SPC — Investor Presentation 2018

Dec 25, 2018

Success Prime Corporation(2496)?Presentation
2018/12/25

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Company Profile

Company Overview Establishment	Parent Company: Success Prime Corporation (2496:TPE), ?established in 1991 100% wholly-owned subsidiary: Chen-Li Educational Group, ?established in 1982
Chairman	Mr. Chen Shi-Feng
Number of Employees	500 Employees (employees of education department included)
Paid-up Capital	NTD 174,594,000
Major Service Items
	Tutoring Branches: Taiwan (Senior High Division 12 branches +Junior High Division 14 branches + Elementary Division 5 branches); China (Consulting Management: Junior High Division 5 branches)
Optical Fiber Manufacturing Industry &
K-12+1 complete Educational e-Learning Platform

POFC & Chen-Li Educational Group

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Summary of Optical Fiber Business Unit
POFC & Chen-Li Educational Group

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Milestones of Optical Fiber ?Business Unit

In 1991, Dr. Xiang Heng-Tai returned to Taiwan from the U.S. and established “POFC”, the abbreviation for Prime Optical Fiber Corporation, in Hsinchu Science Park?In 2000, joined American 3M Company’s Fiber to the Desk (FTTD) Strategic Alliance
In 2002, the company was listed (shares) on Taiwan Stock Exchange(TT: 2496)
In 2007, Bendsafe® optic fiber is selected as Intel’s Light Peak demo in the U.S.
In 2009, small outside diameter hard coated fiber optic was certified by Taiwan National Space Organization and was applied on space satellite
In 2012, BendSafe® shaft-less carton-pack fiber optic cable passed Chunghwa Telecom  product certification
In 2012, joined Cheng-Gong Group and renamed “SPC”, short for Success Prime Corporation
In 2015, filed for project “research and development of high-energy noise-like pulse fiber laser and its application to material processing”, an University-Industry Collaboration program launched by Science Park, and obtained funding for R&D University-Industry Collaboration issued by Hsinchu Science Park Bureau, Ministry of Science and Technology
In 2016, Niche product, hard coated invisible fiber optic cable, entered Chinese market
In 2017, entered consumer market of optical fiber for audio and video transmission
In 2018, became the member of “A+ Industrial Innovation R&D Program”, Industrial Development Bureau, MOEA, and engaged in inventing laser high-energy pulse optical conductive fiber to meet the demands of semiconductor field

POFC & Chen-Li Educational Group

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Operating Areas of Optical Fiber Business Unit

Prime Success Optical Fiber Business Unit

Downstream
Fiber Optic Cable/Devices and Parts
Upstream Raw Materials
Midstream
Optical Fiber Drawing
Upstream Preforms
Indoor cable manufacturing
outdoor cable manufacturing
Fiber jumper wire assembly
Single mode optical fiber preform
Multimode optical fiber preform
Specialty multimode optical fiber preform

Single mode optical fiber
Multimode optical fiber
Specialty multimode optical fiber
Quartz tube(bar)
silicon tetrachloride
Germanium tetrachloride
Acrylic coating materials

Fiber core: SiO2+GeO2?purity 99.9999%
Fiber-optic structure and material composition

chemical equation for manufacturing optical fiber is as follows：
SiCl4 + O2 = SiO2 + 2Cl2

Cladding: SiO2
purity 99.9999%(n2)

Primary coating: acrylic resin

Secondary coating: acrylic resin
POFC & Chen-Li Educational Group

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Features of Special Fibers Produced by Prime

Since traditional optical fibers are developed particularly for long-distance trunk, the coating of the optical fibers only applies acrylic as its protective material. Therefore, the protection of fiber bending resistance and service life of the machine is significantly insufficient for the needs demanded by the market development of consumption pattern and industrial automation .
The glass surface of Prime’s HSF hard coated fiber is cladded in a layer of special material which enables fiber’s  flexing resistance, together with the service life exceeding more than 10,000 times longer than the traditional optical fiber. Its value is recognized highly by premium customers.
Following is the comparison between the fiber-optic structure of the two:

Special coating materials

POFC & Chen-Li Educational Group

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Applied Field of Special Fibers

The level of specification standards and product similarity of communication optical fibers are relatively high with less profitable space. Prime Success takes aim at other niche applications and exploit blue ocean market through expanding consumer demands. Meanwhile it is required that our business should act according to nation’s 2025 industrial development orientation.
Automation Application
Green Energy Technology Application
To generate the lights of the sun based on the principle of light concentrating and introduce optical fiber for transmitting to anywhere that needs light after the special cooling treatment is conducted. Not only is the system applicable to tunnel, underground parking, factory, office and home environment, and etc., it can also make contributions to the natural environment suitable for plant growth: organic vegetable garden use, for instance.
In terms of modern automation application, industrial robot has become one of the most indispensable tools. Along with the tasks assigned to robots’ getting more and more complicated, the transmission volume of the relevant signal control continues to increase. The demand for exclusive highly flexible and bendable fiber signal cable thus grows more intense than ever.

Biomedical Product Application
Defense Industrial Product Application
Ever since the invention of German army’s V2 missile during the Second World War, gyroscope has become the critical part of missile, with its accuracy constantly raised. Compared with electromechanical gyro or laser gyro, fiber optic gyro owns the advantages of optimum precision, stability, and anti-interference capability. Fiber optic gyroscope is widely applied in aerospace industry and military fields. Today many countries are competing to involve in developing the technology.
Ever since the integration of Chinese traditional treatment into modern medicine, health medicine including phototherapy has brought human beings more and new approaches to health care and medical therapy in addition to medication, surgery, electrotherapy, and biochemical treatment. Optical fiber is a transmission medium of light, and Prime Success is going to play an important role in fabricating minute optical fibers with stronger flexing resistance.

POFC & Chen-Li Educational Group

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Influence Brought by 2018 China-United States Trade War

| Customs Tariff |
| --- |
| 0→25% |
| 0→10% |
Along with the rapid development of 5G technology in Chinese during the recent years, information and communications industry has become the core of this time’s China-United States trade war. Enterprises with the industry including Huawei and ZTE Corporation have recently become the main targets suppressed by the U.S.
United States Department of Commerce imposes a 25% punitive tariff on optic fiber and optical cable products exported by China, which causes a great decrease in the exports of single mode optical fiber produced by Chinese dealers to America. The price of single mode optical fiber within the boundary of China has begun to collapse.
Prime has shifted its focus to the development of high value-added specialty optical fiber products since many years ago. Thus the 2018 China-United States trade war has only had a marginal impact on our company.

POFC & Chen-Li Educational Group
Source of information: United States Department of Commerce, China Fortune Land Development Co., Ltd.

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Summary of Education ?Business Unit

POFC & Chen-Li Educational Group

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Organizational Structure of Educational Business Department in Greater China

The increasing demands for educational services are promising in Greater China by and by. Hence we acquired Chen-Li Educational Group (shares) 100% shareholder rights by piecemeal in 2016 and 2017.
Prime?2496:TPE
Educational business has become the main force of the group revenue
100% shareholding
Chen-Li Educational Group (Taiwan)
100% shareholding
Chen-Li Educational Consultancy (Xiamen)
Senior High Division: 12 branches
Junior High Division: 14 branches
Elementary Division:
5 branches
Management Consulting:
Junior High Division: 5 branches
About 6 thousand students-time in China
About 30 thousand students-time in Taiwan

POFC & Chen-Li Educational Group

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Prospect of Chinese Education Market

In 2018, the integral scale of Chinese education market has reached up to RMB 2.68 trillion, and will most likely to attain 3.36 trillion in 2020. A compound annual growth rate (CAGR) of 25% is estimated.
Among all, online e-learning only accounts for a portion of 10% of the overall education market for that offline education is still the mainstream, with K-12 being the maximum class interval.
POFC & Chen-Li Educational Group

Source of information: 2018 Deloitte Analytics Institute (DAI)

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Development Strategy – Set up Taiwan K-12+1 Educational e-Learning Platform

Physical education service
Digital education service
First phase: early childhood, preschool, the first and second year of primary school
Second phase: the third and fourth year of primary school
Third Phase: the fifth, sixth and seventh year of primary and junior school

Forth Phase: the eighth and ninth year of junior school, the first year of senior high school
Fifth Phase: the second and third year of senior high school, calculus for freshman (first year of college)

downward vertical integration from senior high school

Elite Institute for Pupils

Chen-Li Education Junior High Division

Current Major Business

Chen-Li Education Senior High Division

POFC & Chen-Li Educational Group

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Operating Areas of Educational Business

Cross-strait online to offline all-subjects education
Chen-Li Education Comprehensive Platform

Zhang-Yang Physics
Cloud Institute
Chen-Li Mathematics
Elite Institute
Peter’s English
Tang-Yu Physics
Li-Zhe Chemistry
Liyan Chinese
The average number of subjects done by each student at a time is 2.5
Senior High Division
Junior High Division
Elementary Division
Xiamen
12 Branches in Taiwan: 7 branches in Taipei, 1 branch in Hsinchu, 2 branches in Taichung and Fengyuan, 1 branch in Chiayi, and 1 branch in Tainan
14 branches in Taiwan?(with 3 branches added in 2018)
5 branches in Taiwan?(with 4 branches added in 2018)
Management consulting
5 branches (Junior High Division)
POFC & Chen-Li Educational Group

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Chen-Li Education – The Number One Brand of  College Entrance Exam Preparation in Taiwan

Chen-Li is no more just a distinguished teacher but an education brand that has even extended to Chinese market
The number one brand built on 30 years of persistence

From Chen-Li Math to Chen-Li Education, 30 years has passed since the establishment of our brand. We conduct direct tutoring school specialized in all-subjects of the 12-year basic education curricula for junior and senior high students. Our branches can be found throughout the country including Taipei, Hsinchu, Taichung, and Tainan. By instructing professional subjects like mathematics, English, Chinese, physics, and chemistry, we have become the number one brand of supplementary education for college entrance exam preparation in Taiwanese market.??To “Chen-Li Education”, brand value is a kind of educational responsibility and commitment. The quality and effectiveness of the courses we design and plan is promised, and this is the praise and reputation we have gained and accumulated from the support and affirmation given by our students and their parents. What “Chen-Li Education” takes is no more just a single class listed on the course schedule. We expect to proffer our students a unique sense of learning value, which is also the “brand value” we hope to establish.
POFC & Chen-Li Educational Group

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Achievements – the Practitioner of Flipped Education

Chen-Li has tutored 420 rural children under the age of 12 and has obtained 1,157 medals awarded by International Mathematical Olympiad in total.

the overview of the number of awards won by rural children

| | Gold Medal | Silver Medal | Bronze Medal | Special Prize |
| --- | --- | --- | --- | --- |
| Cumulative Number | 90 | 280 | 307 | 480 |
POFC & Chen-Li Educational Group

Statistics gathered until: March 31st, 2017

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Strengthen Service Level via Digital Instructional Tools

After completing registration procedure at Chen-Li, we will offer clicks-and-mortar service aiming at all chapters from senior high school curriculum. Students are allowed to review or listen again to synchronous concept teaching or exercise explanation by scanning the QR-Cod upon entering index codes on their smart phone, tablet PC, or personal computer at home after attending class at physical tutoring branch. The service which breaks up the limitation on distance enables every student to experience the atmosphere and super competitiveness at the entity point and to instantaneously enjoy video and audio learning at the same time. Initiated by Chen-Li, we are the first, the one and only in the country.

Only Chen-Li can be that attentive
National chain, expert in navigation, digital integration, innovative service

POFC & Chen-Li Educational Group

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Enhance Student’s Learning Experience and Effects via Individualized Services

Chen-Li’s online service platform APP provides convenience to students and builds up parents’ confidence. You can download Chen-Li Education APP via mobile phone of tablet PC and read information on all of our branches. You can also check student’s attendance, test scores, personal messages, and other relevant information such as the timetable of a certain branch upon logging in. The most user-friendly interface with the most complete function, Chen-Li is the one and only in the country!

Chen-Li’s online service platform APP provides convenience to students and builds up parents’ confidence.
Being the Country’s First, Chen-Li is the One and Only !
POFC & Chen-Li Educational Group

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Past Business Performances
POFC & Chen-Li Educational Group

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Key Financial Indicators Review

The percentage of revenue and education business progressively rises after Prime Success transforms into an educational business group.
NTD thousand dollar

Chart

Category	Education BU%	Optical Fiber BU%
2017Q1-Q3	0.742	0.258
2018Q1-Q3	0.773	0.227

Chart

Category	list-co revenue
2017Q1-Q3	578303.0
2018Q1-Q3	675523.0

2017-2018 Prime Success’s consolidated revenue of the corresponding period
2017-2018 the change in the percentage of department revenue
POFC & Chen-Li Educational Group

Source of information: 2018 Prime Success’s consolidated financial statement of the 3rd quarter

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Let Our Investors Share the Prosperity

Unit: NT$ thousand dollar

	For 2012	For 2013	For 2014	For 2015	For 2016	For 2017
Revenue	228,743	151,927	108,213	145,854	218,525	822,409
Net Profit	16,529	(25,952)	(88,365)	(28,679)	33,715	157,366
EPS (Earning Per Share)	0.46	(0.69)	(2.32)	(0.64)	2.74	9.31
Distribution Yield（Cash + Stock Dividends）	0	0	0	0	3.0	7.0
Proportion of profit paid %	0%	0%	0%	0%	109%	75%

POFC & Chen-Li Educational Group

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A fertile land that waters knowledge, innovation, and profession while cultivates seedlings into giant trees. We expect to nurture and bring up children of ability as if foresting majestic mountains.
We heartily welcome and invite you to join us!

End of Presentation。Thank you

Q&A
POFC & Chen-Li Educational Group

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