2012 First Nine-Month Results Announcement

19th November, 2012

Disclaimer
This presentation and the accompanying slides (the Presentation) which have been prepared by GOME Electrical Appliances Holding Limited (GOME or the Company) do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or be relied on in connection with any contract or binding commitment whatsoever. They are only being furnished to you and may not be photocopied, reproduced or distributed to any other persons at any time without the prior written consent of the Company. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of or any omission from this Presentation is expressly excluded. Certain matters discussed in this presentation may contain statements regarding the Companys market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. The Companys actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation, including, amongst others: whether the Company can successfully penetrate new markets and the degree to which the Company gains traction in these new markets; the sustainability of recent growth rates; the anticipation of the growth of certain market segments; the positioning of the Companys products and services in those segments; the competitive environment; and general market conditions. The Company assumes no obligation to update any forward-looking information contained in this presentation. Any forward-looking statements and projections made by third parties included in this Presentation are not adopted by the Company and the Company is not responsible for such third-party statements and projections.

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Content

1 2 3 4 5

Market Environment Financial Results in the First Nine Months, 2012 Key Messages to Investors 4Q12 Strategies and Outlook Appendix

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Market Environment

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1. Home Appliances Market

Market size: RMB 1.306 trillion in 2012 Tier 1: 30%Tier 2: 45%
GOMEs market share Tier 1:traditional appliances(25%)/small appliances(22.5%)/3C(12%) Tier 2: traditional appliances(10%)/small appliances(5%)/3C(3%)

Market Size (E-commerce included)

RMB Billion

SourceMcKinsey; GFK; Euromonitor

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2. Growth Opportunity
Tier 2 market will be the growth engine for future
Home Appliance Market Breakdown by Cities
RMB Billion; % 2,023 10% 26% 1st Tier City 2nd Tier City 3rd Tier City 4th Tier City Beyond 4th Tier City 1,053 10% 29% 25% 20% 16% 2010 26% 20% 18% 2016

CAGR

Growth Driver

7% 9% 11% 10% 13%

Urbanization furthered demand for home appliance Product advancement and replacement Healthy GDP growth Per capita income level grew continuously Penetration rate and replacement rate of 3C products increased Significant increase in ownership of all categories of home appliances Home for Appliance Subsidy Program promotion continued

1 Rural areas included

Growth Comparison by City Tiers in 2010-2016

GOME 2nd Tier Market

24% 28% 20% 20%

2nd tier market will be the major growth driver in the home appliance market Home appliance retailer market growth in 2nd tier market is significantly higher than in 1st tier cities

8%

1st Tier City

2nd Tier City 3rd Tier City

4th Tier City

Beyond 4th Tier City

SourceMcKinsey Global Research; Small group analysis

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Financial Results in the First Nine Months, 2012

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1. Income Statement Summary and Analysis

Operating results affected macro environment
RMB Million 1Q 2Q 3Q 9M12 Change vs. 9M11 (18.0)% (31.0)% (133.5)% (125.8)% (138.4)%

Revenue Consolidated Gross Profit Operating Profit / (Loss) Profit / (Loss) Before Tax Profit / (Loss) Attributable to Owners of the Parent Company Consolidated Gross Margin Operating Margin Effective Tax Rate1 Net Profit Margin (Attributable to Owners of the Parent Company)

9,762 1,948 53 95 67

13,364 1,837 (581) (538) (568)

12,931 1,940 (235) (168) (186)

36,057 5,725 (763) (611) (687)

20.0% 0.5% 20.2% 0.7%

13.7% (4.3)% --(4.3)%

15.0% (1.8)% --(1.4)%

15.9% (2.1)% --(1.9)%

(3.0) pct pt (7.3) pct pt --(6.0) pct pt

(1) Effective tax rate = income tax expense/ ( profit before tax + non deductable items)
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2. Consolidated Gross Margin Analysis

RMB Million 9M11 Consolidated gross margin Consolidated gross profit (RMB Million) 18.9% 8,292 9M12 Items 15.9% Revenue 5,725 Consolidated gross margin Gross margin
E-commerce excluded, the consolidated gross margin would be 17.0%.

9M11 43,983 18.9% 12.8% 6.1%

9M12 36,057 15.9% 12.3% 3.6%

Total other income Include: Net income from suppliers Management fee from GOME Parent Co. Management fee from Dazhong Air conditioner installation Gross rental income Government subsidy Others

3.9% 0.5% 0.2% 0.2% 0.3% 0.2% 0.8%

1.7% 0.6% 0.0% 0.1% 0.5% 0.3% 0.4%

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3. Expenses Breakdown
Cost measures started to take effect in 3Q
RMB Million Selling & Distribution Expenses Rent Sales Salaries Advertising Delivery Utilities Other S&D Administrative Expenses Other Expenses Total 1Q 2Q 3Q 9M12 Change vs. 9M11 6.5% 21.8% (7.9)% 14.0% (17.8)% (6.0)% 3.0% 25.8% (18.3)% 7.9%

1,534 714 372 107 71 82 188 307 54 1,895

1,917 754 415 326 84 96 242 378 123 2,418

1,727 732 404 220 90 98 183 365 84 2,176

5,178 2,200 1,191 653 245 276 613 1,050 261 6,489

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4. Store Indicators
Store improvement plan started in 2Q
Period-end sales area
1,000 sq.m

Average sales per store

10,000 RMB

Sales per sq.m

Yuan RMB

Same Store Sale Growth

Number of comparable stores

680

669

662

661

788

763

741

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5. Balance Sheet Summary

3Q Inventory turnover days reduced, positive cash flow from operating activities
RMB Million Cash and Cash Equivalents Pledged Deposits Inventories Trade Payables Bill Payables RMB Million Inventory Turnover Days (1) Trade Payables Turnover Days Bill Payables Turnover Days Pledged Deposit Ratio (2) Cash flows from operating activities Cash flows from investing activities Cash flow from financing activities As at 31st December, 2011 5,971 4,389 9,625 7,177 9,963 9M11 77 days 48 days 85 days 49.4 % (386) (278) 146 As at 30th September 2012 6,665 5,964 9,306 7,871 11,311 9M12 82 days 65 days 92 days 52.7% 3,853 (586) (2,559) Change

11.6% 35.9% (3.3)% 9.7% 13.5% Change 5 days 17 days 7 days 3.3 pct pt -------

(1) 3Q12 inventory turnover was 65 days, 18 days reduction compared with 3Q11 (2) Pledged deposit ratio was 30.9% by excluding domestic guarantee pledged for overseas loan

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Key Messages to Investors

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Key Messages to Investors

During the reporting period, the Group remained under macro pressure

Sales revenue reached RMB 36.06 billion, decreased by 18.0% y-o-y. Sales decline, operating cost increased, and investment in e-commerce during build-up phase led to a loss of RMB 687million.

Bricks & Mortar

Opened 93 stores and closed 102 stores. Total number of stores reached 1,070, covering 245 cities nation-wide. Streamlined 107,000 m2 through sub-lease and lease termination.

E-commerce

The legal procedures in the JV were completed for Coo8.com and gome.com.cn on 21st and 25th September respectively, 40% minority interest will be reflected from 4Q12 onwards. The Group completed the online and offline integration in procurement platform in the ERP system. At the end of the reporting period, e-commerce sales was RMB 3.1 billion, which was a 160% y-o-y growth. Gross margin turned positive from -4.9% for full year 2011 to 3.4% for 9M12.

Differentiated Products

Continued to expand differentiated products range and optimize the product structure. The sales proportion of differentiated products reached 20%.

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Key Messages to Investors

Cost measures started to take effect, business started to bottom out in 2Q12 and showed signs of improvement
Loss reduced and profitability improved Operating expenses started to reduce Inventory turnover days shortened

2
Optimization in store network continued

3 4
Decline in SSSG slowed down

6
Cash flow from operations increased

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Key Messages to Investors

Cost measures started to take effect, business started to bottom out in 2Q12 and showed signs of improvement
Sales Revenue Consolidated Gross Margin Net Profit

Revenue increased gradually

Consolidated gross margin improved

Net loss narrowed

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Key Messages to Investors

Cost measures started to take effect, business started to bottom out in 2Q12 and showed signs of improvement

Floor Area Optimization

Optimized area 10,000 sq.m

Operating Expenses to Sales Ratio

Same Store Sales Growth

Same store sales decline narrowed

Store optimization continued

Operating expenses including rent, labour and advertising costs reduced

SSGG decline slowed down

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4Q12 Strategies & Outlook

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1. Strategic Layout
Multi-Channel Retailer: online/offline businesses with one integrated infrastructure
Consumer demand Oriented

Tier 1 market (1st 2nd Tier cities) Same store sales growth

Tier 2 market E-commerce (3rd 4th Tier cities) Network coverage Steady growth

Supply Chain
100 billion procurement capacity Nation-wide logistics network Nation-wide after-sales network

SAP based ERP System

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2. Tier 1 Market
Same store sales growth focused

3 E-commerce

Tier 2 market Tier 1 market st nd 1 2 tier cities 3rd 4th tier cities

Multi-channel Retailer

Growth potential

Total market value of approx. 632 billion by 2016 Total market value of approx. 361 billion in 2012, of which GOMEs traditional appliances, small appliances and 3C accounted for approx. 25%, 22.5% and 12% share, respectively Technological advancement, rising per capita income, expanding domestic demand Strengthen procurement capacity on individual product, product competitiveness and profitability Improve marketing campaigns and individual store competitiveness Optimize store layout and enhance consumer experience Accelerate store optimization and closure of inefficient stores Standardize stores size, control rent/sales ratio Implement individual store budget management

Strategies

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3. Tier 2 Market
Strong growth engine for physical stores

3 E-commerce

Tier 2 market Tier 1 market st nd 1 2 tier cities 3rd 4th tier cities

Multi-channel Retailer

Growth potential

Total market value of approx. 1 trillion by 2016, exceeds tier 1 market Total market value of approx. 506 billion in 2012, of which GOMEs traditional appliances, small appliances and 3C accounted for approx. 10%, 5% and 3% share, respectively Fragmented channels, potentials for integration Streamline supply chain Sporadic development Strengthen infrastructures in logistics and after-sales Implement individual store budget management, strict control of rent/sales ratio Concentrate on small and medium size stores, with focus on in-house sales team and product mix optimization

Strategies

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4. E-commerce
Integrate online/offline infrastructure to become a multi-channel retailer
1 2 3 E-commerce

Tier 2 market Tier 1 market st nd 1 2 tier cities 3rd 4th tier cities

Multi-channel Retailer

Current issues facing B2C players

1. High operating cost 2. Low gross margin 3. Continuous loss 1. Procurement integration (completed ) Gross margin rose from -4.9% for full year 2011 to 3.4 % for 9M12 2. After-sales integration (completed) Cost ratio dropped from 18.7% for full year 2011 to 18.4% for 9M12 3. Continue to develop strategic cooperation and increase SKU 4. Convert physical stores to provide pick-up services 5. Seek alternative sources of capital, maximize value Leading profitable E-commerce player in home appliance

Strategies

Goal

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5. Strengthening Supply Chain Operations

Boost product competitiveness and consolidated gross profit margin
Supply chain elements Measures

Merchandizing deliver right products to the right stores at right inventory level
Speed up inventory turnover, reduce loss caused by price reduction Ordering and and inefficiency use of capital, minimize impact on margins caused Replenishment by short supply

Supplier management

Strategic alliance reduced cost

Strengthen supply chain

Increase competitiveness Increase consolidated gross margin

Centralized Logistics Pricing & promotion In-store Logistics Customer Shelf

Select best distribution center, delivery route and network to reduce distribution cost Good inventory management to reduce passive promotion needs while systematic pricing and promotion planning to promote the effectiveness Effective supply chain management to offer better services to customers and improve their shopping experience in the store

Optimize sample management to reduce waste

1. Pro-active supply chain: ODM/OEM/exclusive products 2. Coordinative supply chain: supplier participation (transition from suppliers to products management 3. Platform supply chain: small appliances and consignment products to increase product mix and improve customer experience
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Appendix

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Sales by Regions

9M2011

Total: RMB 43.98 billion

9M2012

Total: RMB 36.06 billion

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Sales by Product Categories

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Gross Margin by Product Categories

Continuous increase in gross profit margin due to:

Further optimization of product mix, increasing the sales proportion of high-margin products such as small appliances, accessories, ODM/OEM products Strengthening collaboration with suppliers and optimize contract terms

Gross Margin (E-commerce excluded) Gross Margin

13.9% 13.0%

13.9% 13.3%

14.5% 13.8%

10.3% 9.5%

15.9% 15.4%

9.3% 8.2%

11.2% 10.3%

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Store Network Expansion

As of 30th September, 2012 Flagship stores Standard stores Specialized stores Total: T1 Market T2 Market(1) Net store increase/decrease in 9M2012: Number of stores newly opened: T1 Market T2 Market Number of cities accessed: T1 Cities T2 Cities Number of cities newly accessed Group 216 391 463 1070 672 398 (9) 93 48 45 245 28 217 10 GOME 171 338 352 861 511 350 (5) 74 32 42 209 22 187 9 China Paradise 45 53 65 163 120 43 (4) 12 9 3 58 9 49 1 CellStar 0 0 46 46 41 5 0 7 7 0 6 1 5 0

(1) During the reporting period, Foshan and Dongguan were reclassified as T1 market.

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Stable Supplier Relationship

Top 5 suppliers for 9M2011

Top 5 suppliers for 9M2012

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Thank you

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