Business Overview

Mr. Bruce RENChief Technology Officer of TCL

TCL International Holdings Limited

Presentation for China Tour 2002 - Nikko Salomon Smith Barney

Company Background

Review

Outlook

Corporate Strategy

Agenda

Company Background

4

Established in 1981

Listed on Hong Kong Stock Exchange in Nov 1999

(Ticker symbol: 1070)

IPO price: HK$1.75

Shares Outstanding: 2.5 billion shares

Major shareholder: TCL Industries Ltd. (55%)

TCL - Company Background (1)

Key Facts

5

TCL - Company Background (2)

Colour Television

White Goods

Home Appliances

Personal Computer

Remote Education

Internet VA Services

Information Appliances

Network Equipment

IT Business

TCL International Holdings Ltd.

Overseas Business

India Philippines Vietnam Others

Audio-Visual products

Business Structure

Handset Business

6

西藏

青海

甘肃

内蒙

四川

云南

广西

贵州

陕西

山西

广东

黑龙江

吉林

辽宁

山东

台湾

河北

湖北

湖南福建

浙江

江西

安徽

江苏

上海

香港

天津

北京

海南

河南

新疆

34 Branches

>20,000 Dealers & Retailers

200 Sales Offices

Distribution Network for Home Appliances

TCL - Company Background (3)

7

7 Market Regions

> 900 Distributors

27 Representative Offices

Harbin

ChangchunShenyang

Dalian

Beijing

Jinan

ChengzhouXian

Wuhan

Chengdu

Kunming Guangzhou

Shenzhen

Fuzhou

Changshi

Hangzhou

ShanghaiNanjing

Lanzhou

Urumqi Shijiazhuang Tianjin

Nanchang

Chongqing

QuiyangNanning

Taiyuan

Hefei

Distribution Network – Personal Computer

TCL - Company Background (4)

ReviewFinancial Review

Operation Review

9

(in HK$ millions) Jan-Sept 2001

Jan-Sept 2000 Change

Turnover 6,954 6,065

1,118

18%

316

5%

+15%

Gross Profit 1,133 +1%

Gross Margin 16% -2%

Net Profit 213 -33%

Net Margin 3% -2%

Financial Review (1)

10

Jan-Sept 2001

Jan-Sept 2000 Change

TV 17% 18% -1%

White Goods 23% 23%

20%

PC* 9% 13% -4%

0%

AV 13% -7%

Gross Profit Margin

* PC only has 7 months contribution in Jan-Sept 2001

Financial Review (2)

11

Revenue Mix

Jan-Sept2000

TV78%

WG15%

AV4%

Others3%

Jan-Sept2001

TV72%

WG11%

AV3%

Others5%PC*

9%

* PC only has 7 months contribution in Jan-Sept 2001

Financial Review (3)

12

Unit (‘000) PRCYoY%

ExportYoY%

Total

+8%

-27%

-36%

-4%

-37%

PC 200 -23% 0 n.a. 200 -23%

740

+477%

0

6,230

178

396

160

715

0

0

89

1,247

YoY%

TV* 5,490

0

+7%

Refrigerator 178

+6%

n.a.

n.a.

n.a.

+118%

-27%

Washing Machine 396 -36%

Air Conditioner 160 -4%

AV 626 -31%

n.a.Mobile Phone 1,247 +477%

Unit Sales of 2001 (pre-audited figures)

* Figures included TM-Henan

Operation Review (1)

13

Strengthened market position in the first 9 months of 2001Ranked 1st in PRC TV market in terms of units sold Increased market share to 20%

0

5

10

15

20

25

TCL Changhong Konka

2000 1-3Q2001

Source: China’s Ministry of Information Industry

Mark

et

Sh

are

(%

)

Operation Review – TV (1)

14

Swift introduction of new concepts and high-end modelsOver 50 new models has been launched over the year

The best performer in the industry in terms of profitability (based on latest results announcement)

Competition in PRC TV market has become less severePrice adjustments were categorized to a small number of geographic locations and modelsMargin remained relatively stable

TCL : ProfitHisense : ProfitChanghong : LossKonka : LossSkyworth : Loss

Operation Review – TV (2)

15

Overall sales performance was unsatisfactory

Competition intensified:

Market supply increased as more players entered the market and created pressure on pricing

We are still in the infancy stage and failed to react to the market promptly

New products were not well received due to over-optimistic price strategy

Delay in rolling out product also affected sales

Operation Review – WGs (1)

16

Overall PC shipments were below expectation

Slowdown of home PC market in the PRCThe Internet boom last year led to a high expectation for the demand this yearDelayed consumption due to continuous price cuts

INTEL CPU P4 1.5G price cut by 70% in 1H

Upgrade ERP system and internal operation restructuring

Margin squeezed Production failed to reach economies of scaleIncreasing expenses for R&D, after-sale services and ERP system

Operation Review – PC (1)

17

Robust volume growth throughout the year

Market demand was strong due to low penetration rate

Swift introduction of new concepts and high-end models

8 new models has been launched over the year

Target: to launch new model every month in year 2002 (over 12 GSM models and 6 CDMA models)

Profit margins have been improving

Newly launched high-end models have been well received

Announced to increase the Mobile’s equity interest from 20% to 30%

Valuation: 10x 2001 PE (Guarantee Profit for 2001: Rmb 300 m)

The deal is expected to be completed at the end of March 2002

Operation Review – Handset (1)

OutlookPRC Economic Outlook

Market Outlook

19

PRC Economic Outlook

Expect continuous robust economic growth

GDP expect to grow 7% in next few years

Growing Foreign Direct Investment

⇒ Growing employment

⇒ Improving disposal income & personal wealth

Expect strong domestic demand

Improving consumer confidence

Expect consumers will spend more on high-end consumer products

High-end TV

Personal Computer

Handset

Impact of WTO accession on Chinese economy

20

Increasing Market DemandPenetration Rates

Urban Area: currently over 110%Rural Area : currently over 40%

Demand drivers in the coming few yearsUrban Area

Marriage market: increase in the number of householdsReplacement needs ⇒ Mainly focus on hi-end TV

Housing reform ⇒ Cash subsidies from government to promote ownership of private apartmentsExpect continuous improvement of disposal income

2nd TV demandImproved living standard

Rural Area1st TV demand remains strong due to low penetration rate

Market Outlook – TV (1)

21

Market Outlook – TV (2)Improving market conditions

Market consolidationPRC market is mostly dominated by the top 3 players

Market share of top 3 players

Full year 1997: 46%

Jan-Sep 2001 : 54%(Source: Ministry of Information Industry)

Rationalization of market players’ behaviour

Trend towards more profit-oriented operation

Margin is as important as the market share

Product differentiation & technology upgrading

the main themes of the competition

22

Long term industry trend

Digital information display devices: leading to a new generation of home appliances

It plays a key role in future households, where traditional homeappliances become 3C convergent Infortainment Devices

It has great market potential as the more sophisticated household devices require better display

Major IT players in China are moving into the Infortainment Devices and Digital Display business

Market Outlook – TV (3)

23

Low penetration rate in China, 4% in 2001 (Source: Euromonitor)

China is forecasted to sustain growth rates averaging 25% p.a. (source: IDC) - the fastest growing country in the world

0

5

10

15

20

25

Mill

ion

units

1996 1997 1998 1999 2000 2001F 2002F 2003F 2004F 2005F

China PC unit shipments

Averag

e grow

th rate

:25% p

.a.

Source：IDC

Market Outlook – PC (1)

24

PRC will replace Japan to become the biggest desktop PC market in Asia and the 2nd largest market in the world in 2003

IDC forecast

Desktop PC will grow at 21% in 2002

Sales of desktop PC in the PRC can reach 13.2 mil units in 2003

Consumption power is increasing

P4 & Window XP are expected to become the mainstream products in the PRC

Expect P4 will take at least 60-70% of total market share in coming years

Market Outlook – PC (2)

25

Demand for handset in China has been very strong since 1998

No. of handset users amounted to 120.6 mil as of July 2001 (exceeding that of the United States - 120.1 mil)

0

20

40

60

80

100

120

140

Mill

ion

units

1998 1999 2000 2001E 2002E 2003E 2004E

Source：IDC

China handset unit shipments

Market Outlook – Handset (1)

26

Penetration rate of handset in the PRC in 2000 at 6-7% was lag those in developed countries:

United States 40%United Kingdom 72%Japan 53%Hong Kong 71%

Source: International Telecommunication Union, 2001

Gartner, Inc expects penetration rate of handset in the PRC to experience an exponential growth in the coming years to reach 20% (no. of users will reach 350 mil)

Source of Demand (forecast)New subscribers: 40-50 mil units per annumReplacement: Tremendous growth in the coming years

Market Outlook – Handset (2)

27

Expected limited challenges from foreign players

Consumer electronics and PC industries have been competing fiercely with foreign rivals over the past decade

Domestic players have proved their competitiveness and dominated the markets for years

Opportunities

Reductions in import tariffs on components may improve profitability

Expansion in overseas markets with lower export barriers

Acceleration of the ongoing industry consolidation

Market Outlook – Impact of WTOCreate more opportunities than challenges

Corporate Strategy

29

Our vision: Infortainment Devices will play an important role in the China market

Infortainment Devices

Consumer Electronics

ComputerCommunication

3 C Convergence

TCL – Corporate Strategy

30

Develop overseas market in parallel to the domestic market

Searching for a strategic partner which can bring considerable benefits to the Group

Single brand strategy: TCL is the only brand used across all product lines (TV, AV, WG, PC & handset)

Allocate more resources on R & D (application-focused)

TCL – Corporate Strategy