Annual Results Presentation

CHOW SANG SANG HOLDINGS INTERNATIONAL LIMITED 周生生集團國際有限公司 Stock code: 116

2016 Annual Results Presentation

March 2017 Disclaimer and Forward Looking Statements

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2 Presentation Outline

I. Business Overview

II. Financial Highlights

III Future Plan and Strategy

IV. Q&A Session

V. Appendix

3 Business Overview

4 Company Structure

 Physical metals trading Precious service Metals Wholesale  Commission based Services  Generated 12% of total revenue for 2016

Jewellery Retail Chow Sang Sang Group

 8 HK offices and Internet Securities platform Brokerage  Commission based  Main business segment  No proprietary trading  472 self-operated stores in  Generated 0.2% of total Greater China and Internet revenue for 2016 platform  Operates under “Chow Sang Sang" and “Emphasis  Investment Properties Jewellery” Other Investments  Shares of HKEx  Generated 87% of total  Generated 0.7% of total revenue for 2016 revenue for 2016

5 Business Overview: Jewellery Segment

6 Product mix: Jewellery

Gold based Items

Gem-set Items

Licensed Products

International Brands (Gucci, Rolex, Tudor)

7 Distribution Network

 Chow Sang Sang directly runs and controls all of its retail stores with no franchise operations Beijing  Complementing the extensive retail network, the Surrounding eshop.chowsangsang.com working with key Provinces retail portals in China, offer online shopping (65) service Heilongjiang Northern (86) Inner Mongolia Jilin

Xinjiang Beijing Liaoning Western Tianjin (32) Shanghai Flagship Store Gansu Hebei Ningxia Shanxi Qinghai Shandong Eastern Shaanxi Jiangsu Henan (73) Anhui Tibet Hubei Shanghai Chongqing Chongqing Flagship Store Sichuan Zhejiang Hunan Jiangxi Guizhou Fujian Emphasis Chow Sang Sang Jewellery Kunming Flagship Store Taiwan Guangdong Yunnan Guangxi Hong Kong Flagship Stores Hong Kong Jewellery Watch Macau China(2) 365 9 –

Hainan HK / Macau 48 17 9

Taiwan - – 24 (1) Covered cities Southern as at Dec 31, 2016 (118) (1) Excluding Hong Kong and Macau (2) Reached 376 as of Mar 27, 2017 8 Focus on Growth in Mainland China

Increasing No. of Stores in Mainland China

(No. of Stores)

New New shops shops +40 +47

Same-store Sales -12% +6% -4% Growth

9 Financial Highlights

10 Operating Performance …

Turnover Gross Profit

(HK$ mm) (HK$ mm)

… primarily due to HK retail … gold price and improved mix protected margin

11 Operating Performance (Cont’d) …

Operating Profit Profit attributable to equity holders

(HK$ mm) (HK$ mm)

12 …Driven by Retail Segment…

Revenue Breakdown Results Breakdown

13 … Retail Performance …

Retail – Revenue Retail – Operating Results

(HK$ mm) (HK$ mm)

… despite revenue dropped, margin showed resistance

14 Mainland customers’ contribution continues to increase

2014 2015 2016

Sales Attributable 74% 74% +1% 75% to PRC Customers(1)

(1) China sales + HK/Macau sales by PRC customers 15 Consolidated Sales Mix – (Retail)

2015 2016

Gross margin: Gold* : 16%-22% Non gold jewellery: 38%-42% Watches: 20%-28% * Include gold price movement 16 Consolidated Gross Profit Contribution – (Retail)

2015 2016

17 Change of Average Selling Price

Hong Kong/Macau - Gold Hong Kong/Macau - Jewellery

(HK$) (HK$)

China - Gold China - Jewellery

(RMB) (RMB)

18 Working Capital Trends

Average Inventory Turnover Days Average Receivables Turnover Days

(No. of Days) (No. of Days)

Average Payables Turnover Days Cash Conversion Cycle

(No. of Days) (No. of Days)

19 Financial Highlights

(HK$ million) For the 12 months ended or as at Dec 31, % change 2014 2015 2016 15 vs 16 Turnover 19,246 19,069 16,093 -15.6% Jewellery Retail 16,933 16,723 14,045 -16.0% Other businesses 2,313 2,346 2,047 -12.7% Gross profit 4,295 4,228 4,050 -4.2% Operating profit 1,395 1,150 1,019 -11.4% EBITDA 1,579 1,582 1,201 -24.1% Profit attributable to equity holders 1,082 1,130 742 -34.3% EPS (HK cents) 159.9 167.0 109.6 -34.4% Dividend per share (HK cents) 61.0 62.0 43.0 -30.6%

20 Other Financial Information

For the 12 months ended (HK$ million) or as at Dec 31, 2014 2015 2016 Cash and cash equivalents 1,009 1,621 1,283 Available-for-sale investments1 869 825 763 Capital expenditure 189 172 197 Gearing2 26.1% 19.3% 20.4% Unused banking facilities 3,813 3,831 4,318

1 Available-for-sale investments mainly represents HKEX shares which valued at quoted market prices

2 Total borrowings to total equity holders’ equity. Total borrowings includes interest-bearing bank borrowings, bullion loans and interest-bearing bank borrowings arising from securities and futures broking.

21 Strategy Outline

22 Expansion with Distinctiveness in PRC

Around 50 new stores in PRC in 2017

Expansion Philosophy Self-Run Store Model

 Target entry-mid end consumers  Ensure consistent and superior service quality with seamless delivery  Brand development and fine-tuning are more important than growth in the number of  Leverage on high-end shopping malls and stores department stores’ own positioning to enhance image  Leverage on e-shops to expand coverage and reach  Refresh store image to meet consumer preferences

23 Product Mix and Branding

Jewellery Focus and Product Differentiation

 Clear presence and visibility of international brands and signature collections  Develop house brands - focus on quality and sophistication appropriate to different customer segments

Marketing Initiatives

Continue existing programs with focus:

 Expand e-shop, synergizing with physical stores  Capitalize on CRM database  Reinforce Wedding; expand on Daily wear  Revamp VM at stores

24 Q&A Session

25 Appendix

26 Company History

1930-1970 1970-1980 1980-1990 1990-2000 2000-2016

1934 1973 1998 2005 2009 2011 2014 2016

Chow Sang First Re-entered Became Opened Opened Opened Stable Sang company in the sightholder the first the first the first expansion Goldsmith the industry Mainland of Diamond Flagship Flagship Flagship in China; established listed on China Trading Store in Store in Store in healthy in Hong Kong market Company Beijing Taiwan Shanghai growth in e- Guangdong Stock business Exchange

No. of 9 472 Stores

Turnover 130 16,093 (HK$ mm)

27 Industry Analysis – PRC Luxury Market Overview

 Personal luxury goods market in China contracted to €17 billion in 2016, representing a 2% year-on-year decline.

* CAGR: Compound annual growth rate * 2016 figures are estimates.

Source: Bain & Company

 Chinese consumers have slightly decreased their contribution to the global luxury market—from 31% in 2015 to 30% in 2016.  Longer term, China remains an engine of growth for luxury goods as the country’s middle class continues to grow in size and purchasing power. The behavior of Chinese consumers epitomizes a larger global trend: the re-localization of luxury. * Note: RoW is rest of the world

28 Industry Analysis – HK & PRC

FY2016 HK Jewellery, Watches and Clocks, and Valuable Gifts Sales According to HK Census and Statistics 12.00 Department, total jewellery, watches and clocks, and valuable gifts sales declined 17.2% y-o-y in 10.00 FY2016. 8.19 8.00 7.63 6.13 bn 5.84 5.50 5.47 5.48 5.76 5.67

6.00 5.13 5.30 5.24 HKD HKD 4.00 FY2016 PRC Gold, Silver and Jewellery Sales 35.0 32.3 2.00 30.0 27.1* 27.1* 0.00 24.9 25.5 25.7 24.0 24.2 23.4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 25.0 22.7 22.2 20.9

Source: HK Census & Statistics 20.0 bn

RMB RMB 15.0

Retail sales for jewellery products in PRC stood 10.0 at RMB299.6 billion for FY2016 as against 5.0 RMB306.9 billion in FY2015. 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec * In order to eliminate the impact of the different date of the “Chinese New Year” (CNY) each year, and enhance the comparability of data, in Source: National Bureau of Statistics of China accordance with the national statistical system, the data in January and February 2016 were investigated and released together. Here the data is evenly divided as RMB27.1 billion. 29 Marketing Program Highlights 2016

30 Chinese New Year Campaign

 Celebrating the year of Monkey, bringing New Year blessings to the mass audience and creating top of mind awareness for seasonal gifting.

 Touch points included digital (social media), store POSM, printing collaterals and window display.

31 Valentine’s Day Campaign

 Launched a Valentine’s Day campaign – Key Visuals “The Return of Romance” featuring affordable luxury jewellery which are ideal for seasonal gifting. Launched the new product features “sound wave” from Love Decode collection.

 Leverage the insight of modern Valentine’s Day being a cliché on gifting, we advocated the classic way of expressing love by giving jewellery as a romantic gesture.

 Touch points covered above-the-line thematic communication, digital campaign, below-the-line PR, store POSM, give-away and window display.

Postcard & Chocolate as seasonal give-away 32 Valentine’s Day Campaign

Website with video

Storefront iPad Sales Tool

The sound wave of the words “I Love You”

33 White Day Campaign

 Launched a new unisex Gold jewellery collection “Noir” during White Day to capture the demand of gifting between couple.

 Touch points covered digital campaign, below the line PR, store POSM, sales tool in iPad and designated collection window display.

34 Infini Love Diamond

 After launching Infini Love Diamond rebranding in 2015, a campaign rerun was in place in June 2016 to reinforce the emotional bonding of our top-notch diamond brand with the customers.

 On top of above-the-line advertising, we have brought a few celebrities who are popular amongst Greater China to well elaborate the “Passion for Brilliance” stories.

 Other touch points included digital (social media), PR and promotions.

Key Opinion Leader communications

Lala Hsu

Cheung Chi Lam & Anita Yuen Couple 35 Infini Love Diamond

 Roadshow tour has continued its footprint to cities in China such as Chongqing.

36 Bridal Campaign

Key Visual  Catering strong demand on bridal market, we have launched “For Your Precious Commitment” 360-degree Integrated Campaign throughout HK, China and Taiwan in second half of 2016.

 Touch points included above-the-line advertising i.e. TV commercial, print media, digital media as well as social media, and below-the-line activations such as bridal events, catalogue and visual merchandizing.

 Featured our signature brands including Infini Love Diamond, Promessa, La Pelle, Personalized solitaire and Chinese wedding gold jewellery.

 A loyalty programme “Lasting Joy Wedding Privileges” was launched on 1 Sep 2016 to enhance cross-selling of wedding jewellery in HK. Website pages 37 Christmas Campaign

 To create top-of-mind awareness of X’mas gifting season, a festive theme campaign “A Season of Surprises” was launched in Dec 2016 covering Greater China.

 Targeting at sophisticated consumers, a full range of diamond and gold jewellery were selected (Infini Love Diamond, V&A, Charme and Lady heart etc.) to bring end-users a romantic Christmas experience.

 The campaign was focused on driving social touch points including Facebook, Instagram, Wechat and Weibo. A tailor-made give-away item and season VM Key Visual display were designed to create festive ambience.

Give-away for Media / Special VIP

38 Christmas Campaign

Website & online video

VM Display 39 e-Shops Performance

 Aside from our own eshop.chowsangsang.com, we partnered with different portals such as TMALL, JD.com to launch various trading events and achieved some very positive results.

 During ecommerce giants’ sales event on 18th June, 2016, Chow Sang Sang topped the list of jewellery business.

40 2016 New Stores

Beijing Baoding, Beijing, Hengshui Surrounding Provinces Huhhot, Tangshan, Tianjing

East Rugao, Shanghai

Changchun, Chengdu, Dalian Northern Fuxin, Qingdao, Yantai

Changde, Chenzhou

APM, HK Guangzhou, Guiyang, Haikou Hengyang, Huizhou, JiuJiang Southern Kumming, Sanya, Shenzhen Shiyan, Xiamen, Xiangyang Wuhan, Zhanjiang Kaifeng, Lanzhou Western Xian, Urumqi Yuen Long Plaza, HK New Stores in Hong Kong New Stores in China