ACE — Investor Presentation 2021

Jan 7, 2021

Jinan Acetate Chemical

4763 TT Investor Presentation January 2021

The Little Giant in a Global Oligopoly Industry

• ✓ 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.

• ✓ 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.

• ✓ 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.

• ✓ 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.

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

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Jinan Acetate Chemical @ a Glance

• Ticker: 4763 TT

• Market Cap – 31 December 2020 : US$222 mn

• 2020 Revenue : US$80 mn

• ROE : Averaged 21% in 2015 through 2019

• 2019 Cash Dividend : NT$4.75 per share

• 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
2,500
28%
2,000
29%
17%
1,500 25%
72%
71%
1,000 83% 75%
500
2017 2018 2019 2020
Acetate Tow Acetate Flake
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Products - Applications

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Fiber Grade
Acetate
Diacetate Cigarette Filter
Tow
Flake
Plastic Grade
Optical Frames
Diacetate Flake
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3Q20 Performance

Key 3Q20 Performance Metrics

• ✓ 1-3Q20 sales grew 8% YoY to NT$1,689m.

• ✓ Revenue from acetate tows rose 11% YoY, while acetate flake revenue fell by 1% YoY.

• ✓ Key Performance Highlights were:

• Gross margin was 33.4% versus 29.3% in 1-3Q19.

• Operating margin was 21.1% vs 16.5% in 1-3Q19.

• Net Income adjusting out the MTM effect of Acetek’s CB was NT$336m, up 45% YoY.[1]

• EPS adjusted for CB MTM effect was NT$6.70.[1]

What Factors Affected Profitability?

• ✓ 3Q20 revenue hit a record high as acetate tow and flake revenue grew 9% and 14% YoY respectively.

✓ Within acetate flakes, plastic grade sales were roughly 60% of 3Q19 levels due to the negative impact of COVID-19 but rose 30% QoQ as peak season for flakes in eyewear-use began September. Fiber grade flake sales grew strongly YoY off a low base last year.

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

• ✓ RM prices were favorable, with wood pulp down YoY and the acetic anhydride average price below RMB $5,500/tonne.

Note 1: Mark-to-market paper gain/loss from the 2Q17 and 3Q20 CB issue are not included in these calculations, to better reflect core earning capability.

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Sales Breakdown

January through December 2020

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Acetate Flake
28%
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Acetate Tow 72% Acetate Tow Acetate Flake

January through December 2019

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Acetate Flake
29%
Acetate Tow
71%
Acetate Tow Acetate Flake
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Capacity Utilization Remained High in 1-3Q20

Secure Demand from Key Customers

• ✓ Since 2015, our utilization rate for acetate tows has averaged above 90%. During that time, our capacity increased by 44%.

• ✓ 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

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

• ✓ 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 1-3Q20
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Our Plant Construction Cost is 50% Lower than Peers

• ✓ Vertical integration has enhanced our cost competitiveness, especially since our construction costs are 50% lower than peers.

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Investing in our Future Through R&D

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

• ✓ R&D spending was roughly 4.3% of sales in 1-3Q20. We have been developing several types of biodegradable products, including tows, non-woven material and straws.

• ✓ 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

• ✓ 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.

• ✓ In 2019 and 1-3Q20, 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%
4.3%
2.9%
1.3%
2015 2016 2017 2018 2019 1-3Q20
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Outlook for 4Q20

3Q20 cumulative sales were NT$621m, up 11% YoY. As the peak season for plastic grade acetate flakes for eyewear use is from September to December and demand for tows is robust, we expect our growth momentum to continue.

Tows

3Q20 tow sales grew 9% YoY. We added 1k tonnes of acetate tow capacity in April, amounting to an 8% increase in capacity. 3Q20 utilization continued to be around 95%. Tow selling prices were flat but are expected to trend gradually upwards in 4Q20. On Oct 6[th] , Celanese announced it will raise the prices of all acetate tow product grades by up to 5%, effective for orders shipped on or after Jan 1, 2021. Demand for acetate tows remains strong, and order visibility is extremely robust.

Flakes

Flake sales grew 14% YoY in 3Q20, 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 believe that 4Q20 shipments for this product could approach, and potentially even reach, pre-COVID 19 peak season levels. We added 5k tonnes of acetate flake capacity in June/July, amounting to a 25% increase in flake capacity, and mass production began in October, following the receipt of all necessary regulatory approvals.

Sales Growth

&

RM Pricing

Prospects for continued top line sales growth are good in 4Q20, due to the recovery in plastic grade flake shipments for eyewear and continued robust tow demand. RM pricing should continue to be favorable as wood pulp costs were locked in early in the year and acetic anhydride pricing has softened thus far in 4Q20.

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Vertical Integration into the Production of Acetic Anhydride

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We have decided to integrate upstream into the production of acetic anhydride.

We expect to spend roughly NT$213m to build 60,000 tonnes of design capacity.

We estimate it will reduce our cost of production by about 4-5%. * More importantly, we expect that it will make our profits more stable, greatly reducing the effect acetic anhydride spot price movements.

The factory site is big enough to provide for future expansion.

Item	Details
Land Area	100 Chinese Mu
Leasing Cost, Land	NT$38m
Plant and Equipment	NT$175m
Est. Annual Depreciation	About NT$14m
Est. Cost Savings	4-5% per tonne of flakes*
Construction Begins	2020 Q4
Completion Date	2021 Q2
Design Capacity	60,000 tonnes
Current Internal Use	35,000 tonnes

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

Company Milestones

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2019
Annual Capacity of Acetate Tow and Acetate Flake
Strategic
2017
Year-End Effective Capacity, Tonnes 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 15,000
high-tech
2006 (Cayman)
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
Acetate Tow Acetate Flake
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Annual Capacity of Acetate Tow and Acetate Flake

Year-End Effective Capacity, Tonnes

Note: Tow capacity on this slide is design capacity. Flake capacity is stated in terms of effective capacity because roughly 70% of our production is fiber grade flakes for tows and 30% is plastic grade which consumes more capacity. Design capacity for 100% fiber grade flake production was 25k tonnes at y/e 2020.

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Revenue and Margin Trend

• 3Q20 revenue increased 11% YoY and 14% QoQ to NT$621m.

• Gross margin reached 32.0%, surpassing 30% for the sixth quarter in a row, while operating margin was 20.8%. 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.

• Net margin reached 21.3%, the highest level we’ve achieved since 4Q16.

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NT$m Quarterly Revenue Trend Quarterly Margin Trend
650 40% 40.0% 40.0%
520 25%
30.0% 30.0%
390 10%
20.0% 20.0%
260 -5%
10.0% 10.0%
130 -20%
0 -35% 0.0% 0.0%
4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
Revenue (NT$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 and 3Q20 CB issue.

11

Earnings and Growth Trend

• 3Q20 Operating Income rose 31% YoY to NT$129m.

• 3Q20 Net Income rose 64% YoY to NT$132m. 3Q20 EPS was NT$2.64. Net Income and EPS both reached a record high and have shown positive YoY growth for 9 consecutive quarters.

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NT$m NT$
Earnings & Growth Trend EPS
160 200% 3.00
120 150%
2.00
80 100%
1.00
40 50%
0 0% 0.00
4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
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 and 3Q20 CB issue.

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12

Consolidated Statements of Income - Quarterly

Unit: NTD million	3Q20	2Q20	3Q19	QoQ (%)	YoY (%)
Net Revenue	621	544	561	14	11
Gross Profit	199	192	171	4	17
Gross Margin	32.0%	35.2%	30.4%
Operating Expenses	70	69	72	1	-3
OPEX/Sales	11.3%	12.7%	12.9%
Operating Income	129	123	98	5	31
Operating Margin	20.8%	22.5%	17.5%
MTM Gain (Loss) on CB (non-cash)	(51)	(5)	21
Other Non-Operating Income (Loss), Net	17	(9)	(9)
Pre-Tax Income	95	108	110	-12	-14
Income Tax Expense	10	11	5
Minority Interest	3	(1)	4
Net Income to Parent	81	98	102	-17	-20
Net Margin	13.1%	18.0%	18.1%
EPS (NT$)	1.62	1.96	2.01	-17	-19
ROE – not annualized	6.7%	7.9%	8.9%
Depreciation	27	25	25
CAPEX	36	36	33

13

Consolidated Statements of Income – 1-3Q20 vs 1-3Q19

Unit: NTD million	1-3Q20	1-3Q19	YoY(%)
Net Revenue	1,689	1,568	8
Gross Profit	564	460	23
Gross Margin	33.4%	29.3%
Operating Expenses	207	201	3
OPEX/Sales	12.3%	12.8%
Operating Income	357	258	38
Operating Margin	21.1%	16.5%
MTM Gain (Loss) on CB (non-cash)	(31)	(5)
Other Non-Operating Income (Loss), Net	16	(9)
Pre-Tax Income	342	245	39
Income Tax Expense	32	16
Minority Interest	5	2
Net Income to Parent	305	228	34
Net Margin	18.1%	14.5%
EPS (NT$)	6.09	4.50	35
ROE	24.3%	19.3%
Depreciation	78	73
CAPEX	89	67

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Consolidated Balance Sheet – 1-3Q20

Unit: NT$ million	2020/09/30	2020/09/30	2020/06/30	2020/06/30	2019/09/30	2019/09/30
	$	%	$	%	$	%
Cash and Cash Equivalents	1,020	33	655	25	408	17
Notes and Accounts Receivable, Net	571	19	548	21	444	18
Inventories	207	7	263	10	272	11
Other Current Assets	135	4	117	4	241	10
Fixed Assets	851	28	818	31	842	34
Other Long-term Assets	276	9	239	9	238	10
Total Assets	3,061	100	2,640	100	2,445	100
Current CB Payable	469	15	465	18	452	18
Other Current Liabilities	600	20	900	34	698	29
Non-Current CB Payable	509	17	0	0	0	0
Other Non-Current Liabilities	109	3	9	0	10	0
Total Liabilities	1,688	55	1,375	52	1,160	47
Common Stock	511		511		511
Total Equity	1,373	45	1,266	48	1,285	53
Book Valueper Share(NT$)	25.1		23.1		23.1
Key Indices
Current Ratio ( Current Assets / Current Liabilities)	181%		116%		119%
Net Cash(Debt)to Equity	1%		-10%		-6%

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Jinan Acetate Formula for Success

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Building a Better Moat

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

✓ Securing a stable market position through industry alliances

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Targeting an Attractive Market Niche

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

✓ Demand is stable, and improves in hard economic times due to the ‘lipstick and cigarettes‘ effect

✓ Larger players have been rationalizing capacity, opening up opportunities for Acetek

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New Markets and Capacity Expansion

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

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

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Strategic Alliances

✓ Marketing & Distribution

• ✓ Vertical Integration

✓ Plastic Acetate Flake and the Plastic Eyeglass Frame Market

16

Building a Better Moat

17

Building a Better Moat

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

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Better growth prospects

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

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

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

Offering customized products

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

A Dedicated Acetate Flake and Tow Producer

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

• ✓ 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%

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Chemical Fiber Production Expertise Drives Our Competitive Edge

Patented Technology

✓ 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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✓ 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

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

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

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

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Acetate Tow Industry – An Oligopoly Market

2020 Acetate Tow Industry Market Share

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Jinan Acetate, 2.0%1.8%
Daicel, 14%
Solvay
(Rhodia),
Celanese,
15%
39%
Eastman,
30%
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Eastman,
30%
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Profitable Industry The very profitable acetate fiber industry has consolidated to six major companies.

01

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Entry Barriers

02

New entrants are deterred by barriers, such as technology, raw materials, legal complexity, etc.

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Rising Operating Rates

03

Driven by the closure of higher cost Western facilities.

*The sixth major company is China Tobacco who has Joint Venture plants in China with Celanese, Eastman and Daicel.

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Source: Company data

The Acetate Tow Industry’s Little Giant – Market Share Increased Further in 2020

✓ Acetek has rapidly increased its market share, and is now undeniably a ‘member of the club’

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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 2020
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Source: Tobacco Merchants Association & Bloomberg

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Acetate Flake Market

Acetate Flakes Industry Products Applications

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

Other, 4%

01

02

The major acetate flake producers are expanding their product scope

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

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Global Optical Frame Market

Global Optical Frame Market By Region

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Other
8%
Xiamen,
China Guangdong,
19% China
RMB 41%
$37bn
Zhejiang,
China
32%
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Global Optical Frame Market By Material Type

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Other
5%
Injection
Molding
27%
Plastic Sheet
27%
RMB
$37bn
Metal
41%
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• ＊Plastic grade acetate flakes are used to produce injectionmolded and plastic sheet optical frames.

Source: Company Estimates

28

Celanese announced on 6 Oct 2020 that it would raise prices of all acetate tow grades by up to 5%, effective for orders shipped on or after 1 Jan 2021.

Capacity Rationalization

Celanese Acetate Tow Price YoY Change

4%

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

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

0% -4% -8%

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

-12%

4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20

Acetic Anhydride Prices have Normalized

Asset Repurposing

Acetic Anhydride Price (RMB$/tonnes)

• ✓ Celanese and Eastman are repurposing manufacturing

• capacity from acetate tow to new products.

• ✓ Celanese and Eastman are also pursuing growth opportunities in textile and nonwoven applications.

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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

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Claiming More Market Share

Spinning Grade Cellulose Acetate

Capacity Expansion to Support Our Growth

5-Year Targets for Capacity Growth

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26,000
22,000
21,000
17,000
15,000
13,000
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2019
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2020

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2024E
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Acetate Tows Acetate Flakes

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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.

• Key Target Markets

• • Egypt • Syria • Iran • Tunisia • Turkey • Thailand • Algeria

32

Staying ahead of Industry Trends and Developing New Revenue Sources

Biodegradable cigarette filters

Biodegradable cigarette filters Acetate film for agriculture Biodegradable cellulose acetate film • Sun houses for agriculture Other plastic • Heated tobacco Agricultural and consumer packaging products products to meet EU requirements

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

• Agricultural and consumer packaging to meet EU requirements

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• Diaphragm membranes for lithium batteries.

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Heated tobacco products

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

Biodegradable flakes for other products

• Recyclable straws

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• Recyclable Facial Masks

• Other Non-Woven Products

• Hair Dye and Hair Color Products

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Biodegradable Cellulose Acetate Products Markets Are Growing Rapidly

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

✓ The applications of biodegradable cellulose acetate products are:

Cellulose Acetate Film Cellulose Acetate Fiber Cellulose Acetate Sheet Food Packaging Apparel Premium Eyewear

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Spherical Cellulose Acetate Particles Personal Care Products

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✓ 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 Global Polyester Staple Fiber Market US$89bn US$27bn

Global Food Plastic Packaging Market

US$125bn

Microplastics in Personal Care Products:

Toothpaste, Shower Gel, Shampoo, Cleanser, Facial Masks, Sunscreen, Lipsticks, Mascara, Hair Dye, Blush, Conditioner, Nail Polish

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• TechSci Research, Fior Markets, Mordor Intelligence, Peer company IR presentations

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.

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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%

Sustain ROE in excess of 20% 04

Strategic Alliances Planting a Flag and Staking Our Claim

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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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Acetate Tow Strategic Alliances

Marketing & Distribution Strategic Alliances

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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
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✓ South America Market:

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.

✓ 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

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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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✓ Upstream:

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

✓ Downstream:

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

✓ 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.

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Plastic Grade Flake Strategic Alliances

✓ Strike Alliances with Downstream Acetate Granule and Plate Manufacturers

Thy Glory, JINLIANG, and TALY are cellulose acetate plate and granules manufacturers. All are downstream customers of Acetek’s plastic grade acetate flake.

✓ Access to Tier 1 Suppliers to Luxury Optical Frame Brands

LA/ES is a strategic partner of Acetek. It supplies cellulose acetate plates to Luxottica and Safilo, who between them hold a dominant market share for all luxury optical frame brands. Luxottica’s share amongst luxury optical frame and sunglass brands is 80%. Safilo is the No. 2 player.

✓ Order Commitments

70% of granules Taly buys are made from Acetek flake.

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Plastic Grade Plastic Colored
Optical
Diacetate Acetate Plastic
Frames
Flake Granules Acetate Sheet
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Jinan Acetate
Ken Chen
Chemical
Owner of Thy
Listed Entity
Glory Limited
20% 80%
JINLIANG Acetek Chemical
LA/ES
Acetate (Hong Kong)
Investment
Acetate Plates Acetate Plates
Holding Company
Manufacturer Manufacturer
for ELEUNG
25%
ELEUNG Limited
20% (Hong Kong) 55%
Parent Company
of Acetate Plates
Factory
100%
TALY Plastic
Extrusion
Acetate Plates
Manufacturer
40
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ESG
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Raw Material Reuse & Recycling, Developing Greener Products

1 Developing Eco-Friendly Products

Developing EcoFriendly Products

• Biodegradable products

• Recyclable products

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Improving Waste Management

2 Improving Waste Management

• 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 44
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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 (%)	YoY (%)	YoY (%)	YoY (%)	YoY (%)
							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

Gross Margin	27.5%	27.6%	24.4%	24.2%	31.0%
Operating Margin	16.8%	16.5%	11.9%	9.3%	18.0%
Net Margin	18.4%	18.1%	9.8%	12.9%	15.2%
ROE	25.1%	21.2%	13.3%	18.4%	27.0%

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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

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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.

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Appendix

Cigarette Markets

Global Cigarette Market By Region

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

Cigarette Markets

2017 Cigarette Retail Volume, By Country (In Billion Sticks)

2018 Cigarette Retail Volume, By Country (In Billion Sticks)

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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
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Source: Euromonitor

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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