2002 Annual Results Pres2002 Annual Results Presentationentation

A member of the Li & Fung (Retailing) GroupA member of the Li & Fung (Retailing) Group 14 March 200314 March 2003

2002 Hong Kong Overall Retail Sales 2002 Hong Kong Overall Retail Sales Year-on-Year % ChangeYear-on-Year % Change

-11.8%

7.2%

-3.7% -3.7%

-5.9%

-7.7%

-4.1% -4.4% -4.5%

-2.7% -2.8%-1.9%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Total : $177 BillionTotal : $177 Billion - 4.1%- 4.1%

Source: HKSAR, Census and Statistics DepartmentSource: HKSAR, Census and Statistics Department

2002 Annual Results Presentation2002 Annual Results PresentationAgendaAgenda

2002 Financial Results Highlights2002 Financial Results Highlights

2003 Outlook & Update2003 Outlook & Update

Questions & AnswersQuestions & Answers

2002 Financial Results Highlights2002 Financial Results HighlightsGroup TurnoverGroup Turnover

972.9

1,140.71,305.1

1,393.5

0

400

800

1,200

1,600H

K$

Mill

ion

1999 2000 2001 2002

+ 7%+ 7%

No. of Stores in HK:No. of Stores in HK: 114 114 123 123 146 146 166 166

No. of Stores in China: -No. of Stores in China: - - - - - 2 2

HK Overall Retail Sales: - 8.1% + 3.8%HK Overall Retail Sales: - 8.1% + 3.8% - 1.2% - 4.1% - 1.2% - 4.1%

2002 Financial Results Highlights2002 Financial Results HighlightsGroup Net ProfitGroup Net Profit

6.6

48.1

65.572.1

0

20

40

60

80

HK

$ M

illio

n

1999 2000 2001 2002

+ 10%+ 10%

2002 Financial Results Highlights2002 Financial Results HighlightsNet Profit as % of SalesNet Profit as % of Sales

0.7%

4.2%

5.0% 5.2%

0%

1%

2%

3%

4%

5%

6%

7%

% o

f Sa

les

1999 2000 2001 2002

+ 0.2%+ 0.2%

2002 Financial Results Highlights2002 Financial Results HighlightsBasic Earnings Per ShareBasic Earnings Per Share

1.3

9.8 10.110.9

0

2

4

6

8

10

12

14

HK

Ce

nts

1999 2000 2001 2002

+ 8%+ 8%

2002 Financial Results Highlights2002 Financial Results Highlights

20022002 20012001

Number of StoresNumber of Stores 166166 146146 + 14%+ 14%

Group Turnover (HK$ Million)Group Turnover (HK$ Million) 1,393.51,393.5 1,305.11,305.1 + 7%+ 7%

Group Net Profit (HK$ Million)Group Net Profit (HK$ Million) 72.172.1 65.565.5 + 10%+ 10%

Net Profit as % of TurnoverNet Profit as % of Turnover 5.2%5.2% 5.0%5.0% + 0.2%+ 0.2%

Basic Earnings Per ShareBasic Earnings Per Share 10.9 Cents10.9 Cents 10.1 Cents10.1 Cents + 8%+ 8%

Why 2002 Favourable Results?Why 2002 Favourable Results?Total 2002 Sales Increased Yet ComparablTotal 2002 Sales Increased Yet Comparable Stores Sales Droppede Stores Sales Dropped

10.6%

5%5%

7%

-0.1%

-5%-6%

-5%

-10%

-5%

0%

5%

10%

15%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

% C

ha

ng

e

Total Sales 121 Comparable Stores Sales

Total 2002: + 6.8%Total 2002: + 6.8%

Total 2002: - 4.3%Total 2002: - 4.3%

Why 2002 Favourable Results?Why 2002 Favourable Results?Improving Gross Margin/Other IncomeImproving Gross Margin/Other Income

30.4%31.0%

31.6%

32.8%

26%

28%

30%

32%

34%

1999 2000 2001 2002

+ 1.2%+ 1.2%

Gross Margin/Other Income as % of SalesGross Margin/Other Income as % of Sales

9.5%

7.6%

7.2%

8.6%

6.9%

6.4%

8.5%

6.9%

6.7%

8.9%

6.9%

6.9%

0%

5%

10%

15%

20%

25%

30%

1999 2000 2001 2002

Labour Cost Rental Cost Other Expenses

Why 2002 Favourable Results?Why 2002 Favourable Results?Tight Control of Store Operating ExpensesTight Control of Store Operating Expenses

Store Operating Expenses as % of SalesStore Operating Expenses as % of Sales

24.3%24.3%21.9%21.9% 22.1%22.1% 22.7%22.7%

44thth Quarter 2002 Financial Results Hig Quarter 2002 Financial Results Highlightshlights

20022002 20012001

Group Turnover (HK$ Million)Group Turnover (HK$ Million) 360.8360.8 326.3326.3 + 10.6%+ 10.6%

Comparable StoresComparable Stores 286.7286.7 287.0287.0 - 0.1%- 0.1%

Group Net Profit (HK$ Million)Group Net Profit (HK$ Million) 19.619.6 15.915.9 +23%+23%

Net Profit as % of TurnoverNet Profit as % of Turnover 5.4%5.4% 4.9%4.9% + 0.5%+ 0.5%

2002 Achievements2002 Achievements8 Consecutive Quarters of Profitability Growth8 Consecutive Quarters of Profitability Growth

Q1Q1

20012001

Q2Q2

20012001

Q3Q3

20012001

Q4Q4

20012001

Q1Q1

20022002

Q2Q2

20022002

Q3Q3

20022002

Q4Q4

20022002

+136%

+ 33% + 36%

+ 7% + 7% + 9%+ 3%

+ 23%

2002 Achievements2002 AchievementsConsumer Acceptance of China ModelConsumer Acceptance of China Model

44thth Generation: Generation:

Fresh & Hot Bakery and Gourmet Fresh & Hot Bakery and Gourmet

Hot DrinksHot Drinks

Hi-tech RetailerHi-tech Retailer

STF&F (Speed, Tidiness, STF&F (Speed, Tidiness,

Friendliness & Fun)Friendliness & Fun)

Genuine Products GuaranteeGenuine Products Guarantee

Best Cigarette & Magazine Best Cigarette & Magazine

CategoriesCategories

Grocery at Supermarket PricingGrocery at Supermarket Pricing

2002 Achievements2002 Achievements

Forbes Global Best 200 CompaniesForbes Global Best 200 Companies

(Under A Billion) (Under A Billion) for 2002for 2002

Winner of 2002 HKRMA Service & Courtesy AwardWinner of 2002 HKRMA Service & Courtesy Award

- - Supervisory Level of Supermarket / Convenience Supervisory Level of Supermarket / Convenience

Stores CategoryStores Category

$408M$408M Cash On HandCash On Hand

2003 Update & Outlook2003 Update & Outlook

2003 Update & Outlook2003 Update & OutlookCircle K Hong KongCircle K Hong Kong

High Unemployment, Deflation, Budget Deficit & Tax Increases High Unemployment, Deflation, Budget Deficit & Tax Increases

= Weaker Sentiment to Spend= Weaker Sentiment to Spend

Expect Retail Spending to Drop 3% - 5% in 2003Expect Retail Spending to Drop 3% - 5% in 2003

Our Strategies:Our Strategies:

Efficiency & Cost ControlEfficiency & Cost Control

New Product CategoriesNew Product Categories

Creative PromotionsCreative Promotions

Mass CustomizationMass Customization

Quality & Profitable New OutletsQuality & Profitable New Outlets

2003 Update & Outlook2003 Update & OutlookCircle K ChinaCircle K China

4 Stores Operating by End of March 4 Stores Operating by End of March

20032003

First Batch of 10 Stores by Mid YearFirst Batch of 10 Stores by Mid Year

Aggressive Growth after Fine Tuning Aggressive Growth after Fine Tuning

of Store Model & Supply Chainof Store Model & Supply Chain

30 Stores by End of Year with 30 Stores by End of Year with

Positive Store ContributionPositive Store Contribution

2003 Update & Outlook2003 Update & OutlookTo SummarizeTo Summarize

Solid Foundations in Hong Kong & ChinaSolid Foundations in Hong Kong & China

First 2 Quarters – Profitability Growth A First 2 Quarters – Profitability Growth A

ChallengeChallenge

Weak Hong Kong MarketWeak Hong Kong Market

Heaviest Start Up Cost in ChinaHeaviest Start Up Cost in China

Improving Results in 2Improving Results in 2ndnd Half Half