AIDC — Investor Presentation 2017

Nov 22, 2017

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Investor Conference

Accountability Innovation Dedication Customer Orientation AIDC

Aerospace Industrial Development Corporation Presented by: Nan-Juh Lin, President Date: November 23, 2017

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Contents

I. Global Market Outlook II. Business Status III. Endeavors & Prospects

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I. Global Market Outlook

1. Attractiveness of Taiwan aerospace industry Based on 2017 “Aerospace Manufacturing Attractiveness Rankings” report released by PwC ranked Taiwan sixth within the top ten countries ranked highest for aerospace attractiveness.

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Note: The calculation of country rankings combined a total of 33 metrics into seven categories: cost, labor, infrastructure, industry, geopolitical risk, economy, and tax policy.

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I. Global Market Outlook (cont’d)

2. Defense Industry

New Generation Fighters

Performance Logistics & Upgrade Maintenance

• • • Aircraft Aircraft Modification Commercial

• •

• Development Service Life Maintenance

• • Co-production Extension • GOCO

《 Ratio of defense spending to government general budget 》

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% of budget
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Defense Spending (NT$100M)

15.72% 16.11% 15.94% 15.60% 16.10%

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Source: Directorate General of Budget, Accounting and Statistics, Executive Yuan, R.O.C., AIDC compiled

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I. Global Market Outlook (cont’d) 3. Commercial Aviation Industry Boeing Airbus Bombardier The Next 20 Years The Next 20 Years The Next 20 Years (>30 seats) (>100 seats) (60~150 seats) New Airplane New Airplane New Airplane Deliveries Deliveries Deliveries 41,030 34,899 12,550 Market Value Market Value Market Value US$6.1 Trillion US$5.3 Trillion Billion US$820

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I. Global Market Outlook (cont’d)

3. Commercial Aviation Industry Business Jet Civilian Helicopter Aero Engine The Next 10 Years The Next 5 Years The Next 15 years (by Honeywell) (by Honeywell) (by Forecast International) New Deliveries New Deliveries New Deliveries 8,300 3,900~4,400 221,720 Market Value The Most Market Value In-Demand Area Billion US$249 Trillion US$1.2 Latin America

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I. Global Market Outlook (cont’d)

3. Commercial Aviation Industry

Backlog grew by 250% in the last 10 years. Current focus is on improving productivity and turn backlog into revenue.

《 Order backlog grew by 250% in last 10 years 》

Airbus 2,533 2007 4,988 s/s Boeing 2,455

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Airbus 6,874 2016 12,589 s/s Boeing 5,715

Source: Airbus and Boeing Official Website, AIDC compiled

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II. Business Status

1. Defense business updates

(on major projects)

� Advanced Jet Trainer and Military Aircraft Upgrade

AJT IDF Upgrade F-16A/B Upgrade

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� Military Aircraft MRO

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UH-1H Helicopter
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IDF Maintenance
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Air Force Academy A/C Maintenance GOCO

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� Military Engines

TFE-1042 Applied on the IDF F124

Applied on M346 Advanced Trainer by LeonardoFinmeccanica (Italy)

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II. Business Status (cont’d)

1. Defense business updates

� Advanced Jet Trainer (AJT) Program

(1) Contract duration: 2017-2026

• (2) Current progress: as scheduled

(3) Production Planning: Expand domestic outsourcing of full process parts and tool design and manufacture, and assist domestic suppliers in process planning and tool design review to ensure the compliance with drawings and spec., and perform concurrent engineering per engineering design progress.

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II. Business Status (cont’d)

1. Defense business updates

� Advanced Jet Trainer (AJT) Program

• (4) Material Supply

• a. In support of “jet trainer, local production” policy, AIDC held 3 supplier solicitation conventions during April 25-27, 2017, 607 persons from 332 companies were in attendance.

• b. Major systems contracts (e.g. engine, flight control computer) signed, suppliers committed to meeting maiden flight schedule.

• c. Provide assistance to domestic candidate suppliers for aerospace accreditation in order to expand supplier pool, status as below:

92 Qualified: 83 80 Suppliers Pending: 9 Suppliers Assistance in Assistance in planning process

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II. Business Status (cont’d)

2. Commercial Aviation business updates

� Airframe

(on major projects)

� Popular Aircraft

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Boeing Single Aisle 737 Marine One
Airbus Single-Aisle A320 MLG Door/ Pressurized Door Sikorsky S-92 Cockpit
Aft Belly Fairing Composite Panels
Airbus Giant A380 Boeing Dreamliner 787 Bombardier BizJet CL350
HTP Tip HT Leading Edge Empennage
� Next-Gen Aircraft
A320neo B737MAX
C-Series MRJ
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II. Business Status (cont’d)

2. Commercial Aviation Business Updates

(1) Increase revenue by expanding volume of on-hand orders and ratio of manufacture; explore composite parts and components business through connection with global aerospace market.

(2) Respond actively to the expectation of aerospace giants, improve costs and implement intelligent manufacturing to enhance productivity.

Boeing’s expectation from suppliers

Airbus’ expectation from suppliers

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Source: Boeing 2017 Supplier Summit, Airbus 2017 Global Supplier Conference, AIDC compiled 漢翔公司資料，未經許可請勿轉載

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II. Business Status (cont’d)

2. Commercial Aviation business updates

� Aero Engine

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-
Kang Shan Complex
(47.44 Acres)
Aero Engine Factory(AEF)
� Popular Aero Engine
GE Aviation Rolls-Royce
Top 2 Supplier in Asia Long-Term
Pratt & Whitney Honeywell
Supply Chain Partner
F100 HTF7000 CFM56 GE90 Trent 800 Trent 1000
� Next-Gen Aero Engine
Trent XWB GE9x
CFM LEAP-X Trent 7000
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• Popular Aero Engine

� Next-Gen Aero Engine

(on major projects)

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AIDC is a major supplier to the top five engine providers with customers in 8 countries and 18 locations.

• Major customers of defense business include RoCAF, NCSIST and ITEC.

• Major customers of commercial business include GE, Rolls-Royce, Honeywell, P&W, Safran, KHI, and IHI.

Derby, UK JAPAN Cincinnati, OH, USA FRANCE Phoenix, AZ, USA ITEC AEF/AIDC Phoenix, AZ, USA Hartford, CT, USA 漢翔公司資料，未經許可請勿轉載

AEF/AIDC

II. Business Status (cont’d)

3. Latest Development

• (1) 2017 Taiwan Aerospace Composites Forum

Given composites are widely used in aircraft design and manufacture, AIDC constructed TACC to pursue the business and organized the first composites forum in Taiwan to enable the exchange between experts from oversees and domestic suppliers.

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2017.9.22
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II. Business Status (cont’d)

3. Latest Development

(2) Developed “iAIDC Intelligent Manufacturing Platform” � Objective: Enhance productivity, quality and flexibility to reduce costs and improve competitiveness.

� Benefits: Earn recognition from international customers, and establish a leading position in intelligent and highvalue aerospace technology in Taiwan. � Implementation directions:

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II. Business Status (cont’d)

3. Latest Development

(3) 2017 Taiwan Aerospace Industry & Policy Forum AIDC received positive feedback from 2015 and 2016 forums. This year’s forum will bring together specialists and leaders of the aerospace industry to explore global industry trends in an effort to upgrade Taiwan’s aerospace industry.

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2015 Forum
2016 Forum
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Coming on Dec. 5-6

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II. Business Status (cont’d)

4. Financial Review

(1) Recent revenue

AIDC maintains military and commercial businesses in parallel development, that may compensate possible risks in either sector and help to secure steady growth.

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Unit: NT$100M
Year 2012 2013 2014 2015 2016 2017/1-10
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II. Business Status (cont’d)

4. Financial Review

(2) Income statement

Affected by exchange rate, drop in helicopter market demand and CFM56 engine being replaced by Leap engine, AIDC’s 2017 cumulative revenue saw a minor decline. Growth is expected following accreditation of Leap parts and other new products and processes.

Unit:100M NTD

ITEM	Q3	Q3	Q3	Q3	Q1~Q3	Q1~Q3	Q1~Q3	Q1~Q3
	2017		2016		2017		2016
Sales	70	**100% **	66	**100% **	194	**100% **	204	100%
Cost of Goods Sold	60	85%	57	85%	167	86%	174	85%
Gross Profit	10	**15% **	10	15%	27	14%	31	15%
OperatingExpenses	3	4%	3	4%	8	4%	8	4%
Profit From Operations	8	11%	7	11%	19	10%	22	11%
Non-operatingIncome	0	0%	-2	-3%	-4	-2%	-4	-2%
Profit Before Income Tax	8	11%	5	8%	15	8%	19	9%
Income Tax Expenses	2	2%	1	2%	4	2%	4	2%
Net Profit	6	9%	4	6%	12	6%	15	7%

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II. Business Status (cont’d)

4. Financial Review

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(3) Net Income and EPS
Net profit ： 100M NTD EPS ： NTD/Share
30 3.0
Net Profit EPS
25 2.5
2.21
2.15
1.99
20 2.0
1.37
15 1.23 1.5
10 20.29 20.83 1.0
18.72
12.89
11.57
5 0.5
0 0.0
2013 2014 2015 2016 2017Q1~Q3
Note: Denominator of 2017 EPS includes stock dividend, and retrospectively
adjusted from 2013 to 2016.
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III. Endeavors & Prospects

1. Despite unfavorable factors such as global instability, decline in the oil price and aircraft replacement transition, the aerospace industry sees a stable growth in the next 20 years with the new aircraft orders on hand.

2. AIDC will meet the challenges in 3 aspects: Achieve “Autonomous defense, Local production of our aircraft” mission; Integrate industry supply chain; and Implement intelligent manufacturing.

3. AIDC stock was selected among “TWSE Corporate Governance 100 Index” and ranked in top 20% Corporate Governance Evaluation TWSE listed company for 2 consecutive years.

AIDC has established an effective corporate governance structure to increase transparency, ensure the rights and interests of investors.

TWSE Corporate Governance 100 Index

AIDC

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III. Endeavors & Prospects (cont’d)

4. AIDC was ranked 117[th] in “2016 Taiwan’s Top 2000 Enterprises Survey” and 27[th ] in “2017 Excellence in Corporate Social Responsibility in large enterprise category” published by the CommonWealth Magazine.

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Source: Commonwealth Magazine, No. 622, May 11, 2017

5. AIDC is committed to adhering to its business creed of integrity and is dedicated to continued improvement and upgrade to be in line with the global aerospace community.

－ － Thank You

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