenses associated with the increased wholesale sales derived from the
Doughtie's product lines are greater than selling expenses in prior years
associated with retail sales from New Orleans. Selling expenses associated with
similar product lines were relatively constant during 1998 and 1997.

     General and administrative expenses (G&A expenses) decreased by $570,000
during the year ended March 31, 1998 compared to the prior year. Eliminating
the G&A expenses associated with The New Orleans School of Cooking, 1998 G&A
expenses would have increased $185,252 or 8.5 %. This increase is due to higher
administrative expenses associated with the Doughtie's acquisition as well as
normal cost increases.

     Net interest income decreased to $243,402 for the year ended March 31,
1998 from $280,770 for the year ended March 31, 1997. Invested balances during
fiscal 1998 were lower than fiscal 1997 primarily due to the acquisition of the
frozen barbecue and chili product lines from Doughtie's Foods, Inc. and the
significant amount of repurchased stock during the past two years.

     Income tax expense as a percentage of income before income taxes was
consistent for the years ended March 31, 1998 and 1997. Income tax rates are
lower than statutory rates because of interest income from tax-exempt municipal
bond funds.

     Net income increased to $1,077,115 or $.45 per share in 1998 compared to
$911,016 or $.35 per share in 1997. The difference in weighted average shares
outstanding between 1998 and 1997 is due to the repurchase of 91,670 shares in
1998 and 397,222 shares in 1997. The difference in basic and diluted weighted
average shares is due to exercisable stock options.


Liquidity and Capital Resources

     During the year ended March 31, 1999 the Company obtained an Industrial
Development Revenue Bond (the Bond) in the amount of $2,800,000 to finance the
construction of a 19,000 square foot frozen food processing plant and the
purchase of related equipment to support the Company's barbecue, stew and chili
product lines. Although the Company had available cash on hand to finance the
construction, it obtained the Bond to take advantage of a low interest
environment. The Bond matures in the year 2014 and has principle payments of
$500,000 due in 2004 and 2009.

     At March 31, 1999, the Company had approximately $8.8 million invested in
short-term highly liquid debt instruments. In addition, the Company has an
unused $10 million line of credit loan with a bank, bearing interest at the
LIBOR market rate plus .50%, which expires on July 31, 2000.

     The Company believes its liquidity and capital resources to be excellent.
Current cash flow and available funds are sufficient to satisfy existing cash
requirements.

     At March 31, 1999 the Company had approximately $500,000 remaining to
complete its construction in progress which was completed during April 1999.
The Company intends to use its cash and cash equivalents to finance the
remaining construction.


--------------------------------------------------------------------------------
6    The Smithfield Companies, Inc.

<PAGE>

     The Company will continue its strategy of looking for growth through
acquisitions in higher margin segments of the food industry. Having a
significant amount of cash on hand, as well as available funds on its credit
line, the Company believes it is in excellent position to invest in assets that
will increase shareholder value over time.

     Management believes the Company's capital resources are sufficient to meet
all of its working capital requirements into the foreseeable future.


Year 2000 Compliance

     The "Year 2000" problem relates to computer systems that have time and
date -- sensitive programs that were designed to recognize a date using "00" as
the year 1900 rather than the year 2000. If a computer system or software
application ("IT systems") used by the Company or a third party dealing with
the Company fails because of the inability of the system or application to
properly read the year "2000", the results could conceivably have a material
adverse effect on the Company. In addition, many systems and equipment that are
not typically thought of as "computer-related" ("non-IT systems") contain
imbedded hardware or software that may have a time element which could cause
system failures.

     The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. The Company has, and intends
to continue to utilize internal personnel, contract programmers and third-party
vendors to identify, prioritize and access Year 2000 noncompliance concerns.
The Company believes it has identified its non-compliant software and hardware
which will be modified or replaced. These modifications and replacements to
both IT and non-IT systems are currently being done and are expected to be
completed in mid 1999. The total cost of these Year 2000 compliance activities
is expected to be less than $100,000 and will not have a material impact on the
Company's financial position, results of operations or cash flows.

     The Company relies on third party suppliers for raw materials, water,
utilities and other key services. Interruption of supplier operations due to
Year 2000 issues could affect Company operations. The Company is also dependent
upon its customers for sales and cash flow. Year 2000 interruptions in customer
operations could effect sales and receivable levels as well as cash flow
reductions. The Company believes its customer base is broad enough to minimize
the affects of a simple occurrence. The Company has evaluated the status of
third party efforts and has determined alternatives and contingency plan
requirements. The reduction of risk due to noncompliance with Year 2000 issues
include the identification of alternate suppliers and the accumulations of
inventory to assure production capability. These activities are intended to
provide a means of managing risk but cannot eliminate the potential for
disruption due to third party failure.


Impact of Inflation

     Over the past three years, the effects of inflation on the Company's
operations have been minimal. If inflation rises substantially, competitive
pressures may make it difficult for the Company to pass the increases to the
consumer.


--------------------------------------------------------------------------------
                                                         1999 Annual Report    7
<PAGE>

CONSOLIDATED BALANCE SHEETS
THE SMITHFIELD COMPANIES, INC.



<TABLE>
<CAPTION>
                                                                    MARCH 31
                                                          -----------------------------
                                                               1999            1998
                                                          -------------   -------------
<S>                                                       <C>             <C>
ASSETS
CURRENT ASSETS
 Cash and cash equivalents                                $ 9,728,710     $ 7,679,907
 Trade receivables, less allowance for doubtful
   accounts of $79,000 in 1999 and $71,000 in 1998          1,060,459       1,258,593
 Inventories                                                2,717,850       2,900,668
 Prepaid expenses                                              36,217          50,460
 Deferred income taxes                                        115,000         100,000
-------------------------------------------------------   -----------     -----------
      TOTAL CURRENT ASSETS                                 13,658,236      11,989,628
PROPERTY AND EQUIPMENT
 Land                                                         346,342         346,342
 Buildings                                                  3,516,539       3,497,719
 Machinery and equipment                                    1,886,245       1,820,973
 Delivery equipment                                           269,201         264,885
 Office furniture and equipment                               600,440         506,618
 Construction in progress                                   2,201,088          20,427
-------------------------------------------------------   -----------     -----------
                                                            8,819,855       6,456,964
 Less accumulated depreciation                              3,577,974       3,231,045
-------------------------------------------------------   -----------     -----------
                                                            5,241,881       3,225,919
OTHER ASSETS
 Marketable securities                                        575,840
 Trademarks, net of accumulated amortization                  141,486         160,400
 Other intangibles, primarily customer lists, net of
   accumulated amortization                                   310,909         344,660
 Bond issuance costs, net of accumulated amortization         102,136
 Deferred income taxes                                        130,000         110,000
-------------------------------------------------------   -----------     -----------
                                                            1,260,371         615,060
                                                          -----------     -----------
                                                          $20,160,488     $15,830,607
                                                          ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                                         $   594,569     $   532,720
 Accrued compensation                                         326,662         225,076
 Accrued expenses                                             425,851         337,643
 Income taxes payable                                         272,864         136,398
-------------------------------------------------------   -----------     -----------
      TOTAL CURRENT LIABILITIES                             1,619,946       1,231,837
LONG-TERM DEBT                                              2,800,000
STOCKHOLDERS' EQUITY
 Preferred stock, $100 par value-authorized
   250,000 shares; none issued
 Common stock, no par value, authorized 5,000,000
   shares; outstanding 2,341,061 shares and 2,343,428
   shares                                                   2,488,492       2,503,869
 Retained earnings                                         13,252,050      12,094,901
-------------------------------------------------------   -----------     -----------
                                                           15,740,542      14,598,770
                                                          -----------     -----------
                                                          $20,160,488     $15,830,607
                                                          ===========     ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

--------------------------------------------------------------------------------
8    The Smithfield Companies, Inc.

<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
THE SMITHFIELD COMPANIES, INC.



<TABLE>
<CAPTION>
                                                 FOR THE YEAR ENDED MARCH 31
                                       ------------------------------------------------
                                            1999             1998             1997
                                       --------------   --------------   --------------
<S>                                    <C>              <C>              <C>
Net sales                              $21,195,201      $20,425,385      $19,481,357
Cost of goods sold                     13,772,895       13,893,306       12,999,407
------------------------------------   -----------      -----------      -----------
 Gross profit                           7,422,306        6,532,079        6,481,950
Other operating revenue                    79,839           99,524           87,101
------------------------------------   -----------      -----------      -----------
                                        7,502,145        6,631,603        6,569,051
Operating expenses:
 Selling                                3,018,289        2,720,254        2,376,012
 General and administrative             2,581,966        2,572,636        3,142,793
------------------------------------   -----------      -----------      -----------
                                        5,600,255        5,292,890        5,518,805
                                       -----------      -----------      -----------
 Operating income                       1,901,890        1,338,713        1,050,246
Nonoperating income (expense):
 Other income, primarily interest         264,378          246,400          284,362
 Interest expense                          (9,558)          (2,998)          (3,592)
------------------------------------   -----------      -----------      -----------
                                          254,820          243,402          280,770
                                       -----------      -----------      -----------
   Income before income taxes           2,156,710        1,582,115        1,331,016
Federal and state income taxes            695,000          505,000          420,000
------------------------------------   -----------      -----------      -----------
   Net income                          $1,461,710       $1,077,115       $  911,016
====================================   ===========      ===========      ===========
Basic earnings per share               $     0.62       $     0.45       $     0.35
====================================   ===========      ===========      ===========
Diluted earnings per share             $     0.62       $     0.45       $     0.35
====================================   ===========      ===========      ===========
Weighted average shares -- Basic        2,342,589        2,368,004        2,568,784
====================================   ===========      ===========      ===========
Weighted average shares -- Diluted      2,362,260        2,381,539        2,583,373
====================================   ===========      ===========      ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

--------------------------------------------------------------------------------
                                                         1999 Annual Report    9
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
THE SMITHFIELD COMPANIES, INC.



<TABLE>
<CAPTION>
                                                                     FOR THE YEAR ENDED MARCH 31
                                                          -------------------------------------------------
                                                                1999             1998             1997
                                                          ---------------   -------------   ---------------
<S>                                                       <C>               <C>             <C>
OPERATING ACTIVITIES
 Net income                                                $  1,461,710      $1,077,115      $    911,016
 Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                               441,406         444,225           427,860
    (Gain) Loss on disposal of property and equipment           (14,825)         (3,918)           18,768
    Provision for deferred income taxes                         (35,000)         90,000           (50,000)
    Changes in assets and liabilities:
      Trade receivables                                         198,134         292,790          (560,415)
      Inventories                                               182,818         107,557           (87,922)
      Prepaid expenses                                           14,243          20,922            (6,373)
      Accounts payable and accrued compensation
       and expenses                                             251,643        (166,068)         (186,283)
      Income taxes payable                                      136,466        (106,862)            1,087
-------------------------------------------------------    ------------      ----------      ------------
 NET CASH PROVIDED BY OPERATING ACTIVITIES                    2,636,595       1,755,761           467,738
INVESTING ACTIVITIES
 Proceeds from the sale of New Orleans                                          205,332
 Acquisition:
   Intangible assets                                                            (22,235)         (311,254)
   Inventories                                                                 (127,752)         (213,425)
   Equipment                                                                    (50,050)         (323,000)
 Purchase of marketable securities                             (575,840)
 Purchase of property and equipment                          (2,437,770)       (307,249)         (488,923)
 Proceeds from sale of long-term assets                          50,500         353,264            91,385
-------------------------------------------------------    ------------      ----------      ------------
 NET CASH (USED IN) PROVIDED BY
   INVESTING ACTIVITIES                                      (2,963,110)         51,310        (1,245,217)
FINANCING ACTIVITIES
 Proceeds from long-term debt                                 2,800,000
 Bond issuance costs paid                                      (104,744)
 Cash dividends paid                                           (304,561)       (284,181)         (283,058)
 Repurchase of common stock                                     (15,377)       (503,742)       (2,212,834)
-------------------------------------------------------    ------------      ----------      ------------
 NET CASH PROVIDED BY (USED IN)
   FINANCING ACTIVITIES                                       2,375,318        (787,923)       (2,495,892)
-------------------------------------------------------    ------------      ----------      ------------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                  2,048,803       1,019,148        (3,273,371)
Cash and cash equivalents at beginning of year                7,679,907       6,660,759         9,934,130
-------------------------------------------------------    ------------      ----------      ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                   $  9,728,710      $7,679,907      $  6,660,759
=======================================================    ============      ==========      ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

--------------------------------------------------------------------------------
10   The Smithfield Companies, Inc.

<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999


NOTE A - Significant Accounting Policies
     PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of The Smithfield Companies, Inc. and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

     CASH EQUIVALENTS: The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.

     SEGMENT INFORMATION: The Smithfield Companies, Inc. and its subsidiaries
are engaged principally in a single business segment designated as "food
processing". As a federally inspected food processor, the Company is engaged in
the processing and/or distribution of cured meats, smoked meats and other food
products.

     REVENUE RECOGNITION: Revenue is recognized at the time of title transfer,
which ordinarily occurs at the time of shipment. Revenue from retail stores is
recognized in the period which the products are sold.

     ADVERTISING COSTS: Advertising costs are expensed in the period incurred.

     USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the periods presented. Actual results could differ from those estimates.

     CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially
subject the Company to credit risk consist primarily of cash equivalents and
trade receivables. All of the Company's cash equivalents are in highly liquid
short-term municipal bond funds. The carrying amount of these cash equivalents
approximate fair value because of their short maturities and fluctuating
interest rates. Credit risk with respect to trade receivables is limited as the
Company has a large number of diverse customers, thus spreading the trade
credit risk. No single customer accounts for more than 10% of net sales.

     STOCK-BASED COMPENSATION: Stock-based compensation is determined using the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25. Required disclosures determined under the fair value method of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, are presented in Note E.

     NEW ACCOUNTING STANDARDS: The Company has adopted SFAS No. 130 "Reporting
Comprehensive Income", SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" and SFAS No. 132 "Employers Disclosures
about Pensions and Other Postretirement Benefits." The implementation of these
statements did not have a material effect on the financial condition or results
of operations of the Company. In October 1998, the Financial Accounting
Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities." This standard is effective for fiscal years beginning
after June 15, 1999. The Company does not expect that SFAS No. 133 will have a
material effect on the financial statements.

     INVENTORIES: Inventories are valued at lower of cost (determined on the
first-in, first-out method) or market.

     PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets using
the straight-line and accelerated methods (buildings 10-40 years; machinery and
equipment 7-10 years; delivery equipment 3-10 years; office furniture and
equipment 5-10 years). Accelerated methods are used for income tax purposes.
Gains and losses from dispositions or retirements of property and equipment are
recognized currently.

     MARKETABLE SECURITIES AND COMPREHENSIVE INCOME: Investments in marketable
securities are reported at fair market value based on quoted market prices,
with unrealized gains or losses, net of tax, recorded as a separate component
of shareholders' equity, if material.

     BOND ISSUANCE COSTS: Bond issuance costs have been capitalized and are
being amortized over the life of the bonds. Accumulated amortization of bond
issuance costs is $2,608 at March 31, 1999.


--------------------------------------------------------------------------------
                                                         1999 Annual Report   11
<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999

     AMORTIZATION OF INTANGIBLES: Intangibles include goodwill, trademarks,
brand names and customer lists. Goodwill is being amortized over twenty years
using the straight-line method. Trademarks, brand names and customer lists are
being amortized over their estimated useful lives of four to twenty years using
the straight-line method. Accumulated amortization of intangibles is $448,000
and $396,000 at March 31, 1999 and 1998, respectively.

     INCOME TAXES: Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.

     EARNINGS PER SHARE: Earnings per share are computed based upon the
weighted average number of common shares outstanding and common equivalent
shares in the form of stock options.


NOTE B - Inventories
     Inventories at March 31, 1999 and 1998 consisted of the following:


<TABLE>
<CAPTION>
                              1999            1998
                         -------------   -------------
<S>                      <C>             <C>
Finished goods            $1,197,108      $1,265,440
Production materials:
 Meats                       931,928       1,101,861
 Other ingredients           207,138         161,597
 Packing materials           381,676         371,770
----------------------    ----------      ----------
                          $2,717,850      $2,900,668
                          ==========      ==========
</TABLE>

NOTE C - Long-Term Debt
     On March 4, 1999, the Company obtained, through its subsidiary The
Smithfield Ham and Products Company, Incorporated, an Industrial Development
Revenue Bond (IRB) in the amount of $2,800,000 from The Industrial Development
Authority of the County of Isle of Wight. The interest rate on the bonds is
variable and is adjusted weekly in accordance with the Bond Indenture by the
Remarketing Agent. In no event shall the interest rate exceed 10%. At March 31,
1999 the variable interest rate on the bonds was 3.10%. The only collateral for
the bonds is an irrevocable letter of credit from a bank. The letter of credit
expires on February 15, 2001 and is subject to renewal. The Company's long-term
debt is carried at cost, which approximates fair market value.

     Principal payments on the bonds are as follows: $500,000 in 2004, $500,000
in 2009 and $1,800,000 in 2014. Interest is payable monthly. The Smithfield
Companies, Inc. has guaranteed all principle and interest payments due under
the bonds. At March 31, 1999, $619,074 of the bond proceeds is included in
"Cash and cash equivalents" and is restricted to cover construction and
equipment expenditures in accordance with the loan agreement.

     Under terms of the IRB, the Company, among other things, agrees to
maintain a current ratio of 3:1 and a debt service coverage ratio, as defined,
of 1.5:1. Interest expense in the amount of $6,632 was accrued on the bonds at
March 31, 1999.


NOTE D - Line of Credit
     The Company has an uncollateralized line of credit agreement with a bank.
The agreement provides the Company with a $10 million line of credit loan that
can be used for all general corporate uses including acquisitions of companies
in the food business. The loan bears interest at the LIBOR market rate plus
 .50% and is subject to renewal on July 31, 2000. The Company did not have any
outstanding balance on this facility during the year ended March 31, 1999.


--------------------------------------------------------------------------------
12    The Smithfield Companies, Inc.

<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999
NOTE E - Stockholders' Equity

CAPITAL STOCK
     The Company is authorized to issue up to 5,250,000 shares of stock of all
classes, of which 5,000,000 shares are to be designated Common Stock and
250,000 shares are to be designated Preferred Stock. The Company's Common Stock
has no par value. The Company's Preferred Stock (none outstanding) has a par
value of $100.00 per share.

     The Company's Preferred Stock may be issued in one or more series, with
each series to have distinctive serial designations and such preferences,
limitations, and relative rights as shall be permitted by law and established
by resolution of the Board of Directors providing for the issue of such
Preferred Stock. Each series of Preferred Stock may have the number of shares,
voting powers, redemption provisions, dividend rights, liquidation preferences,
convertibility features, and sinking fund entitlements as shall be set forth in
such Board resolution.

     On July 31, 1991, the Board of Directors authorized 100,000 shares of
voting Series A Junior Participating Cumulative ($300 per share semi-annually)
Preferred Stock pursuant to the Shareholder Rights Plan discussed below.

     The issuance of Preferred Stock may have the effect of delaying,
deferring, or preventing a change in control of the Company without any further
action by holders of the Company's Common Stock and may adversely affect the
rights of existing stockholders.



STOCK OPTIONS

     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options. In electing to account for its stock options under APB
25, the Company is required by SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide pro forma information regarding net income and
earnings per share.

     Under the Company's Stock Option Plan, which terminated in June 1998,
selected employees of the Company may be granted options to purchase Common
Stock. Such options may be designated Incentive Stock Options, as defined under
the Internal Revenue Code, or Nonstatutory Stock Options at the time the option
is granted. The exercise price of the options may not be less than 100% of the
fair market value of the Company's Common Stock on the date of grant of such
options, and the options must be exercised within ten years. Other terms of the
options will be determined at the date of grant. The termination of the Stock
Option Plan does not effect the validity of options outstanding on the date of
termination. The options are exercisable two years from the date of grant. At
March 31, 1999, the weighted average remaining contractual life of the options
is 7.0 years. The Company had 40,000, 34,000 and 38,000 shares which were
exercisable at March 31, 1999, 1998 and 1997, respectively. At March 31, 1999,
the weighted average exercise price of those shares is $3.71.

     During January 1997, the Company offered cash compensation to holders of
stock options with an expiration date of no later than May 16, 1999. The
Company offered the difference between $5.75 and the option price for the
shares. 75,000 shares were surrendered in connection with this offering at a
cost of $101,250. This expense is included in general and administrative
expenses during the year ended March 31, 1997.


--------------------------------------------------------------------------------
                                                         1999 Annual Report   13
<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999
     The following is a summary of transactions for the Stock Option Plan:


<TABLE>
<CAPTION>
                                           NUMBER OF        PER SHARE        WEIGHTED AVERAGE
                                             SHARES           RANGE           EXERCISE PRICE
                                          -----------   -----------------   -----------------
<S>                                       <C>           <C>                 <C>
Options outstanding at April 1, 1996        113,000     $3.38- 4.75              $  4.06
 Granted                                     10,000     $ 5.38- 5.50             $  5.45
 Repurchased                                (75,000)    $4.38- 4.75              $  4.40
---------------------------------------     -------     ---------------          -------
Options outstanding at March 31, 1997        48,000     $3.38- 5.50              $  3.83
 Granted                                     87,500     $5.50- 5.88              $  5.57
 Retired                                     (8,000)    $ 3.38- 5.50             $  4.41
---------------------------------------     -------     ---------------          -------
Options outstanding at March 31, 1998       127,500     $3.38- 5.88              $  4.99
 Repurchased                                (10,000)    $  5.63                  $  5.63
---------------------------------------     -------     -------                  -------
Options outstanding at March 31, 1999       117,500     $3.38- 5.88              $  4.93
=======================================     =======     ===============          =======
</TABLE>

     The fair value of each stock option granted in fiscal 1998 and 1997 is
estimated using the Black-Scholes option model with the following weighted
average assumptions for both years: dividend yield of 2%, expected volatility
of 4%, weighted average risk-free interest rate of 5.65% and expected lives of
eight years. The weighted average fair value of options granted is $3.77 and
$3.52 in fiscal 1998 and 1997, respectively. Had compensation cost for the
Company's stock options been determined based on the fair value at the grant
dates for awards consistent with the method of SFAS No. 123, the Company's pro
forma net income would have decreased by $68,000, or $.03 per share for the
year ended March 31, 1998 and $7,000 or $.00 for the year ended March 31, 1997.
No stock options were issued during the year ended March 31, 1999.



SHAREHOLDER RIGHTS PLAN

     On July 31, 1991, the Board of Directors adopted a Shareholder Rights Plan
("Rights Plan") and declared a dividend of one Right for each outstanding share
of Common Stock. Under the terms of the Rights Plan, the Rights will be
exercisable only if a person, group or other entity that was not a 10%
shareholder as of July 1, 1991, becomes a 15% or more shareholder. Each Right
will entitle the holder, upon payment of the exercise price of $29.50, to
acquire one ten-thousandths of a share (a "unit") of Series A Junior
Participating Cumulative Preferred Stock. Each unit has the same voting rights
as one share of Common Stock. At the discretion of the Board of Directors, the
Company will be entitled to redeem the Rights for $.01 per Right at any time
before announcement that a 15% position has been acquired, and for 10 days
after the announcement.

     If the Rights have not been redeemed, and any person, group or entity
becomes a 20% or more shareholder, each Right will entitle the holder, except
the acquiring person, group, or entity, upon payment of the exercise price, to
acquire Preferred Stock or Common Stock at the option of the Company, each
having a value equal to twice the Right's exercise price. Also, if the Company
were acquired in a merger or other business combination by such persons, group
or entity, or if 50% of its earning power or assets were sold in one
transaction or series of transactions, each Right would entitle the holder,
except the acquiring person, group or entity, to purchase securities of the
surviving company having a market value equal to twice the Right's exercise
price. The Rights will expire on July 31, 2001 unless previously exercised or
redeemed by the Board of Directors.


--------------------------------------------------------------------------------
14    The Smithfield Companies, Inc.

<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999
     An analysis of changes in Common Stock and Retained Earnings follows:



<TABLE>
<CAPTION>
                                                       COMMON          RETAINED
                                                       STOCK           EARNINGS
                                                  ---------------   --------------
<S>                                               <C>               <C>
Balance at April 1 1996                            $  5,220,445      $10,674,009
 Net Income                                                              911,016
 Dividends ($.11 per share)                                             (283,058)
 Repurchase of 397,222 shares of Common Stock        (2,212,834)
-----------------------------------------------    ------------
Balance at March 31, 1997                          $  3,007,611      $11,301,967
 Net Income                                                            1,077,115
 Dividends ($.12 per share)                                             (284,181)
 Repurchase of 91,670 shares of Common Stock           (503,742)
-----------------------------------------------    ------------
Balance at March 31, 1998                          $  2,503,869      $12,094,901
 Net Income                                                            1,461,710
 Dividends ($.13 per share)                                             (304,561)
 Repurchase of 2,367 shares of Common Stock             (15,377)
-----------------------------------------------    ------------
Balance at March 31, 1999                          $  2,488,492      $13,252,050
===============================================    ============      ===========
</TABLE>

NOTE F - Sale of Assets
     Because of the termination of its retail lease and the fact that the
business was no longer compatible with the Company's strategy as a manufacturer
and marketer of specialty food products, the Company sold the operations of The
New Orleans School of Cooking on July 22, 1997. The sale of this business did
not have a material effect on income during the year ended March 31, 1998.


NOTE G - Employee Benefit Plans



PROFIT SHARING PLAN
     The Company's profit sharing plan is a voluntary, defined contribution
plan which covers virtually all employees. The Company may contribute annually
up to a certain percentage of employee compensation to the plan. Effective
January 1, 1997 the Company added a 401(k) feature to its profit sharing plan.
The Company makes contributions to the plan based on 50% of the participants'
contributions, which can range from 1% to 6% of their total compensation
subject to certain limitations. Company matching contributions to the 401(k)
plan were $45,240, $42,373 and $12,380 for the years ended March 31, 1999, 1998
and 1997, respectively. Discretionary profit sharing contributions to the plan
was $95,000 for the year ended March 31, 1997. No discretionary contributions
were made for the years ended March 31, 1999 and 1998.


EMPLOYEE STOCK OWNERSHIP PLAN

     The Company's Employee Stock Ownership Plan "the Plan" covers all
employees who have attained the required minimum age and length of service,
except those covered by a collective bargaining agreement. Contributions to the
Plan, which will be invested in the Company's Common Stock, are made as
determined by the Board of Directors and are limited to certain percentages of
the eligible employees' compensation. The Company contributed $50,000, $43,000
and $40,000 into the Plan for the years ended March 31, 1999, 1998 and 1997,
respectively.


--------------------------------------------------------------------------------
                                                         1999 Annual Report   15
<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999
NOTE H - Income Taxes
     Significant components of the Company's deferred tax assets as of March
31, 1999 and 1998 are as follows:



<TABLE>
<CAPTION>
                                       1999          1998
                                   -----------   -----------
<S>                                <C>           <C>
Deferred tax assets:
 Accrued liabilities                $ 75,000      $ 64,000
 Inventories                          13,000        14,000
 Accounts receivable allowance        25,000        22,000
 Book over tax depreciation          123,000       102,000
 Book over tax amortization            9,000         8,000
--------------------------------    --------      --------
   Total deferred tax assets        $245,000      $210,000
================================    ========      ========
</TABLE>

     The provision for income taxes consists of the following:



<TABLE>
<CAPTION>
                          1999          1998          1997
                      -----------   -----------   -----------
<S>                   <C>           <C>           <C>
Currently payable:
   Federal             $ 633,000     $359,000      $ 407,000
   State                  97,000       56,000         63,000
-------------------    ---------     --------      ---------
                         730,000      415,000        470,000
                       ---------     --------      ---------
 Deferred:
   Federal               (29,000)      76,000        (43,000)
   State                  (6,000)      14,000         (7,000)
-------------------    ---------     --------      ---------
                         (35,000)      90,000        (50,000)
                       ---------     --------      ---------
                       $ 695,000     $505,000      $ 420,000
                       =========     ========      =========
</TABLE>

     The provision for income taxes varies from that computed using federal
statutory rates of 34%, as follows:



<TABLE>
<CAPTION>
                                              FOR THE YEAR ENDED MARCH 31
                                            1999          1998          1997
                                        -----------   -----------   -----------
<S>                                     <C>           <C>           <C>
Federal taxes at statutory rate          $ 733,000     $ 538,000     $ 454,000
State taxes net of federal benefit          60,000        42,000        42,000
Trademark and goodwill amortization          5,000         6,000         7,000
Tax-exempt interest                        (92,000)      (88,000)      (95,000)
Other                                      (11,000)        7,000        12,000
-------------------------------------    ---------     ---------     ---------
                                         $ 695,000     $ 505,000     $ 420,000
                                         =========     =========     =========
</TABLE>

     The Company made income tax payments of $593,534 in 1999, $521,862 in 1998
and $468,913 in 1997.


NOTE I - Other Financial Information

COMMITMENTS AND CONTINGENCIES
     Employment agreements have been established with certain officers of the
Company. These agreements include clauses relating to salary and severance. The
Company also has incentive arrangements with certain officers of the Company.
     The estimated cost to complete construction in progress is approximately
$500,000.

--------------------------------------------------------------------------------
16   The Smithfield Companies, Inc.

<PAGE>

Notes to Consolidated Financial Statements
THE SMITHFIELD COMPANIES, INC. -- MARCH 31, 1999
LEASES

     The Company's operating leases consist primarily of retail facilities,
some of which contain escalation clauses and renewal options for up to five
years.

     At March 31, 1999 aggregate minimum rental commitments under
non-cancelable operating leases having remaining terms of more than one year
were $375,000 and are payable as follows: 2000, $131,000; 2001, $127,000; 2002,
$68,000; 2003, $49,000.

     Contingent rentals relate to retail sales space based on gross sales. Rent
expense is summarized as follows:



<TABLE>
<CAPTION>
                             FOR THE YEAR ENDED MARCH 31
                       ---------------------------------------
                           1999          1998          1997
<S>                    <C>           <C>           <C>
Minimum rentals         $150,715      $152,968      $222,018
Contingent rentals        26,048        25,096        59,403
--------------------    --------      --------      --------
 TOTAL                  $176,763      $178,064      $281,421
====================    ========      ========      ========
</TABLE>

RELATED PARTY TRANSACTIONS

     A member of the Board of Directors is an attorney with the Company's law
firm. The Company paid $7,397, $29,996 and $20,601 to the law firm in 1999,
1998 and 1997, respectively. Another member of the Board of Directors is
chairman of a company which supplied packaging materials to the Company in the
amount of $14,488, $6,759 and $7,674 in 1999, 1998 and 1997, respectively.
During the year ended March 31, 1999 the Company invested $80,000 to acquire
8,000 shares of common stock in TowneBank (the Bank), a newly created community
bank. The Company's President and CEO is on the Board of Directors of the Bank
and a member of the Company's Board of Directors is President and Senior Loan
Officer of the Bank.


NOTE J - Subsequent Events
     In April 1999 the Company purchased a Certificate of Deposit from
TowneBank in the amount of $1,000,000. The certificate matures in April 2000
and bears interest at 5.15%.

     Subsequent to March 31, 1999, the Company purchased and retired 96,317
shares of its Common Stock at a cost of $707,800.


--------------------------------------------------------------------------------
                                                         1999 Annual Report   17
<PAGE>

Report of Independent Accountants



Shareholders and Board of Directors
THE SMITHFIELD COMPANIES, INC.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and cash flows present fairly, in all
material respects, the financial position of The Smithfield Companies, Inc. and
Subsidiaries (the "Company") at March 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 1999 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.


/s/PricewaterhouseCoopers LLP


Virginia Beach, Virginia
May 27, 1999



Quarterly Results Of Operations
     The following table presents quarterly results of operations for the years
ended March 31, 1999 and 1998.
(IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                FISCAL 1999                                     FISCAL 1998
                              ----------------------------------------------- -----------------------------------------------
                                  1ST         2ND         3RD         4TH         1ST         2ND         3RD         4TH
                                QUARTER     QUARTER     QUARTER     QUARTER     QUARTER     QUARTER     QUARTER     QUARTER
                              ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S>                           <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Net Sales                       $ 3,787     $ 6,122     $ 7,992     $ 3,295     $ 4,487     $ 4,771     $ 7,924     $ 3,244
Cost of Goods Sold                2,418       4,177       4,974       2,204       2,952       3,360       5,300       2,282
-----------------------------   -------     -------     -------     -------     -------     -------     -------     -------
Gross Profit                      1,369       1,945       3,018       1,091       1,535       1,411       2,624         962
Other operating revenue              22          20          13          25          18          52          18          11
-----------------------------   -------     -------     -------     -------     -------     -------     -------     -------
                                  1,391       1,965       3,031       1,116       1,553       1,463       2,642         973
Selling, general and
 administrative expenses          1,170       1,382       1,971       1,078       1,336       1,235       1,776         945
-----------------------------   -------     -------     -------     -------     -------     -------     -------     -------
Operating Income                    221         583       1,060          38         217         228         866          28
Interest, net                        70          55          67          62          63          52          58          70
-----------------------------   -------     -------     -------     -------     -------     -------     -------     -------
Income before income taxes          291         638       1,127         100         280         280         924          98
Income taxes                         81         211         387          16          82          86         330           7
-----------------------------   -------     -------     -------     -------     -------     -------     -------     -------
Net Income                      $   210     $   427     $   740     $    84     $   198     $   194     $   594     $    91
=============================   =======     =======     =======     =======     =======     =======     =======     =======
Basic earnings per share:       $  0.09     $  0.18     $  0.32     $  0.04     $  0.08     $  0.08     $  0.25     $  0.04
=============================   =======     =======     =======     =======     =======     =======     =======     =======
Diluted earnings per share:     $  0.09     $  0.18     $  0.31     $  0.04     $  0.08     $  0.08     $  0.25     $  0.04
=============================   =======     =======     =======     =======     =======     =======     =======     =======
</TABLE>


--------------------------------------------------------------------------------
18   The Smithfield Companies, Inc.

<PAGE>
                                   [PICTURE]
DIRECTORS: (STANDING LEFT TO RIGHT) PETER D. PRUDEN, III, R. SCOTT MORGAN,
                           BERNARD C. BALDWIN, III,
 FRANK H. BUHLER, (SEATED LEFT TO RIGHT) JAMES L. CRESIMORE, RICHARD S. FULLER

DIRECTORS
Bernard C. Baldwin, III
PARTNER
EDMUNDS & WILLIAMS

Frank H. Buhler
CHAIRMAN
OLD DOMINION BOX COMPANY

James L. Cresimore
CHAIRMAN
THE SMITHFIELD COMPANIES, INC.
CHAIRMAN
ALLEGIANCE BROKERAGE COMPANY

Richard S. Fuller
PRESIDENT AND
CHIEF EXECUTIVE OFFICER

R. Scott Morgan
PRESIDENT AND SENIOR
LOAN OFFICER
TOWNEBANK

Peter D. Pruden, III
EXECUTIVE VICE PRESIDENT
AND SECRETARY

EXECUTIVE OFFICERS
Richard S. Fuller
PRESIDENT AND
CHIEF EXECUTIVE OFFICER

Peter D. Pruden, III
EXECUTIVE VICE PRESIDENT
AND SECRETARY

Mark D. Bedard
CHIEF FINANCIAL OFFICER
AND TREASURER

MANAGEMENT
Alton H. Gwaltney
EXECUTIVE VICE PRESIDENT
THE SMITHFIELD HAM &
PRODUCTS CO.

John S. Mitchell
VICE PRESIDENT AND
GENERAL MANAGER
WILLIAMSBURG FOODS

Larry R. Santure
VICE PRESIDENT AND
GENERAL MANAGER
V. W. JOYNER & CO.

James S. Groves
VICE PRESIDENT OF RETAIL SALES
THE SMITHFIELD HAM &
PRODUCTS CO.

Robert J. Koch, Jr.
VICE PRESIDENT OF
FOODSERVICE SALES
THE SMITHFIELD HAM &
PRODUCTS CO.

R. Steven Jordan
CORPORATE CONTROLLER

Kevin A. Jones
GENERAL MANAGER
PRUDEN PACKING CO.

--------------------------------------------------------------------------------
                                              1999 Annual Report              19
<PAGE>

Corporate Information


EXECUTIVE OFFICES
The Smithfield Building
311 County Street, Suite 203
Portsmouth, Virginia 23704

TRANSFER AGENT
Registrar and Transfer Company

NASDAQ SYMBOL
HAMS

COUNSEL
Edmunds & Williams
800 Main Street
Lynchburg, Virginia 24505

AUDITORS
PricewaterhouseCoopers LLP
400 One Columbus Center
Virginia Beach, Virginia 23462

ANNUAL MEETING
The Annual Meeting of Stockholders
will be held on Friday, July 30,
1999 at 9:00 a.m. at The Wachovia
Bank Building, 200 High Street,
Suite 305, Portsmouth, VA

FORM 10-K REPORT
Copies of the Company's Annual Report
on Form 10-K are available without
charge, upon written request to:

The Smithfield Companies, Inc.
The Smithfield Building
311 County Street, Suite 203
Portsmouth, VA 23704

MARKET FOR SMITHFIELD COMMON STOCK
      The Company's common stock is traded in the NASDAQ Small Cap Market under
the symbol HAMS. The following table sets forth the quarterly high and low
market prices and dividends paid for each quarter of fiscal 1999 and 1998.



<TABLE>
<CAPTION>
FISCAL 1999          HIGH       LOW
----------------   -------   ------
<S>                <C>       <C>
First Quarter      7 1/2       6
Second Quarter       8       6 3/4
Third Quarter        8       6 1/4
Fourth Quarter     8 5/8     7 3/8
</TABLE>


<TABLE>
<CAPTION>
FISCAL 1998          HIGH       LOW
----------------   -------   -------
<S>                <C>       <C>
First Quarter      5 5/8     5 5/16
Second Quarter     5 7/8     5 1/4
Third Quarter      5 7/8     5 1/2
Fourth Quarter     6 3/4     5 3/8
</TABLE>


<TABLE>
<CAPTION>
DIVIDENDS              1999          1998
----------------   -----------   -----------
<S>                <C>           <C>
First Quarter        $ 0.030       $ 0.030
Second Quarter       $ 0.030       $ 0.030
Third Quarter        $ 0.035       $ 0.030
Fourth Quarter       $ 0.035       $ 0.030
----------------     -------       -------
                     $ 0.130       $ 0.120
                     =======       =======
</TABLE>

      On June 8, 1999 there were 150 holders of record of the Company's Common
Stock. In addition over 200 beneficial shareholders are estimated.

Mail Order Catalogs

       Your Company publishes two unique full color specialty foods consumer
catalogs each fall featuring many of the Company's products. We hope that you
will consider these when planning your personal or corporate giving as well as
your own fine dining and entertaining needs. For your catalog(s), call us TOLL
FREE.


  The Smithfield Collection/Fin 'n Feather           1-800-628-2242
  The Peanut Shop of Williamsburg                    1-800-637-3268


You can also visit the Company's catalogs on the Internet at:
www.smithfield-companies.com

--------------------------------------------------------------------------------
20   The Smithfield Companies, Inc.


<PAGE>

                                     [LOGO]

                                      THE
                                   SMITHFIELD
                                   COMPANIES

<TABLE>
<S> <C>
The Smithfield Building o 311 County Street, Suite 203 o Portsmouth, Virginia 23704
</TABLE>