Legend Group Limited

2002/03 Fiscal Year

Interim Results Announcement

Business and Financial Review

Ms. Mary MaSenior Vice-President & CFO

November 12, 2002

2

Overview

• Turnover for the first half of FY2002/03 increased by 4.1% to HK$10.37 billion, from HK$9.96 billion for the corresponding period of last year

• Profit attributable to shareholders increased to HK$524 million, or 20.5%, compared to the proforma profit of the same period last year of HK$435 million

• Gross margin is 15.02%, up from proforma gross margin of 13.72% of the same period last year

• Net profit margin increased from 4.37% (proforma) to 5.06%

• The Board of Directors proposed an interim dividend of 1.8 HK cents per share

3

Overview

• Turnover for FY2002/03 Q2 increased by 2.3% to HK$5.57 billion, from HK$5.45 billion for the corresponding period of last year

• Profit attributable to shareholders increased to HK$256.3 million, or 26.5%, compared to the proforma profit of the same period last year of HK$202.6 million

• Gross margin is 14.61%, up from proforma gross margin of 12.28% of the same period last year

• Net profit margin increased from 3.72% (proforma) to 4.6%

4

(HK$'000)2002/03

Q2 2002/03 Interim

% of Turnover

2001/02 Q2

2001/02 Interim

(Proforma)% of

Turnover

Turnover 5,573,185$ 10,369,537$ 5,449,065$ 9,957,341$

EBITDA 279,736$ 580,173$ 5.59% 225,834$ 487,412$ 4.90%

Depreciation expenses (34,306)$ (66,321)$ (33,992)$ (66,571)$

Amortisation of goodwill (4,063)$ (5,901)$ -$ -$

Gain on disposal of investment -$ 6,401$ -$ -$

Interest income 19,348$ 32,939$ 18,901$ 40,780$

Profit from operations 260,715$ 547,291$ 5.28% 210,743$ 461,621$ 4.64%

Finance costs -$ -$ (597)$ (1,430)$

Share of losses of jointlycontrolled entities (16,372)$ (34,623)$ -$ -$

Share of profits/(losses) ofassociated companies 8,020$ 15,227$ (4,480)$ (7,646)$

Profit before taxation 252,363$ 527,895$ 5.09% 205,666$ 452,545$ 4.54%

Taxation 571$ (10,348)$ 462$ (10,960)$

Profit after taxation 252,934$ 517,547$ 206,128$ 441,585$

Minority interests 3,335$ 6,638$ (3,577)$ (6,587)$

Profit attributable to shareholders 256,269$ 524,184$ 5.06% 202,551$ 434,998$ 4.37%

Dividend -$ 135,121$ -$ 921,384$

Earnings per share (Basic) 3.41 cents 6.98 cents 2.68 cents 5.75 cents

Earnings per share (Fully diluted) 3.41 cents 6.97 cents 2.65 cents 5.71 cents

2002/03 Interim Consolidated P&L Account

Proforma results: The proforma results are prepared on the basis as if the demerger of Digital China has been completed as at March 31, 2000, and hence its results are not consolidated in the Group’s proforma results of FY2001/02.

5

2002/03 Interim Turnover Breakdown

Consumer IT 35.2% (39.7%)Corporate IT

53.6% (49.7%)

Handheld Device

(Note 1) 6.4% (1.3%)

Contract Manufacturing (Note 2) 4.1%

(9.0%)

IT Services 0.7% (0%)

Note 1: Starting from FY2002/03, contribution from handheld device business includes the contribution from mobile handset business.

Note 2: Legend sold 55% of Legend Techwise (PCB) in Jan 2002. Hence, the contribution from contract manufacturing business in FY2002/03 interim does not include any contribution from Legend Techwise. Note 3: FY2001/02 interim proforma figures are in brackets. Internet service business contributed about 0.3% in FY2001/02 interim. Legend-AOL JV was formally set up on Nov 20, 2001. Hence, the contribution from Internet service is not included in the consolidated turnover for FY2002/03.

6

Changes in Turnover Breakdown

(HK$ Million) Note2002/03 Interim

2001/02 Interim

Proforma Change

Corporate IT 5,559$ 4,952$ 12.2%

Consumer IT 3,645$ 3,951$ -7.8%

Handheld Access Devices 667$ 126$ 429.5%

IT Services 72$ -$ N/A

Contract Manufacturing 4 427$ 893$ -52.2%

Other 5 -$ 34$ N/A

Total 10,370$ 9,957$ 4.1%

Note 4: Legend sold 55% of Legend Techwise (PCB) in Jan 2002. Hence, the contribution from contract manufacturing business in FY2002/03 interim does not include any contribution from Legend Techwise.

Note 5: Contribution from Internet service for FY2001/02.

7

Changes in Proforma Turnover Breakdown

Note 4: Legend sold 55% of Legend Techwise (PCB) in Jan 2002. Hence, the contribution from contract manufacturing business in FY2002/03 Q2 does not include any contribution from Legend Techwise.

Note 5: Contribution from Internet service for FY2001/02.

(HK$ Million) Note2002/03

Q22001/02

Q2 ChangeCorporate IT 3,064$ 2,653$ 15.5%

Consumer IT 1,812$ 2,199$ -17.6%

Handheld Access Devices 406$ 65$ 525.2%

IT Services 35$ -$ N/A

Contract Manufacturing 4 257$ 516$ -50.3%

Other 5 -$ 17$ N/A

Total 5,573$ 5,450$ 2.3%

8

Changes in Proforma Operating Profit Breakdown

(HK$'000) Note2002/03 Interim

2001/02 Interim

Proforma ChangeCorporate IT 372,404$ 284,119$ 31.1%

Consumer IT 171,097$ 153,140$ 11.7%

Handheld Access Devices 17,874$ (9,724)$ N/A

IT Services (23,363)$ -$ N/A

Contract Manufacturing 8,777$ 67,446$ -87.0%

Other -$ (34,790)$ N/A

Total 6 546,789$ 460,191$ 18.8%

Note 6: Operating profit for FY2002/03 interim before amortization of intangible assets and gains on disposal of investment securities.

9

Changes in Proforma Operating Profit Breakdown

(HK$'000) Note2002/03

Q22001/02

Q2 ChangeCorporate IT 208,528$ 154,613$ 34.9%

Consumer IT 56,626$ 52,575$ 7.7%

Handheld Access Devices 13,702$ (8,491)$ N/A

IT Services (12,671)$ -$ N/A

Contract Manufacturing (1,408)$ 30,983$ N/A

Other -$ (19,534)$ N/A

Total 6 264,777$ 210,146$ 26.0%

Note 6: Operating profit for FY2002/03 Q2 before amortization of intangible assets and gains on disposal of investment securities.

10

Interim Gross Margin Analysis

18.66%

13.72%15.02%

11.17%

21.46%

13.95%

15.86%

12.44%

19.94%17.81%17.99%

0%

5%

10%

15%

20%

25%

2001/02 Interim2002/03 Interim

Corporate IT

Consumer IT

Handheld Access Devices

Group

Note: Before elimination of inter-company transaction, the gross margin of contract manufacturing business is 10.2% (2001/02 Interim: 15%).

Contract Manufacturing

IT Service

11

Q2 Gross Margin Analysis

17.90%

12.28%

14.61%13.22%

19.60%

9.03%6.77%

16.97%

22.02%

11.31%

15.47%

0%

5%

10%

15%

20%

25%

2001/02 Q22002/03 Q2

Corporate IT

Consumer IT

Handheld Devices

GroupContract Manufacturing

Note: Before elimination of inter-company transaction, the gross margin of contract manufacturing business is 10.8% (2001/02 Q2: 15.2%).

IT Service

12

(HK$ Million)

As at 30/9/2002

As at 30/6/2002

As at 31/3/2002

Intangible fixed assets 75$ 66$ -$ Tangible fixed assets 849$ 848$ 847$ Construction-in-progress 80$ 56$ 44$ Investments 401$ 392$ 446$

Current assets 5,507$ 5,371$ 4,355$ Current liabilities 2,933$ 2,738$ 2,002$ Net current assets 2,574$ 2,633$ 2,353$ Total assets less current liabilities 3,979$ 3,996$ 3,689$

Capital and reserves 3,911$ 3,928$ 3,682$ Minority interests 68$ 68$ 7$ Long-term liabilities 0.3$ 0.3$ 0.3$

3,979$ 3,996$ 3,689$

Consolidated Balance Sheet

13

Key Financial Figures

(HK$ Million)2002/03 Interim

2001/02 Full Year Proforma

2001/02 Q1

Proforma

Cash reserves 2,781$ 2,441$ 2,095$

Total borrowings -$ -$ 16$

Net cash reserves 2,781$ 2,441$ 2,079$

Net tangible assets 3,835$ 3,682$ 3,266$

Capital expenditure 372$ 703$ 197$

Current ratio 1.9 x 2.2 x 1.9 x

Days inventory 20.2 days 21.8 days 21.3 days

Days receivables 19.7 days 22.0 days 23.1 daysDays payable 35.1 days 36.8 days 37.1 days

14

Key Financial Figures

2002/03 Interim

2001/02 Full Year Proforma

2001/02 Interim

Proforma

Gross margin 15.02% 13.70% 13.72%

Net margin 5.06% 5.33% 4.37%

Return on equity 13.6% 30.3% 13.3%

Return on net tangible assets 13.7% 30.3% 13.3%

Earnings per share (Fully diluted) 6.97 cents 13.55 cents 5.71 cents

Net tangible assets per share 50.8 cents 44.9 cents 43.5 cents

Shares in issue (million shares) 7,507 7,508 7,522

Legend Group Limited

2002/03 Fiscal Year

Interim Results Announcement

Market and Business Review

Mr. Yang YuanqingPresident & CEO

November 12, 2002

16

Business Review• China’s PC market recovers to healthy growth

– PC unit shipment growth in Q1, Q2 and Q3 for 2002 was 4.8% ，9.6% and 22.3%, respectively (April to September grew by 16%)

– Unit shipment of Corporate market in April to September are estimated to grow by 21%, driven by robust growth in“School Link”, e-government and SMEs.

– Consumer PC market was relatively less dynamic. Unit shipment in April to September are estimated to grow by 8%

• Legend’s management is confident with the growth potential of China IT market– China’s accession to WTO speed up the pace of informatizatio

n of enterprises for increasing competitiveness – E-government implementation is in full force, y-o-y growth of go

vernment spending on IT will exceed 25%

17

Business and Strategy Review• Legend PC sales growth in line with market, gross margin and

net margin increased significantly, 1H FY02/03 y-o-y growth up from 13.72% and 4.37% to 15.02% and 5.06%, respectively while market share continue to rise– Legend PC unit shipment grew 17% in 1HFY02/03 (April to

September 2002), Q1 and Q2 reported 10% and 22.5% growth, respectively

– Legend home PCs, commercial desktop PCs, notebooks and servers increased significantly:

Commercial desktop

PCs 25.9%

Home PCs 5.4% Servers

41.7%

Notebooks 17.2%

18

Successful operating strategy

Legend’s strategy Service-oriented and technology innovations

• Healthy growth and profitability as prime target• Precise process management, value-added services and technology innovations balance growth (cost reduction and value enhancement)• Synergy between new and existing businesses

Precise and effective process management

Service

Customer driven

Emphasis on tailor-made applications and user-friendly products and services

Technology

Reduce Cost

Increase Value-add

Big

ger ro

om

for

pro

fit gro

wth

19

Strategy Review

Terminal Devices

PC (Pocket PCs, PDAs, mobile handsets, digital cameras)

Back-office Products

Server High-end servers, storage, network securities products

Services • Consumers• Small & Medium

scale clients• Large scale

clients

Value-added service(Product pre-sales / after-

sales services)

Service Business

20

Business Review

• Launch of “Dual Mode” home PC– Legend LEOS operating system sets new stan

dard for digital applications

– Provides user-friendly and wide variety of digital applications

– One button for instant browsing hard disk, CD-ROM or memory stick for audio/ video/photo playing

LEOSoperating system

Win XPoperating system

Navigation computer model

Digital home appliance model

Digital home work pack

Dream factorysoftware

Operation

Application

HardwareDigital appliance control system

Packaging technology Smart thermostat system

Legend Tianjiao

Development of terminal device

21

Business Review

• Launch of new generation commercial PC “Kaitian”6800

– Designed for commercial use, equipped with wireless Internet access, keyboard and mouse, 360 adjustable LCD monitor and VPN security system

– The only model that won the "2002 Intel Innovative PC Award"

• “Qitian”PC tailored for education sector

– Leveraging application solutions to enhance sales of education PCs

– “Qitian” is specifically designed for education purpose with features such as easy-to-assemble, smart recovery function, all-in-one mouse, chassis lock and the use of anti bacteria material

Development of terminal device (Cont’d)

22

Development of terminal device (Cont’d)

• Mobile handset

– Smooth operation of the joint venture company, 6 months’ sales attained better-than-expected results

– Rolling out various models of handsets, including colour screen handset i188, which was well received by the market

– Leveraging on Legend’s brand name, Legend handset has become one of the most popular brands in China

– Streamlining Legend’s handset distribution network, after-sales and maintenance services improved substantially

i188

G808

Business Review

23

Business Review

• Servers– Shift business model from “product-centric” to “soluti

on-centric” (VOLUME BUSINESSVALUE BUSINESS)

– Specialize sales and service team– Successful development of server chip applications

enhanced Legend’s capability in server design catering for customer needs

• High Performance Computers– Developed China’s first super computer with world cl

ass computing speed– Enhance Legend’s overall server technology and pro

duct quality

Wanquan Server

Legend Deepcomp 1800 Supercomputer

Development of back office products

24

Business Review

• Education, government and SMEs

Small & Medium scale clients

Services Value-added service

(Product pre-sales / after-sales services)

Service Business

• Consumers• Small & Medium

scale clients• Large scale clients

25

Business Review

e-classroomSchool

IntranetWAN Long Distance

Education Network

Evolution of education informatizationAffiliated

School

Large scale education network

Long

Distance

Education

Network

Solution

Case study: e-Education

26

Business Review

e-School solutions School-Link solutionsFull range of education products

Legend’s total solution for education sector

e-multimedia classroom solution

Teacher’s e-preparation room solution

e-library solution

e-multi function classroom solution

Internet library solution

e-office solution

School e-security solution

Education Hardware Facility Solution

Education Security Solution

Education Software Solution

Education Resources Solution

Education Support & Training Solution

Education Operation Solution

Education PCs,

notebooks,

servers,

peripheral,

storage & networking

equipment

Case study: e-Education

27

Others（ Energy, publications, transport sector and etc）B

ank

ing

Tele

com

Vertical application

Horizontal application

Infrastructure platform

OutsourcingS.I.

Consulting

Go

vt

Insu

ranc

e

Operation of IT system

Infrastructure platform and security

Management System: ERP、 SCM、 CRM

Business Review

Large scale clients: Established framework of IT service business

Application Implementation