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CORPORATE FINANCE

Natura Cosméticos S.A.

Puchase Price Allocation procedures related tothe acquisition of Emeis Holdings Pty Ltd.

(F t l ti f th i i l i d i P t i(Free translation from the original issued in Portuguese in February 3, 2014)

Advisory

February 4, 2014

ABCD KPMG Corporate Finance Ltda.Av. Nove de Julho, 5109 - 6º andar01407-905 - São Paulo, SP - Brasil

Central Tel 55 (11) 3245-8000Fax 55 (11) 3245-8309Internet www.kpmg.com.br

ToThe Board of Directors ofNatura Cosméticos S.A.São Paulo, SP, Brazil

Caixa Postal 246701060-970 - São Paulo, SP - Brasil

p g

S , S ,

February 4, 2014

Attention: Directors of Natura Cosméticos S.A.

D SiDear Sirs:

Under the terms of our proposal for the provision of services dated January 23, 2013 and subsequent discussions, we have carried out the procedures specificallyrelated to the Purchase Price Allocation in respect of the acquisition of Emeis Holdings Pty Ltd., in accordance with CPC-15/IFRS 3 and on the base date of February28, 2013, whose report is attached hereto.

We consider that within the delivery of this report the service which is the subject of our proposal is fully concludedWe consider that within the delivery of this report, the service, which is the subject of our proposal, is fully concluded.

We remain at your disposal for any further clarification and appreciate this opportunity to provide services to you.

Yours Sincerely,

Luis Augusto Motta Marcos de Oliveira R. CoelhoPartner Director

KPMG Corporate Finance Ltda., uma sociedade simples brasileira, de responsabilidade limitada, e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Corporate Finance Ltda., a Brazilian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Contents

1. Introduction 3

Page

2. Description of the Company3. PPA Analysis Framework 4. Identification of intangible assets5. Valuation of intangibles assets5. Valuation of intangibles assets6. Valuation of tangible assets7. Discount Rate8. Results and conclusionsAppendicesAppendices

I. Summary of values and WARAII. Valuation of the trade-markIII. Valuation of the client portfolio - wholesalersIV A bl d W kfIV. Assembled WorkforceV. Contributory assetsVI. Proportional PPA

2© 2014 KPMG Corporate Finance Ltda., uma sociedade brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos reservados. Impresso no Brasil.

Puchase Price Allocation procedures related tothe acquisition of Emeis Holdings Pty Ltd

1. Introduction

Introduction (Source: Client and Company)• On February 28, 2013, Natura Cosméticos S.A. (“Natura” or “Client”) acquired

65% of Emeis Holdings Pty Ltd. (“Aesop” or “Company”). The amount paid byNatura was AU$ 71,1 million (R$ 143,7 million).

• Aesop as fo nded in A stralia in 1987 foc sing on the man fact re of

– Economic/Financial valuation of Aesop prepared by KPMG;

– “Financial and tax due diligence” report prepared by KPMG Financial AdvisoryServices (Australia) Pty Ltd;

– Information obtained through interviews with the Management of Natura andAesop and• Aesop was founded in Australia in 1987, focusing on the manufacture of

personal care products aimed at the retail market (high level). On the date of theacquisition, Aesop operated in over 60 points of sale in 11 countries. Theproducts include care of skin, body and hair. The Company´s products areavailable “online” and in over 50 stores in some of the world´s main citiesincluding Paris, Tokyo and New York and are also present in some of theworld´s major department stores.

Aesop; and

– Market data and information regarding the sector of the market in which theCompany operates.

Scope

Our job included the following principal procedures:

• As a result of this transaction (“Transaction”), the Management of Natura(“Management”) requested KPMG Corporate Finance Ltda. (“KPMG”) to carryout a job entailing procedures specifically related to a Purchase Price Allocation(“PPA”) relative to the acquisition of Aesop in accordance with CPC-15/IFRS 3and on the base date of February 28, 2013.

Objective

− Analysis of the asset and liability accounts shown in the company´saccounting statements on the base-date (excluding inventories, fixed assetsand contingencies);

− Identification of tangible assets and liabilities for which it is expected thatthere is a difference between fair value and book value (excludinginventories, fixed assets and contingencies);

Objective

• The objective of our job was to carry out the specific procedures described in thescope of the job in respect of the PPA of Aesop, in accordance with CPC-15/IFRS 3 and on the base date of February 28, 2013.

Basis of the information

• W li t b l th b f i f ti d i th ti f j b

− An estimate of the fair value of these tangible assets and liabilities (excludinginventories, fixed assets and contingencies);

− Analysis and identification of the Company´s relevant intangible assets andliabilities;

− Valuation of intangible assets and estimate of the remaining useful life; and• We list, below, the bases of information used in the execution of our job:

– Purchase and Sale Agreement dated December 20, 2012;

– The Company´s Audited Financial Statements as at June 30, 2010, 2011 and2012;

– Balance Sheet as at February 28, 2013 made available by Natura;

− Estimated calculation of the initial value of goodwill.

• In order to estimate the fair value of the intangible assets, we used generallyaccepted valuation methods (described in the report).

Important information and scope limitations

• Our work was substantially based on assumptions and information provided by



– Internal documents made available by the Management of Natura in thecontext of the Transaction;

the Client´s Management, which were discussed with KPMG.

1. Introduction (cont.)

• We must emphasize that the determination of the economic value of eventualcontingencies as well as inventories and fixed assets are not within the scope ofthis job. Thus, in respect of such items, we based ourselves on the informationand analyses which were placed at our disposal by the Client´s Managementand/or its respective auditors, lawyers and/or other advisors.

• The work was carried out by KPMG under technical guidance and in anindependent manner. However, the analysis of the various data to be consideredfor the purpose of valuation, due to their nature, demand a subjective approachso that the work may be effectively carried out, which also makes it possible thatif the same analyses were to be carried out by other professionals, these couldp y

• During the course of our job, we carried out analysis procedures which wedeemed appropriate within its context. However, KPMG is not responsible forthe information it has been provided and will not be made responsible under anycircumstance, nor will bear losses or damages resulting or arising from theomission of any data or information by the Client´s Management. We wouldfurther stress that this job did not constitute an audit according to generally

y y pexpress points of view which differ from those expressed by KPMG.

• KPMG does not issue any opinion regarding the probability of the assumptionsto be used in the work materializing. Any counseling, opinion or recommendationmade by us in respect of the services covered by this report must not be takenas a guarantee of the establishment or forecasting of future events andcircumstancesfurther stress that this job did not constitute an audit according to generally

accepted auditing procedures and must not be interpreted as such.

• In this same sense, on carrying out the job, KPMG does not express any formalopinion or any other form of guarantee in relation to the financial statements.

• The processing of information by KPMG does not imply any type of affirmationthat these are true and also must not be interpreted as proof of authenticity of

circumstances.

• We must stress that it is the nature of financial valuation models that every orany assumption alters the value obtained for the Company which is beingvalued. Such possibilities do not constitute errors of valuation and arerecognized by the market as part of the nature of the valuation process of acompany. Thus, it is impossible for KPMG to be responsible or to be madethat these are true and also must not be interpreted as proof of authenticity of

the information collected and consequently does not correspond to an opinion orany other form of assurance as to their in entirety.

• The scope of the job now carried out does not contemplate the specific anddetermined obligation on the part of KMPG of detecting any fraud in theoperations, processes, records and documents of the Company.

responsible for eventual differences between the projected future results andthose which are later effectively obtained, due to changes in market conditions orin the business of the company which is being valued.

• Furthermore, the market knows that every valuation contains a significant levelof subjectivity since it is based on expectations regarding the future which mayor may not be confirmed. Therefore, it is recognized that there are no guarantees

• We do not give the Client any assurance of success is respect ofimplementation of any proposed operation, neither do we give any assurancethat this may occur at any given time, neither do we answer for any eventualopportunities which may not have been identified, presented or explored,independently of the motives or reasons for such occurrences.

y , g gthat any or all of the assumptions, estimates, projections, results or conclusionsused or presented in our report will be effectively reached or may come to betotally or partially achieved. The final actual results may be different from theprojections and these differences can be significant.



1. Introduction (cont.)

• The services provided are based on legal norms and regulations and, in thiscontext, we stress that our legislation is complex and often the same legalprovision can have more than one interpretation. KPMG seeks to be up todate with all the various lines of interpretation so that it may be possible toevaluate the alternatives and risks involved

Subsequent events

• The current study used as a basis the net equity position as at February 28,2013.

• We would point out that relevant facts which may have occurred between theevaluate the alternatives and risks involved.

• Consequently it is certain that there may be interpretations of the law whichdiffer from ours. Under such circumstances, neither KPMG nor any other firmcan give the client total assurance that it will not be questioned by thirdparties, including tax inspectors.

• We wish to point out that we cannot guarantee that the restructuring of the

We would point out that relevant facts which may have occurred between thebase-date of the valuation and the date of issue of this report were not takeninto account considering the nature and objective of this job.

• KPMG was not responsible for updating this report following its date of issue.

Free translation

• Thi t i f t l ti i t E li h ( t d b N t )e s to po t out t at e ca ot gua a tee t at t e est uctu g o t eproposed transaction, including its taxation aspects, will be fully accepted bythe corresponding authorities in Brazil or overseas. Therefore our work hasthe sole and exclusive objective of attending to a specific request made bythe Client´s Management.

• The services informed and/or backed by legal norms and regulations wererendered based on laws and regulations in force at the time the services

• This summary report is a free translation into English (requested by Natura)of the report issued in Portuguese. If there are any discrepancies ordifferences between the versions, the version in Portuguese, datedFebruary,3 2014, will prevail.

rendered based on laws and regulations in force at the time the serviceswere performed. The scope of this job does not include updating the servicesand/or resulting reports in the event of changes in legislation or regulationswhich took effect after the conclusion of the job.

Use and disclosure of the report

• This report was prepared to be used exclusively by the Management ofThis report was prepared to be used exclusively by the Management ofAesop and therefore must not be disclosed to third parties, that is, legalentities or individuals who are not members, employees or shareholders ofthe Company.

• Nevertheless, this report may be disclosed to the independent auditors ofAesop and tax authorities when requested.



Contents

Page

1. Introduction





2. Description of the CompanySource: Aesop and Natura

Description of the Company

• Aesop is an Australian company that operates in the cosmetics segment, withproducts in Skin Care, Body Care and Hair Care lines amount others, includingproducts for men, for the household and domestic animals.

• Over the years Aesop has expanded its presence into new markets; launching inUnited States in 1990, followed by its arrival in Europe and Asia.

• Currently, its products are sold in over 50 signature stores in major cities aroundthe world including Paris, Tokyo and New York.p

• The Aesop brand is recognized in the market for its high quality as well as itsuse botanical natural ingredients.

• The Company was founded in 1987 in the city of Melbourne - Australia, initiallyoffering only products for hair treatment.

• The Company also has a strong presence in department stores. This businessmodel, with department stores and its signature stores has been achievingsuccess in various countries in which Aesop operates.

• It is also worth highlighting that Aesop´s products are manufactured by thirdparties and it does not carry out its own manufacture.

Principal historical events of the Company

1987 1990 1995 2000 2005

Aesop was founded by Dennis Paphitis in Melbourne, Australia.

Launch in EUA. Launch of the Body

Care e Skin Care lines.

Launch in the UK, Japan, Malaysia, France and Hong

Kong.

Launch in the EU, first signature stores inaugurated, UK subsidiary was

established.

Signature stores opened in Hong Kong,

Sydney, Taiwan, Singapore, Paris and

Canberra.

2006

French and Japanese subsidiary established, three signature stores

2008

Singapore subsidiary established, signature

stores opened in

2009

Four signature stores opened in Australia.

2010Hong Kong and US

subsidiarysestablished, signature

stores opened in Tokyo Paris

2011

New signature storesopened in the US anddepartament stores



gopened in Australia.

pLondon and Australia.

Tokyo, Paris, Melbourne and

Singapore.

ppoint of saleexpansion.

2. Description of the Company (cont.)Source: Aesop and Natura (cont.)

Regional Distribution EuropeRegional Hub in London

Participation in revenue: 13,9%

Responsible for management, marketing, retail operations and development in Europe

APAC (excl. Australia)Regional Hub in Hong Kong


Responsible for management, marketing, retail operations and development in Asia and Pacific

p p

p

AmericasRegional Hub in New York


Responsible for management, marketing, retail operations and development in the United Statesdevelopment in the United States

AustraliaGlobal Head Office




Responsible for the trade-mark, marketing and distribution strategies, finance and treasury and R&D

Note: The participations in revenue by Region are based of management data from July 2011 to June 2012 (12 months).


Product Portfolio

• The Company´s product portfolio is made up of the following segments:

Participation of product ranges in total revenues (July 2011 – June 2012):

Others15%

• Skin Care: Aesop´s Skin Care products areformulated with high concentrations of scientificallytested botanical ingredients. They also contain anti-oxidants, vitamins and vegetable extracts of thehighest quality.

Skin Care50%

Hair Care5%

• Body Care: This segment is made up of soaps, gelsoaps, ointments and oils all of which are delicatebut highly effective for the skin.

Body Care30%

• Hair Care: The products in this segment weredeveloped to attend to the needs for all types of hair.

• Others: Segment of complementary products whichincludes deodorants, fragrances, shaving products,travel and gift packs, domestic animal care andhousehold items.




Distribution channels

• Below, a description of the Company´s distribution channels:

• Signature stores: Present inthe four continents they focus

• With the exception of only two department stores located in Australia,Aesop does not sell directly to these stores but only uses their structure as adistribution channel treating them as partners. The relationship with thesestores is not exclusive and so competing brands also operate alongside.• Number of stores: 63 (June/2012)the four continents, they focus

on offering a uniform, highstandard of customer attentionso as to maximize the brand´sexperience. Architecturallyplanned for speedy launchingand low cost, the size of the

• Wholesale: Aesop has alwaysdefended a firm, premiumposition in the wholesale

Number of stores: 63 (June/2012)

store varies from 25m2 to 80m2

both at street level and insideshopping malls.

• Number of stores: 54(June/2012)

• Department stores: For over

position in the wholesalesegment so as to enhance therecognition of its brand by thetarget public.

• Department stores: For overten years, Aesop has had astrong presence in the principaldepartment stores in Europe,Australia and Asia. The mainpartners are: Liberty, LaneCrawford, Isetan, David Jones,

• The main wholesalers selected by Aesop are: drugstores, apothecaries orperfumeries, premium multi-brand stores with similar brands inside artgalleries, wine cellars and bookstores, hotels, restaurants and airlinecompanies.• Number of stores: 355 (June/2012)

, , ,Mitsukoshi, Lotte and Le BomMarchè. • Digital: This segment has

been recently introduced bythe Company (2012). It permitsexpanding global presence,providing a simple introductionto new clients

• The spaces are planned so as to combine especially designed counters with amore basic finish, both optimized for local conditions. The design is unique andclearly differentiates the brand from its competitors as the aesthetics reflect, on a



to new clients.clearly differentiates the brand from its competitors as the aesthetics reflect, on areduced scale, the structure of its signature stores with water, music and oilburners. This appeals to consumers who are open to new ideas.


Distribution channels (cont.)

• Shown, below, the participation in total revenue by distribution channel in 2012:

Department Stores 23,5%

Retail/signature stores (*)

67,1%

Wholesalers 9,4%

(*) Includes Distributors.




Consolidated Balance Sheet

• We show, below, the Net Equity position of the Company on the base-date of the acquisition, as informed by the Management of Natura:

Consolidated Balance Sheet (in 02/28/2013)( )Emeis Holdings Pty Ltd. (AU$ mil)

Current Assets 16.440 Current Liabilities 6.056 Cash and equivalents 5.388 Short-Term Debt 2.183 Clients 2.623 Taxes Payable 136 Other receivables 2.483 Payroll Expense 575 Inventory 5.946 Provisions 686

Other payables 2.476

Fixed Assets 11.172 Long term Liabilities 437 Deferred Tax 1.510 Accrued Expenses 356 Others 1.944 Accrued Taxes 81 Fixed Assets 7.718

Equity 21.119

Total Asset 27.612 Total Liabilities + Equity 27.612

Note 1: This Consolidated balance sheet management is a pro-forma that includes no debts of Aesop, as indicated in the purchase agreement.Note 2: The exchange rate on February 28, 2013 - R$/AU$ was 2,0215.



Contents

Page

1. Introduction





3. PPA Analysis Framework Basic procedures

• We present, below, the basic procedures used in the valuation of intangible assets:

Identification Analysis and calculation Reporting

Analyze industry sector and business model.

C ll t d i hi t i l

Select valuation approach:

Market approach

Analyze consistency with the information provided.

R i th lt ith li t Collect and review historical information.

Identify potential intangible assets.

Income approach

Cost approach

Estimate intangibles value.

Analyze and project life and amortization profile for intangible

Review the results with client.

Finalize report and analysis.

amortization profile for intangible assets.



3. PPA Analysis Framework (cont.)Criteria for recognition

• The criteria for recognition are summarized in the flowchart below:

Analysis

Business model

Business Planning

Existing Licenses

Definition of Intangible Assets

Existing Licenses and Rights

Value Drivers

Are the economic benefits achieved contractually or

legally?Is there sufficient control over the

Can the future economic benefits

be recognized Estimate the value of the intangible

YesNo

Yes

Yes Yes

Are there future economic benefits ? Can they be

separated?

resources? separately and reliably?

assets

Is the economic useful life

f ?No No No

Yes

indefinite?

Amortize over theDo not

No No No

NoSim



over the economic useful life

Do not amortizeGoodwill

3. PPA Analysis Framework (cont.)Criteria for recognition (cont.)

To value intangible assets, the first step was to identify acquired company’spotential intangible assets. Therefore, the Company’s business model wasanalyzed, as well as long-term planning and value elements comprising it. Thisinformation was made available to and discussed with Management andanalyzed in light of our experience in similar projects and of market practices.

An intangible asset is recognized separately from goodwill if it meets intangibleassets definition and its fair value may be reasonably measured.

The definition of intangible assets determines that it needs to be clearlydifferentiated from goodwill and that it is controlled by the company that is theobject of analysis. A company controls an asset if it has the power to obtainfuture economic benefits flowing from this asset or from underlining resourcesfuture economic benefits flowing from this asset or from underlining resourcesand may restrict access of other entities to these benefits. A company’s capacityto control future economic benefits from an intangible asset would normallyderive from legal rights that are enforceable by courts. In the absence of legalrights, it is more difficult to demonstrate such control. However, legalenforceability of the right is not a sine qua non condition for control, as thecompany may be able to control corresponding future economic benefits inp y y p gsome other manner.

Intangible assets that meet recognition criterion are measured at fair value onacquisition date. Fair value is the amount for which this asset could beexchanged between knowledgeable, willing parties in an arm’s lengthtransaction.

Recognition criteria should be verified for intangible assets that are already Recognition criteria should be verified for intangible assets that are alreadyseparately accounted for and those that have not been accounted apart fromgoodwill. For PPA purposes, assembled workforce should not be recognized asintangible assets apart from goodwill, as a company normally does not havesufficient control on future economic benefits deriving from a team of qualifiedstaff.



3. PPA Analysis Framework (cont.)Application of approaches and criteria

• The flowchart below presents a summary of the various approaches and criteria for a valuation which are explained in more detail in the following pages:

HIERARQUY OF VALUATION CRITERIA

Similar operations available on the market

Cash Generation of the Intagible Assets Cost approach

YES YES

NO NO

A h C t i t d hI i t d hM k t i t d h

Market approach Income approach

Approach Cost-oriented approachIncome-oriented approachMarket-oriented approach

Replacement CostRelief from royaltiesMarket prices in an active market

Methods Reproduction CostIncremental cash flowComparable transactions

ymarket



Multi-period excess earnings

3. PPA Analysis Framework (cont.)Methods of Valuation - Fundamentals

Method of Valuation DescriptionMarket approach The market approach estimates the fair value by comparing recent sales of similar assets. The available information is adjusted based on factors like age,

condition or type of sale, to reflect the specific characteristics of the intangible asset.

In the market approach, a variety of factors is considered by the market. However, the market does not necessarily value the contribution of the specifici t ibl t t th l f i t i Th k t h fl t t k t ti diti d t ti Hintangible asset to the value of an ongoing enterprise. The market approach reflects current market perceptions, conditions and transactions. However,sales or market prices of intangible assets are seldom available. This is due to the fact that intangible assets typically are transferred only as part of abusiness, and not in a single transaction. A comparison between intangible assets is difficult and thus a market approach is seldom feasible, becauseintangible assets are rather unique to each enterprise.

Income approach The income approach estimates the fair value from the future cash flows which the intangible asset will generate over its remaining useful life. Theapplication of this approach involves projecting the cash flows which the intangible assets are generating, based on current expectations and assumptionsabout future states. It should be noted though, that synergistic or strategic benefits in excess of those to be realized by regular market participants have tog y g g y g p pbe removed from the projected cash flows. Then, these cash flows generated by the asset have to be converted to a present value by discounting themwith the appropriate discount rate. The discount rate reflects the time value of money and the relevant risk associated with the cash flows and the intangibleasset.

The income approach can be further distinguished according to the way the cash flows generated by the intangible asset are calculated. The mostimportant methods are:

Multi-period excess earnings method;g

Relief from royalty method; and

Incremental cash flow method.

Multi-period excess earnings method

The multi-period excess earnings method calculates the cash flows based on a detailed forecast of cash inflows, cash outflows and pro forma charges foreconomic returns of and on the tangible and intangible assets employed. The cash inflows and outflows are in general derived from projected financialg g p y g p jinformation provided by management.

Since intangible assets normally only generate cash flows in combination with other tangible or intangible assets, notional payments for these contributoryassets are taken into consideration for the determination of the relevant cash flows. The charges for the economic returns are computed based on theassets utilized by the intangible asset. The resulting net cash flows are also termed multi-period excess earnings.

It is presumed that the contributory assets were leased from a third party in the scope necessary for the generation of cash flows. All considerations refer tothe attributable fair value of the relevant contributory asset. The applied contributory asset charges take into account the return of the asset (wear and tear)



y pp y g ( )and the return on the asset (a reasonable interest on the capital invested). Asset charges have to be calculated for the value of the assembled workforce,although the workforce itself cannot be recognized as an independent asset apart from goodwill.

3. PPA Analysis Framework (cont.)Methods of Valuation - Fundamentals (cont.)

Method of Valuation DescriptionIncome approach (continuation)

Relief from royalty method

The relief from royalty method assumes that the intangible asset has a fair value based on royalty income attributable to it. This royalty income representsthe cost savings of the owner of the asset – the owner does not have to pay royalties to a third party for the license to use the intangible asset. Thed i ti f th lt i i i d f t b i tderivation of the royalty income is comprised of two basic steps:

the estimation of revenues attributable to the asset; and

the estimation of the appropriate royalty rate.

Incremental cash flow method (or “with and without”)

The incremental cash flow method compares the future estimated cash flows from the enterprise including the intangible asset being valued with the cashfl f fi titi bl l di th tflows from a fictitious comparable company excluding the asset.

The difference in the cash flows per period between the two companies is reflected in the incremental cash flow attributable to the intangible asset to bevalued. To calculate the fair value of the asset, these additional cash flows are discounted to the valuation date using the weighted cost of capital ratespecific to the asset (post-tax calculation). These additional cash flows may arise if additional cash receipts are generated by the intangible assetconcerned or cash payments are saved.

The application of the incremental cash flow method presupposes that the future cash flows of the theoretical comparable enterprise can be reliablyti t d ith t thi t A th lt ti th t b li d i th l l ti f i t l h fl t d di tl b ti l t (estimated without this asset. Another alternative that can be applied is the calculation of incremental cash flow generated directly by a particular asset (or

group of assets), and compare this flow with that of another asset (or group of assets) to serve as a reference.

Cost approach The cost approach estimates the value of an asset based on the current cost to purchase or replace that asset. The cost approach reflects the idea that thefair value of an asset should not exceed the cost to obtain a substitute asset of comparable features and functionality. However, there may be littlecorrelation between the cost incurred and the fair value created by an intangible asset.



Contents

Page

1. Introduction

21





4. Identification of intangible assets

• The lists below show categories and examples of possible intangible assets:

Related to the market Related to clients Related to contracts Related to technology Related to art

Trade-marks Backlog of orders from clients

Rental contracts Software licenses Compositions, advertisements jingles

Certifications

Domains on the internet

Non-compete agreements

clients

Contracts and contractual relationships with clients

Non-contractual relationships with clients

Building permits

Agreements and franchises

Operating and transmission licenses

Contracts with employees

Own software

Business secrets (formulas, processes and recipes)

Patented technology

Non-patented technology

advertisements, jingles

Paintings, photographs

Visual and audio-visual material

Publicity, construction, management, service or supply contracts

Operational contracts

• In the following chapter we comment on the intangible assets identified/valued.

Expansion/Development Projects in Progress



Contents

Page

1. Introduction

23

2. Description of the Company3. PPA Analysis Framework 4. Identification of intangible assets5. Valuation of intangibles assets 235. Valuation of intangibles assets6. Valuation of tangible assets7. Discount Rate8. Results and conclusionsAppendicesAppendices




5. Valuation of intangible assetsGeneral considerations

• The intangible assets considered and discussed with the Managements of Natura and Aesop were as follows:

Potential Intangible Asset Identified

To be Valued Discussion/Rationale Probable Method of

Valuation

Softwares, Technologiesand Licenses X

Due to the nature of its business, the Company does not detain any software and/or any specific technology and/or licenseswhich could be considered potential intangible assets. In addition, as we were informed by the Company Management, Aesopdoes not have any ingredients or exclusive methods for the preparation of its products which could create a differential inrelation to any other market participant.

n/a

The Company operates through three distribution channels: (i) signature stores (“retail”), (ii) department stores, and (iii)wholesalers:(i) I it i t t th i i l di t ib ti h l f A l d di tl t th bli t l tl

Client Portfolio –Wholesalers

(i) In its signature stores, the principal distribution channel of Aesop, sales are made directly to the public at large, mostlymade up of individual people. The Management of Aesop does not have an identification and recurrence control of itscustomers, due to the nature of the business.

(ii) In relation to department stores, with the exception of two department stores located in Australia, these are only onedistribution channel for Aesop (partners) in which the Company uses the structure of the department store to promoteand sell its products. In this case Aesop sells its products inside the department store through its own employees,running the risk of stocks and paying a percentage on sales. Its end clients are also the general public made up ofindividual persons. Furthermore, Aesop does not have any advantage and/or benefit in these stores in relation to its

tit i t th tit ’ d t di l d l id Th t d t t t i A t li

Income Approach: Excess EarningsWholesalers competitors – in most cases the competitors’ products are displayed alongside. The two department stores in Australia

are end clients (they purchase from Aesop) however, the Company does not have any exclusive relationship with themand they also sell the competitors´ products and for this reason this client relationship was not considered a potentialintangible asset.

(iii) On the other hand, with respect to wholesalers, there are historic and recurrent relationships. These relationshipsprovide Aesop with new sales orders generating revenue and profitability. In the period 2011/2012 wholesalersrepresented about 10% of total sales.

In this context and taking into account the characteristics of the Company´s business, the client portfolio associatedl i l ith th h l l l d i t ibl t

Method

exclusively with the wholesalers was valued as an intangible asset.

Backlog of orders from clients X According to the Management on the base-date there was no relevant backlog of clients’ orders which needed to be valued. n/a

The right of use of the “Aesop” trade-mark is guaranteed by law and this mark was acquired as part of the process ofacquiring the company The trade-mark was valued since it has been present on the market for over 25 years and is a strong

Income Approach:



Trade-mark acquiring the company. The trade-mark was valued since it has been present on the market for over 25 years and is a strongand recognized name, also internationally, in the market in which the Company operates. According to the Management ofNatura the strength of the mark was one of the principal drivers behind the acquisition.

Relief from Royalty Method

5. Valuation of intangible assets (cont.)General considerations (cont.)

Potential Intangible Asset Identified

To be Valued Discussion/Rationale Probable Method of

Valuation

Rental contracts X

According to the Management of Aesop, the rental contracts existing on the date of the acquisition are at market value. Thevast majority of contracts is of short duration (approx. 5 years) and have been signed recently. Furthermore, when negotiatinga new rental contract, it is the Company practice to contract a consultancy specialized in real estate to analyze if the valuebeing asked is consistent with the values being charged in that particular region. Finally, new contracts are submitted toapproval and internal analysis.

n/a

Non-compete agreements X

According to the Management of Natura although the purchase and sale agreement contains a non-compete clause inrespect of the sellers, the strong entry barriers to the business (among them the trademark and the extensive chain of street-level stores around the world) in themselves hinder any threat of competition. Replicating such a business would be verydifficult. Furthermore, the sellers will continue to have a participation in the company, in the Management and on the Board ofDirectors.

n/a

On the base-date of the transaction there were only 5 contracts in which there was key money, amounting to a net book valuef AU$ 180 th d (Th l AU$ 430 th d) A di t th M t f A th t

Key money payments Xof AU$ 180 thousand. (The gross value was AU$ 430 thousand). According to the Management of Aesop, these paymentsare unusual, the payments were small and were made recently (of the 5 payments, 4 were made in the last 2 years). Inaddition, due to their location and the scenario of a world economic crisis, the Management of Aesop does not believe thatthere would be any market adjustment to these payments.

n/a

Assembled workforce Although this asset cannot be separated from goodwill, according to IFRS 3/CPC-15, the value of this asset was estimated sothat this amount may be taken into account in the calculation of the value of other intangible assets valued using the excess Cost ApproachAssembled workforce that this amount may be taken into account in the calculation of the value of other intangible assets valued using the excessearnings method.

Cost Approach



5. Valuation of intangible assets (cont.)Trade-mark

• Since Aesop markets 100% of their products with the Aesop brand name, theroyalties were calculated over the Company´s total business range.

Royalty Rate• The Royalty Rate used was estimated based on information obtained from

R lt S hi h bli h th lt t d i li i t

Recognition

• The right to use a trademark is considered an intangible asset related tomarketing, which is classified as an asset used in the advertising andidentification of products and services

RoyaltySource, which publishes the royalty rates used in licensing agreementsin the market.

• The percentage of royalty fee defined was based on an independent research oftransactions involving comparable companies in the industry in which theCompany operates and on discussions with the Management regarding thecontribution which the trade-mark makes to the Company´s total business.

• I d t l t i f ti bl ith th C ´ t d

• The Aesop brand is recognized in the market in which it operates, having beenpresent since 1987 in addition to being a highly consolidated brand in the worldmarket for cosmetics.

• The right to use the “Aesop” brand is guaranteed by law and this brand wasacquired as part of the process of acquiring the Company.

Approach used in the valuation • In order to select information comparable with the Company s sector, we usedinformation from companies in the sector of cosmetics and beauty products.

• As a result of the survey, we obtained an average rate of 5% of net income forlicensing a trade-mark.

Discount rate• In order to discount the resulting cash flows we used a rate of 12 71% which

Approach used in the valuation

• In order to value the right of use of the trade-mark we used the IncomeApproach and the Relief from Royalties Method due to the possibility ofcalculating the value of the royalties which would theoretically be paid if thistrade-mark were to be licensed.

Assumptions made In order to discount the resulting cash flows we used a rate of 12,71% whichcorresponds to our discount rate (detailed in the next chapter), plus a spread of0,5% to cover the additional risk specific to this asset, thus totaling 13,21%.

Useful life• Considering that the brand has been in the market since 1987, the useful life of

this intangible asset was considered at around 25 years, that is, until December2037

p

• In order to measure this intangible asset we researched royalties in thecosmetics and beauty products market, in other words, an average percentagerate of net income charged by comparable companies on licensing the use oftheir trade-marks. Having established this benchmark, we calculated the valueof the royalty to be paid on the basis of projected revenues net of income tax.Since these values were based on the flow of receipts of future royalties, it was 2037.

Estimated value• As a result of the above calculations, the value of the Aesop trade-mark was

estimated at AU$ 39,4 million.

• Details of the projections regarding the valuation of this intangible asset can befound in Appendix II of this report.

p y ,necessary to adjust the value in question by applying a previously calculateddiscount rate.

• The financial projections used to value the Aesop trade-mark were prepared inAustralian Dollars (AU$) in nominal terms, that is, taking inflation into account.

• The valuation of this intangible asset was based on Aesop´s projected revenuesi d ith th ti i th i fi i l l ti f th



in accordance with the assumptions in the economic-financial valuation of theCompany prepared by KPMG in order to justify the price paid.

5. Valuation of intangible assets (cont.)Client portfolio - Wholesalers

• Considering that, since the company does not retain 100% of its client portfoliofor a lengthy period of time, the projected cash flows must be multiplied by anattrition factor to reflect that the net revenue attributed to the existing clientportfolio will reduce as a percentage of the businesses´ total income over time.

• The client portfolio was projected based on an attrition factor which reflects thei f li ( h l l ) i

Recognition According to CPC-15, the relationships which a company maintains with its

clients through a formal contract or recurrent relationships, are considered anintangible asset since they generate an economic benefit for the company andthey can be controlled by legal or contractual means.

retention of clients (wholesalers) over time.

Assumptions made

Projected revenues and Operating Cash Flows

• The Company´s revenue derives from three distribution channels: retail,department stores and wholesalers and for the calculation of the client portfolioonly the revenues from the wholesaler channel were used (as previously

CPC 15 requires that these intangible assets be recognized separately fromgoodwill even if contractual confidentiality provisions or other provisions prohibitthe sale or transfer of these contracts and/or relationships separately from theentity acquired.

A relationship between an entity and its clients exists if (a) the entity hasinformation about the client and has regular contact with the client; and (b) the

only the revenues from the wholesaler channel were used (as previouslydescribed, the other channels sell directly to individuals). The 2012 sales mixwas used to project the revenues from wholesalers. It was considered that salesthrough wholesalers represent about 10% of total sales.

• For the existing client portfolio (wholesalers), we analyzed the rates of retentionand the behavioural characteristics in order to determine the attrition rate. Inorder to estimate the attrition rate, we used historical retention data for

client is capable of making direct contact with the entity. Relationships withclients can result from contracts (such as supply agreements and servicecontracts) or through other non-contractual means such as regular contacts withthe client made by salesmen or service representatives or through regularpurchases.

Aesop has historic and recurrent relationships with various clients (wholesalers).wholesalers over the last 3 years. Based on our calculations and informationprovided by the Management of Aesop, the annual loss of clients was estimatedat approximately 11,5%.

• After applying the attrition factor we took into account the cost of goods sold andoperating expenses consistent with the business projections.

• We then took into account the taxes applicable to operating profit.

On account of this, we carried out a valuation of Aesop´s wholesaler clientportfolio.

Approach used in the valuation In order to value client relationships, we used the Income Approach under the

Multi-period Excess Earnings Method due to the possibility of attributing thecash flow generated directly to the asset identified.

The approach used to value the client portfolio foresees that the income fromproducts supplied under the terms of agreements in force, as from the valuationdate, are projected throughout the useful life of the contract deducting thecorresponding costs and expenses incurred to finalize their delivery.



.

5. Valuation of intangible assets (cont.)Client portfolio – Wholesalers (cont.)

Cost of contributing assets

When calculating the value of each intangible, the contributing assets or“Contributory Capital Asset Charges” are deducted as applicable. This is doneso as to calculate the opportunity cost of acquiring and maintaining certainassets which contribute towards the intangible assets having a value The costsassets which contribute towards the intangible assets having a value. The costsof these assets were calculated jointly since these assets contribute towards thecompany´s activities as a whole.

In the case of valuing the intangible asset “Client portfolio - Wholesalers” thefollowing contributing assets and their respective opportunity costs were takeninto account: Net Working Capital: 5 6% p a (US Corporate Retail BB+ p/ Australian AAA Net Working Capital: 5,6% p.a. (US Corporate Retail BB+ p/ Australian AAA

rate + 1% p.a. spread, after-tax); Fixed Assets: 5,2% p.a. (US Corporate Retail BB+ p/ Australian AAA rate +

0,5% p.a. spread, after-tax); Trade-mark: 3,5% of net income (Royalty Rate after-tax); and Assembled Workforce: 13,21% p.a. (Company´s WACC, plus 0,5% p.a.

spread, after-tax).

Details of the projections relative to contributing assets can be seen inAppendix VI of this report.

Discount Rate In order to discount the resulting cash flows, we used a rate of 12,71% which in

it iti i d b d f 0 5% i f thits composition was increased by a spread of 0,5% as a premium for theadditional risk specifically associated with this intangible asset.

Useful life We estimated the useful life of the client portfolio at approximately 9 years.

Estimated value



As a result of the above calculation, the value of Aesop´s client portfolio wasestimated at AUD$ 0,6 million.

Details of the projections regarding this intangible asset are shown in AppendixIV of this report.

5. Valuation of intangible assets (cont.)Assembled workforce

Summary Although the workforce has been identified and valued in order to estimate the

value of the asset which contributes towards the other intangible assets, IAS 38does not permit that it be separated from goodwill. Therefore, it was segregatedfor the purpose of allocation and only used as a contributing asset in thevaluation of other intangibles when applicable

Conclusion Based on the information provided and our own analysis, the fair value of the

Company´s workforce is estimated at AU$ 0,8 million. Details of the projectionsrelative to the valuation of this intangible asset can be found in Appendix V ofthis report.

valuation of other intangibles, when applicable.

Its value is estimated based on how much a purchasing entity would save if ithad to form a new workforce. This estimate can be found in Appendix V of thisreport.

The client provided us with data about the workforce which was attributed to theCompany.

Approach used in the valuation We used the Cost Approach to value the workforce. In this approach the value

of the existing workforce is calculated based on the costs which have beenavoided by the buyer in respect of the acquisition of an efficient and alreadytrained team, as opposed to training and forming a new team.

The calculation of income tax took into account an average rate of 30%.The calculation of income tax took into account an average rate of 30%.

Recruitment and Training costs avoided Aesop avoided the costs of having to identify, recruit and train an adequate

team, by having already purchased one with these requisites. Based ondiscussions with the client, we identified the costs related to recruitment andtraining of new employees.

Th t li d t th b f l i d i d t These rates were applied to the number of employees acquired in order toestimate the value of the net-of-tax costs avoided by Aesop.

Loss of productivity avoided New employees require a certain amount of adaptation time before becoming

fully productive and therefore they are not as efficient as more experiencedemployees. This period represents an implicit cost of training a workforce. We

id d th t l h i d ti it 4 th



considered that on average, employees reach maximum productivity 4 monthsafter entering the Company.

Contents

Page

1. Introduction2. Description of the Company3. PPA Analysis Framework 4. Identification of intangible assets5. Valuation of intangibles assets

305. Valuation of intangibles assets6. Valuation of tangible assets7. Discount Rate8. Results and conclusionsAppendicesAppendices




6. Valuation of tangible assets

Tangible assets Based on our analysis of the Company´s assets and liabilities on the base-date of

the job, excluding fixed assets, inventories and contingencies, and on discussionswith the Managements of Natura and Aesop, we concluded that due to theirnature and balances, eventual adjustments to the value would be nil ori i limmaterial.



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32





7. Discount rate

Cost of capital Cost of capital (Ke)

Method of calculating the discount rate

• The calculation of the discount rate is a fundamental step in the valuation process. This factor reflects aspects of a subjective and variable nature which vary frominvestor to investor, such as the opportunity cost and the particular perception of the risk of the investment.

The cost of capital can be calculated using the Capital Assets PricingModel (CAPM). Considering that the company being valued is locatedin Australia, the cost of capital is calculated using the followingformula:

We used the Weighted Average Cost of Capital (WACC) which isan appropriate parameter to determine the discount rate to beapplied on the Company's free cash flows. The WACC considersthe several types of financing, including debt and equity, which areused by companies to meet their funding needs, and is calculatedthrough the following formula:

p p ( )

KeCost of Capital

Rf

ß x (E[Rm] – Rf)

=

+=

WACCWeighted Average Cost of Capital

Rs

Where:

Rf = Average risk-free return based on the return on 15 yearfixed income bonds of the Australian Government

+D / (D+E) Kd x (1-t)

E / (D+E) Ke

x

+

x

Where:

D = Total third party capitalE = Total own capitalt = Rate of Income Tax and Social Contribution

ed co e bo ds o t e ust a a Go e e tβ = Beta (coefficient of risk specific to the company being

valued)E[Rm] = Average long-term return obtained on the North-American

stock marketE[Rm] - Rf = Market risk premiumRs = Risk Premium associated to the size of the Company



t = Rate of Income Tax and Social ContributionKd = Cost of third party capitalKe = Cost of capital

7. Discount rate (cont.)

Cost of capital

Risk-free rate

• In order to quantify the average risk-free return (Rf) we considered the

Comparables Beta levered

Debt to Equity

Effectivetax rate

Beta unlevered

TUPPERWARE BRANDS CORP 1,34 72,8% 30,5% 0,89NU SKIN ENTERPRISES INC - A 1,10 34,5% 34,5% 0,90BEIERSDORF AG 0,41 62,2% 62,2% 0,33

return on the base-date (31st January 2013) for 15-year fixed incomebonds of the Australian Government, which was 3,35% (Source:Bloomberg).

Calculation of Beta Beta is the specific risk coefficient of the shares of a company compared to

BEIERSDORF AG 0,41 62,2% 62,2% 0,33ORIFLAME COSMETICS SA-SDR 0,82 17,3% 17,3% 0,72L'OREAL 0,52 1,3% 28,5% 0,51ESTEE LAUDER COMPANIES-CL A 1,04 7,2% 30,2% 0,99ELIZABETH ARDEN INC 1,40 63,1% 23,9% 0,94REVLON INC-CLASS A 1,18 18,7% 38,3% 1,06

a market index, representing the stock market as a whole. In the case ofvaluations of companies that are listed and have significant negotiations onthe stock exchange, the share Beta is calculated by the correlation ofweekly returns of their own stocks compared to the selected market indexduring a certain period prior to the valuation date.

In the case of companies that are not listed on the stock exchange, orhich do not ha e significant trading ol mes the compan ’s Beta can be

Market risk premiumSource: Bloomberg

Beta unlevered Debt to Equity Effective tax rate Beta relevered

0,73 35% 30% 0,99

which do not have significant trading volumes, the company’s Beta can berepresented using the average beta for the sector in which the companyoperates. Thus, the average Beta for the sector is calculated based on theaverage correlations of weekly returns of several companies from the samesector, in relation to the weekly returns of the market index during a certainperiod.

• For the long term stock market risk premium (E[Rm] – Rf), we used theaverage return above the Treasury Bond rate provided by investing in theAustralian stock market, which was of 5,80% (Source: Prof AswathDamodaran website).

Size premium• In order to estimate the Company’s Beta, the average Beta of comparable

companies from the cosmetics sector was used. This Beta was obtained byaveraging the unlevered Betas of comparable companies shown in thefollowing table, with the value of 0,73.

• This Beta was then re-leveraged according to the capital structure of theCompany and at the current basic rate of income tax and social contribution

• For the premium for company size (Rs) was considered the rate of 6,36%,according to information released by Ibbotson Associates, for comparable-sized companies (Source: Ibbotson Associates).



Company and at the current basic rate of income tax and social contributionincurred on the Company's operations. As a result the beta utilized was0,99.

7. Discount rate (cont.)

• We present, below, the calculation of the cost of the Company´s capital:

Cost of capital - Ke Risk-free rate 3,5%

Re-leveraged Beta 0,985

Cost of third party capital

Market risk premium 5,80%

Risk for size of Company 6,36%

Cost of capital (Nominal in AU$) - Ke 15,42%

• For purposes of the cost of third party capital, was considered the nominalcost of an American corporate bond in the retail segment rated BB + of7,0%. After the effect of taxes (we used the rate of Aesop) the cost of debtis 4,90%.

Cost of third party capital (Nominal in AU$)Cost of third party capital 7,00%

Capital structure

• The capital structure used was defined based on the target capital structureobserved in comparable companies Based on this criteria the capital

Cost of third party capital 7,00%Effective long term rate of tax 30%Cost of third party capital after tax (Nominal in AU$) - Kd 4,90%

observed in comparable companies. Based on this criteria, the capitalstructure used was of 74,3% of own capital and 25,7% of third party capital.

Calculation of the discount rate

• Based on the capital structure used and the costs of capital and third partycapital, the discount rate was calculated at 12,71% per annum.



cap ta , t e d scou t ate as ca cu ated at , % pe a u

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36





8. Results and conclusion

• The acquisition value of 65% of Aesop was AU$ 71,1 million (see Appendix I).• The trade-mark and the client portfolio (wholesalers) were valued as relevant

intangibles for the purposes of this study. Thus, considering an acquisition of100%, we estimate the value of the trade-mark at approximately AU$ 39,4million and that of the client portfolio (wholesalers) at approximately AU$ 0,6

illi h b l

• We wish to stress that the present valuation is substantially based onassumptions provided by the Managements of Natura and Aesop.

• Therefore we cannot, as the Management of Aesop also cannot, guaranteethat the Company´s results after February 2013 were or will be effectivelyachieved in accordance with the projected results, since the events

million, as shown below:ac e ed acco da ce t t e p ojected esu ts, s ce t e e e tsforeseen may not occur due to various exogenous conjunctional andoperational factors resulting therefore in relevant variations.

• KPMG was not requested to update this valuation following its date ofissue.

• During the course of our work we carried out analysis procedures which weconsidered appropriate in the context of the valuation. However, KPMG is

AU$ '000

Trade-mark - 100% value 39.408 (11.822) 27.586 Clients Wholesalers 100 % value 636 (191) 445

Fair Value Deferred Tax Net Fair Value

• The detailed calculations carried out can be found in Appendices II and IIIrespectively.

• Regarding the relevant assets and liabilities existing on the base-date, excluding

pp p ,not responsible for the information it has been provided and will not bemade responsible under any circumstance, nor will bear losses ordamages resulting or arising from the omission of any data or informationby the Client´s Management. We would further stress that this job did notconstitute an audit according to generally accepted auditing proceduresand must not be interpreted as such.

Clients - Wholesalers - 100 % value 636 (191) 445

g g g gfixed assets, inventories and contingenvies, we did not find the need to makeany adjustment to fair value. The adjustment to market value of the fixed assets,inventories and contingencies was not within the scope of this job

• Concerning to the balances of fixed assets, inventories and contingencies, wetook the Management´s assumption that there was no need to make eventualadjustments to market value of these accounts on the base-date.

• On February 28, 2013, according to the procedures applied and the scopelimitations already described, the value of goodwill considering an acquisition of100% was estimated initially at AU$ 60,2 million (See Appendix I).



Contents

1. Introduction2. Description of the Company3. PPA Analysis Framework 4. Identification of intangible assets5. Valuation of intangibles assets5. Valuation of intangibles assets6. Valuation of tangible assets7. Discount Rate8. Results and conclusionsAppendicesAppendices




Appendix ISummary of values and WARA

Emeis Holdings Pty Ltd. WARA - Weighted Average Return on AssetsBase Date: 2/28/2013´in AUD 000

Purchase price (65%) 71.104 Minority interests (35%) 38.287 BEV 109 391

Values and WARA Calculations Fair Value Average tax rate BEV Deferred tax % Purchase

PriceExpected return

before taxes

Expected return after

taxesWARA

BEV 109.391

PPA

Working Capital 30% 10.384 9,5% 8,0% 5,6% (*) 0,53%Long term assets and liabilities 30% 3.017 2,8% 8,0% 5,6% (*) 0,15%Fixed Assets 30% 7.718 7,1% 7,5% 5,2% (**) 0,37%Intangible - Trade-mark 30% 39.408 (11.822) 27.586 25,2% 13,21% (***) 3,33%Intangible - Customer relationship - Wholesalers 30% 636 (191) 445 0 4% 13 21% (***) 0 05%Intangible Customer relationship Wholesalers 30% 636 (191) 445 0,4% 13,21% ( ) 0,05%Estimated Goodwill (including workforce) 60.241 55,1% 15,11% 8,32%

Total 109.391 100,0% 12,71%

WARA 12,71%WACC 12,71%

(*) US Corporate Retail BB+ p/ Australian AAA rate + spread 1,0 %(**) US Corporate Retail BB+ p/ Australian AAA rate + spread 0,5 %(***) WACC + spread 0,5 %



Appendix IIValuation of the Trade-mark

Emeis Holdings Pty Ltd. 1 2 3 4 5 6 7 8 9 10 11 12Trade markBase Date: 2/28/2013´in AUD 000

Emeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Trade-mark 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Net Revenues 64.045 85.944 106.486 116.316 127.442 139.770 153.046 158.498 164.144 169.992 176.048 182.320 % of growth 30,7% 34,2% 23,9% 9,2% 9,6% 9,7% 9,5% 3,6% 3,6% 3,6% 3,6% 3,6%

Royalty rate 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0%

Relief-from-royalties (pre taxes) 3.202 4.297 5.324 5.816 6.372 6.989 7.652 7.925 8.207 8.500 8.802 9.116

% tax rate 29,4% 29,9% 30,0% 30,0% 30,1% 30,2% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3%

Relief-from-royalties (post taxes) 2.260 3.014 3.728 4.068 4.452 4.877 5.335 5.525 5.722 5.925 6.137 6.355

WACC 12,71%Spread 0,5%Adopted WACC - Brand 13,21%

Discount Period 0,33 1 1 1 1 1 1 1 1 1 1 1Period 0,17 1,17 2,17 3,17 4,17 5,17 6,17 7,17 8,17 9,17 10,17 11,17 Discount factor 1,02 1,16 1,31 1,48 1,68 1,90 2,15 2,43 2,75 3,12 3,53 4,00

DCF 2.214 2.608 2.850 2.747 2.655 2.569 2.482 2.271 2.077 1.900 1.738 1.590



Appendix IIValuation of the Trade-mark (cont.)

Emeis Holdings Pty Ltd. 13 14 15 16 17 18 19 20 21 22 23 24 25Trade markBase Date: 2/28/2013´in AUD 000

Emeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Trade-mark 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

Net Revenues 188.815 195.541 202.508 209.722 217.193 224.931 232.944 241.243 249.837 258.737 267.955 277.501 287.387 % of growth 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6% 3,6%

R lt t 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0% 5 0%Royalty rate 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0%

Relief-from-royalties (pre taxes) 9.441 9.777 10.125 10.486 10.860 11.247 11.647 12.062 12.492 12.937 13.398 13.875 14.369

% tax rate 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3% 30,3%

Relief-from-royalties (post taxes) 6.582 6.816 7.059 7.310 7.571 7.840 8.120 8.409 8.709 9.019 9.340 9.673 10.018

WACC 12 71%WACC 12,71%Spread 0,5%Adopted WACC - Brand 13,71%

Discount Period 1 1 1 1 1 1 1 1 1 1 1 1 1Period 12,17 13,17 14,17 15,17 16,17 17,17 18,17 19,17 20,17 21,17 22,17 23,17 24,17 Discount factor 4,52 5,12 5,80 6,56 7,43 8,41 9,53 10,78 12,21 13,82 15,65 17,71 20,05

DCF 1.455 1.331 1.217 1.114 1.019 932 852 780 713 653 597 546 500DCF 1.455 1.331 1.217 1.114 1.019 932 852 780 713 653 597 546 500

Ʃ of DCF's 39.408



Appendix IIIValuation of the Client Portfolio - Wholesalers

Emeis Holdings Pty Ltd. Customer relationship - wholesalersBase Date: 2/28/2013´in AUD 000

1 2 3 4 5 6 7 8 9Emeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Customer Relationship - Wholesalers 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net Revenues 64.045 85.944 106.486 116.316 127.442 139.770 153.046 158.498 164.144 % growth 30,7% 34,2% 23,9% 9,2% 9,6% 9,7% 9,5% 3,6% 3,6%

Retail% of total revenues

Department stores% of total revenues

Wholesalers% of total revenues

Net Revenues - Client Accounts - Wholesalers 6.030 8.092 10.027 10.952 12.000 13.161 14.411 14.924 15.456 % of net revenues 9,4% 9,4% 9,4% 9,4% 9,4% 9,4% 9,4% 9,4% 9,4%

% growth 30,7% 34,2% 23,9% 9,2% 9,6% 9,7% 9,5% 3,6% 3,6%

Churn rate 11,50% 88,5% 77,0% 65,5% 54,0% 42,5% 31,0% 19,5% 8,0% 0,0%Average 94,3% 82,8% 71,3% 59,8% 48,3% 36,8% 25,3% 13,8% 4,0%



Appendix IIIValuation of the Client Portfolio – Wholesalers (cont.)

Emeis Holdings Pty Ltd. Customer relationship - wholesalersBase Date: 2/28/2013´in AUD 000in AUD 000

Emeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Customer Relationship - Wholesalers 2013 2014 2015 2016 2017 2018 2019 2020 2021

Adjusted income from Customer Relationship - Wholesalers 5.684 6.696 7.144 6.544 5.790 4.837 3.639 2.052 618

( - ) COGS (922) (1 076) (1 144) (1 038) (909) (759) (560) (316) (95)( - ) COGS (922) (1.076) (1.144) (1.038) (909) (759) (560) (316) (95) % of income from Customer Relationship - Wholesalers 16,2% 16,1% 16,0% 15,9% 15,7% 15,7% 15,4% 15,4% 15,4%

Gross Margin 4.762 5.621 6.000 5.506 4.881 4.077 3.078 1.736 523

( - ) Operating expenses (4.076) (4.723) (4.862) (4.448) (3.924) (3.277) (2.461) (1.388) (418) % of income from Customer Relationship - Wholesalers 71,7% 70,5% 68,1% 68,0% 67,8% 67,8% 67,6% 67,6% 67,6%

( - ) Depreciation (341) (408) (400) (259) (236) (156) (87) (34) (10) % of income from Customer Relationship - Wholesalers 6,0% 6,1% 5,6% 4,0% 4,1% 3,2% 2,4% 1,6% 1,6%

EBT 345 489 738 799 721 644 530 314 95

( - ) Taxes (101) (146) (221) (240) (217) (195) (161) (95) (29) % of EBT 29 4% 29 9% 30 0% 30 0% 30 1% 30 2% 30 3% 30 3% 30 3%% of EBT 29,4% 29,9% 30,0% 30,0% 30,1% 30,2% 30,3% 30,3% 30,3%

NOPAT 243 343 517 559 504 449 370 219 66



Appendix IIIValuation of the Client Portfolio – Wholesalers (cont.)

Emeis Holdings Pty Ltd. Customer relationship - wholesalersBase Date: 2/28/2013´in AUD 000

Emeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Customer Relationship - Wholesalers (cont'd) 2013 2014 2015 2016 2017 2018 2019 2020 2021 NOPAT 243 343 517 559 504 449 370 219 66

Contributory Assets Expenses (305) (344) (358) (322) (274) (223) (166) (94) (28)

Working Capital (56) (58) (59) (55) (47) (38) (28) (17) (5) % of income from Customer Relationship - Wholesalers 0,98% 0,87% 0,83% 0,84% 0,82% 0,78% 0,76% 0,81% 0,81%

Fixed Assets (42) (46) (45) (36) (24) (16) (11) (5) (2) % of income from Customer Relationship - Wholesalers 0,74% 0,68% 0,63% 0,55% 0,41% 0,33% 0,29% 0,27% 0,27%

Trade mark (199) (234) (250) (229) (203) (169) (127) (72) (22) % of income from Customer Relationship - Wholesalers 3,50% 3,50% 3,50% 3,50% 3,50% 3,50% 3,50% 3,50% 3,50%

Work Force (9) (6) (4) (2) (0) - - - - % of income from Customer Relationship - Wholesalers 0,15% 0,09% 0,05% 0,03% 0,01% 0,00% 0,00% 0,00% 0,00%

Excess Earnings (Profit) (62) (1) 159 237 230 226 204 125 38

Discount rate 12,71%Discount rate 12,71%Spread 0,50%Adopted Discount rate 13,21%Discount Period 0,33 1 1 1 1 1 1 1 1Period 0,17 1,17 2,17 3,17 4,17 5,17 6,17 7,17 8,17 Discount Factor 1,02 1,16 1,31 1,48 1,68 1,90 2,15 2,43 2,75

DCF (61) (1) 122 160 137 119 95 52 14



% of NPV -10% -10% 9% 35% 56% 75% 90% 98% 100%

Ʃ of DCF's 636

Appendix IVValuation of the Assembled workforce

Emeis Holdings Pty Ltd. Assembled workforceBase Date: 2/28/2013´in AUD 000

Aggregated cost per employee Number of employees Total CostWork force valuation Opportuinity costs per

employeeTraining cost per

employee

Full time Employees 739 2.133 2.872 343 984.971 Part Time Employees 369 1.600 1.969 98 192.966

Total 1.177.937

1.177.937 Total costs aggregated

(353.381)

824.556 Cost after texes

Taxes



Appendix VContributory asset charge

Emeis Holdings Pty Ltd. Contributory asset chargeBase Date: 2/28/2013´in AUD 000

Emeis Holdings Pty Ltd Proj Proj Proj Proj Proj Proj Proj ProjEmeis Holdings Pty Ltd. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj.Cost of contributory assets 2013 2014 2015 2016 2017 2018 2019 TV

Net Revenues 64.045 85.944 106.486 116.316 127.442 139.770 153.046 158.498

Working CapitalInicial Balance sheet 10.384 10.384 12.099 14.583 16.962 18.039 19.258 19.769 22.046 Change 1 715 2 484 2 379 1 077 1 219 510 2 278 1 636Change 1.715 2.484 2.379 1.077 1.219 510 2.278 1.636 Ending Balance sheet 12.099 14.583 16.962 18.039 19.258 19.769 22.046 23.682 Average 11.242 13.341 15.773 17.501 18.649 19.514 20.908 22.864 Demanded Return on Contributory Assets 5,60% 629 747 883 979 1.044 1.092 1.170 1.280

Fixed AssetsInicial Balance sheet 7.718 7.718 10.335 12.087 13.331 11.075 8.849 8.849 8.041 ( + ) Investiments 6.460 6.995 7.210 2.347 2.970 4.502 2.870 2.609( ) Investiments 6.460 6.995 7.210 2.347 2.970 4.502 2.870 2.609 ( - ) Depreciation (3.843) (5.242) (5.966) (4.602) (5.196) (4.502) (3.677) (2.609) Ending Balance sheet 10.335 12.087 13.331 11.075 8.849 8.849 8.041 8.041 Average 9.026 11.211 12.709 12.203 9.962 8.849 8.445 8.041 Demanded Return on Contributory Assets 5,25% 474 588 667 640 523 464 443 422

Work forceInicial Balance sheet 825 825 660 495 330 165 - - - 825 Remaining useful life 5 (165) (165) (165) (165) (165) - - - Ending Balance sheet 660 495 330 165 - - - - Average 742 577 412 247 82 - - - Demanded Return on Contributory Assets 13,21% 98 76 54 33 11 - - -

Demanded Return over Contributory Assets (% Net Revenue)Working Capital 0,98% 0,87% 0,83% 0,84% 0,82% 0,78% 0,76% 0,81%



g p , , , , , , , ,Fixed Assets 0,74% 0,68% 0,63% 0,55% 0,41% 0,33% 0,29% 0,27%Trade mark 3,50% 3,50% 3,50% 3,50% 3,50% 3,50% 3,50% 3,50%Work force 0,15% 0,09% 0,05% 0,03% 0,01% 0,00% 0,00% 0,00%

Appendix VIProportional PPA

Emeis Holdings Pty Ltd. Proporcional PPA Base Date: 2/28/2013´in AUD 000

Estimated PPA Total Value Deferred taxNet Fair Value (% of

the purchased capital by Natura)

Total Paid (65%) - (A) 71.104

AllocationWorking Capital 10.384 Long term assets and liabilities 3.017 Fixed Assets 7.718 Net Assets Book Value - (B) 21 119Net Assets Book Value - (B) 21.119

Intangible trade-mark 39.408 (11.822) 27.586 Intangible - Customer relationship - Wholesalers 636 (191) 445 Intangible Assets Identified and Evaluated - (C) 28.031

Identified Net Asset - Fair Value - (D) = (B) + (C) 49.150

Minority interests - (E) = 35% * (D) (17.202)

Intangible Assets Identified and Evaluated - Fair Value - (F) = (D) + (E) 31.947



Estimated Goodwill (G) = (A) - (F) 39.157

© 2014 KPMG Corporate Finance, a Brazilian company and a member-firm of the KPMG network of independent member-firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Brazil.

This proposal was prepared by KPMG Corporate Finance, a Brazilian company and a member-firm of the KPMG network of independent member-firms affiliated with p p p p y p , p y pKPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG International does not provide services to clients. The present proposal is strictly confidential and was prepared exclusively for internal use by Aesop, so as to provide sufficient information to take a decision of contracting or not the services of KPMG Corporate Finance. This document must not be disclosed, commented or copied either partly or in total without our prior written consent. Any disclosure in excess of that permitted may prejudice the commercial interests of KPMG Corporate Finance. KPMG detains property of this document, including the property of the copyright and all other rights of intellectual property.

Th KPMG th l d “ tti th h l it ” i t d i l t d k f KPMG I t ti lThe name KPMG, the logo and “cutting through complexity” are registered or commercial trade-marks of KPMG International

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