Fuqi International — Investor Presentation (November 2008)
22 slides from Fuqi International's investor presentation, Nov 20, 2008
Slide 1: FUQI International Investor Presentation
4 FES ti FUQI INTERNATIONAL Investor Presentation NASDAQ: FUQI November 2008
Slide 2: Forward-looking statements
This ati contain “forward id uncertainti general ifecting the Pp trends, pricing pressures which may cause the company to lower its prices, increases in supplier prices, changes in the company’s senior management team, the company’s ability to protect its intellectual property Aedes companys serrcen
Slide 3: Based in Shenzhen, China, FUQI is a leading designer of high quality precious metal jewelry
y y Based in Shenzhen, China, FUQI International, Inc. is a leading designer of high quality precious metal jewelry in China, developing, promoting, and selling a broad range of products in the large and rapidly expanding Chinese luxury goods market Nasdaq: FUQI Price®: $7.89 Market Value": $170 mil
Slide 4: Overview
Overview Net Income $MM > Fuqi International is a leading manufacturer & designer of high quality jewelry in China > Founded in 2001 & headquartered in Shenzhen > Profitable since inception with $145.6 mum in sales in 2007 (57% YOY over 2006) # Nalignins distibatiesyrorictangels the rapidly expandin
Slide 5: Growing purchasing power in China
» Growing purchasing power in China = 11.4% GDP growth® in 2007 * '07-'11 disposable income® CAGR of 12% Attractive and large jewelry market = $14.9 bn in ‘06, projected $18.2 bn in ‘10 China is now the 2nd largest consumer of gold jewelry in the world Y Vv Vv Leading market position in highly fragm
Slide 6: Rapid Economic Growth Positive Trends
Rapid Economic Growth Positive Trends GDP per Capita (in 000 USD) » '04-'07 GDP CAGR of 19% > '07-'10 GDP projected CAGR of 12% » Government commitment to continued economic growth » Favorable government policies > WTO entry reinforces reform & investments ~ Rapid urbanization resulting in faster gr
Slide 7: Increasing Purchasing Power Favorable Dynamics
Increasing Purchasing Power Favorable Dynamics Urban Disposable Income per Capita $ > Large population and higher disposable income support dem. ‘07-'11 disposable income CAGR of 12% > Rapid growth of the middle class" © Defined as earning $6-525K per year » Estimated at 87 mm in ‘05 = Projected to
Slide 8: Favorable Trends
Favorable Trends in China after automobiles and housing > Demand foe jevaly feeimbadidd inclture dlue to historical backgrou: > Huge market for customary - for major events » Total jewelzy sales in China increased by 3% since 2001, reaching $13.9 bn in 2005 » Market size for precious diamond, gold a
Slide 9: Hong Kong Jewelers
Hong Kong Jewelers Dynamics 630 sem LIM Company Sales Chow Sang Sang Holdings ape International Ltd. (12/07) Luk Fook Holdings Int'l Ltd. (09/07) 267.0 ‘Hang Fung Gold Technology Ltd.(09/07) inal ‘TSE Sui Luen Jewellery Int'l Ltd. (02/08) 2045 a > Hong Kong based jewelers Generate majority of busine
Slide 10: Overview
Overview yoo st Total: $56.8 mm 2007 = Total: $145.6 mm » Wide range of high quality products with unique designs and styles » Products include gold & platinum rings, bracelets, necklaces, ornaments, bars, coins and studded jewelry > Customer-designed rare metals ornaments studded with precious ston
Slide 11: Manufacturing
Manufacturing Design & Development > Large scale production base including: = Large factory (53,000 sq. feet) ® 500+ Company-trained employees > Internationally certified standards of quality = 1S0 9001 accreditation = ISO 14000 accreditation > Raw materials supply: Shanghai Gold Exchange > Current
Slide 12: Sales & Marketing
Sales & Marketing > In house sales & marketing division located in Shenzhen, China » Wide distribution network © National salesforce of 17 = In-house salesforce of 12 ® 106 provincial retailers * 700 direct sales distributors > Average retail price of $200-300 » China Top Brand award boosts customer
Slide 13: Expand existing and new product offerings
Expand existing and new product offerings: i.e, diamond line > Expand into new provinces previously do not have presense > Deepens penetration into existing markets > Enhance regional distribution network > Increased spending to promote & grow bri » Long-term strategy focused on national, > Enhanced
Slide 14: Enter retail market in key locations
> Enter retail market in key locations © Higher margins = Vertical integration > Direct to consumer transparency > Operating synergies to absorb new locations ® Established brand awareness ® Established warehousing & fulfillment > Strong pipeline of proprietary deals
Slide 15: Growth through acquisition: Temix Jewelry
> Through acquisition: Fugi closed the acquisition of Temix Jewelry Company in August 2008: ® A50 outlet branded jewelry store chain with locations in Beijing, Shanghai and Ningbo. 45 counters + 5 stand alone stores. Expected to contribute $7-8 M of revenue for the 5 months left in 2008 f > Shortens
Slide 16: Organic growth
Organic growth: > Open new retail outlets in premium locations > Dual branding strategy > Temix brand targets modem segment: ® Younger generations, higher level of education and western influence ® Preferred platinum, diamond, and modern fashionable designs = Average price point $500 to $800 > Fuqi
Slide 17: Counter and Store Expansion
> e ” Counter and Store Expansion: > 2008 target: 72 to 75 locations > 2009 target: 160 TO 180 locations > Optimum target in a few years: 400+ > . F Economics: > Counters: Department stores charge concessions (variable rent). GP approx. 25%, NM approx. 16% > Stores: pay fixed rent, GP approx 30%, NM
Slide 18: aca Year Ended Dee. 3, ine Monne Ending Septem
aca Year Ended Dee. 3, ine Monne Ending Septem 90 2005 2008. 2007 2008. (asset ose) a a: Netsales see7es S728 Sozdo9 S145 880, 90489 $28,120 perodoverporoa % a : 1634 cogs sas Bassa 83519129, 708214288 Gross prot 5008 7816 8700, 65d H ose 70% 709% 20% es 18% 113% Sales and macising 9 eat 499 1,105 e
Slide 19: (acca ehucanss)
as (acca ehucanss) CCash and cash equivalents jvable, net le, laventory Other current assets ‘Total curent assets PPRE, net Deposits sete Intangible, net Oh asets otal assets Total current debt ‘Accounts payable and acerved lilies Other current libites ota ewrent abilities Long-tm debt CComman stock
Slide 20: Name Title Experience
Name Title Experience > One ofthe pioneers ofthe jewelry business in China, more than 19 years of experience in managing jewelry related businesses xanwa EO > Permanent Disector of Gems & Jewelry Trade Azcociation of Chia Chong | Trad > Azzocinte President of Shenzhen Gold Jewelry Azzociation > CPA
Slide 21: Experience
Experience Name Title Independent > President of Dawson-Forte Cashmere , oe, Hosvard a Eileen B ‘ ae Compensation & and the 2006 NCCE CO-OP Hall of Fame Award iY ‘Audit Committee. _~ Senior Manager with KPMG Peat Marwick Financial Expert f i Independent reporting companies worldwide on various trsac
Slide 22: FUQI: Well-Positioned for Growth
FUQI: Well-Positioned for Growth Growth Opportunity ‘Strong Financial Performance Positive economic trends + Top line annual growth of 58% Growing purchasing power + Increasing profitability & cash flow High demand for luxury items Attractive Industry Solid Management Team Sizable market SU bn in 20
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