Against the backdrop of global economic slowdown, Legend Holdings’ operation performance temporarily suffered from pressure due to the fluctuations in the industry and capital markets; the profits contributed by Lenovo Group and Levima Group from the industrial operations segment, as well as the investment gain in the industrial incubations and investments segment, both recorded a year-on-year decrease, and the net profit attributable to equity holders of the Company recorded a loss. In response, the Company implemented proactive measures to help its subsidiaries accommodate market challenges and industry cycles’ influence and achieved initial success. Furthermore, the recovery of the capital market will boost the development of the Company’s investment businesses.

Mr. Li Peng, the Executive Director and Chief Executive Officer of Legend Holdings, said, in the year 2023, in the face of various challenges emerged in the high-quality development transformation of the enterprises, Legend Holdings remained resolute in advancing innovation-driven development strategies, proactively responded to the influence of external environment, solidly fulfilled its corporate social responsibilities, and actively integrated itself into the strategic deployment for Chinese path to modernization. Furthermore, the Company has conducted more in-depth review on its shortcomings and will be committed to coordinating high-quality development while maintaining a high-level of security. While further consolidating its foundations, the Company will fully capitalize on its accumulated strengths to seize opportunities from this new wave of technological innovation, not only to fuel the continuous improvements in its business performance but also actively contribute value to the society.

Strengthening the pillar industries and resolutely advancing innovation-driven enterprise transformation and upgrade

In 2023, Legend Holdings safeguarded the relative stability of its business foundations while implementing the new development concept in depth.

The Company accelerated the development of leading enterprises with international competitiveness and command over the industrial chain, focusing its efforts on strengthening its industrial base. Lenovo maintained its solid leading position in IT field, further consolidated its world’s No. 1 place in PC market with a significant outperformance in the market, ranking among the top three globally in the server industry, and retained as the No. 1 in the global TOP500 and Green100 in terms of high-performance computing. At the same time, Lenovo took the lead in launching the world’s first AI PC, and committed to leading the PC industry in intergenerational upgrade, and to creating the first inclusive AI terminal. After completing the domestic substitution of EVA photovoltaic adhesive film materials, Levima Advanced Materials has once again entered into the field of POE (Polyolefin elastomer), breaking the monopoly held by foreign countries in production and technology of POE, and multiple projects will be put into production in the first half of 2024. With the steady development of its businesses, Fullhan Microelectronics has made solid and in-depth efforts in the three major business areas of smart video, smart IoT and smart automotive products, accelerated the introduction of new products, penetrated new market opportunities, and possessed the capability of supplying complete one-stop solutions.

Continuously enhancing the ability in scientific and technological innovation, increasing investment in research and development, the Company continued to strengthen the exploration and practice of its AI innovation path. In 2023, the R&D expenditure of the Company reached RMB14.8 billion, raising its R&D expense ratio from 2.6% in 2021 to 3.4% in 2023. At the same time, it actively promoted its subsidiary funds to increase support for China’s innovative hi-tech enterprises, and invested in more than 100 Chinese innovative hi-tech enterprises throughout the year. In the field of artificial intelligence, which is an important engine for the development of new quality productive forces, the Company has invested in more than 200 related enterprises, formed a full-stack portfolio covering “device, technology, model, platform, and application”, securing a first-mover advantage for the development of the “AI+” initiative. On March 8, 2024, Legend Holdings entered into a strategic cooperation agreement with Zhipu AI to carry out in-depth cooperation in the field of artificial intelligence.

The Company continued to harness the role of industrial chain leader and actively promoted the digital and intelligent transformation and growth of SMEs, which has gained considerable achievements. Its subsidiary, Lenovo, can provided SMEs with not only a full matrix of smart devices, but also stable computing power for all scenarios, hybrid cloud, industry solutions, and life-cycle intelligent transformation services. It has served over a million SMEs and supported the intelligent transformation of over 30,000 specialized and innovative enterprises, including over 3,000 national specialized and innovative “little giant” firms.

The Company also strengthened its attention on early-stage technologies and explored approaches to integrated development across education, technology, talent, and industries. The "Legend Holdings Forward-looking Technology Research Institute , set up by the Company, has initially built an enterprise-led and market-oriented technology innovation system leveraging collaboration among industry, academia, research institutes, and end users. It has established connections with more than 60 enterprises and research institutions to discuss IP co-creation and cooperation modes, and preliminarily selected 39 seed technologies, and initiated in-depth cooperation with 2 universities and 7 domestic and foreign enterprises.

Practicing low-carbon development and actively fulfilling corporate social responsibilities

Legend Holdings has consistently promoted its subsidiaries to seize the green and low-carbon development and actively responded to the national strategy of carbon peaking and carbon neutrality. Lenovo was the first company in China to pass the net zero target verification by the Science Based Targets initiative (SBTi) and has zero-carbon factories with the highest-standard in the industry. Levima Advanced Materials, as a state-level High-tech enterprise and Green Factory, deepened its layout in green industries such as new energy materials and biodegradable plastics, contributing to the achievement of Chinese de-carbonization goals.

Rural revitalization and technological innovation are the focused areas of Legend Holdings for its corporate social responsibility. In terms of rural revitalization, the Company has launched the “Legend Enterprising Class” with a focus on education in underdeveloped areas, providing assistance for the talent pool of rural industry revitalization over the past 20 years. The Revolving Loans for Mothers, a project supported by the Company since 2018, has helped women from low-income families in many areas to start businesses with local characteristics, promoting their hometowns towards improving agriculture by high-quality and green products while giving first priority to effectiveness. In terms of technological innovation, the Company remained committed to building an entrepreneurial ecosystem conducive to technological innovation and supported the growth of high-tech entrepreneurial leaders. For instance, the public welfare training program for start-up CEOs launched in 2008 has admitted approximately 1,300 entrepreneurs. Currently, 55 enterprises founded by the trainees have been successfully listed, while 122 have been selected as national specialized and innovative “little giant” firm, providing employment for nearly 400,000 people.

Developing new quality productive forces and deepening the establishment of core competitiveness

The “give great impetus to the development of the modern industrial system and accelerate the development of new quality productive forces” proposed in this year’s government work report provided new guidance for the development of enterprises. In the future, the Company will focus more on “technological innovation”, fully capitalize on its 40 years of industrial accumulation, ecological layout and technological & innovative investment, highlight the development of new quality productive forces and deepen the establishment of the Company’s core competitiveness.

The Company will continue to promote the strategic transformation of itself and its subsidiaries to build a more robust industrial foundation; further optimize the business layout and financial structure, accelerate the backflow of resources, and incline to make investment in the field of scientific and technological innovation; in combination with the trend of the capital markets, the Company will actively promote the capital operation of quality enterprises to help them develop faster and become better, and effectively increase its public value; continue to give full play to the exploration and cultivation of the early-stage technologies by The Legend Holdings Forward-looking Technology Research Institute, with a focus on the forward-looking needs in three major fields of intelligent sensing, new materials and new energy. It will accelerate the advancement and implementation of innovative incubation topics which are our key layout, such as photonic integration to fill the shortcoming of AI’s new computing, biodegradable new materials for treating white pollution, and virtual power plant algorithms oriented for the optimization of the new type of electric power system.

Mr. Ning Min, Chairman and Executive Director of Legend Holdings, said, in 2023, in the face of multiple internal and external challenges, Legend Holdings, on the one hand, consolidated its industrial foundation and strengthened its risk-resistant capability, and on the other hand, put the implementation of the innovation-driven development strategy and support for high-level scientific and technological self-reliance in a more prominent position, confronted the difficulties, conducted positive explorations, and made solid progress in operations. This year marks the 75th anniversary of the founding of the People’s Republic of China, and in accordance with the deployment of the Central Economic Work Conference, the Company will stay true to its original aspiration of serving the country through industry, consciously practice the people-centered philosophy of development, and accommodate itself to the trend of the times by actively participating in scientific and technological innovation-led high-quality development, to vigorously promote the development of new quality productive forces and make greater contributions to Chinese path to modernization.