air OSIM INTERNATIONAL LTD Annual Report 2010 In Weiqi, to win is through encirclements that conquer more territory. OSIM’s growth is driven by leadership, innovation and execution – which has led OSIM to gain more markets globally and record profit. Net Cash Flows from 2010 2009 Growth Operating Activities For year ended 31 December $ Sales $509m $477m +$32m million Profit 94 EBITDA $79m $51m +55% Before tax $68m $38m +79% + 45% After tax $50m $23m +117% Net cash flows from operating activities $94m $65m +45% EBITDA Per share (cents) $ Diluted earnings 6.6 3.7 Net assets value 15 15 79million At year end Cash & cash equivalents $73m $63m + Shareholders funds $108m $97m 55% Net cash $58m $28m Profit Before Tax Returns on shareholders funds Profit before tax 63% 39% $ Profit after tax 46% 24% Shareholders value million Total dividends ($m) 13.3 6.6 68 Share price at 31 December 1.64 0.53 +209% Returns on Shareholders Funds 63% PERFORMANCE REVIEW Record Cash Flow and Profit for FY 2010 We achieved growth in sales, cash flow and profitability. Revenue for FY 2010 rose by $32 million to $509 million. The increase in sales was driven by launch of new products during the year. EBITDA grew 55% to a record $79 million (EBITDA margin 15.5% vs 10.8% in 2009) due to new product innovation and better operating efficiency. Profit before tax reached a historical high of $68 million. This is due to better margins and more effective shop and salesman productivity. Profit after tax for the year was $50 million. This is the highest level in the company's history. Revenue by Region – New Products Contributing Region FY 2010 FY 2009 $m % $m % North Asia 298 59 259 54 South Asia 169 33 160 34 America/Africa/Europe/ Middle East/Oceania 42 8 58 12 Total 509 100 477 100 During the year, we had positive sales growth of $32 million with better product mix of massage chairs, massage sofas, foot massagers, head massagers, neck and shoulder massagers and nutrition supplements. We launched uDivine chair with Andy Lau in Hong Kong, Singapore and Malaysia in Q4 which received strong customer reception. The GNC Australia conversion to franchise outlets resulted in better profit in our Australian subsidiary but lower sales recognition (we now book franchise sales instead of retail sales). 04 PERFORMANCE REVIEW Global Network of Outlets - More Profitable Region 31 Dec 2010 31 Dec 2009 North Asia 386 301 South Asia 183 194 America/Africa/Europe/ Middle East/Oceania 39 39 Total OSIM Outlets 608 534 GNC/RichLife Outlets 251 188 Brookstone Outlets 310 314 Total 1,169 1,036 During the last 12 months, we increased the number of OSIM outlets by 74 and the number of GNC/RichLife outlets by 63. At the same time, we increased profitability within existing outlets. We expect to increase the number of outlets in 2011. In China our target is to open another 50 to 80 OSIM outlets and 60 to 100 RichLife outlets per year. Strengthened Balance Sheet - Net Cash Position Building strong balance sheet and profitability is a key focus and priority. During the year, net cash flow from operating activities rose by 45% to $94 million compared with $65 million in FY 2009. This was due to better operating margins and working capital management. As at 31 December 2010, the cash and cash equivalents were $73 million compared with $63 million a year ago. In addition, we except to raise an expected $76 million in April through Taiwan TDRs. During the year, we paid down bank loans of $25 million, invested in fixed assets of $12.6 million and Brookstone Senior Preferred Notes of $12.5 million. Net assets were $110 million as at 31 December 2010. Our financial ratios remain strong from improved demand for our products and better operating efficiency. As a result of the strong performance, the Board is pleased to propose a final dividend of 1 cent per share. Inclusive of interim dividend, the total dividend is about $13.3 million or 27% of earnings. Brand OSIM Brand RICHLIFE Geographical North Asia, South Asia Geographical China Presence Africa, Europe & Middle East Presence Number of Number of Outlets 608 Outlets 97 OUR BRANDS Pillars of Innovation Brand GNC Brand BROOKSTONE Geographical South Asia Geographical America Presence Presence Number of Number of Outlets 154 Outlets 310 06 FOUNDER, CHAIRMAN & CEO LETTER “I am pleased to present a record set of results for the year. Profit before tax reached an historical high of $68 million. I would like to congratulate and thank my team for the wonderful achievement. I expect that this growth will continue to be driven by strong leadership, innovation and execution.” Growth by Leadership, Innovation and Execution Growing cash, growing brands OSIM is Asia’s No.1 brand in well-being and healthy lifestyle EBITDA grew 55% to a record $79 million. As at 31 Decem- products. We take position to build and enhance our market ber 2010, our cash and cash equivalents totalled $73 million. leadership position. International artiste Andy Lau’s uDivine We expect to raise an estimated $76 million in April through chair endorsement and OSIM BWF World Superseries global the issue of Taiwan TDRs. sponsorship are excellent examples, which position OSIM in Asia and beyond. Globally we have a total of 1,169 outlets through OSIM, RichLife, GNC and Brookstone. We expect to expand our We take an innovative approach in product development, China outlets by 50 to 80 OSIM outlets and 60 to 100 branding and in management. We expect to continue to RichLife outlets. Over time, we will build a portfolio of create higher consumer demand in the coming year with the brands in Asia and the rest of the world in well-being and launch of one to two major products every quarter. At the lifestyle businesses. same time, we will enhance our strategy, structure and systems to position for sustainable growth. The outlook for the year is bright We believe there will be many opportunities for us this year. We set clear goals and objectives. We put performance meas- We are excited with the successful launch of uDivine chair ures in place to evaluate results against plan. This focus on amongst other key innovations in the pipeline. The OSIM execution has enabled us to raise our productivity per outlet BWF World Superseries will reach out to 500 million TV and per man. viewers globally, particularly in China. Record PBT $68 million Overall, our focus is to continue to build sustainable growth, Returns on shareholders funds 63% profitability and positive operating cash flow. This will Profit before tax reached an historical high of $68 million. strengthen our balance sheet and build long-term value for This was due to better margins and more effective shop and all our stakeholders. salesman productivity. The returns on shareholders funds were an impressive 63%. Finally, I would like to express my appreciation to my team, vendors, shareholders and bankers who have worked closely Profit after tax for the year was $50 million. This is the highest with us on this journey. level in the company’s history. We are optimistic about the future of our industry as we build our next phase of growth. 02 FOUNDER, CHAIRMAN & CEO LETTER “I am pleased to present a record set of results for the year. Profit before tax reached an historical high of $68 million. I would like to congratulate and thank my team for the wonderful achievement. I expect that this growth will continue to be driven by strong leadership, innovation and execution.” Growth by Leadership, Innovation and Execution Growing cash, growing brands OSIM is Asia’s No.1 brand in well-being and healthy lifestyle EBITDA grew 55% to a record $79 million. As at 31 Decem- products. We take position to build and enhance our market ber 2010, our cash and cash equivalents totalled $73 million. leadership position. International artiste Andy Lau’s uDivine We expect to raise an estimated $76 million in April through chair endorsement and OSIM BWF World Superseries global the issue of Taiwan TDRs. sponsorship are excellent examples, which position OSIM in Asia and beyond. Globally we have a total of 1,169 outlets through OSIM, RichLife, GNC and Brookstone. We expect to expand our We take an innovative approach in product development, China outlets by 50 to 80 OSIM outlets and 60 to 100 branding and in management. We expect to continue to RichLife outlets. Over time, we will build a portfolio of create higher consumer demand in the coming year with the brands in Asia and the rest of the world in well-being and launch of one to two major products every quarter. At the lifestyle businesses. same time, we will enhance our strategy, structure and systems to position for sustainable growth. The outlook for the year is bright We believe there will be many opportunities for us this year. We set clear goals and objectives. We put performance meas- We are excited with the successful launch of uDivine chair ures in place to evaluate results against plan. This focus on amongst other key innovations in the pipeline. The OSIM execution has enabled us to raise our productivity per outlet BWF World Superseries will reach out to 500 million TV and per man. viewers globally, particularly in China. Record PBT $68 million Overall, our focus is to continue to build sustainable growth, Returns on shareholders funds 63% profitability and positive operating cash flow. This will Profit before tax reached an historical high of $68 million.