Yunkang Group Limited — Earnings Release 2002

May 23, 2002

Listed Company Information

LEGEND GROUP<00992> - Results Announcement (Summary) Legend Group Limited announced on 23/5/2002: (stock code: 992) Year end date: 31/3/2002 Currency: HKD Auditors' Report: Neither Review of Interim Report by: N/A (Audited) (Audited) Last Current Corresponding Period Period from 1/4/2001 from 1/4/2000 to 31/3/2002 to 31/3/2001 ('000) ('000) Turnover : 20,853,254 27,219,212 Profit/(Loss) from Operations : 1,097,490 202,700 Finance cost : (11,785) (33,516) Share of Profit/(Loss) of Associates : (12,979) (6,628) Share of Profit/(Loss) of Jointly Controlled Entities : 8,468 Nil Profit/(Loss) after Tax & MI : 1,044,900 113,514 % Change over Last Period : +820.50% EPS/(LPS)-Basic : 13.86 cents 1.52 cents -Diluted : 13.79 cents 1.51 cents Extraordinary (ETD) Gain/(Loss) : Nil Nil Profit/(Loss) after ETD Items : 1,044,900 113,514 Final Dividend per Share : 3.6 cents 2.4 cents (Specify if with other options) : N/A N/A B/C Dates for Final Dividend : 5/7/2002 to 9/7/2002 bdi. Payable Date : on or before 20/8/2002 B/C Dates for Annual General Meeting : 5/7/2002 to 9/7/2002 bdi. Other Distribution for Current Period : Nil B/C Dates for Other Distribution : N/A Remarks: 1. Spin-off of DCHL from the Group On 1st June, 2001, Legend Group Limited and its subsidiaries (collectively, the "Group") spun-off Digital China Holdings Limited and its subsidiaries (collectively, "DCHL") for separate listing on the Stock Exchange of Hong Kong (the "Spin-off"). Business operations of DCHL is reported under "Others" in Remark 4. It is noted that turnover and contribution from operating profit of DCHL only covers 2 months in 2002 compared to a full year in 2001. As the Spin-off was substantial to the operating results of the Group, the Directors have prepared unaudited proforma consolidated results of the Group for the corresponding period as if the Spin-off had been completed as at 31st March, 2000. The unaudited proforma consolidated results are prepared on a combined basis as if the current group structure had been in existence throughout the years ended 31st March, 2001 and 2002. The unaudited proforma consolidated results will be published on newspapers. 2. Principal accounting policies The principal accounting policies adopted in the preparation of these annual results are consistent with those adopted in the annual accounts for the year ended 31st March, 2001, except for those changes as a result of adoption of the following Statements of Standard Accounting Practice ("SSAP") issued by the Hong Kong Society of Accountants which are effective for accounting periods commencing on or after 1st January, 2001: SSAP 9 (revised) : Events after the balance sheet date SSAP 14 (revised) : Leases (effective for periods commencing on or after 1st July, 2000) SSAP 26 : Segment reporting SSAP 28 : Provisions, contingent liabilities and contingent assets SSAP 29 : Intangible assets SSAP 30 : Business combinations SSAP 31 : Impairment of assets SSAP 32 : Consolidated financial statements and accounting for investments in subsidiaries The major changes to the Group's accounting policies and the major effect of adopting these new policies are set out below: (a) SSAP 9 (revised) "Events after balance sheet date" In accordance with the revised SSAP 9, the Group no longer recognises dividends proposed or declared after the balance sheet date as liability at the balance sheet date. This change in accounting policy has been applied retrospectively so that the comparative figures have been restated to conform with the current year's policy. Opening accumulated losses at 1st April, 2000 have decreased by approximately HK$134 million which is the reversal of the provision for proposed final dividend for the year 1999/2000 previously recorded as a liability as at 31st March, 2000 although declared after balance sheet date. Opening accumulated losses at 1st April, 2001 have decreased by approximately HK$990 million which is the reversal of the provision for proposed special interim dividend and final dividend both for year 2000/01 previously recorded as liabilities as at 31st March, 2001 although declared after balance sheet date. This adjustment has resulted in a decrease in current liabilities at 31st March, 2001 by approximately HK$990 million (2000: HK$134 million) being provision for proposed dividends that is no longer required. Changes to headings used in the balance sheet and profit and loss account relating to dividends and profit for the year as previously reported in 2000/01 annual report have also been made to reflect the changes resulting from the application of SSAP 9 (revised). (b) SSAP 29 "Intangible assets" Effective in December 1997, the Group acquired the entire equity interest in Legend (Beijing) Limited from its controlling shareholder. The intangible assets arising thereon were regarded as trademarks which were valued by an independent valuer on an open market value basis and capitalised in the consolidated balance sheet with no amortisation. Under the new SSAP 29, the intangible assets should be regarded as goodwill on acquisition and amortised over its estimated useful lives. In view of the fact that DCHL contributed a substantial part of the operating results of the Group since the acquisition of Legend (Beijing) Limited and the rapid changing in computer technology, the Directors consider that it is prudent and appropriate to amortise the goodwill from the date of acquisition (i.e. December 1997) up to the date of announcement of the Spin-off of DCHL in March 2001. The change in accounting policy arising from the adoption of the new SSAP 29 has been applied retrospectively so that the comparatives presented have been restated to conform with the change of accounting policy. Opening accumulated losses at 1st April, 2000 have increased by approximately HK$1,307 million which is the amount of the adjustment in respect of amortisation of goodwill relating to periods prior to year ended 31st March, 2000. Opening accumulated losses at 1st April, 2001 have increased by approximately HK$1,888 million which is the amount of the adjustment in respect of amortisation of goodwill relating to periods prior to year ended 31 st March, 2001. A corresponding decrease in intangible fixed assets by approximately HK$1,888 million has been reflected in the comparative 31st March, 2001 consolidated balance sheet. This adjustment in respect of amortisation of goodwill has resulted in a decrease in profit for the year ended 31st March, 2001 by approximately HK$581 million. (c) SSAP 30 "Business combinations", SSAP 31 "Impairment of assets" and Interpretation 13 SSAP 31 prescribes procedures to be applied to ensure that assets are carried at not more than their recoverable amounts. The recoverable amount of an asset is defined to be the higher of its net selling price and its value in use. The Group determines the value in use of its assets (including fixed assets, goodwill arising on business combinations accounted for using the purchase method and intangible assets) as the present value of estimated future cash flows together with estimated disposal proceeds at the end of its useful life. The Group is required to assess at each balance sheet date whether there are any indications that assets may be impaired, and if there are such indications, the recoverable amount of the assets is to be determined. Any resulting impairment losses identified are charged to the profit and loss account. In accordance with the provisions of Interpretation 13, assessments of impairment of goodwill also apply to goodwill previously eliminated against reserves which will not be reinstated at the time of adoption of SSAP30. Any impairment loss identified in respect of goodwill previously eliminated against reserves is to be recognised as an expense in the profit and loss account. The Group has performed an assessment of the fair value of its assets, including the related goodwill that had previously been charged to reserves. The Group has retrospectively restated its previously reported net profit for the year ended 31st March, 2001 by a decrease of approximately HK$166 million for the impairment of goodwill arising from the acquisition of an associated company. (d) For the year ended 31st March, 2001, the profit attributable to shareholders before any restatement as a results of Remarks 2(b) and 2(c) above amounted to approximately HK$860 million. 3. Earnings per share The calculation of basic and diluted earnings per share is based on the following data: 2002 2001 Earnings for the purposes of basic and diluted earnings per share HK$ 1,044,900,000 HK$113,514,000 ====================================== Weighted average number of shares for the purposes of basic earnings per share 7,539,152,694 7,459,949,492 Effect of dilutive potential shares 36,580,910 56,414,971 -------------------------------------- Weighted average number of shares for the purposes of diluted earnings per share 7,575,733,604 7,516,364,463 =====================================