Chlitina Holding Limited

Group Introduction

1

Everybody on this planet is separated by only six other people. ThePresident of the United States, a gondolier in Venice, just fill in the names.

-- “Six Degrees of Separation”

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Agenda • Executive Summary

• New Initiative – The Launch of O2O

Strategy

• Chlitina Value Creation

• Future Growth Drivers

• Outstanding Financial Performance

Executive

Summary

• We are one of Greater China’s leading skincare brands, operating

China’s largest franchise-based chain of skincare salons. Our 3,000+

exclusive franchise stores offer a fully-integrated line of beauty products

and services to female consumers.

• Growth in the China beauty products industry is in the early stages of

taking-off. Through our unique business model and through joint-efforts

with our extensive network of franchisees, CHLITINA seeks to penetrate

even more deeply into our target client base.

• Our core competence is our ability to connect people, then to leverage

these personal connections to accumulate new customers and expand

pocket share.

• By Oct. 2014, a new initiative of O2O model to extend our physical

channel will be integrated into our sales system. We expect the new

channel to contribute additional sales of NT$ 150mn in 2015 and

NT$600mn in 2017.

• We aim to deliver steady, high-quality earnings growth to investors. We

have maintained an operating margin above 30% since 2012, and have

consistently produced strong cash flows, as witnessed by our net cash

position of NT$2.4bn as of y/e 2013.

5

6

百奧維他

Rise with the Tail Wind of China’s Online Market

In 2013, China’s internet sales amounted to US$ 295.8bn, compared to US$ 263.3bn in the US

From 2003 to 2013, internet sales CAGR>100%

3G/4G increased the number of people utilizing online platforms

Growing spending by high income earners, and their shift towards online channels

Development of logistics facilities expanded the number of online users

Considering the market’s expansion rate up to 2020, entering the internet channel now ensures a threefold growth

Extreme high spenders (average spending over the internet >10,000 RMB) are only 7% of the market, yet their online purchases amount to 40% of total sales

7

The largest online shopping platform in the world

Simultaneous acceleration of technology and increase in

online shoppers

China = the future of internet sales by international brands

Why Chlitina? We Connect People

百奧維他

√√

√√

√

8

O2O

9

百奧維他

The brand new product line for O2OBiotta Vertical Sales Channel Integration Plan

• Target customers: white-collar workers,

professionals and families

• Product goal: improve self-healing capabilities

for a healthier life

Advantages of Internet Channel

Advantages of Chlitina’s Physical

Channel

Sales Channels

Biotta Vertical Sales Channel

Integration Plan

O2O

2014

Launch O2O

platform by

October

2015

Revenue exceed

NT$ 150mn

2016

Revenue exceed

NT$ 300mn

2017

Revenue exceed

NT$ $ 600mn

O2O

10

Online-to-Offline 3 Year Strategy

O2O

11

Not Only Shopping Online

Online platform

Physical stores

Service

Online

Offline

• Timely and easy access to all

product information

• Online platform represents an

innovative and powerful channel

to Chlitina

• Product specialist provides 1-on-1

consulting to customers

• Sales force costs remain low by

utilizing profit sharing mechanism.

• Physical stores provide the customer

with a more intimate experience and the

opportunity to learn first-hand about

Chlitina and its services

• Powerful CRM system allows Chlitina to

increase customer consumption in

physical stores

Our unique O2O

model turns plain

vanilla online shopping

into 360° complete

integrated service and

sales channels

O2O

• Focus in Tier 1~3 cities

• Selected 2,000 franchises will join the O2O program

12

Well Calculated Game Plan

2015

•Start from 100

Product Specialists

and expand to 1,500

by the end of the

year

•For 1,000 effective

personnel, each

contribute NT$150k

revenue, equals to 3

sets/person/annum

2016

•Recruit 2,000

Specialists by the

end of the year

•For 1,500 effective

personnel, each

contribute NT$200k

revenue, equals to 4

sets/person/annum

2017

•Recruit 4,000

Specialists by the

end of the year

•For 3,000 effective

personnel, each

contribute NT$200k

revenue, equals to 4

sets/ person/annum

13

Scale BrandChannel Training

"China is a land of opportunities, and we are in a season of harvest."

Scale BrandChannel Training

Scale –

China Skincare

Market

• The China skincare industry is an RMB$130bn

market with high-single-digit annual growth.

• Chlitina specializes in facial products, which

represent more than 90% of China’s total skincare

market.

• Moisturizing (45%), anti-aging (25%) and

cleansing (10%) products consistently account for

the lion’s share of the facial products market.

Source: Euromonitor (May 2014)14

103.7 114.2

124.6 133.8

3.4

3.6

3.7

3.8

2.5

2.8

3.1

3.3

40

60

80

100

120

140

160

2011 2012 2013 2014E

Rmb bnChina Skincare Market

Hand

Body

Facial

2011-16 CAGR

9.1%

4.3%

8.8%

15

Chain

stores

48%Stand-alone

stores

52%

Chain stores 3%

Stand-alone stores

97%

Source: Annual Survey of Aesthetic, Recreation and Wellness Chains, China Chain Store & Franchise Association

Scale –

Market Structure

"China's beauty & recreation services are mostly delivered by

independent businesses, without any differentiated industry leaders."

A Highly-Fragmented Beauty Salon Market

Waiting to Be Conquered

Western Countries Mainland China

16

Stand-alone beauty

salons (97%)

Franchise beauty salons (Mainland China)

Stand-alone beauty salons (Mainland China)

Stand-alone beauty brands:

- 291,000 stores

- Survival Rate: 10%

Lack of

Branding

Lack of Industry

Know-how

Inconsistent Level

of Service

Undisciplined

Competition

Source: Annual Survey of Aesthetic, Recreation and Wellness Chains, China Chain Store & Franchise Association

2011-2015 Prospects of Operating a Beauty Chain in China or Making Related Investments, Beijing-based Zhi-Yan

Scientific Information Consulting Co. (www.abaogao.com)

Scale –

Franchise salons

are gaining share Franchise beauty brands:

- Approx. 9,000 stores

- Survival Rate: 90%

High Store Survival Rate for Franchise Salons

Franchise beauty

salons (3%)

17

Heilongjiang

Province

31 locations

Jilin Province

29 locations

Liaoning

Province

87 locationsBeijing City

211

locations

Inner Mongolia

Autonomous

Region

102 locations

Shanxi

Province

81 locations

Anhui

Province

114 locations

Hebei Province

99 locations

Henan Province

41 locations

Hubei Province

186 locations

Jiangsu

Province

366 locations

Jiangxi

Province

115 locations

Shandong

Province

108 locations

Hunan Province

183 locations

Tianjin City

107 locations

Hainan Province

5 locations

Guangdong

Province

326 locations

Shanghai City

354 locations

Zhejiang

Province

474 locations

Gansu Province

3 locations

Ningxia Hui

Autonomous Region

7 locations

Shaanxi

Province

42 locations

Chongqing City

58 locations

Sichuan Province

82 locations

Tibet

Autonomous

Region

7 locations

Guangxi Zhuang

Autonomous Region

26 locations

Yunnan Province

19 locations

Guizhou Province

45 locations

Xinjiang Uyghur

Autonomous Region

6 locations

Fujian Province

56 locations

Taiwan

149 locations

Northeast China

North China

East China

Southeast China

Northwest China

Southwest China

Taiwan

CHLITINA – The Most Scalable Skincare Franchise in China

with 3,000+ Exclusive Stores, and Still Growing

Scale –

Penetration

18

1H2014 # of Stores % of TotalSales

(NT$ K)% of Total

Tier 1 Cities 892 26.46% 386,127 29.68%

Tier 2 Cities 687 20.38% 246,004 18.91%

Tier 3 Cities 510 15.13% 181,383 13.94%

Tier 4& 5 Cities 1282 38.03% 487,320 37.46%

Franchisee sales 3371 100% 1,300,835 100.00%

Other* 132,220

Total 1,433,055

There is Still Substantial

Untapped Potential in Tier 2 and Tier 3 Cities

* Other include HK/Taiwan sales, sales from related party, and franchise fees.

2687

3004 30863228

3371

5000

2000

2500

3000

3500

4000

2011 2012 2013 1Q14 1H14 3-5 years

Store Count

No of Cities

Penetrated2010 2011 2012 2013 1H2014

Total 308 310 329 334 350

19

Scale BrandChannel Training

"It's not the only option, but the most competitive one."

Channel –

Effective

Management• Asset-light, franchise-based model to capture

growth opportunity in the China beauty industry

• 25 well-established branch offices to

– ensure business strategy is effectively carried out to

each region and store

– cover up to 70% of China’s population

• Pleasing our customers is our top priority, but we place equal emphasis on our franchisees. We strive to develop a franchise model that

– inspires entrepreneurship among franchisees

– increases franchisee and customer stickiness

A Clear Strategy to Realize Franchise Value

Store AgeSource: company data

20

>50%

>30%

> 3 yrs 5-10 yrs

Resilient Store Portfolio

Bohai Economic Rim

Yangtze River Delta

Pearl River Delta

We Expect the China High Speed Rail Network

to Enable More Rapid Growth

1. Provincial cities act as regional hubs to cover all major areas in China.

2. There is enormous potential for penetration into areas within a 2-hour drive

from the regional hubs, particularly in Tier 3 and Tier 4 cities.

3. Economic development should expand further out from the existing three

main economic rims

21

22

Hangzhou

DalianBeijing

Chengdu

Guangzhou

Chongqing

Hubei

Hunan

Shanghai

Shandong

Anhui

Inner Mongolia

TianjinHebei

Ningbo

Shenzhen

Kaohsiung

Taichung

Taipei

WenzhouJiangxi

Fujian

Shaanxi

Suzhou

Nanjing

Our 25 Regional Branch Offices Ensure a Uniform

Level of Service Across Our Franchisee Network

Our Branch Offices Provide Trainees with:

• Basic storefront management courses for new franchisees

• Timely advice and supervision for existing franchise stores

• Strategies for business development and expansion

• Basic & advanced knowledge on new and existing products

• Training in basic & advanced skincare

Channel

25 Branch

Offices

3,000+

Franchisees

40,000+

Beauticians

400,000+

New CustomersChlitina

23

Connecting People -

Not Your Normal Store Management

24

High-Quality Storefronts and Interior Design

"A client-oriented, sophisticated service environment"

25

Scale BrandChannel Training

"Nurturing well-rounded professionals with comprehensive,

career-long training solutions"

Training

26

Advanced

Advisors

(Over 3 years)

Beauty

Ambassadors

(1-2 years)

Basic Training

(Below 1 year)Skincare Techniques

(basic)Corporate Culture

Customer Service

Etiquette

Professional

Image Building Corporate Culture Skin Physiology

Advanced Skincare

TechniquesSkincare Consultancy Product Knowledge

Business AdministrationCorporate Culture Consumer Psychology

MarketingTreatment Planning Instructor Training

Beauticians

Skincare Consultants

Store Managers & Aesthetic Consultants

26

Comprehensive Training to Nurture Elite

Aestheticians & Future Store Managers

Chlitina training scheme/facility:

• Accommodates up to 2,000 trainees and is supported by a

highly-qualified teaching staff

• Has provided training to 90%+ of incumbent beauticians

• Ensures that consistent service quality and the most up-to-

date skincare know-how are delivered

• Improve the operational and financial performance of

franchise stores

TrainingBuilding a Stable Foundation of Franchise Stores

27

28

Scale BrandChannel Training

Brand –

Precise

Positioning

Source: Euromonitor (May 2012).

• The Chlitina brand is positioned at the “affordable

luxury” level, targeting rising middle-class consumers

in China.

• Chlitina focuses on fast-growing market segments:

high-end skincare & high-end beauty products.

29

Benefiting from Brand Positioning & Investment

1,042

36 2

725

433

9

-

200

400

600

800

1,000

1,200

< $7,500 $7,501-80,000 > $80,000

Million

Annual Income (US$)

Surging Middle-Incomers in China

2007

2017E

-4%

+28%

+16%

2007-2017

CAGR

Well-Received Products

More than 145 SKU to provide a full-range of products.

30

Brand –

Product Series

31

➲ In a rare occurrence, CHLITINA and Ke-Li-Ti-Na (the Chinese name for

CHLITINA) were simultaneously designated as China's Famous Trademarks.

➲ "China Famous Trademark" is the highest-level honor that a trademark can

be awarded by the State Administration for Industry and Commerce of the

People's Republic of China.

➲ Only 14 Taiwan-based businesses have been awarded the Famous

Trademark designation.

➲ China's Famous Trademarks reflect excellence in terms of brand awareness,

reputation and customer services, as well as favorable recognition from both

the authorities and consumers.

Brand –

National-wide

Recognition

China Famous Trademark

CHLITINA is an iconic brand that has achieved China’s highest honor

Future Growth Drivers – Key Initiatives

• Steady Store Expansion

• Add 400,000 customers in the next 3-5 yearsScale

• Retail Infrastructure Build-up

• Further Penetration in Targeted Areas

• Integration of Vertical Sales Channel-OTO Strategy

Channel

• Strengthening Sales and Store-Opening Capability

• Product & Skincare Knowledge UpgradeTraining

• Product Innovation

• Marketing Campaign to Enhance RecognitionBrand

32

OUTSTANDING FINANCIAL

PERFORMANCE

Revenues NTD$ million

Gross Margin %

Net Profit NTD$ million

Net Margin %

Steady Growth & Rising Profitability

34

1,588

1,954

2,409

2,701

1,433

Y2010 Y2011 Y2012 Y2013 2014 H1

115

275

590

693

359

Y2010 Y2011 Y2012 Y2013 2014 H1

54.4%58.6%

82.7% 78.4%80.9%

7.2%

14.1%24.5% 25.7%

25.0%

1.44

3.46

7.43 8.72

2.01 2.213.89

4.51

0

5

10

Y2010 Y2011 Y2012 Y2013 2013

Q2

2014

Q2

2013

H1

2014

H1

EPS(NTD)NT$

35

Outstanding EPS Records

➲ 2013 Dividend Payout: NT$6.5 cash dividend per share and

NT$0.5 stock dividend, representing cash payout ratio of 71%.

Note: EPS based on shares issued on June 30, 2014

(79,492)

Y2010 Y2011 Y2012 Y2013 2013 Q2 2014 Q2 2013 H1 2014 H1

Net Income

(K NT$)114,603 275,415 590,385 693,228 159,868 176,055 308,886 358,755

2014Q2 shares

balance79,492 79,492 79,492 79,492 79,492 79,492 79,492 79,492

Basic EPS

(NTD)1.72 4.12 8.84 10.25 2.28 2.21 4.4 4.51

EPS of shares

issued (NTD)1.44 3.46 7.43 8.72 2.01 2.21 3.89 4.51

Income Statement Summary

NTD$ million 2010 2011 2012 2013 2Q14

Sales

Revenue1,588 1,954 2,409 2,701 712

Gross Profit 864 1,146 1,992 2,118 569

OP Profit 177 388 791 811 183

Income before

Tax177 394 805 867 237

Net Income 115 275 590 693 176

EPS (NTD$) 1.72 4.12 8.84 10.25 2.21

YOY (%)

2011 2012 2013 2Q14

23.0 23.3 12.2 17.8%

32.6 73.9 6.3 12.5%

119.0 104.0 2.6 (16.3%)

122.1 104.3 7.7 5.5%

140.3 114.4 17.4 10.1%

139.5 114.6 16.0 10.1%

36

Gross Margin 54.4% 58.6% 82.7% 78.4% 79.9%

OP Margin 11.1% 19.8% 32.8% 30.0% 25.7%

Net Margin 7.2% 14.1% 24.5% 25.7% 24.7%

NT$ million 2010 2011 2012 2013 2Q14

Total Assets 812 1,494 1,952 4,338 4,485

Cash 380 553 849 2,646 2,679

AR & Other

Receivables79 69 44 35 25

Inventory 233 256 198 235 234

Fixed Asset 58 444 487 1,109 1,143

Total Liabilities 648 1,046 960 1,372 1,697

Bank Loans 67 206 154 423 337

AP & Other

Payables379 574 466 618 1,105

Total Equity 164 447 992 2,966 2,789

Balance Sheet Summary

37

*Net cash = cash & cash

equivalents + other current

financial assets (time

deposits, money market fund

and government bond

related) – bank loans

ROA 15.2% 23.9% 34.3% 22.0% 16.3%

ROE 98.1% 90.1% 82.0% 35.0% 23.7%

Net cash* 320 450 967 2,397 2,581

YOY (%)

2011 2012 2013 2Q14

83.8 30.7 122.2 3.4%

45.5 53.6 211.7 1.3%

(12.0) (37.1) (19.1) (29.2%)

10.0 (22.6) 18.3 (0.2%)

668.8 9.8 127.7 3.1%

61.4 (8.3) 42.9 23.7%

208.9 (25.0) 174.1 (20.4%)

51.4 (18.7) 32.4 78.9%

172.3 121.9 198.9 (6.0%)

Q&A