Test Rite — Investor Presentation 2017

Aug 25, 2017

Test Rite Group (2908:TT) 2Q17 IR Presentation

2017 August

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Investor Relations

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1

Investor Relations

Legal Disclaimer

• The information contained in this presentation, including all forward-looking statements, is subject to change without notice, whether as a result of new information, future events or otherwise, and Test-Rite Int’l Ltd. (the “Company”) undertakes no obligation to update or revise the information contained in this presentation.

• •Actual results may differ materially from those expressed or implied in these forward-looking statements and no representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is the information intended to be a complete statement of the Company, markets or developments referred to in this presentation.

• •Beginning on January 1, 2013, the Company has adopted International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board and endorsed by ROC Financial Supervisory Commission (FSC). Reporting for our annual and interim consolidated financial statements follow Taiwan IFRS requirements, however, given that there exist material differences between Taiwan IFRS and generally accepted accounting principle in the Republic of China (ROC GAAP), selected comparison of financial results in 2013 may have material differences versus previously released financial information under ROC GAAP.

Sophia Tong Group CEO TEL: 886-2-8791-5888

Daniel Liu (Please contact for further information) Deputy Spokesperson TEL: 886-2-8791-5888 ext. 6073 Email : daniel.liu@testritegroup.com

Linda Lin

CFO & Spokesperson TEL: 886-2-8791-5888

Judy Chen Investor Relations Principal Specialist TEL: 886-2-8791-5888 ext.5936 Email : investor@testritegroup.com

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Agenda

• 2Q2017 Snapshot………………….……….…………………………………………….….…..…….4 • Financial Highlights 2Q17…….….……………………..….………………………….…..……...5 • Group Introduction…………….…………………………………………………………..….....…12 • Retail Sector……………………………..…………………………………………………….….......16 • Trading Sector………………………..…..…………………………………..………………......... 22 • Appendix……..………………………….………………………………………………....……………26

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2Q2017 Snapshot

2Q2017 GROUP OVERVIEW NT$ 9,278M NT$ 2,667M NT$ 148M NT$ 132 M NT$ 0.26 Revenue Gross Profit Operating Profit Net Profit EPS TLW (TW) HOLA (CN) 243 27 stores 28 stores TLW Private Label TW Retail (44%) 12.1% 4,345 4,062 CN Retail (7%) HOLA (TW) Brand Agency Revenue Trading (47%) 25 stores 22 brands HOLA (TW) Private Label Others (2%) Total Retail Revenue 32.1% 628 NT$ 4,062M N. America Shipment Global Presence 86.5% 11 countries/14 offices Total Trading Shipment Global Employees NT$ 8,066M 5,828 people Europe Shipment Warehouse 8% 4 countries

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FINANCIAL HIGHLIGHTS

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Financial Highlights 2Q17

Revenue (YoY)

2Q17: 5.9 % 2Q16: -2.3 %

Gross Profit

2Q17: 28.7% 2Q16: 31.2%

Gross margin is decreased because most of the revenue growth result from trading which is lower margin.

Operating Profit

2Q17: 2.1% 2Q16: 2.1%

Benefited from the lowered operating expenses in HOLA China, the consolidated operating profit is increased.

(NT$ mn)	2Q17	2Q16	YoY% chg	FY2017	FY2016	YoY%chg
Revenue	9,278	8,758	5.9%	18,995	18,400	3.2%
COGS	(6,611)	(6,022)	9.8%	(13,391)	(12,560)	6.6%
Gross profit	2,667	2,736	-2.5%	5,604	5,840	-4.0%
Operating Expense	(2,473)	(2,549)	-3.0%	(5,002)	(5,299)	-5.6%
Operating profit	194	187	3.9%	602	541	11.3%
Non-operating income/loss	(46)	26	NA	(71)	67	NA
Pre-tax profit	148	213	-30.1%	531	608	-12.6%
Net profit	132	117	12.9%	440	423	3.9%
Other net profit	66	(43)	NA	(39)	(52)	-25.0%
Total net profit	198	74	167.1%	401	371	7.9%
Net profit attribute
to TRIC	132	117	12.9%	440	423	3.9%
shareholders
NT dollar (After Tax)
Basic EPS	0.26	0.23	11.2%	0.86	0.83	3.5%
Diluted EPS	0.26	0.23	11.2%	0.86	0.83	3.5%
Gross margin	28.7%	31.2%	-2.5%	29.5%	31.7%	-2.2%
Operating margin	2.1%	2.1%	0.0%	3.2%	2.9%	0.2%
Pretax margin	1.6%	2.4%	-0.8%	2.8%	3.3%	-0.5%
Net margin	1.4%	1.3%	0.1%	2.3%	2.3%	0.0%

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2Q17 by BU

Revenue by BU

The growth of trading has been benefited from new customers’ orders. On the other hand, Taiwan retail is affected by the chill real-estate market. HOLA China sales decreases due to closures of unprofitable store.

Net Profit by BU

Trading net profit is lower due to stronger Taiwanese dollar and increased marketing and promotion expenses in this quarter.

Both Sales and net profit of Taiwan retail is affected by the macroeconomic. On the other hand, HOLA China has contributed largely by savings of operating expenses. Losses of HOLA China has decreased 35.7%, therefore, increased 12.9% of the group consolidated net profit.

Sales by BU (NT$ mn)	2Q17	2Q16	YoY% chg	FY2017	FY2016	YoY%chg
Taiwan Retail▲	4,062	4,240	-4.2%	8,512	9,078	-6.2%
HOLA China ^	628	853	-26.4%	1,380	1,797	-23.2%
Trading◎	4,345	3,370	28.9%	8,643	6,959	24.2%
Others #	243	295	-17.5%	460	566	-18.8%
Consolidated Sales	9,278	8,758	5.9%	18,995	18,400	3.2%
Net Profit by BU (NT$ mn)	2Q16	2Q17	YoY% chg	FY2017	FY2016	YoY%chg
Taiwan Retail▲	80	91	-12.2%	315	341	-7.5%
HOLA China ^	(84)	(130)	-35.7%	(153)	(227)	-32.8%
Trading◎	148	198	-25.0%	348	401	-13.2%
Others #	(12)	(42)	-70.8%	(70)	(92)	-21.9%
Consolidated Net Profit	132	117	12.9%	440	423	3.9%

◎ Trading included Great China, TRPC, SO/RO, and related party transactions write-off.

▲ Taiwan Retail included TLW, HOLA, Décor House, TLW Service, Testrite Brand Agency, and Test Rite C&B.

^ HOLA China only included HOLA China.

# Others included Life 1 Plaza, TRR others, Chung Cin, group office expense, and gain on sale and leaseback

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Stable Cash Div. and High Tax Deductable

NT$	2012A	2013A	2014A	2015A	2016A	2017A
Cash dividend	1.08	1.00	1.13	0.95	1.08	-
Payout rate	77.1%*	76.9%	79.6%	72.0%	81.2%	-
Tax Deductable	20.48%	20.48%	20.48%	20.48%	20.48%	-

• EPS 1.4 on R.O.C. GAAP basis

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TR Basic EPS
NT$ 1Q 2Q 3Q 4Q
1.60
1.42
1.40 1.30 1.32 1.33
1.20 0.36 0.19 0.2
1.03 0.36
1.00 0.30 0.3
0.23 0.30
0.80 0.27
0.23 0.22 0.23
0.21
0.60 0.17
0.14
0.40 0.56
0.62 0.6 0.6
0.50
0.20 0.43
0.00
2012A 2013A 2014A 2015A 2016A 2017A
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Long-term Investment Value

Only 12 companies in the service industry can keep up in the top 100 list for over 30 years.

Company Name	1986 Ranking	2016 Ranking
Taiwan Power Co.	1	1
China Telcom	2	6
China Airline Co.	3	10
Evergreen Marine Co.	4	12
YangMing Marine Co.	7	13
Taiwan Railway Admin.	8	55
Taiwan Water Co.	13	48
Far Eastern Dept. Store	14	32
HoTai Motor	17	9
CTCI Construction	33	22
Wan Hai Lines Co.	37	24
Test-Rite	43	41

In such a rapidly changing environment of service industry, most of the survivors are state-owned companies.

It again proves our value of steady corporate management. Also showing our continuous efforts to deliver long-term investment value for all investors.

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Best Interest of Shareholders

Test Rite pursues best interests of shareholders

ROE is stable at 9-10% in the past 3 years

Highly Transparent

Test Rite is awarded by TWSE as the top 6%-20% best corporate governance public company.

TR Group ROE & Net profit

n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE	n Net Profit ROE
					100%
			9.5%		.		9.1%		9.1%
	7.3%		635		706		671		676
	509

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2017 Outlook

Trading Business

• 1) Transforming to product company and strengthening product development ability

• 2) Provide value-added services to enhance sourcing and supply chain management

• 3) Strengthening strategic alliance with the trading partners to increase shipments.

• 4) Developing 3[rd] party QA/QC business

• 5) Integrating the newly acquired German subsidiary to expand European business

• 6) Reaching synergies of group trading and retail business

• 7) Continuing to enhance customer relationships

Retail Business

• 1) Store opening schedule in 2017

• TLW, HOLA TW : no new store

• Crate & Barrel: no new store；online store will open in the first half year.

• Brand agency will expand presences in department stores.

• HOLA CN: no new store, but it will focus on reviewing profitability of each store and developing EC/Franchise model.

• 2) Enhancing customers experiences in physical store

• 3) Through the integration of POS system, we hope to fully eliminate the boundary in terms of product, payments, membership and marketing. Hence guiding our massive offline memberships to online.

• 4) Strengthening TLW Home services business unit to extend our services into customers’ home, and cooperating with real-estate developers.

• 5) Raising the sales mix of private label

• 6) Joint merchandise

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GROUP INTRODUCTION

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Key Management Team

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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 completed his graduation thesis: “How to pursue further growth by organization transformation-take large retail group for example.”

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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”. Judy is also awarded by “EY Entrepreneur of the Year” in 2015.

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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.

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Milestones

2016 TLW new concept store in XiTun Taichung

2015 First Crate & Barrel store in Taiwan

2014 Establish a Distribution Center in Shanghai Free Trade Zone; Acquired German operations 2013 Acquired 100% shares of International Art

2012 Sold 67% stake in Tong Lung Metal; Acquired 49% TRPC’s shares

2011 Décor House grand opening 2010 Successfully integrated 4 retail channels in Taiwan

2008 Acquired 50% of B&Q TW’s shares from Kingfisher plc

2004 Established HOLA China

2001 Nominated “The Best 200 Small Companies” by Forbes

1998 Established HOLA Taiwan – Home Decoration

1995 Established B&Q Taiwan – Home Improvement

1993 Listed on TWSE, became a listed company ( 2908TT )

1978 Test Rite Group established as a trading company that specialized in hand tool exports

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Group Structure

Home HOLA Taiwan (25) decoration China (28)

Home TLW 特力屋 (27), Improvement TLW PLUS (1), HISU(2),

Hardl ine & Auto Home Furnishing Consumer electronics, Lighting, Hand tools, Hardware, Auto accessories, Kitchenware, Decoration, Christmas Auto parts, New business development decoration, Sport equipments

Mattresses HOLA CASA (25), HOLA Petite(6), & Bedding WEDGWOOD(14), FRETTE(6), Zucchi (3), Elle(1)

Comprehensive home DÉCOR House integration services

Brand Agency Crate & Barrel (2)

Bath & Storage Seasonal Storage, Bathroom products, Outdoor furniture, BBQ rack/hearth, Suitcase, Traveling utilities Gardening, North-East Asia projects

Stationery Indoor furniture, Office supplies , Agency Stationery, PC peripherals

New The Pan Southeast Zealand & India Americas Europe Asia Australia

Taiwan China Zealand & India Americas Europe Asia Australia Other investment holdings Creative Design/ Product Development Chung Cin Corp. Logistics/ warehousing services China Taiwan Theme Trend & Product Concept; Product Design; VI & Shopping mall construction; Office building Graphic Design; Packaging & Purchasing construction; Booth recruitment USA Europe

Note: store numbers updated on June 30[th] , 2017

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RETAIL SECTOR

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Building the best “Home-related” channel

Store #	2012A	2013A	2014A	2015A	2016A	2Q2017
TLW	24	26	26	26	27	27
HOLA TW	21	22	23	25	25	25
HOLA CN	31	33	35	38	33	28
Avg. selling space(m2)	2012A	2013A	2014A	2015A	2016A	2Q2017
TLW	3,696	3,541	3,541	3,410	3,727	3,634
HOLA TW	2,466	2,414	2,311	2,179	2,218	2,229
HOLA CN	2,054	1,904	1,853	1,867	1,881	1,998

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Store Locations

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TLW
HOLA
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Improve Margin by Private Label

2Q2017

TLW Sales mix 12.1% HOLA Sales mix 32.1%

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Mid-term Goal

TLW: reaches 15% HOLA: reaches 30% Long-term Goal

TLW: reaches 30% HOLA: reaches 50%

• Save costs by joint-merchandise

• Leading home décor trend by strengthening PL designing ability

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500
400
300
200
100
99 85 105 130 190 184 198 224 264 209 229 268 414 359 345 411 430 344
0
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
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500
400
300
200
100
79 77 82 159 176 174 200 246 272 244 292 362 382 314 355 445 469 392
0
Investor Relations
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
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Omni-Channel Development

2Q2017

2017 Goal

• TLW EC Sales mix 4%

• HOLA EC Sales mix 4.4%

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• Growth of EC traffics and product skus

• New version of EC platform

• Improve customers experiences in physical stores

• Transforming online traffic to offline shoppers

The decrease is mainly because TLW and HOLA discontinued to distribute physical stores coupons online. Actually, the EC sales keeps growing.

EC Sales (Quarterly)

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300
200
100
0
特力屋 HOLA
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
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Current

TLW online skus >40,000

HOLA online skus >30,000

Online sales per ticket is about 1.5-2x times of physical stores

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Growth Driver – Brand Agency

• 2017 Goal

• 2Q2017 • Increase the brand awareness in the market

• Total of 22 brands agency • Increase channels in department stores

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TEST-RITE Brand Agency
Product Agency Channel Agency Licensing
Appliance Kitchen
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HOLA China Strategy

2Q2017

2017 Goal

• Private Label Sales mix: 20.9%

• EC Sales mix: 2.14%

• Self-Supported Sales mix 60.2%

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• Increase Self-Supported sales, PL sales and joint merchandise

• Improve store level profit and decrease headquarter costs to reach breakeven point

• Making structural adjustment by actively shut down those stores which can’t achieve profitability goals.

HOLA CN Breakeven store numbers

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30 27
24 24
25 21 21
19 18 18 18
20 17 [19 20 ]
15
14
13
15
9
10 8 7
5
0
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
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HOLA CN Net Sales & Profit

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RMB$mn NT$mn
1,000 0
800
-100
600
-200
400
-300
200
775 777 813 833 793 720 185 170 140
0 -400
2011A 2012A 2013A 2014A 2015A 2016A 2Q15A 2Q16A 2Q17A
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TRADING SECTOR

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Global Worldwide Network

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• With local service of 14 offices in 11 countries/region, 4 warehouses in China, Taiwan, Germany, and U.S separately.

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

Worldwide Trading Service

China Trading Service

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黑龍江
吉林
新疆 北京 遼寧
內蒙古
天津
河北
青海 寧夏 山西 山東
甘肅 陝西 河南 江蘇
西藏 上海
重慶 湖北 安徽
四川 浙江
貴州 湖南 江西
福建
雲南 廣西 廣東 臺灣
香港
澳門
海南
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TESTRITE’s Warehouse

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Partner with Global Retail Giants

• Provide value added services and supply chain management in Principal Trading

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Growth of Agency Trading

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N. America drives the growth

2Q2017

• N. America remains to be the fastest growing market. Accumulated shipment to the region has 41.5% YoY.

• Electrical and Hardline products are outperformed. Seasonal/ outdoor category is sluggish because of the weather is not favor for outdoor products in Europe.

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2017 Goal

• Hardline and House Ware keep growing

• Closely work with the strategic alliances to further boost trading shipments.

• Transforming to product company and strengthening product design ability

• Acquiring new customers in Agency

Total Shipment NT$8,066M

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Order
Manageme Total Shipment Trading by Category
nt 12.3% growth YoY 11% Hardline
1,916
Trading
23% 11% House Ware
4,251
53% 43% Seasonal
Agency Electrical
1,899
19% Others
23%
16%
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Shipment growing

• 2Q2017

• Traditional trading is expected to have strong growth in the year due to new customers’ orders.

• Agency business is stably growing. The momentum could remain still.

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2017 Goal

• Principal trading aims to grow 10% more by working closely with strategic alliance

• Agency business aims to have double-digit growth in shipment.

• Order management aims to grow furthermore.

Shipment Volume	2017	2016	YoY % chg
Principal trading shipment – 2Q17	4,250,849	3,264,902	30.2%
Agency business shipment – 2Q17	3,814,760	3,914,384	-2.5%
- Agency shipments	1,898,370	2,198,671	-13.7%
- Order management shipments	1,916,390	1,715,713	11.7%
Total Shipment – 2Q17	8,065,609	7,179,286	12.3%
Principal trading shipment – Accumulated	8,461,477	6,790,572	24.6%
Agency business shipment – Accumulated	6,798,576	5,335,077	27.4%
- Agency shipments	3,763,707	3,619,364	4.0%
- Order management shipments	3,034,869	1,715,713	76.9%
Total Shipment – Accumulated	15,260,053	12,125,649	25.8%

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APPENDIX

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Private Label - Designing & Branding ability

HOLA Spring/Sumer and Autumn/Winter style is leading the trend of Home décor each year

2017 Spring/Sumer 「Paris after the rain」Home Style The Beauty of watercolor ● Rain washed blending colors

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New Private Label - Cookware

Price Competitive / Higher Margin Launched on Nov-2016 / sold in “Stainless Steel Series, Non-Stick Series, and Cast-Iron Series”

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TLW2.0 – Buy after you experience it

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New Concept Store

TLW Shihlin store includes the 400m[2] “Service Center for the real scene of home “ , and The largest “DIY Classroom” in Taiwan with the area of 100m[2] .

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Product Development Achievement

2014-2017 International Design Award

2017 iF Designing Awards

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MOMO
Urban
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Repositioning-Total Solution Provider 貿易提供全方位服務

 Competitor shops analysis

• Customer service center

• Repair center

• Consumer survey

• Global design and R&D center network

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After Sales
Services
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• Artwork / Packaging services

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Private Label
& Planogram
Design
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• Showroom in Shanghai & Shenzhen

• Professional merchandising resources

• (300+ professionals

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Warehousing
& Inventory
Manageme
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• Pre-production quality assurance

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Vendor
Sourcing &
Management
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• Certified vendors in Greater China,

• Southeast Asia and India

• USA / Europe warehouses

Purchasing power

• Compliance training

• Inventory management

• system

• Replenishment services

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Manufacturing
Control
•
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• Test Rite import & export

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Vendor
Financing
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• licenses available

• QA/QC services in Greater China,

• Southeast Asia and India

• Trucking and customs

• clearance services

• Testing labs

• Inventory and pick & pack

• Shipment consolidation

• Capital management support to customers

• Replenishment services

• Advance payment through bank partners

• to vendors

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2Q2017 Consolidated Balance Sheet

(NT$ mn)	2017	2016		2017	2016	2016
Cash and cash equivalents	2,172	2,085	Short-term borrowings	4,430	2,325
Financial assets at fair value through profit or loss-current	431	815	Short-term notes bills payable		20
Debt investments with no active market - current	74	14	Financial liabilities at fair value throughprofit or loss–current	92	0
Accounts & notes receivable	3,569	2,626	Accounts and notes payable	5,432	5,368
Other receivable	284	348	Other payable	2,036	2,129
Inventories	6,117	6,132	Current tax liabilities	198	237
Prepayments	277	407	Advance receipts	563	575
Other current financial assets	20	23	Current portion of long-term borrowings	490	1,522
Other current assets	3	4	Other Current tax liabilities	63	78

Total current assets

12,947 12,454 Total current liabilities 13,304 12,254

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2Q2017 Consolidated Balance Sheet

(NT$ mn)	2017	2016		2017	2016	2016
Financial assets measured at cost - non- current	94	94	Long-term borrowings	3,249	4,535
Debt investments with no active market - non-current	203	269	Total non-current provisions	24	34
Property, plant and equipment	5,862	6,331	Net defined benefit liability	492	494
Goodwill and intangible assets	2,575	2,595	Other non-current Liability	3,765	5,063
Deferred tax assets	1,310	1,258	Total non-current liabilities	17,069	17,317
Refundable Deposits	800	905
Other non-current assets	600	727	Share capital	5,099	5,099
Total non-current assets
	11,444	12,179	Capital surplus	648	673
			Retained earnings	1,721	1,621
			Other equity	(205)	(80)
			Treasury shares
			Total equity attributable to owners of the Company	7,263	7,313
			Non-controlling interests	59	3
			Total equity	7,322	7,316
Total assets	24,391	24,633	Total liabilities & equity	24,391	24,633

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THANK YOU For Watching

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Investor Relations