Test Rite — Interim / Quarterly Report 2013

May 31, 2013

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1Q13 Version Updated on May 24[th] ,2013

• Test Rite Group - Strategy & Outlook ...................6

• Test Rite Group - Trading Sector ………….....…………11

• Test Rite Group - Retail Sector ..…………….….………17

• • Test Rite Recent Financial Results ......................... 26

1

Company Background

Test-Rite Group, established in 1978, focused initially in the exports of hand tools. Test-Rite trading has since grown into a hardline specialist and Taiwan’s largest trading company. Over the past +30 years, Test-Rite Trading division has received numerous recognition, receiving “Best Partner Awards” from multi-national retailers.

In 1996, the company entered the retail business by entering into a JV with Kingfisher and opened DIY Specialty “B&Q” in Taiwan. The following year, Test-Rite launched its own home furnish retail format “HOLA” in Taiwan and subsequently introduced “HOLA” in China in 2004

Test-Rite Group was co-founded by Tony Ho, Group Chairman, and Judy Lee, Chairwoman of Test-Rite Trading. Sophia Tong, joined Test-Rite in 2009. Test-Rite listed on the TAIEX in 1993.

� 1Q13 consolidated revenue was RMB 217 mn, +7.4% YoY, on the back of new store openings.

� Losses reduced by 66.2% YoY to NT$11.8 mn in 1Q13 and -35.9% YoY to NT$ 164.9 mn in 2012 on margin expansion and lower OPEX.

1Q13 Consolidated Earnings and April sales Performance

� 1Q13 consolidated sales ( IFRS based) totaled NT$ 8.9 bn,5.0% YoY and net profit totaled $ 245 mn, +13.4%YoY; and EPS totaled $0.50, +16.3%YoY. TR has reported 11[th] consecutive quarterly earnings growth. Ex TLM impact, 1Q13 consolidated sales totaled NT$ 8.87bn, +3.4% YoY while net profit of NT$ 230 mn and EPS of NT$ 0.43, both saw +24.9% YoY increase.

� April consolidated sales totaled $2.7 bn, -6.5%YoY and ex TLM impact, was +2.0%YoY; Accumulated sales for the first four months totaled $11.6 bn, -5.3%YoY and ex TLM impact, was +3.0%YoY.

� Net debt reduced to 64.0% in 1Q13 vs. target of 65%

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TR(2908) Share Price Performance
NT$
trading value share price USD$mn
27.5 30
25 QFII holdings increased to 14.4%, 25
+5.1 ppt compared to the past
22.5
12 months. 20
20
15
17.5
10
15
12.5 5
10 0
2
Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13
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Retail Channels*

(1Q13 Revenue: ~NTD$ 5.5 bn / 2012 Revenue: NTD$ 19.9 bn)

Trading Group

( 1Q13 Shipment Value: NTD$ 4.0 bn/ 2012 :NTD$ 15.8 bn )

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HOLA TW (22)
Hard Lines Electrical
Home Furnishings HOLA China (32)
Hand tools, Power tools, Home appliance, Lighting,
TAYOHYA (3) Automotive accessories, Ceiling fans, Cord
Hardware
TLW (TW) (25)
Home Improvement
TLW PLUS (14) House ware Seasonal
Bathroom accessories, Outdoor furniture,
HOLA CASA Kitchenware, Home Décor, BBQ/Fireplace, Gardening,
Furniture/Mattress (22) Storage, Building materials Sports, Xmas
HOLA Petite (9)
Bedding/Ceramics Others
WW China (5)
Stationary, Indoor furniture,
Service BU Repair/Design services PC peripherals, Office supply
Home Center Décor House (1)
Market Deployment Market Deployment
Taiwan China America Europe Aust & Asia
NZ
Other Long-Term Investment
B & S Link Corp. Chung Cin Corp. Logistic / Warehousing
Product Development
(e-Market Place, Supply Chain (Turnkey Solution Provider Service
(Product Design, Packaging
Management to Sourcing & to Retail Outlet (China 1, TWN 1,
Design, Product Display)
Retailing ) Construction) USA 1, Europe 1)
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• Store numbers updated on May 24[th] , 2013

3

Tony Ho, Group Chairman; Co Founder of Test-Rite Group. Tony played a critical role in Test-Rite’s expansion into retail business and was instrumental in leading the company’s IPO efforts. Tony recently completed the two-year Joint Executive MBA Program between Taiwan University and Fudan University and is currently working on his graduation thesis: “How to pursue further growth by organization transformation-take large retail group for example.” ’ - Judy Lee, Chairwoman, Test Rite Int l (2908 TT/2908 TW); Co Founder of Test-Rite Group. Best know as the “Queen of Hardline”, Judy is a seasoned veteran of the import/export trading business. With Judy at the helm, Test-Rite Trading consistently provides outstanding services to retail customers globally and has received multiple recognitions as “Best Partner/Supplier”. Sophia Tong, Group CEO. Sophia joined Test-Rite in March 2009 to lead both Trading and Retail businesses. Prior to Test-Rite Sophia was the General Manager of IBM Taiwan from 2006 to 2009 and the Director of China Banking Cluster for IBM Greater China Group. Sophia was previously with IBM for over 25 years.

4

Test Rite Group	Milestone
1978-91	Establishment and Growth
1988-00	“Best Supplier Award” from Wal-Mart
1993	Test Rite IPO (2908TT) – Taiwan Stock Exchange
	Launch of Retail Business
1996-98	B&Q特力屋Taiwan 50-50 JV with Kingfisher
	HOLA – “House of Living Art”
2001	Named “The Best 200 Small Companies” by Forbes
2004	Retail: Inception of HOLA China
	Nei-Hu HQ Building Sale-and-Leaseback
2007	Purchase of Kingfisher’s 50% joint venture stake of TLW Taiwan
	(US$100mn)
2009	4-in-1 Merger of Taiwan Retail channels: TLW (DIY), HOLA, Freer, and HOLA Casa.
2011	Décor House grand opening in September in Taoyuan, Taiwan. Received Best Supplier Award from Wal-Mart
	Sold TLM to Stanley Black & Decker( Proceed of NT$2.3bn)
2012	Merged outstanding shares of TR USA(US$13.8mn)
	Opened of discount household channel TAYOHYA in Taiwan
2013	Acquired International Art, a trading company with specialization in Seasonal, House ware, Garden tools, and stationary.
		5

Form a global integrated enterprise in homeVision 願景 : related products & services 構築一個專注居家產業的全球整合型企業 Sustainable business growth 業務持續成長 Goals 終極目標 : Corporate governance 公司治理 Growth through Innovation & Integration : Strategy 策略 透過創新與整合保持成長 Sustainable earnings & revenue growth 集團營收五年持續正成長 Objectives 目標 : Integrate operation 集團整合 High Performance 高績效 Culture 文化 : Customer focus 顧客導向 Sales oriented 銷售導向

6

• 1Q13 IFRS based net income $ 245 mn and EPS $0.50; 2012 IFRS based net income $ 504.0 mn and EPS $1.02

• Acquired 100% shares of International Art.

• Disposal of TLM net proceeds of NT$2.3bn (3Q12)

• Purchase of 51% (control 100% currently) shares of TR USA of US$ 13.9 mn

• Extend trading payment term from 30 days to 90 days; working capital improvement of ~ NT$600mn

• Consolidated Net Debt/Equity target was 64.0% in 1Q13 vs. target of 65%

7

• 2011&2012 consolidated sales exceeded pre financial crisis high of 2007.

• Group profit increased 30%YoY in 2011.

TR Group Sales & Profit

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NT $b n Sales(LHS) Net Profit(RHS) NT $ mn
50 800
2011�10%YoY
700
40
600
2010�14%YoY
2011�30 %YoY
500
30
400
20
300
2010�256 %YoY
200
10
100
0 0
2006 2007 2008 2009 2010 2011 2012 8
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8

Outlook and Opportunities

• Trading

• New agency customer signings (+4 since 4Q12)

• International Art integration (acquisition @ 0.2x sales of US$25-30mn)

• New program wins for principal trading and rising agency shipments

• Further develop brand licensing/importing opportunities for Taiwan and Chi na

• Develop private brands

• Retail

• HOLA CN loss less than NT$100mn in 2013

• Continued store expansion in Taiwan and China

  • +1 TLW/Hola TW in 1Q13; Smaller formats in Taiwan (TLW Plus and HOLA Petite)

  • 3 – 5 net increase for Hola China per year; TLW Plus plan to open 5-10 stores and HOLA Petite plan to open 6-10 stores in 2013( included the 9[th] stores currently)

• Margin improvements across channels

• Develop private labels and private brands

9

• 2013 Major CAPEX plan (~NT$750 mn):

• TLW / Hola TW

• 1 store of TLW; 1 store Hola TW; 10 store of TLW Plus

• Renovation and upgrade

• NT $ 300 mn

– HOLA CN

• 3 – 5 stores of Hola China

• Renovation and upgrade

• NT$ 250 mn

– Group IT & Logistics

• NT$ 200 mn

10

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TRADING SECTOR

11

• with local service 19 offices in 15 countries, 3 warehouses in China, Taiwan, and U.S.

• US warehouse provides logistics/ warehousing service to customers of principal trading.

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Winchester
Hampshire ‧
‧
‧
Bentonville ‧ ‧ Toronto Paris ‧ Shanghai
Ontario ‧ ‧ ‧ Eau Claire ‧‧ Ningbo
Atlanta ‧
‧ [‧]
Taipei
‧
Bangkok ‧ [Ho Chi ] Hong Kong &
Minh City
Haryana ‧‧ Shenzhen
Kuala ‧
Lumpur
Singapore
‧ [Sydney]
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12

�Top 10 Trading Customers

Principle Trading

Agency

Growth Opportunities

• Leverage growth of recovery in U.S. consumer demand

• Agency biz (Michaels, AutoZone, Tractor Supply, AAFES , Spotlight, OSH Arteriors, Express Gift and Pep Boys)

• Principal trading : continued focus on key customers/products through global sourcing platform

• Brand licensing opportunities for Greater China markets : La-Z-Boy and Umbra

• � Brand licensing opportunities for TW : Frette, Bissell, La-Z-Boy, Umbra, Stanley Black & Decker, Joseph Joseph, 7th generation, Joyoung and OXO) 13

• Trading business IFRS based consolidated revenue for 1Q13 totaled NT$3.0 bn, decrease 3.2% YoY, and shipments showed decrease 0.5% YoY to NT$4.0 bn. The YoY decline is the result of shipment mix change.

• Shipments for principal trading decreased by 3.5% YoY in 1Q13 to NT$ 2.9 bn; agency business increased by 9.2% YoY in 1Q13 to NT$ 1.0 bn; Exports accounted for 58.3% of shipments, and agency and imports accounted for 31.8% and 9.9% res ectivel . p y

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TR Trading Shipment TR Trading Shipment
NT$mn NT$mn Exports Agency Imports
Exports Agency Imports
20,000 4,000
3,653 3,687
16,133 15,671
13,685 14.1% 14.9%
15,000 14.9% 12.7% 3,000 20.6%
18.9%
14.1%
20.6% 27.8%
10,000 18.9% 2,000 67.0% 64.4%
64.4%
67.0% 59.4%
5,000 1,000
0 0
2010 2011 2012 1Q12 1Q13
14
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• Shipment breakdown by region

• U.S. usually accounted for 55-65%, Europe around 10-15%, Asia 15-20%.

• Saw strong growth in America in 1Q13.

• Europe market remain challenging

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TR Trading Shipment by Region TR Trading Shipment by Region
NT$mn
America Europe Australia Asia Africa America Europe Australia Asia Africa
20,000 4,000
3,653 3,687
16,133 15,671 1.9% 1.7%
17.7%
17.80%
15,000 1.7% 1.9% 3,000 5.3%
13,685 17.7% 5.7%
1.9% 16.4% 12.6%
17.80% 5.3% 8.0% 15.5%
12.6%
10,000 5.7% 9.6% 2,000
15.5%
62.7%
5,000 62.7% 64.0% 1,000 59.0%
59.0%
0
0
2010 2011 2012 NT$mn 1Q12 1Q13
15
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• Shipment breakdown by product

• Hard lines, house ware and seasonal are main product categories at ~ 25% of total shipments each

TR Trading Shipment by Categories

TR Trading Shipment by Categories

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Electrical Hard lines House ware Electrical Hard lines House ware
Oth ers S . . I T S easona l Others S . . I T Seasonal
12,000 2,500
2,263
2,212
10,415
9,349
10,000 9,233
2,000
22.5%
22.5%
25.0%
8,000 25.0% 7.0% 26.2%
1.2% 1,500
6.8% 7.0%
10.2% 1.0% 10.2% 1.2%
6,000 2.1% 27.5% 2.1%
27.5%
18.7% 24.9%
1,000 18.7%
4,000
30.1% 28.6% 25.0% 500 30.1% 28.6%
2,000
13.9% 13.2% 16.2% 13.9% 13.2%
0 0
NT$mn 2010 2011 2012 NT$mn 1Q12 1Q13
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16

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RETAIL SECTOR 零售事業

17

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Brand value proposition of Retail BUs
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Specialty Solutions

Affordable Indulgence

S E E imple asy xciting To choose To buy Experience

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18

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Holding structure of TR Retail Group
特力 (TR)
2908 TT / 2908 TW
100%
100%
Test Rite Retailing
(Cayman)
力秋
100% 100%
立駿 Perfect Group 特力有限公司
(HK) Test-Rite Retailing Ltd.
75%
100% 100% 25%
立威 Energy 特力屋 ( 上海 ) 商貿 TLW / 特力屋 ( 股 )
(Shanghai) HOLA (Shanghai) 100%
TR Home
Service Co.
HOLA
Life One Plaza HOLA CN TLW Plus TLW HOLA TW HOLA CASA Décor House
Petite
( 五角場 ) (32 stores) (14 stores) (25 stores) (22 stores) (22 Stores) (1 Store)
(9 stores)
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Store # are as of May 24[th] ,2013 Designate Retail Sales Channels TLW (Formerly B&Q TW) made a tender offer of HOLA TW common shares in June 2009. TLW merged HOLA TW, Freer, and HOMY in Oct 2009. And the scheduled date of 4 in 1 merger is Dec. 31, 2009.

19

Provide consumers the experience of “affordable indulgence”

� TLW ( 特力屋 ) Taiwan

• Open first Décor House, the one-stop home ware shopping center in Sep. 2011

• � Added one TLW in Taoyuan (within Décor House) in Sept. 2011; +1 openings in 2012( Nantou) ; +1 store in Jan. 2013 (Sanxia)

• Open TLW Plus targeting neighborhood market.

� HOLA

• HOLA Taiwan –add 1 store in Dec. ,2012(Chiayi); +1 store in Jan. 2013 (Sanxia)

• 2013 open HOLA small stores named “ HOLA Petite” transformed from FREER, target 20 stores in 2013.

• HOLA China

• +1 store in Jan. 2013 and plan to add 1 store in 2Q13, plan to open 3-5 stores in 2013.

Trading/Retail Synergy

• TLW, HOLA, Freer, HOLA CASA, and HOLA China - continued integration of merchandizing, marketing, store operations, FIN, HR & IT departments

20

• Leading DIY player with ~30% market share.

Store Locations

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TLW
HOLA
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• +1 store in Nantou in Sept.2012; +1 store in Jan. 2013 (Sanxia), totaled 25 stores in Jan. 2013, and new business opportunities with TLW Plus and TLW 好幫手 .

• 1Q13 revenue totaled NT$2.5 bn, up 2.9%YoY.

TLW Net Sales

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NT$mn YoY %
12,000 8%
10,134 9,771 9,687 9,361 9,888 10 , 252 10 , 289 6%
10,000
4%
8,000
2%
6,000
0%
4,000
2,522 -2%
2,000 -4%
0 -6%
2006 2007 2008 2009 2010 2011 2012 1Q13
( ㎡ ) 2006 2007 2008 2009 2010 2011 2012 1Q13
Selling space 91,756 93,938 93,938 93,938 89,727 87,966 88,711 90,473
Store # 21 22 22 22 23 23 24 25
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21

• No. 1 home décor chain in Taiwan with totaled 22 stores; open

• small HOLA stores named “ HOLA Petite” totaled 9 stores.

• Add 1 store in 2012(Chiayi), and +1 store in Jan. 2013

• (Sanxia).

Store Locations

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TLW
HOLA
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• Revenue increased 4.1%YoY to NT$ 1.5bn in 1Q13.

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HOLA TW Net Sales
NT$mn YoY %
6,000 5,591 30%
5,118 5,293
25%
5, 000
4,073 20%
4,000
15%
3,182 [3,549 ]
3,037
3,000 10%
5%
2,000
1,468 0%
1,000
-5%
0 -10%
2006 2007 2008 2009 2010 2011 2012 1Q13
( ㎡ ) 2006 2007 2008 2009 2010 2011 2012 1Q13
Selling space 45,157 48,311 51,779 51,779 58,587 58,938 60,004 62,146
Sales and selling space include
HOLA TW and HOLA small
Store # 11 12 13 13 18 20 21 22 stores 22
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22

• Closed original TLW store to rebuilt Décor House in 2Q10. Soft opening started in July 2011 and officially opened in September.

• Selling space over 8,100 ping (26,700 ㎡ ); Rental revenue of ~ NT$100mn per year

• Key anchors include: TR Group retail channels – TLW, HOLA, HOLA Casa, HOLA Petite and other furniture, F&B, and other retail outlets

23

HOLA China (Private – 100% held by Test-Rite)

• 1Q13 revenue totaled RMB$217mn, +7.4% YoY.

• +1 store in Jan. 2013, totaled 32 stores; also plan to open 1 store in 2Q13, plans to open 3-5 stores in 2013.

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RMB$mn HOLA CN Net Sales YoY %
1,000 100%
775 777
800 80%
640
600 60%
449
400 40%
305
210 217
200 110 20%
0 0%
2006 2007 2008 2009 2010 2011 2012 1Q13
( ㎡ ) 2006 2007 2008 2009 2010 2011 2012 1Q13
Selling
25,593 32,595 46,442 51,506 59,481 60,116 63,686 65,764
space
Store # 7 9 14 18 27 28 31 3224
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• 1Q13 revenue increased 7.4% YoY to RMB 217mn; FY2012 revenue increased 0.3%YoY to RMB 777mn.

• Loss reduced 66.2% YoY in 1Q13 to net loss NT$ 11.8mn.

• 20 out of 32 stores were at breakeven for 1Q13 and 20 stores were at store level breakeven for FY2012.

---

• Same store sales, calculated for stores opened for more than one year, decreased to 1.1% YoY in 1Q13 and +1.0% in FY2012.

• opened +1 store in Jan. 2013 , also plan to open 1 store in 2Q13, plan to add 3-5 stores in 2013.

25

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RECENT FINANCIAL RESULTS

26

Test Rite Int’l Co., Ltd. (2908) Consolidated sales breakdown ( IFRS Based)

(NT$ ‘000)	1Q13	1Q12	YoY% chg
trading sales	2,993,378	3,093,563	-3.2%
Taiwan retail sales	4,490,623	4,170,736	7.7%
HOLA China sales	1,029,213	944,569	9.0%
Total retail sales	5,519,836	5,115,306	7.9%
Other sales	355,689	1,122,388	-68.3%
Consolidated Sales	8,868,902	9,331,257	-5.0%
Consolidated Sales ex TLM	8,868,902	8,580,102	3.4%

# The tender offer for TR’s 68.27% held subsidiary, Tong Lung Metal (8705 TT/8705 TW), was completed on August 15[th] , 2012. As a result, Test-Rite will continue to book 3Q12 revenue and earnings from Tung Lung Metal until August 15[th] .

27

Test Rite International Co., Ltd. (2908) – Consolidated ( IFRS Based)

Consolidated P&L for 1Q13 & 1Q12 ( IFRS Based )

(NT$mn)	1Q13	1Q12	YoY%
Turnover	8,869	9,331	-5.0%
Gross profit	2,577	2,656	-3.0%
Gross margin	29.1%	28.5%	2.1%
Operating Expense	(2,302)	(2,406)	-4.3%
O ti fit pera ng pro	275	250	10 0% .
Operating margin	3.1%	2.7%	15.7%
Non-operating income/loss	1	50	-98.0%
Pre-tax profit	276	300	-8.0%
Net profit	248	227	9.3%
Other comprehensive income	26	(24)	n.a
Total net profit	274	203	35.0%
Net profit attribute to TRIC	245	216	13.4%
Recurring Net profit attribute to TRIC	227	181	24.9%
EPS(attributed to TRIC)(NT$)	0.50	0.43	16.3%
Recurring Fully-diluted EPS(Aft-tax)	0.47	0.36	30.6%

28

Test Rite International Co., Ltd. (2908) – Consolidated ( IFRS Based)

B/S (Consolidated ) 1Q13 and 1Q12

C/F (Consolidated ) of 1Q13 and 1Q12

(NT$ mn)	1Q13	1Q12	YoY % chg
Cash & Equivalents	1,796.8	1,358.1	32.30%
Current Assets	10,786.8	11,482.8	-6.06%
Net PP&E	6,185.2	7,407.1	-16.50%
L/T Investments	124.0	159.4	-22.21%
Total Assets	22,294.5	26,001.2	-14.26%
S/T Debts	2,157.5	2,937.8	-26.6%
Current Liability	10,319.8	10,244.6	0.73%
L/T Debts	4,437.2	6,656.6	-33.34%
Total Liabilities	15,371.4	17,877.3	-14.02%
Shareholders
Equities	6,923.1	8,124.0	-14.78%
Current Ratio (%)	104.53%	112.09%
Net Debt/Equity (%)	64.04%	101.38%
Total Liab/Assets
(%)	68.95%	68.76%

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(NT$ mn) 1Q13 1Q12 YoY % chg
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Operating CF	458.2	892.0	-48.6%
Investment CF	-112.9	-435.0	-74.0%
Financing CF	-400.3	-1,160.9	-65.5%
Net Cash Flow	-84.9	-735.7	-88.5%
Cash at beg. quarter	1,881.7	2,093.8	-10.1%
Cash at endquarter	1,796.8	1,358.1	32.3%

29

Thank you!

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