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Matahari Department Store Corporate Social Responsibility A Strategic Perspective Presentation by Travis Saucer CEO Matahari Department Store Lippo Group PT Matahari Putra Prima Tbk. Indonesia’s Leading Retail Group A Strategic Perspective 2007 Exceeding 1 Billion Sales in US Dollars MDS Department Store division 2007F Sales: Rp5.0 trillion Matahari Food Business (MFB) division 2007F Sales: Rp4.5 trillion TimeZone & Others 2007F Sales: Rp318 billion Department Store Hypermarket Arcade centre ♦ 80 outlets ♦ 38 outlets ♦ 90 outlets ♦ 38 cities ♦ 20 cities Foodmart ♦ 29 supermarket outlets ♦ 45 cities Other operations directly held under Matahari ♦ 25 cities Distribution Boston Pharmacy ♦ 3 centres ♦ 42 Health & Beauty Centers (HBC) ♦ In-house support Property ♦ Property management ♦ Retail leasing Note: No of outlets as of February 26, 2008 A Strategic Perspective Indonesia’s Largest Department Store A Strategic Perspective Matahari Department Store Group Target middle and upper middle income consumers: Particularly targets females/families between ages 15 to 45. Store size typically ranges from 4,000 – 15,000 sqm – Modern, well-lit and well fixtured. MDS competes on Fashion, Value and Quality. A Strategic Perspective 2007 Matahari Department Store’s Most Successful Year in Its 50 Year History  Highest ever same store sales growth performance in 2007 at 13.7%  2007 EBIT Margin of 10.4% - highest ever, best of class worldwide  Develop long-term, strategic plan of multi-segment business to double sales within 5 years  Sales hit Rp 5 Trillion A Strategic Perspective Matahari Department Store is the crown jewel for PT. Matahari Putra Prima Tbk!!! Beginning in 2008 we will further dominate Indonesia with a major expansion of Matahari Department Stores!!! A Strategic Perspective INDONESIAN ECONOMY SHOWS PROMISING GROWTH Real GDP forecast to grow by 6% p.a. .. Real GDP, 2007-12 (Rp T) 6,000 •+31 5,000 4,000 % ... while population is growing at 1% per year ... ... resulting in increase of GDP/capita of 25% by 2012 Population, 2007-12 (M) Real GDP/capita, 2007-12 (Rp M) 300 4,944 3,775 250 •+6 25 % 235 +25 % 248 20 200 150 2,000 100 1,000 50 5 0 0 0 2012 16 15 3,000 2007 20 10 2007 2012 2007 2012 Average income per capita projected to grow by 25% through 2012 Note: All figures in constant 2007 Rp Source: EIU; BCG analysis A Strategic Perspective DEVELOPMENT OF MODERN RETAIL EXPECTED TO ACCELERATE Share of modern retail to increase to 30% by 2012 Modern retail as % of total retail sales, 2004 % 90 South Korea 60 Projected increase to 30% of total retail sales in 2012 Thailand 30 Hong Kong Japan Indonesia 2012 Vietnam 0 100 Taiwan Malaysia Singapore China India Indonesia 1 1000 (1) Figure for 2007 Source: IBM consulting; Press search; BCG analysis A Strategic Perspective 10000 100000 GDP per capita in US$ (2004) Matahari Department Store The Crown Jewel Our number 1 strategy: Grow Matahari Department Store Faster!!! A Strategic Perspective EXPAND MATAHARI STORE BASE MORE AGGRESSIVELY ... Planned number of Matahari stores, 2007-2012 +58% 115 125 105 79 20071 85 95 Open 10 new stores a year starting 2008 2008 2009 2010 1. Figure end 2007 (excludes 2 Matahari stores that are converted to Parisian) Source: Matahari Real Estate and Store Planning A Strategic Perspective 2011 2012 ... AND EXPAND GEOGRAPHICAL FOOTPRINT THROUGHOUT INDONESIA Existing stores New stores in current cities New stores in new cities Potential future locations Source: Matahari Real Estate and Store Planning A Strategic Perspective Matahari Department Stores Corporate Social Responsibility • Our success comes with a responsibility to be a role model in giving back to the employees and the communities that support us A Strategic Perspective What Is Corporate Social Responsibility ? Achieving commercial success in ways that honor ethical values, respect people, communities and the natural environment A Strategic Perspective Corporate Social Responsibility Divided into Four Areas: Work Place – How do we treat the people who work for us? Market Place – Good Governance practices Code of ethics Globally accepted accounting practices Community – Seeing ourselves as a member of the community rather than an outsider Environment – Reduce the resources we use and waste we produce A Strategic Perspective Benefits A. Good reputation – attract the best people B. Brand enhancement C. Income appeal to investors and financial analysts D. Increase sales and market share A Strategic Perspective Cost of Ignoring CSR A. Risk of new business B. Brand risk C. Legal risk A Strategic Perspective Challenges A. Choosing social issues B. Selecting on initiative to address the issue C. Developing and implementing program plans D. Evaluation A Strategic Perspective Corporate Social Responsibility Matahari 2006/2007 A Strategic Perspective Matahari: Aid and Support on 2006 / 2007 Natural Disasters 1. Earthquake victims 2. Tsunami victims 3. Flood victims A Strategic Perspective June 2006, EARTHQUAKE Matahari disbursed aid to help the earthquake victims with food, blankets, medicine for more than 10,000 households. A Strategic Perspective February 2007, TSUNAMI Together with Yayasan Obor Berkat Indonesia, Matahari helped the victims of the tsunami A Strategic Perspective February 2007, FLOOD Together with Yayasan Obor Berkat Indonesia, Matahari helped the flood victims in Jakarta and greater Jakarta region A Strategic Perspective Matahari: Aid and Support on 2006 / 2007 Arts, Humanities and Education for the Nation’s Future 1. Arts programs 2. Sport events 3. Scholarships to employees and the less fortunate 4. Teachers in isolated areas 5. Loaning of associates to universities A Strategic Perspective August 2007, TEACHERS SUPPORT In cooperation with Foreign Affairs Department, Matahari donated special packages for teachers in isolated areas throughout Indonesia A Strategic Perspective Matahari: Aid and Support on 2006 / 2007 Less Fortunate Members of the Community 1. Special Olympics 2. Orphanages 3. Blind and handicapped individuals A Strategic Perspective 2006 IKM donation to Orphanage A Strategic Perspective August, 2006 Matahari donated Rp 100 million to Yayasan Putra Bahagia to help the unfortunate children A Strategic Perspective 2006 Donation to Orphanage A Strategic Perspective Employee Welfare 1. Scholarship to employee 2. Vocational study 3. Spiritual responsibility; establishment praying place i.e mosque 4. Condolences contribution 5. “Koperasi Karyawan” - benefit of local loans to employee - special allocation of emergency of employee 6. Employee’s union – annual conference meeting A Strategic Perspective Employee voluntary blood donor for Indonesia Red Cross A Strategic Perspective Employee spiritual responsibility A Strategic Perspective Matahari Soccer Team A Strategic Perspective Worked with Others to Achieve More 1. Employees union 2. Customer donations 3. Matahari Suppliers Club 4. Indonesia Retail Association 5. Special Olympics 6. Louis Braille Institution 7. Organized Bazaars for funds 8. Ministry of Foreign Affairs to provide aid 9. UNICEF A Strategic Perspective September 2006 Through a trade-in program, Matahari collected more than 10,000 pairs of jeans which were donated to social institutions in areas surrounding Matahari stores. A Strategic Perspective November 2006 Rp 4 billion was donated by Matahari in cooperation with Matahari Suppliers Club (AMSC) to 33 social foundations, as part of the “Matahari Charity Day”. A Strategic Perspective October 2007 Matahari in-cooperation with Dompet Dhuafa gathered funds to help those in needs. A Strategic Perspective New Initiatives for 2008 Cause Marketing – Donate a portion of the profits of each bra we sell to the Breast Cancer Council Trade Ins – Encourage our customers to donate uniforms/bags/shoes which will be donated to local orphanages in return for discounts on new merchandise Matching Donations – donations by our customers will be matched by MDS and our suppliers A Strategic Perspective CSR is beyond the old philanthropy of the past “Donate to good causes at the end of the year” CSR is a year round responsibility that we accept for the environment around us CSR is the difference we make to the world and the contributions to poverty reduction A Strategic Perspective