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FY2008/09 Annual Results Announcement

18 June 2009

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Disclaimer

This presentation may contain certain projection and forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Digital China may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statement, including but not limited to any projections of revenue, margins, expenses, charges, earnings or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of any restructuring plans; any statements concerning the expected development, performance or market share relating to products or services; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by suppliers, customers and partners; employee management issues; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; expectations and assumptions relating to the execution and timing of workforce restructuring programs. In addition, statistical and other information relating to the PRC and the technology industry contained in this presentation have been compiled from various publicly available official or unofficial sources generally believed to be reliable. However, the quality of such source materials cannot be guaranteed. Moreover, statistics derived from multiple sources may not be prepared on a comparable basis.

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AGENDA

Financial Review

Business Review by SegmentsIndustry Market (Services)

Enterprise Market (Systems)

SMB & Consumer Market (Distribution)

Company Outlook

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Financial Review

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Financial Highlights

Q4 FY08/09Turnover up 14.07% yoy to HK$10,078 millionGross profit margin decreased yoy to 7.18% Profit from operating activities grew 25.88% yoy to HK$195 millionNet profit up 105.86% yoy to HK$135 millionNet cash outflow from operating activities was HK$344 million

Annual FY08/09Turnover up 20.10% yoy to HK$42,326 millionGross profit margin decreased yoy to 6.99% Profit from operating activities grew 35.82% yoy to HK$884 millionNet profit up 59.84% yoy to HK$641 millionEPS reached 66.58 HK cents, up 52.29% from annual FY07/08.Net cash inflow from operating activities was HK$727 million

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Continuous Out-performance

6 – Year Turnover CAGR : 22.52%

Turnover

HK$

’Bi

llion

FY08/09

40

30

20

10

FY03/04 FY04/05 FY06/07FY05/06 FY07/08FY02/03

2002 2003 2004 2005 2006 2007 2008

Digital China 18.90% 14.12% 8.26% 28.52% 27.96% 38.65% 20.10%

China IT Spending* 2.20% 8.10% 11.00% 12.20% 15.70% 16.10% 8.50%

Growth Rate *IDC Data

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Income Statement Highlights

HK$ millionFY2008/09

AnnualFY2008/09

Q4FY2007/08

AnnualFY2007/08

Q4

Turnover 42,326 ↑20.10% 10,078 ↑14.07% 35,244 8,835

Gross profit margin (%) 6.99 --- 7.18 --- 7.12 8.18

Profit from operating activities 884 ↑35.82% 195 ↑25.88% 651 155

Net profit 641 ↑59.84% 135 ↑105.86% 401 66

Basic EPS (HK cents) 66.58 ↑52.29% --- --- 43.72 ---

Other income and gains include:

HK$ millionFY2008/09

AnnualFY2008/09

Q4FY2007/08

AnnualFY2007/08

Q4

Exchange gains/(losses), net 89 ↓69.55% (11) --- 294 105

Government grants 61 ↓5.59% 16 ↓8.40 % 64 17

Others 298 ↑398.12% 114 ↑634.41% 60 16

As of 31 March 2009

As of 31 March 2008

Current Ratio 1.45x 1.56x

Capital Expenditure (HK$ million) 77 98

ROE 20.42% 15.28%

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Segment Breakdown

HK$ millionDistribution Systems Services Consolidated

08/09Annual

07/08Annual

Y-o-Ychange

08/09Annual

07/08Annual

Y-o-YChange

08/09Annual

07/08Annual

Y-o-YChange

08/09Annual

07/08Annual

Y-o-Ychange

Revenue 24,087 20,889 15.3% 13,356 9,732 37.2% 4,883 4,623 5.6% 42,326 35,244 20.1%

Cost of Sales 23,051 19,922 15.7% 12,088 8,826 37.0% 4,229 3,985 6.1% 39,368 32,733 20.3%

Gross Profit 1,036 967 7.1% 1,268 906 39.9% 655 638 2.7% 2,959 2,511 17.8%08/09

Annual07/08

AnnualY-o-Y

Change08/09

Annual07/08

AnnualY-o-Y

Change08/09

Annual07/08

AnnualY-o-Y

ChangeOther income and gains 109 272 (59.9%) 40 82 (51.0%) 448 418 7.1%

SG&A (1,406) (1,251) 12.4% (459) (452) 1.4% (2,074) (1,943) 6.7%

Other (286) (138) 107.5% (157) (195) (19.6%) (449) (335) 33.9%

EBIT 718 750 (4.2%) 88 71 22.8% 884 651 35.8%

Finance costs (159) (208) (23.4%)

Tax (127) (52) 143.4%

Net profit 641 401 59.8%

FY07/08 Annual Gross Profit: HK$ 2,511 million

Distribution1,03635%

Systems1,26843%

FY08/09 Annual Gross Profit: HK$ 2,959 million

Distribution96739%

Systems90636%

Services63825%

HK$ million HK$ millionServices65522%

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Gross Profit Margin Trend

FY05/06 Annual FY06/07 Annual FY07/08 Annual FY08/09 Annual

Distribution 4.69% 4.79% 4.63% 4.30%

Systems 8.92% 9.51% 9.31% 9.49%

Services 13.77% 13.30% 13.79% 13.41%

0%

5%

10%

15%

20%

2005/06Q1

Q2 Q3 Q4 2006/07Q1

Q2 Q3 Q4 2007/08Q1

Q2 Q3 Q4 2008/09Q1

Q2 Q3 Q4

Distribution Systems Services

Distribution 5.36 4.61 4.30 4.65 5.05 4.91 4.45 4.81 4.32 4.56 4.68 4.95 4.30 4.54 4.11 4.21

Systems 8.81 10.06 7.89 9.23 9.30 9.24 8.51 11.20 8.26 9.68 9.39 9.87 8.27 10.24 9.21 10.32

Services 12.93 12.87 11.01 18.47 10.11 12.75 13.79 15.25 12.48 13.04 12.42 16.24 12.27 13.69 12.40 16.79

Note: Financial Statement Data

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Consolidated Balance Sheet

HK$ million 31 Mar 2009 31 Dec 2008 31 Mar 2008

Fixed assetsOther non-current assetsInventoriesTrade and bills receivablesPrepayments, deposits and other receivablesCash and cash equivalentsDerivative financial instruments

413398

2,1365,4721,3661,734

27

424351

2,5215,2201,3132,162

0

416334

2,5593,7731,234

9980

Total assets 11,546 11,991 9,314

Trade and bills payablesOther current liabilitiesInterest-bearing bank borrowings (current)Interest-bearing bank borrowings (non-current)Bond payable

4,6981,814

875702226

5,0152,027

917703227

3,3341,762

400953222

Total liabilities 8,315 8,889 6,671

Share capitalOther reservesRetained earningsProposed final dividendMinority interests

961,5831,321

14091

961,4731,436

097

961,443

94714018

Total equity 3,231 3,102 2,644

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A/R Turnover Days

Turnover Days for the Group

Cash Cycle DaysA/P Turnover Days

Inventory Turnover Days

0 2,000 4,000 6,000 8,000 10,000

Microsoft

Intel

AMD

Asus

Lenovo

Acer

Dell

IBM

Cisco

HP

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Group Level: Concentration Analysis

% of the Group’s total procurement

Purchase from Top 10 Suppliers accounted for 69% of the Group’s total procurement

20%

11%

8%

6%

6%

5%

4%

3%

2%

2% HK$ million

Business Development

Key Initiatives:- Streamline the organization to be more customer-focused

- Operation re-modeled to be more customer-centric- Market expansion (product & market share )

- Cash is the King- Extend A/P terms- Collection drive on A/R- Improvement on cash flow

- Speed up the Service-oriented Transformation

- Continuous enhancement on software and services capabilities

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Business Review:Industry Market

(Services)

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Services Segment: FY08/09 Annual

Revenue achieved HK$4,883 million

EBIT for annual achieved HK$88 million

Revenue from FSI & Telecom grew 30% and 29% yoy

Service contracts value of Telecom grow by nearly 114%

HK$ million

FY08/09 Annual Services Business:HK$4,883 million

Others13%

Finance19%

Telecom54%

Gov’t14%

BU Quarterly Revenue

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Digital China banking industry total solution ModelB@nk 2.0Digital China banking industry total solution ModelB@nk 2.0

Software Infrastructure（Middle Ware, Database, Operation System）Software Infrastructure（Middle Ware, Database, Operation System）

ESB & Financial Service DefinitionESB & Financial Service Definition

Data Integration Platform & Financial Data ModelData Integration Platform & Financial Data Model

MB Finteractive MB Finnovator MB FintelligenMB FusionG

L

Contribution

Managem

entA

ccounting

PB

OC

CBR

C

SA

FE

Risk Management

Finance & Performance

Regulatory

Core BankingTreasury

Trade Finance

Loan

Deposit

Payment

Financial Product & Service

Intermediate

Business

Card

Cash

Managem

ent

Loan

Wealth

Marketing & Sales

CRM

Loyalty

EC

IF

integration contract

Custom

er Service

Marketing

Sales

Channel Integration

Multi-Chanel Platform

Bank & Corp. Direct Link

VIP

E-Banking

Internet

Mobile

ATM

Branch

Teller

Payment Gateway

CNAPS CUP SWIFT

Telephone

Customer Value Case – Banking Solutions

Credit

ALM

Operation

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BOSS/BSS

Customer Value Case – Telecom Solution

B2B

Integration Portal

CorpServiceProducts

CorpCustomer

ISPCustomerService

Gateway / Integrated Business Portal / ISP Systems

3rd PartySolution

Unified Business Support Portal

Concerted Network

Data Integration Portal

BSS A

pplication Process Integration Portal

Operation Analysis System

Billing & Settlement

CRM

HR & KnowledgeManagement

Gateway & Monitoring

Man

agem

ent I

nfor

mat

ion

Syst

em

Quality Control

Complaints

Settlement

Channel Mgt

Product Mgt

Customer Service

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Services Segment: Customer Analysis

0 200 400 600 800

ZTE Kangxun

Zhongying

Taikang

China P&T

China Unicom

CCB

China Mobile

China Telecom

Zhongjie Guangdong

CNC

HK$ million1.44%

1.48%

1.58%

1.67%

2.54%

4.50%

5.60%

14.95%

10.49%

7.03%

Sales to Top 10 Customers accounted for 36.51% of Services Business’s revenue

% as of Services Business’s revenue

Sales to Top 10 Customers accounted for 51.28% of Services Business’s revenue

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Business Review:Enterprise Market

(Systems)

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Systems Segment: Annual FY08/09

Turnover increased by 37.24% yoy.

Revenue growth drivers:

Storage – up 101%

Networking product – up 25%

Unix server – up 25%

Effective business expansion into Key Regional Clients, rev up 85%

Others 15%

Packagedsoftware

17%

Storageproducts

12%

Networkingproducts

31%

Unix servers25%

Case Study: City Emergency System

Smart contingency plan management

Emergency forecasting and warning

Emergency forecasting and warning

Emergency store management

Contingence planstartup

Contingence planstartup

Emergency security training Emergency responseEmergency response

Emergency intendancemanagement

Disposal of aftermath and rebuilding

Disposal of aftermath and rebuilding

Peacetime WartimeWartime

Information release

Emergency linkage switch

Emergency control center

GIS & CADSGIS & CADS

FY08/09 Annual Systems Business: HK$13,356 million

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Business Review:SMB & Consumer Market

(Distribution)

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Distribution Segment: Annual FY08/09

NotebookComputers

38%

Others 8%Consumer IT

Products8%

Accessories10%

Peripherals13%

DataProjectors

3%

PC Servers9%

DesktopComputers

11%

Turnover grew 15.31% yoy, still growing business against a backdrop of slowing down consumer market

Aggressive expansion into 4th-6th tier cities, turnover grew 51.4% yoy

Revenue growth drivers:

Notebooks – up 35%Accessories – up 39%

FY08/09 Annual Distribution Business:HK$24,087 million

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Company Outlook

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Company Outlook

• Expansion in customer-base, market share and in product portfolio are the keys to ensure future market leadership

• As part of strategic transformation process, organization has been further streamlined to focus on customers in all market sectors

• Improvement over operation efficiency and enhanced controls over working capital and risks, will help to ensure a stable & healthy operation environment

• Strategic transformation into “service-oriented” organization will position the Group into a more-competitive stance for future development

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Services

Systems

Distribution

Customer-Oriented

TextIT Services Deployment

Text

MA

Enterprise

SMB

Consumer

1. Application Services of ITS

2. Infrastructure Services of ITS

3. Systems Technology

4. Business IT Solutions 5. Consumer & SMB

Solutions 6. Supply Chain Services

Customer-Oriented IT Services Deployment

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Thank You

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Questions & Answers