ACE — Investor Presentation 2020

Oct 14, 2020

Jinan Acetate Chemical

4763 TT Investor Presentation September 2020

The Little Giant in a Global Oligopoly Industry

• ü Jinan Acetate is a fully-integrated, independent manufacturer of superior quality acetate tows and flakes in an oligopoly market . Acetate tows are the key raw material used in making cigarette filters. Acetate flakes are primarily used in the production of acetate tows and optical frames.

• ü The industry has very high entry barriers , particularly in securing raw materials and customers. Jinan Acetate has successfully built strategic alliances to align its interests with key suppliers and customers. Advanced R&D and production expertise keep our costs significantly lower than our global peers , who are reducing and repurposing their capacity while we target double digit annual capacity growth over the next 5 years.

• ü We continue to invest while producing robust cash flows . In order to stay ahead of industry trends, we are developing new biodegradable products and new applications for existing products. We have also been investing in cost-saving equipment to maintain our cost advantage.

• ü We aim to double our market share for acetate tows within 5 years from 1.6% currently (2019). Our focus clients are mid-to-small sized brands located in emerging market countries , which have greater growth potential than the established global brands. We also hope to gain business from one or more Tier-1 Tobacco players within the next 12-24 months.

• ü We aim to maintain a cash dividend payout ratio between 60-80% and ROE in excess of 20%.

2

Jinan Acetate Chemical @ a Glance

• Ticker: 4763 TT

• Market Cap – 30 September 2020 : US$ 251 mn

• 2019 Revenue : US$72 mn

• ROE : Averaged 21% in 2015 through 2019

• 2019 Dividend : DPS NT$4.75

• Business Scope : Exports to more than 50 countries

• Client Diversification : Top 5 are less than 40% of sales

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Acetek Material
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Jinan Acetate
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• Jinan, Shandong

• Zaozhung, Shandong

• Acetate Tow Production

• Acetate Flake Production

• Employees: 170

• Employees: 100

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NT$m Sales Breakdown by Products
2,400
29%
1,800
17%
25%
1,200
24%
71%
83%
600 75%
76%
0
2017 2018 2019 1H20
Acetate Tow Acetate Flake
Products - Applications
Fiber Grade
Acetate
Diacetate Cigarette Filter
Tow
Flake
Plastic Grade
Optical Frames
Diacetate Flake
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3

1H20 Performance

Key 1H20 Performance Metrics

What Factors Affected Profitability?

• ü 1H20 sales grew 6% YoY to NT$1,068m.

• ü Revenue from acetate tows rose 13% YoY, while acetate flake revenue fell by 11% YoY.

• ü Key Performance Highlights were:

• Gross margin was 34.2% versus 28.7% in 1H19.

• Operating margin was 20.1% vs 15.9% in 1H19.

• Net Income adjusting out the MTM effect of Acetek’s CB was NT$204m, up 35% YoY.[1]

• EPS adjusted for CB MTM effect was NT$4.06.[1]

• ü Demand remains robust for acetate tows while sales of acetate flakes were negatively impacted by COVID-19.

• ü Within acetate flakes, plastic grade sales were roughly 40% to 50% of 2019 levels while fiber grade flake sales grew strongly off a low base.

• ü Overall, the product mix changes benefited profitability, as tows are most profitable, followed by plastic flakes, then fiber flakes.

• ü RM input prices for wood pulp and acetic anhydride were lower than the 1H19 average.

Note 1: Mark-to-market paper gain/loss from the 2Q17 CB issue are not included in these calculations, to better reflect core earning capability.

4

Sales Breakdown

January through June 2020

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Acetate Flake,
24%
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Acetate Tow Acetate Flake

January through June 2019

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Acetate Flake,
28%
Acetate Tow, Acetate Tow,
76% 72%
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Acetate Tow Acetate Flake

5

Capacity Utilization Remained High in 1H20

Secure Demand from Key Customers

• ü Since 2015, our utilization rate for acetate tows has averaged above

• 90%. During that time, our capacity increased by 44%.

• ü Strategic alliances with key customers have secured a market niche in South America and stable business from downstream suppliers to Tier 1 eyeglass frame makers Luxottica and Safilo.

Self-sufficient in Acetate Flake Production

• ü Access to key raw materials is one of the most difficult barriers to entry and survival in this industry.

• ü Acetate flakes account for almost 90% of acetate tow raw material cost. We completed the construction and ramp up of our acetate flake plant in 2017-2018.

Acetate Tow Utilization Rate Averages above 90%

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100%
90%
80%
70%
60%
2015 2016 2017 2018 2019 1H20
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Our Plant Construction Cost is 50% Lower than Peers

• ü Vertical integration has enhanced our cost competitiveness,

• especially since our construction costs are 50% lower than peers.

6

Investing in our Future Through R&D

The Current Focus of our R&D spending is biodegradable products

• ü R&D spending was roughly 4% of sales in 1H20. We have been developing several types of biodegradable products, including tows, non-woven material and straws.

• ü We expect R&D spending to rise in 2021, as we gear up for initial mass production of our green products.

It takes 12 to 24 months for R&D spending to create earnings growth

• ü R&D as a percent of sales was 5-6% of sales in 2017 and 2018 as we built, tested, debugged and began production of acetate flakes.

• ü In 2019 and 1H20, R&D spending has remained close to peak levels in absolute terms, while falling as a percent of sales.

R&D Expense as % of Revenue (%)

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6.4%
5.6%
4.4%
3.8%
2.9%
1.3%
2015 2016 2017 2018 2019 1H20
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7

Outlook for 2H20

July-Aug cumulative sales were NT$405m, up 9% YoY. As the peak season for plastic grade acetate flakes is from September to December and demand for tows is robust, we expect our growth momentum to continue.

	July-Aug cumulative tow sales grew 6% YoY. We added 1k tonnes of acetate tow capacity in April, amounting to
Tows	an 8% increase in capacity. 3Q20 utilization continued to be above 95%. Acetate tow selling prices were soft in
	1H20 and are expected to trend gradually upwards in 2H20.
	Flake sales grew 17% YoY in July-August, as a 2k metric tonne order for fiber grade flakes was shipped between
	May to August, and shipments of plastic grade flakes for eyewear frames began to recover. We now have order
Flakes	visibility through December for eyewear-use plastic grade flakes and expect that 2H20 revenues for this
	product will be 75-80% of pre-COVID 19 levels. We added 5k tonnes of acetate flake capacity in June/July,
	amounting to a 25% increase in flake capacity. This capacity will begin to ramp up in 4Q20, once government
	approvals are received.
	We expect our 2H20 product mix to be favorable, with 3Q product mix improving over 2Q and 4Q product mix
Product Mix	improving over 3Q. This is due to the completion of the 2k fiber grade flake order in August, recovery in plastic
&	grade flake shipments for eyewear and continued robust tow demand. RM pricing should continue to be
RM Pricing	favorable as wood pulp costs were locked in early in the year and acetic anhydride pricing has softened
	following a temporary uptick in 2Q20.

8

Item Details We have decided to integrate upstream into Land Area 100 Chinese Mu the production of acetic anhydride. Leasing Cost, Land NT$38m Vertical We expect to spend roughly NT$213m Plant and Equipment NT$175m to build 60,000 tonnes of design Integration capacity. Est. Annual About NT$14m into the Depreciation Production of We estimate it will reduce our cost of 4-5% per tonne of Est. Cost Savings flakes production by about 4-5%. * More Acetic importantly, we expect that it will make Commencement Date 2020 Q4 Anhydride* our profits more stable, greatly reducing the effect acetic anhydride Completion Date 2021 Q2 spot price movements. Design Capacity 60,000 tonnes The land is big enough to provide for future expansion. Current Internal Use 35,000 tonnes

*Based on a spot price of $5,250 RMB per tonne of acetic anhydride

9

Company Milestones

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2019
Annual Capacity of Acetate Tow and Acetate Flake
Strategic
Year-End Design Capacity, Tonnes 2017 alliances
Mass production with LA/ES
2016
of acetate flake:
Established
2015 5,530 tonnes 21,000
Acetek
2014 Listed on
Material
Taiwan Stock
Established
2012 Jinan Acetate Exchange 17,000 17,000 17,000
Obtained Chinese
Chemical
high-tech
2006 (Cayman) 14,000
enterprise 13,000
Began
certification
1999 Production of 11,000 11,000
Established acetate tow 10,000
9,000 9,000
Jinan Julong
8,000
Fiber
4,000 4,000 4,000
3,000 3,000
2,000 2,000
1999 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 e
Acetate Tow Acetate Flake
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Annual Capacity of Acetate Tow and Acetate Flake

Year-End Design Capacity, Tonnes

10

Revenue and Margin Trend

• 2Q20 revenue decreased 1% YoY and increased 4% QoQ to NT$544m.

• Gross and operating margins have been trending up since 2Q18, on production efficiency improvements, vertical integration into acetate flakes, strong top line growth, and stabilization in raw material prices.

• Gross margin was 35.2%, the fifth quarter in a row above 30%. Operating margin reached a record high 22.5%, increasing from 20.1% in 1Q20. Net margin was 19.0%.

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NT$m Quarterly Revenue Trend Quarterly Margin Trend
650 40% 40.0% 40.0%
520 25%
30.0% 30.0%
390 10%
20.0% 20.0%
260 -5%
10.0% 10.0%
130 -20%
0 -35% 0.0% 0.0%
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20
Revenue (NT$m) Growth(YoY) Gross Margin Operating Margin Net Margin
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• Note: On this page, Net Margin numbers exclude the mark-to-market paper gain/loss from the 2Q17 CB issue.

11

Earnings and Growth Trend

• 2Q20 Operating Income rose 14% YoY to NT$123m.

• 2Q20 Net Income rose 12% YoY to NT$103m. 2Q20 EPS was NT$2.06. Net Income and EPS have shown positive YoY growth for 8 consecutive quarters.

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NT$m NT$
Earnings & Growth Trend EPS
160 200% 2.50
2.00
120
125%
1.50
80
1.00
50%
40
0.50
0 -25% 0.00
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20
Operating Profit Net Income to Parent Net Income Growth(YoY) EPS
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• Note: On this page, all Net Income & EPS numbers, as well as related growth calculations, exclude the mark-to-market paper gain/loss from the 2Q17 CB issue.

12

Consolidated Statements of Income - Quarterly

Unit: NTD million	2Q20	1Q20	2Q19	QoQ (%)	YoY (%)
Net Revenue	544	524	549	4	-1
Gross Profit	192	173	169	11	13
Gross Margin	35.2%	33.1%	30.8%
Operating Expenses	69	68	62	2	12
OPEX/Sales	12.7%	13.0%	11.3%
Operating Income	123	105	108	16	14
Operating Margin	22.5%	20.1%	19.6%
MTM Gain (Loss) on CB (non-cash)	(5)	25	(36)
Other Non-Operating Income (Loss), Net	(9)	9	(0)
Pre-Tax Income	108	139	71	-22	52
Income Tax Expense	11	11	12
Minority Interest	(1)	2	3
Net Income to Parent	98	126	56	-22	74
Net Margin	18.0%	24.1%	10.2%
EPS (NT$)	1.96	2.50	1.22	-22	61
ROE – not annualized	7.9%	9.8%	4.7%
Depreciation	25	26	24
CAPEX	36	17	20

13

Consolidated Statements of Income – 1H20 vs 1H19

Unit: NTD million	1H20	1H19	YoY(%)
Net Revenue	1,068	1,007	6
Gross Profit	365	289	26
Gross Margin	34.2%	28.7%
Operating Expenses	137	129	6
OPEX/Sales	12.8%	12.8%
Operating Income	228	160	42
Operating Margin	21.3%	15.9%
MTM Gain (Loss) on CB (non-cash)	(20)	26
Other Non-Operating Income (Loss), Net	39	(51)
Pre-Tax Income	247	135	83
Income Tax Expense	22	11
Minority Interest	1	(2)
Net Income to Parent	224	126	78
Net Margin	21.0%	12.5%
EPS (NT$)	4.46	2.74	63
ROE	18.6%	10.9%
Depreciation	51	48
CAPEX	53	50

14

Consolidated Balance Sheet – 1H20

Unit: NT$ million	2020/06/30	2020/06/30	2019/03/31	2019/03/31	2019/06/30	2019/06/30
	$	%	$	%	$	%
Cash and Cash Equivalents	655	25	661	25	323	13
Notes and Accounts Receivable, Net	548	21	541	20	461	19
Inventories	263	10	287	11	289	12
Other Current Assets	117	4	156	6	228	9
Fixed Assets	818	31	800	30	867	36
Other Long-term Assets	239	9	229	8	268	11
Total Assets	2,640	100	2,673	100	2,436	100
Current CB Payable	465	18	461	17	448	19
Other Current Liabilities	900	34	764	29	735	30
Non-Current CB Payable	0	0	0	0	0	0
Other Non-Current Liabilities	9	0	9	0	10	0
Total Liabilities	1,375	52	1,234	46	1,193	49
Common Stock	511		511		465
Total Equity	1,266	48	1,439	54	1,243	51
Book Value per Share (NT$)	23.1		26.5		24.5
Key Indices
Current Ratio ( Current Assets / Current Liabilities)	116%		134%		110%
Net Debt to Equity	10%		7%		19%

15

Jinan Acetate Formula for Success

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Building a Better Moat

ü R&D and Production Team have strong technical skills, extensive industry experience ü Lowest production cost in the industry

ü Securing a stable market position through industry alliances

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Targeting an Attractive Market Niche

ü The cellulose acetate tow market is an oligopoly market with a favorable pricing environment

ü Demand is stable, and improves in hard economic times due to the ‘lipstick and cigarettes‘ effect ü Larger players have been rationalizing capacity, opening up opportunities for Acetek

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New Markets and Capacity Expansion

ü We expand in line with new order visibility and have historically maintained capacity utilization of 90% or above.

ü We are developing new market opportunities in the Middle East and Africa

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Strategic Alliances

ü Marketing & Distribution

ü Vertical Integration

ü Plastic Acetate Flake and the Plastic Eyeglass Frame Market

16

Building a Better Moat

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17
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Building a Better Moat

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Strategic Alliances
Vertical Integration
ü Secure Customers
ü Secure Raw Materials
Emerging Market
Focus
ü The Low-Cost Producer
ü Better Growth Prospects
Advanced R&D Skills
Experienced Technical Team
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18

Emerging Markets Focus

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Better growth prospects

• ü Many of our customers are reliant on Acetek for supply of tows. We help them get bigger so we can grow bigger.

• ü Our target customers are mostly mid-to-small sized brands located in emerging market countries. They have greater growth potential than international brands.

• ü Regulations on tobacco use are more relaxed in our target markets. Other vice products may be prohibited.

Offering customized products

• ü We offer products in small quantity and with specialized packaging based on customer requirements, creating a strong bond with our clients.

A Dedicated Acetate Flake and Tow Producer

• ü Acetate tow is only a fraction of our peers’ revenues.

• ü The payoff to them of driving us out of the market – with measures such as price cuts – are not worth the cost.

Over 90% of Our Tow Shipments are to Emerging Markets

% of shipments by volume

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Developed
Markets 8%
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Emerging Markets 92%

19

Chemical Fiber Production Expertise Drives Our Competitive Edge

Patented Technology

• ü Acetek Founder and President Wang Ke-Zhang is a formally trained chemical fiber engineer with over 35 years of technical production experience.

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• ü Acetek is the only fully-integrated, independent manufacturer of superior quality acetate tows and flakes with proprietary intellectual property rights in China.

Industry Leader in Cost Competitiveness

• ü The ability to design the plant and machines ourselves results in at least 50% costsaving in building a new plant.

• ü We continue to improve our production process through measures such as reducing steam usage and improving water treatment & RM recovery techniques. We expect to achieve further cost reductions over the next 2-3 years.

20

Production Process for Acetate Flakes

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Plastic Grade
Diacetate Flake
Fiber Grade
Diacetate Flake
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21

Production Process for Acetate Tows

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Fiber Grade
Diacetate Flake
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22

Targeting an Attractive Market Niche

Plastic Grade Cellulose Diacetate

The Structure of the Global Cigarette Market

We Partner with Emerging Market Brands

Cigarette Market Share - World

Cigarette Market Share - World ex-China

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Philip Morris
British American
13.4%
Tobacco Japan Tobacco
British American 22.6% Inc
Tobacco 16.0%
12.7%
Imperial Brands
7.5%
Japan Tobacco Inc
9.0%
China National
Tobacco Corp Altria Group
43.9% 3.6%
Imperial Brands Philip Morris
4.2% 23.9%
Altria Group
2.0%
Other
Other
26.4%
14.8%
Acetek Niche
Acetek Niche
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Source: Tobacco Merchants Association & Bloomberg

24

Acetate Tow Industry – An Oligopoly Market

2019 Acetate Tow Industry Market Share

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Jinan Acetate, 2.0%1.6% Profitable Industry
The very profitable acetate fiber industry has
01
consolidated to six major companies.
Daicel, 14%
Solvay Entry Barriers
(Rhodia), New entrants are deterred by barriers, such as
02
Celanese,
15% technology, raw materials, legal complexity, etc.
39%
Rising Operating Rates
Eastman, 03 Driven by the closure of higher cost Western
facilities.
30%
The sixth major company is China Tobacco who has Joint Venture plants in
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*The sixth major company is China Tobacco who has Joint Venture plants in China with Celanese, Eastman and Daicel.

Source: Company data, JPMorgan Industry Report

25

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The Acetate Tow Industry’s Little Giant – Market Share Increased Further in 1H20
ü Acetek has rapidly increased its market share, and is now undeniably a ‘member of the club’
Jinan Acetate's tow shipments (tonnes) (LHS) Jinan Acetate's market share (RHS)
20,000 2.0%
15,000 1.5%
10,000 1.0%
5,000 0.5%
0 0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H20
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Source: Tobacco Merchants Association & Bloomberg

26

Acetate Flake Market

Acetate Flakes Industry Products Applications

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Optical Frames,
2%
Cigarette Filter, 90%
Pen Refill, 1%
Optical Frames, 2%
Sewage Treatment, 1%
Hemodialysis, 1%
Cigarette Filter, Nonwoven Facial Mask, 1%
90%
Other, 4%
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01

02

The major acetate flake producers are expanding their product scope

Optical frames are the top non-cigarette application for acetate flakes

27

Tow Pricing softened in 1H20, but appears to be firming thus far in 2H20

Capacity Rationalization Acetate Tow Pricing Softened in 1H20

• ü From 2014 to 2018, the industry utilization rate dropped from nearly 100% to around 80%.

• ü In March 2015, Eastman announced the closing of its UK acetate tow manufacturing site.

• ü June 2018, Celanese announced plans to discontinue acetate tow production at its Mexico facility.

Asset Repurposing

• ü Celanese is repurposing manufacturing capacity from acetate tow to new products.

• ü Celanese is also pursuing growth opportunities in textile and nonwoven applications.

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Celanese Acetate Tow Price YoY Change
4%
0%
-4%
-8%
-12%
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20
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Acetic Anhydride Prices have Normalized

Acetic Anhydride Price (RMB$/tonnes)

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10,000
7,500
5,000
2,500
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Median Price
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Source: Celanese Quarterly Reports & Company Data

28

Claiming More Market Share

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Spinning Grade Cellulose Acetate
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Capacity Expansion to Support Our Growth

5-Year Targets for Capacity Growth

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26,000
22,000
21,000
17,000
14,000
13,000
2019 2020E 2024E
Acetate Tows Acetate Flakes
11%
9%
Acetate tows CAGR >
Acetate flakes CAGR >
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30

Gain Share by Developing New Markets

Key Target Markets

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• Middle East, North Africa and South East Asia

• The China market is an important new market for acetate flakes. We target new orders this year.

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One Belt, One Road

Taking Advantage of One Belt, One Road

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• We are expanding in sync with China’s One Belt, One Road initiative.

• Yankuang Lunan Chemical, strategic shareholder in Acetek Material and supplier of upstream RM, is a State-Owned Enterprise in China.

Breaking into Tier-1

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• We hope to gain business from one or more Tier-1 Tobacco players within 12-24 months.

• • Until now, Big Tobacco has mostly partnered with the ‘Big Four’ filter acetate tow producers. This would be a huge milestone, opening up opportunities for rapid growth.

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Key Target Markets

• Egypt • Syria

• • Iran • Tunisia • Turkey • Thailand • Algeria

31

Staying ahead of Industry Trends and Developing New Revenue Sources

Biodegradable cigarette filters

Biodegradable cigarette filters Acetate film for agriculture Biodegradable cellulose acetate film

By 2025 all cigarettes sold in the EU will be required to have filters that will biodegrade within 45 days after use.

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Other plastic
products
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• Sun houses for agriculture

• Agricultural and consumer packaging to meet EU requirements

Heated tobacco products

• Diaphragm membranes for lithium batteries.

Heated tobacco products

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Acetate tow for heated tobacco products, such as IQOS, GLO, and Ploom Tech.

Biodegradable flakes for other products

• Recyclable straws

• Recyclable Facial Masks

• Other Non-Woven Products

32

Biodegradable Cellulose Acetate Products Markets Are Growing Rapidly

ü We estimate the annual market for biodegradable cellulose acetate products is US$250m – US$300m

ü The applications of biodegradable cellulose acetate products are:

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Cellulose Acetate Film Cellulose Acetate Fiber Cellulose Acetate Sheet Spherical Cellulose Acetate Particles
Food Packaging Apparel Premium Eyewear Cosmetics
ü Although TAM is relatively low, green and biodegradable products have become a global trend.
Actual Market Size of Target Segments
Global Polyester
Filament Yarn Market
US$89bn
Global Food Plastic
Global Polyester
Packaging Market
Staple Fiber Market
US$27bn US$125bn
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• TechSci Research, Fior Markets, Mordor Intelligence, Peer company IR presentations

33

Examples of Some of the Industry’s Most Innovative Biodegradable Cellulose Acetate Products

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Eastman - Naia

The Naia portfolio of cellulosic acetate fibers includes cellulosic staple fiber and cellulosic filament yarn. These sustainable fibers transform into luxurious, comfortable, and easy-to-carefor fabrics with supreme softness, improved dry rates, and reduced pilling.

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Celanese - Clarifoil

Daicel - BELLOCEA

BELLOCEA, spherical cellulose acetate, elicits a feeling of softness and smoothness from fine particles, and gives a moist and smooth feeling to makeup products such as foundation and skin care products.

Clarifoil is a sustainable and highly aesthetic cellulose acetate film. Applications include carton windows, anti-fog film, print lamination, labels, tape.

34

Our 5-Year Targets

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Double our share of the acetate tow market and increase our 01 share of the acetate flake market by 50% Be an industry leader in the development of biodegradable 02 acetate flakes We aim to maintain a cash dividend payout ratio between 03 60-80% 04 Sustain ROE in excess of 20%

Strategic Alliances Planting a Flag and Staking Our Claim

36

Jinan Acetate Chemical Corporate Structure

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Jinan Acetate Chemical
Co., Ltd. (Cayman)
Listed Entity
100%
My Parents Living
Technology Limited
(Hong Kong)
Hong Kong Holding
Company
80% 100% 80%
Acetek Chemical Co., Jinan Acetate Chemical Acetek Material Co., Ltd.
Ltd. (Hong Kong) Co., Ltd. (China) (China)
Investment Holding Acetate Tow Acetate Flake
Company for ELEUNG Manufacturer Manufacturer
25%
ELEUNG Limited
(Hong Kong)
Parent Company of Taly
Plastic Extrusion
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37

Acetate Tow Strategic Alliances

Marketing & Distribution Strategic Alliances

ü South America Market:

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Macrifer Wang
Trading S.A. Family
Affiliate Company
Chairman Wang and
of GlobalFilters SAF
family
and TH
Jinan Acetate
25.4% Chemical (Cayman) 40%
Listed Entity
Yankuang Lunan Jinan Acetate Thy Glory
Chemical Chemical (Cayman) Limited
Parent Company of
Acetic Anhydride
Listed Entity Acetate Granules
Manufacturer
Factory
80%
Acetek Material
12%
8% (China)
Acetate Flake
Manufacturer
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The owner of Macrifer owns GlobalFilters and Tabacalera Hernandarias (TH). GlobalFilters is the largest cigarette filter producer in South America. TH is a Top 5, branded cigarette producer in South America. Both are customers of Acetek.

ü Market Expansion:

GlobalFilters is expanding geographically and will begin production in Argentina and Miami, Florida (USA) in 2020. TH is developing products for Asia and the Middle East.

Vertical Integration Strategic Alliances

ü Upstream:

Yankuang Lunan, an upstream supplier of acetic anhydride, contributed the land on which Acetek Material is built.

ü Downstream:

Thy Glory owns an acetate granules factory which is Acetek’s customer.

ü Vertical Integration – 100% self-sufficient in flakes for tow: 70% of the acetate flake that Acetek Material produces is supplied to Jinan Acetate for production of acetate tow.

38

Plastic Grade Flake Strategic Alliances

ü Strike Alliances with Downstream Acetate Granule and Plate Manufacturers

Jinan Acetate Ken Chen Plate Manufacturers Chemical Thy Glory, JINLIANG, and TALY are cellulose acetate plate and Owner of Thy Listed Entity granules manufacturers. All are downstream customers of Acetek’s Glory Limited plastic grade acetate flake. 20% 80% Access to Tier 1 Suppliers to Luxury Optical Frame Brands JINLIANG Acetek Chemical LA/ES Acetate (Hong Kong) LA/ES is a strategic partner of Acetek. It supplies cellulose acetate Investment plates to Luxottica and Safilo, who between them hold a dominant Acetate Plates Holding Company Acetate Plates Manufacturer Manufacturer market share for all luxury optical frame brands. Luxottica’s share for ELEUNG amongst luxury optical frame and sunglass brands is 80%. Safilo is 25% the No. 2 player. ELEUNG Limited 20% (Hong Kong) 55% Order Commitments Parent Company of Acetate Plates 70% of granules Taly buys are made from Acetek flake. Factory 100% TALY Plastic Plastic Grade Plastic Colored Optical Extrusion Diacetate Acetate Plastic Frames Flake Granules Acetate Sheet Acetate Plates Manufacturer 39

• ü Access to Tier 1 Suppliers to Luxury Optical Frame Brands

ü Order Commitments

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ESG
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Raw Material Reuse & Recycling, Developing Greener Products

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1 Developing Eco-Friendly Products
Developing Eco- •
Biodegradable products
Friendly Products
•
Recyclable products
2 Improving Waste Management
Improving
Waste • Enhancing our sewage treatment
recycling processes.
Management
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• Enhancing our sewage treatment and water recycling processes.

3 Increasing Reuse of Manufacturing Inputs

Increasing Reuse of Manufacturing Inputs

• Improving the efficiency of our acetone and acetic acid regeneration processes.

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Financial Performance

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Key Financial Performance Metrics

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NT$m
2,175 400 40.0%
2,000
1,748 1,739 31.0%
1,586 27.5% 27.6%
300 30.0%
1,500 1,439 330 24.4% 24.2%
265 287
200 20.0%
1,000
188 18.0%
170 16.8% 16.5%
100 10.0%
500
11.9%
9.3%
0 0 0.0%
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Revenue (LHS) Net Income (RHS) GPM OPM
NT$ NT$
8.00 27% 30.0% 8.00 160%
25% 135%
21%
6.00 6.00 120%
18%
20.0%
82%
13%
4.00 4.00 81% 80%
88%
72%
10.0%
2.00 2.00 40%
6.33 6.17 3.70 4.85 6.52 5.00 5.00 5.00 4.00 4.75
0.00 0.0% 0.00 0%
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
EPS (LHS) ROE (RHS) Dividend per share (LHS) Payout %
20 43
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• Excludes the mark-to-market impact from the convertible bond issued in 2Q17.

Income Statement Highlights

NT$ million	2015	2016	2017	2018	2019	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)	YoY (%) 2015 2016 2017 2018 2019 5 10 10 (1) 25 7 10 (3) (1) 60 (8) 8 (21) (22) 141 - - - - (100)
							2015	2016	2017	2018	2019
Sales Revenue	1,439	1,586	1,748	1,739	2,175		5	10	10	(1)	25
Gross Profit	396	437	426	421	673		7	10	(3)	(1)	60
Operating Profit	242	261	207	162	391		(8)	8	(21)	(22)	141
MTM Gain (Loss) on CB	0	0	(16)	55	0		-	-	-	-	(100)
Other Non-Operating Income(Loss),Net	61	58	(23)	(7)	(13)		-	(5)	(140)	-	-
Pretax Income	303	319	169	210	378		15	5	(47)	25	80
Net Income to Parent	265	287	172	225	330		18	8	(40)	31	46
EPS (NT$)	$6.33	$6.17	$3.70	$4.85	$6.52		13	(3)	(40)	31	34

44

Balance Sheet Highlights

							Percent of Total Assets (%)	Percent of Total Assets (%)	Percent of Total Assets (%)
NT$ million	2015	2016	2017	2018	2019
						2015	2016	2017	2018	2019
TOTAL ASSETS	1,858	1,604	2,437	2,317	2,586	100	100	100	100	100
Cash	623	364	206	369	589	34	23	8	16	23
NR & AR	289	128	378	312	438	16	8	16	13	17
Inventory	220	375	416	321	243	12	23	17	14	9
Fixed Assets	261	320	832	864	827	14	20	34	37	32
TOTAL LIABILITIES	477	235	1,062	1,025	1,214	26	15	44	44	47
CB Payable	0	0	424	440	457	0	0	17	19	18
NP&AP	346	85	289	245	222	19	5	12	11	9
TOTAL EQUITY	1,381	1,368	1,375	1,291	1,373	74	85	56	56	53
A/R turnover days	59	48	53	72	63
Inventory turnover days	62	95	109	102	68
A/P turnover days	75	69	52	74	57
Cash conversion cycle	46	74	110	100	75

45

Dividend Payout & Capex

(NT$m)	2015	2016	2017	2018	2019
Net Income to Parent	265	287	172	225	330
Dividend Paid	232	232	232	184	238
DPS (NT$)	5.00	5.00	5.00	4.00	4.75
Payout ratio	88%	81%	135%	82%	72%
Dividend yield	4.2%	2.8%	3.9%	2.7%	3.6%
Capex	27	356	261	190	128
Capex/Sales	1.9%	22.4%	14.9%	10.9%	5.9%

Note: Yield calculated using market cap on the day prior to ex-dividend date for all years.

46

Appendix

CB-1 Terms and Trading Information

nd Trading Information	nd Trading Information	nd Trading Information
Issue Date			2017/06/09
	Issue Date		2017/06/09
	Maturity Date		2022/06/09
	Maturity Term		5 years
	Coupon Rate		0.00%
	Issue Amount		NT$ 500,000,000
	Issue Price		NT$ 101.0
	Latest Conversion Price		NT$ 137.0
	Conversion Premium		103.59%
	Latest Trading Price		NT$ 108.00 (2020/09/30)
	CB Holder Redemption Option
	Date	Put Price (NT$)		Yield to Put
	2020/06/09	101.5075		0.5%
2021/06/09	2021/06/09	102.0151		1.0%

48

CB-2 Terms and Trading Information

nd Trading Information	nd Trading Information	nd Trading Information
Issue Date			2020/09/25
	Issue Date		2020/09/25
	Maturity Date		2025/09/25
	Maturity Term		5 years
	Coupon Rate		0.00%
	Issue Amount		NT$ 600,000,000
	Issue Price		NT$ 101.0
	Latest Conversion Price		NT$ 130.7
	Conversion Premium		102%
	Latest Trading Price		NT$ 110.95 (2020/09/30)
	CB Holder Redemption Option
	Date	Put Price (NT$)		Yield to Put
	2023/09/25	100.75		0.25%
2024/09/25	2024/09/25	101.00		0.50%

49

Cigarette Markets

Global Cigarette Market By Region

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2005 2018
Australasia, 0% Australasia, 0%
Eastern Europe,
Eastern Europe,
10%
13%
Latin America, 3%
Asia Pacific,
Latin America, 5%
55%
Middle East and Asia Pacific,
Africa, 9% 64%
Middle East and
Africa, 7%
North America, 5%
North America, 8%
Western Europe,
9%
Western Europe,
12%
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Source: Euromonitor

50

Cigarette Markets	Cigarette Markets	Cigarette Markets	Cigarette Markets
2017	Cigarette Retail		Volume, By Country		(In Billion Sticks)		2018	Cigarette Retail		Volume, By Country		(In Billion Sticks)
China						2369	China						2369
Indonesia		308					Indonesia		307
Russia		259					United States		241
United States		253					Russia		237
Japan		151					Japan		133
Turkey		106					Turkey		119
Egypt		93					Egypt		96
Bangladesh		89					Bangladesh		92
India		81					India		83
Germany		79					Vietnam		81
	0	500	1000	1500	2000	2500		0	500	1000	1500	2000	2500

Source: Euromonitor

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Disclaimer

•The information contained in this confidential document ("Presentation") has been prepared by Jinan Acetate Chemical Co., Ltd. (Cayman) (the "Company"). It has not been fully verified and is subject to material updating, revision and further amendment. While the information contained herein has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers gives, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this Presentation, or any revision or supplement thereof, or of any other written or oral information made or to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly disclaimed. Accordingly, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers takes any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness or injury of the Information or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation or the information.

•Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any transaction and the right is reserved by the Company to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent.

•This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.

•This Presentation includes certain statements that may be deemed “forward-looking statements”. All statements in this discussion, other than statements of historical facts, that address future activities and events or developments that the Company expects, are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing, general economic, market or business conditions and other unforeseen events. Prospective Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements.

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Thank You

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