1

LBMA / LPPM Precious Metals Conference 2012 (13 November 2012, 9 am)

Presentation by Mr. Kent Wong, Managing Director, Chow Tai Fook

“Changing Trends in the Chinese Jewellery Market”

SUGGESTED INTRODUCTION OF KENT BY MODERATOR

<SLIDE 1 then SLIDE 2 as holding slide>

• Kent Wong started with the company in 1977 and worked his way

up from apprentice, through manufacturing and retail assignments.

He was responsible for developing the Group’s business in China

beginning in 1999, and became Managing Director of the Group

last year. Chow Tai Fook is the market leader in Greater China

and is now the largest publicly listed jewellery retailer in the world

• A very well-respected industry professional, Kent knows the

jewellery business inside and out. Over half of Chow Tai Fook’s

revenues come from gold products, so he is an excellent person to

tell us about trends in the Chinese gold jewellery market. Kent?

INTRODUCTION – THE INDUSTRY IS CHANGING

Thank you, Philip. As many of you may already know, China is the

fastest growing market for gold jewellery. But do you know the

answers to these two questions: Firstly, what is behind this rise in

demand? Secondly, what are customers buying? Well, as the

jeweller with the largest market share in China, we actually have

some very interesting insight to share. [PAUSE] We can see that

2

consumers are gradually changing their buying behaviour, and the

jewellery industry is changing with them. [PAUSE]

I think most of you know that Chinese people like to buy pure gold

jewellery. <SLIDE 3> Mainland China’s GDP increased 7.7% year-on-

year in the last three quarters with retail sales of consumer products

increasing by over 14%. Chinese people have more spending power

and they are buying more jewellery, including pure gold jewellery. In

fact, there’s a very long tradition, dating back to the Xia dynasty,

which was the first dynasty in China about 4,000 years ago, that gold

jewellery gifts should be part of a bride’s dowry. <SLIDE 4> There is

also an age-old tradition of giving jewellery gifts at weddings, births,

Chinese holidays, birthdays and anniversaries. [PAUSE] We have

some Westerners in today’s audience, but you do not buy the same

kind of gold we Chinese buy, right? [PAUSE – LOOK INTO CROWD]

You like to buy 14 karat or 18 karat gold jewellery, because it is

harder and more durable. In China and India, people traditionally

prefer pure, 24 karat gold jewellery or “足金” (Zu Jin) in Chinese,

mostly because the high purity of gold is more valuable and a better

investment. [PAUSE] We could generalise by saying that

Westerners buy gold jewellery for decoration, [PAUSE] but Asians

buy it for both decoration and as an investment. In fact, some

3

customers sell their gold back to the jewellers and we also offer that

option. This practice of repurchase of gold jewellery has been

common in Chinese society from ancient time right up to the present

day.

DESIGN AND INNOVATION COMMAND A PREMIUM

So what is changing in China? Well, these days, many buyers are

young people and our buyers seem, on average, to be getting

younger and younger as time goes by. Different age customers

display different philosophies and buying habits. Young people today

are better educated and more exposed to modern styles, so they

naturally want trendy items and care a lot about design. They do not

want to wear “their mother’s jewellery” [PAUSE-SMILE], and they

want to say something about their own personalities through the

jewellery they wear. [PAUSE]

So what does this means to us as a business? Well, it is good news.

Unique jewellery designs command better margins. The same theory

applies to our gold jewellery business. <Slide 5> Traditionally,

Chinese jewellers like us sold gold jewellery by weight, and that is

very common not only in China, but in India and the Middle East.

Since the 1990s, however, there has been a shift in tastes and

demand, and Chinese consumers have begun to care more about

4

design, style, and fashion. <Slide 6> This allows us to sell more pure

24 karat gold jewellery at a premium, rather than by weight.

(PAUSE) Frankly, we believe those who only sell traditional gold

jewellery by weight in China will have a hard time surviving in today’s

market, particularly considering the changing consumer preferences.

Unless they can invest in design, marketing, branding, and create

more desirable products, they won’t be able to survive. So, I see a

consolidation process in the industry is now working, and larger

jewellery players like ours will prevail.

EXAMPLES OF POPULAR JEWELLERY TODAY

Now, let me describe and even show you the kind of 24 karat gold

jewellery that is popular in China today. <SLIDE 7-8>

(1) Look at this line of Disney-licensed gold jewelry, which includes,

for example, our Winnie the Pooh collection. This is sold at a

premium. [REFER TO SLIDE 7]

(2) We set some of our gold jewellery with both precious and semi-

precious stone such as a diamond, tourmaline or tanzanite, and

other materials such as pearl. Here is an example of what sells

well. [REFER TO SLIDE 8]

5

(3) Another increasingly popular category is what we call “hard gold.”

<SLIDE 8 Cont’d> Through special new technology, called electro-

forming, we can raise the hardness of 24 karat gold to be almost

as hard as 18 karat gold, yet still pure, and thus the design of gold

jewellery can be more flexible and diverse; our customers don’t

need to worry about the limitation of gold’s softness. We can also

make it hollow, so that it looks bigger; which is something that

young customers find very appealing. See these two bangle

bracelets and you can tell the difference. [HOLD UP] The one on

the left is hard and hollow, and the one on the right is the

traditional, soft 24 karat gold. If any of you want a closer look after

this panel discussion I welcome you to come up and take a look.

The gold jewellery industry has to innovate with new ideas in order

to create demand, and at Chow Tai Fook we are at the forefront of

that innovation. The innovation and design of the products is what

our younger customers are paying for, and these sales earn higher

margins.

TREND TOWARD GEM-SET JEWELLERY

It is also extremely important to note that we are seeing

encouraging growth in the level of demand for gem-set jewellery.

Pure gold is regarded as less trendy by some of our customers,

6

and for that reason diamonds and precious stones are an

increasingly important part of our business. Again, design is

important. To meet these changing customer preferences, we

have devoted a lot of effort to innovative design, e.g. we added

trendy elements to the traditional wedding bangles and attracted a

lot of young customers (POINT TO <SLIDE 9>). Another

important trend to note is the growing demand for gold jewellery

from customers in Tier 3 and 4 cities. <SLIDE 10> According to

research done by Frost & Sullivan, Tier 3 and 4 cities are going to

be the major growth driver of China’s jewellery market. Frost &

Sullivan predicts that Tier 3 and 4 cities will account for more than

40% of China’s total jewellery market by 2015, up from 34% in

2010 and 29% in 2006. We saw this trend years ago and have

already been strengthening our presence in China’s lower tier

cities where we can capture this growing demand. Currently, we

have about 1,700 points of sale in over 390 cities in China, and we

aim to open approximately 200 points of sale per year in mainland

China. Nowadays, e-commerce has been a powerful retail channel

in China. Jewellers also regard this as a chance to increase sales

by diversifying their client base and expanding their customer

reach. Take Chow Tai Fook as an example, <SLIDE 11> we have

developed our own eShop and more than 10 online channels at

7

Tmall, 360Buy and others. We are continuously ranked as the

“Best Selling Jewellery Brand” on Tmall. We believe e-commerce

will become more and more important in China in the future.

[PAUSE] We are proud to sell both the Chinese style as well as

international style gold jewellery that rival other high end luxury

brands. <SLIDE 12> One of Chow Tai Fook’s key strengths is that

we have over 80-years of brand heritage. Another strength is our

vertically integrated business model. We understand Chinese

customer needs, and we are very confident that we can offer them

exactly what they want in our stores.

Thank you for having me here today, and I am happy to take

questions.

[END]

1

LBMA / LPPM Precious Metals Conference 2012 (13 November 2012, 9 am)

Presentation by Mr. Kent Wong, Managing Director, Chow Tai Fook

“Changing Trends in the Chinese Jewellery Market”

SUGGESTED INTRODUCTION OF KENT BY MODERATOR

<SLIDE 1 then SLIDE 2 as holding slide>

• Kent Wong started with the company in 1977 and worked his way

up from apprentice, through manufacturing and retail assignments.

He was responsible for developing the Group’s business in China

beginning in 1999, and became Managing Director of the Group

last year. Chow Tai Fook is the market leader in Greater China

and is now the largest publicly listed jewellery retailer in the world

• A very well-respected industry professional, Kent knows the

jewellery business inside and out. Over half of Chow Tai Fook’s

revenues come from gold products, so he is an excellent person to

tell us about trends in the Chinese gold jewellery market. Kent?

INTRODUCTION – THE INDUSTRY IS CHANGING

Thank you, Philip. As many of you may already know, China is the

fastest growing market for gold jewellery. But do you know the

answers to these two questions: Firstly, what is behind this rise in

demand? Secondly, what are customers buying? Well, as the

jeweller with the largest market share in China, we actually have

some very interesting insight to share. [PAUSE] We can see that

2

consumers are gradually changing their buying behaviour, and the

jewellery industry is changing with them. [PAUSE]

I think most of you know that Chinese people like to buy pure gold

jewellery. <SLIDE 3> Mainland China’s GDP increased 7.7% year-on-

year in the last three quarters with retail sales of consumer products

increasing by over 14%. Chinese people have more spending power

and they are buying more jewellery, including pure gold jewellery. In

fact, there’s a very long tradition, dating back to the Xia dynasty,

which was the first dynasty in China about 4,000 years ago, that gold

jewellery gifts should be part of a bride’s dowry. <SLIDE 4> There is

also an age-old tradition of giving jewellery gifts at weddings, births,

Chinese holidays, birthdays and anniversaries. [PAUSE] We have

some Westerners in today’s audience, but you do not buy the same

kind of gold we Chinese buy, right? [PAUSE – LOOK INTO CROWD]

You like to buy 14 karat or 18 karat gold jewellery, because it is

harder and more durable. In China and India, people traditionally

prefer pure, 24 karat gold jewellery or “足金” (Zu Jin) in Chinese,

mostly because the high purity of gold is more valuable and a better

investment. [PAUSE] We could generalise by saying that

Westerners buy gold jewellery for decoration, [PAUSE] but Asians

buy it for both decoration and as an investment. In fact, some

3

customers sell their gold back to the jewellers and we also offer that

option. This practice of repurchase of gold jewellery has been

common in Chinese society from ancient time right up to the present

day.

DESIGN AND INNOVATION COMMAND A PREMIUM

So what is changing in China? Well, these days, many buyers are

young people and our buyers seem, on average, to be getting

younger and younger as time goes by. Different age customers

display different philosophies and buying habits. Young people today

are better educated and more exposed to modern styles, so they

naturally want trendy items and care a lot about design. They do not

want to wear “their mother’s jewellery” [PAUSE-SMILE], and they

want to say something about their own personalities through the

jewellery they wear. [PAUSE]

So what does this means to us as a business? Well, it is good news.

Unique jewellery designs command better margins. The same theory

applies to our gold jewellery business. <Slide 5> Traditionally,

Chinese jewellers like us sold gold jewellery by weight, and that is

very common not only in China, but in India and the Middle East.

Since the 1990s, however, there has been a shift in tastes and

demand, and Chinese consumers have begun to care more about

4

design, style, and fashion. <Slide 6> This allows us to sell more pure

24 karat gold jewellery at a premium, rather than by weight.

(PAUSE) Frankly, we believe those who only sell traditional gold

jewellery by weight in China will have a hard time surviving in today’s

market, particularly considering the changing consumer preferences.

Unless they can invest in design, marketing, branding, and create

more desirable products, they won’t be able to survive. So, I see a

consolidation process in the industry is now working, and larger

jewellery players like ours will prevail.

EXAMPLES OF POPULAR JEWELLERY TODAY

Now, let me describe and even show you the kind of 24 karat gold

jewellery that is popular in China today. <SLIDE 7-8>

(1) Look at this line of Disney-licensed gold jewelry, which includes,

for example, our Winnie the Pooh collection. This is sold at a

premium. [REFER TO SLIDE 7]

(2) We set some of our gold jewellery with both precious and semi-

precious stone such as a diamond, tourmaline or tanzanite, and

other materials such as pearl. Here is an example of what sells

well. [REFER TO SLIDE 8]

5

(3) Another increasingly popular category is what we call “hard gold.”

<SLIDE 8 Cont’d> Through special new technology, called electro-

forming, we can raise the hardness of 24 karat gold to be almost

as hard as 18 karat gold, yet still pure, and thus the design of gold

jewellery can be more flexible and diverse; our customers don’t

need to worry about the limitation of gold’s softness. We can also

make it hollow, so that it looks bigger; which is something that

young customers find very appealing. See these two bangle

bracelets and you can tell the difference. [HOLD UP] The one on

the left is hard and hollow, and the one on the right is the

traditional, soft 24 karat gold. If any of you want a closer look after

this panel discussion I welcome you to come up and take a look.

The gold jewellery industry has to innovate with new ideas in order

to create demand, and at Chow Tai Fook we are at the forefront of

that innovation. The innovation and design of the products is what

our younger customers are paying for, and these sales earn higher

margins.

TREND TOWARD GEM-SET JEWELLERY

It is also extremely important to note that we are seeing

encouraging growth in the level of demand for gem-set jewellery.

Pure gold is regarded as less trendy by some of our customers,

6

and for that reason diamonds and precious stones are an

increasingly important part of our business. Again, design is

important. To meet these changing customer preferences, we

have devoted a lot of effort to innovative design, e.g. we added

trendy elements to the traditional wedding bangles and attracted a

lot of young customers (POINT TO <SLIDE 9>). Another

important trend to note is the growing demand for gold jewellery

from customers in Tier 3 and 4 cities. <SLIDE 10> According to

research done by Frost & Sullivan, Tier 3 and 4 cities are going to

be the major growth driver of China’s jewellery market. Frost &

Sullivan predicts that Tier 3 and 4 cities will account for more than

40% of China’s total jewellery market by 2015, up from 34% in

2010 and 29% in 2006. We saw this trend years ago and have

already been strengthening our presence in China’s lower tier

cities where we can capture this growing demand. Currently, we

have about 1,700 points of sale in over 390 cities in China, and we

aim to open approximately 200 points of sale per year in mainland

China. Nowadays, e-commerce has been a powerful retail channel

in China. Jewellers also regard this as a chance to increase sales

by diversifying their client base and expanding their customer

reach. Take Chow Tai Fook as an example, <SLIDE 11> we have

developed our own eShop and more than 10 online channels at

7

Tmall, 360Buy and others. We are continuously ranked as the

“Best Selling Jewellery Brand” on Tmall. We believe e-commerce

will become more and more important in China in the future.

[PAUSE] We are proud to sell both the Chinese style as well as

international style gold jewellery that rival other high end luxury

brands. <SLIDE 12> One of Chow Tai Fook’s key strengths is that

we have over 80-years of brand heritage. Another strength is our

vertically integrated business model. We understand Chinese

customer needs, and we are very confident that we can offer them

exactly what they want in our stores.

Thank you for having me here today, and I am happy to take

questions.

[END]

1

LBMA / LPPM Precious Metals Conference 2012 (13 November 2012, 9 am)

Presentation by Mr. Kent Wong, Managing Director, Chow Tai Fook

“Changing Trends in the Chinese Jewellery Market”

SUGGESTED INTRODUCTION OF KENT BY MODERATOR

<SLIDE 1 then SLIDE 2 as holding slide>

• Kent Wong started with the company in 1977 and worked his way

up from apprentice, through manufacturing and retail assignments.

He was responsible for developing the Group’s business in China

beginning in 1999, and became Managing Director of the Group

last year. Chow Tai Fook is the market leader in Greater China

and is now the largest publicly listed jewellery retailer in the world

• A very well-respected industry professional, Kent knows the

jewellery business inside and out. Over half of Chow Tai Fook’s

revenues come from gold products, so he is an excellent person to

tell us about trends in the Chinese gold jewellery market. Kent?

INTRODUCTION – THE INDUSTRY IS CHANGING

Thank you, Philip. As many of you may already know, China is the

fastest growing market for gold jewellery. But do you know the

answers to these two questions: Firstly, what is behind this rise in

demand? Secondly, what are customers buying? Well, as the

jeweller with the largest market share in China, we actually have

some very interesting insight to share. [PAUSE] We can see that

2

consumers are gradually changing their buying behaviour, and the

jewellery industry is changing with them. [PAUSE]

I think most of you know that Chinese people like to buy pure gold

jewellery. <SLIDE 3> Mainland China’s GDP increased 7.7% year-on-

year in the last three quarters with retail sales of consumer products

increasing by over 14%. Chinese people have more spending power

and they are buying more jewellery, including pure gold jewellery. In

fact, there’s a very long tradition, dating back to the Xia dynasty,

which was the first dynasty in China about 4,000 years ago, that gold

jewellery gifts should be part of a bride’s dowry. <SLIDE 4> There is

also an age-old tradition of giving jewellery gifts at weddings, births,

Chinese holidays, birthdays and anniversaries. [PAUSE] We have

some Westerners in today’s audience, but you do not buy the same

kind of gold we Chinese buy, right? [PAUSE – LOOK INTO CROWD]

You like to buy 14 karat or 18 karat gold jewellery, because it is

harder and more durable. In China and India, people traditionally

prefer pure, 24 karat gold jewellery or “足金” (Zu Jin) in Chinese,

mostly because the high purity of gold is more valuable and a better

investment. [PAUSE] We could generalise by saying that

Westerners buy gold jewellery for decoration, [PAUSE] but Asians

buy it for both decoration and as an investment. In fact, some

3

customers sell their gold back to the jewellers and we also offer that

option. This practice of repurchase of gold jewellery has been

common in Chinese society from ancient time right up to the present

day.

DESIGN AND INNOVATION COMMAND A PREMIUM

So what is changing in China? Well, these days, many buyers are

young people and our buyers seem, on average, to be getting

younger and younger as time goes by. Different age customers

display different philosophies and buying habits. Young people today

are better educated and more exposed to modern styles, so they

naturally want trendy items and care a lot about design. They do not

want to wear “their mother’s jewellery” [PAUSE-SMILE], and they

want to say something about their own personalities through the

jewellery they wear. [PAUSE]

So what does this means to us as a business? Well, it is good news.

Unique jewellery designs command better margins. The same theory

applies to our gold jewellery business. <Slide 5> Traditionally,

Chinese jewellers like us sold gold jewellery by weight, and that is

very common not only in China, but in India and the Middle East.

Since the 1990s, however, there has been a shift in tastes and

demand, and Chinese consumers have begun to care more about

4

design, style, and fashion. <Slide 6> This allows us to sell more pure

24 karat gold jewellery at a premium, rather than by weight.

(PAUSE) Frankly, we believe those who only sell traditional gold

jewellery by weight in China will have a hard time surviving in today’s

market, particularly considering the changing consumer preferences.

Unless they can invest in design, marketing, branding, and create

more desirable products, they won’t be able to survive. So, I see a

consolidation process in the industry is now working, and larger

jewellery players like ours will prevail.

EXAMPLES OF POPULAR JEWELLERY TODAY

Now, let me describe and even show you the kind of 24 karat gold

jewellery that is popular in China today. <SLIDE 7-8>

(1) Look at this line of Disney-licensed gold jewelry, which includes,

for example, our Winnie the Pooh collection. This is sold at a

premium. [REFER TO SLIDE 7]

(2) We set some of our gold jewellery with both precious and semi-

precious stone such as a diamond, tourmaline or tanzanite, and

other materials such as pearl. Here is an example of what sells

well. [REFER TO SLIDE 8]

5

(3) Another increasingly popular category is what we call “hard gold.”

<SLIDE 8 Cont’d> Through special new technology, called electro-

forming, we can raise the hardness of 24 karat gold to be almost

as hard as 18 karat gold, yet still pure, and thus the design of gold

jewellery can be more flexible and diverse; our customers don’t

need to worry about the limitation of gold’s softness. We can also

make it hollow, so that it looks bigger; which is something that

young customers find very appealing. See these two bangle

bracelets and you can tell the difference. [HOLD UP] The one on

the left is hard and hollow, and the one on the right is the

traditional, soft 24 karat gold. If any of you want a closer look after

this panel discussion I welcome you to come up and take a look.

The gold jewellery industry has to innovate with new ideas in order

to create demand, and at Chow Tai Fook we are at the forefront of

that innovation. The innovation and design of the products is what

our younger customers are paying for, and these sales earn higher

margins.

TREND TOWARD GEM-SET JEWELLERY

It is also extremely important to note that we are seeing

encouraging growth in the level of demand for gem-set jewellery.

Pure gold is regarded as less trendy by some of our customers,

6

and for that reason diamonds and precious stones are an

increasingly important part of our business. Again, design is

important. To meet these changing customer preferences, we

have devoted a lot of effort to innovative design, e.g. we added

trendy elements to the traditional wedding bangles and attracted a

lot of young customers (POINT TO <SLIDE 9>). Another

important trend to note is the growing demand for gold jewellery

from customers in Tier 3 and 4 cities. <SLIDE 10> According to

research done by Frost & Sullivan, Tier 3 and 4 cities are going to

be the major growth driver of China’s jewellery market. Frost &

Sullivan predicts that Tier 3 and 4 cities will account for more than

40% of China’s total jewellery market by 2015, up from 34% in

2010 and 29% in 2006. We saw this trend years ago and have

already been strengthening our presence in China’s lower tier

cities where we can capture this growing demand. Currently, we

have about 1,700 points of sale in over 390 cities in China, and we

aim to open approximately 200 points of sale per year in mainland

China. Nowadays, e-commerce has been a powerful retail channel

in China. Jewellers also regard this as a chance to increase sales

by diversifying their client base and expanding their customer

reach. Take Chow Tai Fook as an example, <SLIDE 11> we have

developed our own eShop and more than 10 online channels at

7

Tmall, 360Buy and others. We are continuously ranked as the

“Best Selling Jewellery Brand” on Tmall. We believe e-commerce

will become more and more important in China in the future.

[PAUSE] We are proud to sell both the Chinese style as well as

international style gold jewellery that rival other high end luxury

brands. <SLIDE 12> One of Chow Tai Fook’s key strengths is that

we have over 80-years of brand heritage. Another strength is our

vertically integrated business model. We understand Chinese

customer needs, and we are very confident that we can offer them

exactly what they want in our stores.

Thank you for having me here today, and I am happy to take

questions.

[END]

1

LBMA / LPPM Precious Metals Conference 2012 (13 November 2012, 9 am)

Presentation by Mr. Kent Wong, Managing Director, Chow Tai Fook

“Changing Trends in the Chinese Jewellery Market”

SUGGESTED INTRODUCTION OF KENT BY MODERATOR

<SLIDE 1 then SLIDE 2 as holding slide>

• Kent Wong started with the company in 1977 and worked his way

up from apprentice, through manufacturing and retail assignments.

He was responsible for developing the Group’s business in China

beginning in 1999, and became Managing Director of the Group

last year. Chow Tai Fook is the market leader in Greater China

and is now the largest publicly listed jewellery retailer in the world

• A very well-respected industry professional, Kent knows the

jewellery business inside and out. Over half of Chow Tai Fook’s

revenues come from gold products, so he is an excellent person to

tell us about trends in the Chinese gold jewellery market. Kent?

INTRODUCTION – THE INDUSTRY IS CHANGING

Thank you, Philip. As many of you may already know, China is the

fastest growing market for gold jewellery. But do you know the

answers to these two questions: Firstly, what is behind this rise in

demand? Secondly, what are customers buying? Well, as the

jeweller with the largest market share in China, we actually have

some very interesting insight to share. [PAUSE] We can see that

2

consumers are gradually changing their buying behaviour, and the

jewellery industry is changing with them. [PAUSE]

I think most of you know that Chinese people like to buy pure gold

jewellery. <SLIDE 3> Mainland China’s GDP increased 7.7% year-on-

year in the last three quarters with retail sales of consumer products

increasing by over 14%. Chinese people have more spending power

and they are buying more jewellery, including pure gold jewellery. In

fact, there’s a very long tradition, dating back to the Xia dynasty,

which was the first dynasty in China about 4,000 years ago, that gold

jewellery gifts should be part of a bride’s dowry. <SLIDE 4> There is

also an age-old tradition of giving jewellery gifts at weddings, births,

Chinese holidays, birthdays and anniversaries. [PAUSE] We have

some Westerners in today’s audience, but you do not buy the same

kind of gold we Chinese buy, right? [PAUSE – LOOK INTO CROWD]

You like to buy 14 karat or 18 karat gold jewellery, because it is

harder and more durable. In China and India, people traditionally

prefer pure, 24 karat gold jewellery or “足金” (Zu Jin) in Chinese,

mostly because the high purity of gold is more valuable and a better

investment. [PAUSE] We could generalise by saying that

Westerners buy gold jewellery for decoration, [PAUSE] but Asians

buy it for both decoration and as an investment. In fact, some

3

customers sell their gold back to the jewellers and we also offer that

option. This practice of repurchase of gold jewellery has been

common in Chinese society from ancient time right up to the present

day.

DESIGN AND INNOVATION COMMAND A PREMIUM

So what is changing in China? Well, these days, many buyers are

young people and our buyers seem, on average, to be getting

younger and younger as time goes by. Different age customers

display different philosophies and buying habits. Young people today

are better educated and more exposed to modern styles, so they

naturally want trendy items and care a lot about design. They do not

want to wear “their mother’s jewellery” [PAUSE-SMILE], and they

want to say something about their own personalities through the

jewellery they wear. [PAUSE]

So what does this means to us as a business? Well, it is good news.

Unique jewellery designs command better margins. The same theory

applies to our gold jewellery business. <Slide 5> Traditionally,

Chinese jewellers like us sold gold jewellery by weight, and that is

very common not only in China, but in India and the Middle East.

Since the 1990s, however, there has been a shift in tastes and

demand, and Chinese consumers have begun to care more about

4

design, style, and fashion. <Slide 6> This allows us to sell more pure

24 karat gold jewellery at a premium, rather than by weight.

(PAUSE) Frankly, we believe those who only sell traditional gold

jewellery by weight in China will have a hard time surviving in today’s

market, particularly considering the changing consumer preferences.

Unless they can invest in design, marketing, branding, and create

more desirable products, they won’t be able to survive. So, I see a

consolidation process in the industry is now working, and larger

jewellery players like ours will prevail.

EXAMPLES OF POPULAR JEWELLERY TODAY

Now, let me describe and even show you the kind of 24 karat gold

jewellery that is popular in China today. <SLIDE 7-8>

(1) Look at this line of Disney-licensed gold jewelry, which includes,

for example, our Winnie the Pooh collection. This is sold at a

premium. [REFER TO SLIDE 7]

(2) We set some of our gold jewellery with both precious and semi-

precious stone such as a diamond, tourmaline or tanzanite, and

other materials such as pearl. Here is an example of what sells

well. [REFER TO SLIDE 8]

5

(3) Another increasingly popular category is what we call “hard gold.”

<SLIDE 8 Cont’d> Through special new technology, called electro-

forming, we can raise the hardness of 24 karat gold to be almost

as hard as 18 karat gold, yet still pure, and thus the design of gold

jewellery can be more flexible and diverse; our customers don’t

need to worry about the limitation of gold’s softness. We can also

make it hollow, so that it looks bigger; which is something that

young customers find very appealing. See these two bangle

bracelets and you can tell the difference. [HOLD UP] The one on

the left is hard and hollow, and the one on the right is the

traditional, soft 24 karat gold. If any of you want a closer look after

this panel discussion I welcome you to come up and take a look.

The gold jewellery industry has to innovate with new ideas in order

to create demand, and at Chow Tai Fook we are at the forefront of

that innovation. The innovation and design of the products is what

our younger customers are paying for, and these sales earn higher

margins.

TREND TOWARD GEM-SET JEWELLERY

It is also extremely important to note that we are seeing

encouraging growth in the level of demand for gem-set jewellery.

Pure gold is regarded as less trendy by some of our customers,

6

and for that reason diamonds and precious stones are an

increasingly important part of our business. Again, design is

important. To meet these changing customer preferences, we

have devoted a lot of effort to innovative design, e.g. we added

trendy elements to the traditional wedding bangles and attracted a

lot of young customers (POINT TO <SLIDE 9>). Another

important trend to note is the growing demand for gold jewellery

from customers in Tier 3 and 4 cities. <SLIDE 10> According to

research done by Frost & Sullivan, Tier 3 and 4 cities are going to

be the major growth driver of China’s jewellery market. Frost &

Sullivan predicts that Tier 3 and 4 cities will account for more than

40% of China’s total jewellery market by 2015, up from 34% in

2010 and 29% in 2006. We saw this trend years ago and have

already been strengthening our presence in China’s lower tier

cities where we can capture this growing demand. Currently, we

have about 1,700 points of sale in over 390 cities in China, and we

aim to open approximately 200 points of sale per year in mainland

China. Nowadays, e-commerce has been a powerful retail channel

in China. Jewellers also regard this as a chance to increase sales

by diversifying their client base and expanding their customer

reach. Take Chow Tai Fook as an example, <SLIDE 11> we have

developed our own eShop and more than 10 online channels at

7

Tmall, 360Buy and others. We are continuously ranked as the

“Best Selling Jewellery Brand” on Tmall. We believe e-commerce

will become more and more important in China in the future.

[PAUSE] We are proud to sell both the Chinese style as well as

international style gold jewellery that rival other high end luxury

brands. <SLIDE 12> One of Chow Tai Fook’s key strengths is that

we have over 80-years of brand heritage. Another strength is our

vertically integrated business model. We understand Chinese

customer needs, and we are very confident that we can offer them

exactly what they want in our stores.

Thank you for having me here today, and I am happy to take

questions.

[END]