Nan Pao Resins Chemical Group 4766 TT

Investor Presentation

Integrity Teamwork Innovation Efficiency

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Executive Summary

We are a professional manufacturer of adhesives for athleticfootwear, and a leading Asian supplier of chemical resins forspecialty adhesives, coatings and construction products.

We excel at providing a customized total product solution toour clients, including precision resin compound engineering andsophisticated spraying, automation & application support.

During the past decade, we broadened the horizons of ourR&D efforts, looking beyond OEM client needs to the materialsscience-based products that would be required by theconsumers of the future.

A rich pipeline of new products is emerging from our R&Dwork, which we expect will usher NanPao into its next stage ofsustained, robust top and bottom line growth.

南寶的終端客戶

Ticker 4766 TT

Revenue NT$14.6bn in 2017

基本概覽

Sales Breakdown by BU

47.3% 41.7% 44.5% 46.4% 40.9%

35.2%30.7% 30.7% 30.6%

33.2%

15.2%

12.7% 12.8% 12.5% 12.5%

2.3%15.0% 12.0% 10.5% 13.4%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017

Footwear AS Coating Construction & Other

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Agenda

NanPaoCore

Values

NanPaoCore

Values

A World Class

Chemical Materials Supplier

A World Class

Chemical Materials Supplier

Rising BOM Ownership

Rising BOM Ownership

Rich New Product Pipeline

Rich New Product Pipeline

Health Financial

Performance

Health Financial

Performance

NanPao Core Values

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NanPao Core Values

NanPao began its existence as a family-friendly Tainan-based enterprise where management and staff work & spend leisure time together, succeeding with a strong work ethic and a strict eye on cost control.

While the above values are still important, NanPao has shifted its management orientation to growth and dynamism, driven by the core values of innovation, passion, accountability and delegation of responsibility.

Management has placed a strong emphasis on board, C-Suite and staff Code of Conduct, encouraging legal, safe and just behavior, plus avoidance of conflicts of interest. The code states ‘Ethical behavior is the key nutrient for business growth.

The major shareholders of the group have established a clear shareholding structure. The management team has also established succession plan and system for professional operators.

NanPao cares about long-term shareholders and maintain a stable dividend policy.

A World Class Chemical Materials Supplier

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Industry Characteristics

High Value Added Chemical Resins are an Attractive Market Segment

*Limited Cyclicality – Adhesives and coatings are direct inputs into downstream consumerdiscretionary and consumer staple products, offering greater opportunity for differentiation andvalue-add than for middle and upstream chemical producers.*Secular Trend Towards Urbanization – growing middle class in emerging market countries,moving to and living in cities and increasingly buying manufactured goods.*APAC region is the fastest growing user of adhesives globally*Consolidation: Larger players are taking advantage of industry fragmentation to buy entry intoproduct groups and geographies.*Opportunities for Growth – The Global Adhesives market was roughly US$45bn in 2017, andis projected to grow at 5% annually over the next five years.

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MEK Vinyl AcetateEmulsion

Chloroprene rubber Butyl Acrylate Adipic acid HDI Vinyl Acetate

2017 & 2018 Average Price

2017Average price

2018Average price

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Adhesive Fundamentals

Increase 21.7%

Increase 12.6%

Increase 7.2%

Increase 15.3%

Increase 7.6%

Increase 7.5%

Increase 31.1%

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NanPao Competitive Edge

Tier One Know-How:We are involved at the design-in stage with Tier 1 athletic shoe producers, producing purpose-engineered resin adhesives, and advising on application, automation and spraying technology. In thefragmented adhesives market, these skills give us an edge over smaller, cost-focused players whocompete with us in other product segments.

Customized & Localized Total Solution:Precision resin engineering capability at the local level combined with sales technicians with deepcustomer knowledge allow NanPao to provide an integrated and specialized customer solution in allcore geographies it competes in.

High competition threshold:Our products are certified for long-term reliability and durability, and the competition threshold is high.

New Geographies

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Products and Application

Resins and Adhesives Coatings Construction Materials

1987 Thai Nan Pao

Resins Chemical

1984Began production of waterproofing sealer

1983 Licensed production of Ripolin powder coating

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1999Established Nan Pao

Resins Vietnam

1997Nan Pao

Resins India Pvt

1992 China: Established

Dongguan and FuqingNan Pao Resins

1991P.T. Indo Nan PaoResins Chemical

2005 Nan Pao divided

into 3 business units

2004China Expansion: Nan Pao Resins

Fo Shan

1973Co-op with Hoechst

AG to produce Water-based resins

1971 Est. R&D Center1965

Footwear Adhesives

1963Founded by Dr. Huang

2008 Formal Entry into

Construction Materials Business

International Expansion

New Product Development

Company Milestones

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Our Geographic Reach

Distribution Hub

Factory

Sales Office

Los AngelesNew York Spain Italy

MEA

SA

China (Foshan, Hong Kong,Dongguan, Fuqing)

IndiaTaiwan

Thailand Vietnam

Indonesia & Singapore

Australia

Peru

Chile

Mexico

Brazil

Rising BOM Penetration

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提升BOM的滲透率

鞋面 BOM的34% 12億美金

接著劑 2%6千萬美金

大底 5%1億6千萬美金

Innovative core technology from 2% shoe rubber to 48% shoe material

2%

48%

50%

鞋膠 鞋材(鞋面+中大底) 加工製造費用

Upper 34% of BOM

Adhesive 2%

Midsole 9%

Outsole 5%

Aiming to Claim up to 48% of Athletic Shoe BOM

Glue for shoesShoe Material ( Upper + Midsole & Outsole )Manufacture fee

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Broad, Innovation-Based R&D

Future Lifestyle

Consumer Needs

Industry & Brand

• ZDHC compliant*• Organic-based• Industry 4.0

• Lightweight• Abrasion resistant• Moisture-wicking

• Automation & Reduced Labor Input

• Speed Factories• Reduced RM Usage

Several years ago, we shifted our R&D focus to an integrated, forward-looking approach, from a passive approach.

*See: roadmaptozero.com

Sustainability

Automated & Speed Factories

Materials Requirements

Goal: Reduce # of Shoe Components, Raise Performance

NanPao Solutions: Unisole replaces mid-sole and

outsole. Enhanced shock absorption,

abrasion & slip resistance High shock absorption pad insert Ability to vary upper appearance

(color, ribbing, etc.) using the same compound

Goal: ZDHC

NanPao Solutions: Industry 4.0, Water-based

adhesive primer & cleaner, 100% solid-contained (no VOC)

PUD、PUR Organic/Bio content > 30% Recyclable TPV/elastomer Eco-leather uppers

Goal: Less chemical and energy use, less labor, less steps

NanPao Solutions: Automatic sprayed PUR Upper materials with lower

thermal melting points Primer-free materials Enhanced bonding properties &

one-side coated sole 3D Printing elastomer/foam

The Future of FootwearNanpao is working with supply chain players, OEM and Branded Footwear producers to

produce compounds for the shoe factories of the future.

Note: See Glossary of Terms for definitions of abbreviations

How We Will Reach Our Targets

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Organic Growth Innovation Acquisition

Channel or MFG players in targeted areas for Geographic expansion – US, EMEA & India

Target young companies with new & green technologies.

Horizontal & vertical extension of existing business lines

Spend 2-3% of sales on R&D

Systematic search to apply existing core technology to new product opportunities.

R&D team composed of polymer experts with knowledge beyond resins

Extend market reach in GC and SEA for existing core products

New Geographies: EMEA, India & The Americas

New products from ongoing R&D.

Rich New Product Pipeline

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New Product Pipeline

Growth Drivers

Advanced Materials for

Footwear Carbon Fiber

Composites

PSA for Electronic

Film

Construction Materials

Insulating Glass

Sealant for Doors & Windows

Non-Woven Product

Adhesives

Water-based

Industrial Paints

Flexible Packaging Adhesives

Water-Based Nano

Coating

Several products are emerging from our R&D pipeline, with strong potential to propel Nan Pao to another period of high growth over the next five years.

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Carbon Fiber Composite

Note: CFRTP = Carbon Fiber Reinforcement Thermoplastic, a competing product

Product Attributes*Proprietary formable thermoset carbon fiber composite material*High strength, self-curing, lightweight, fire retardant, halogen free and solvent free

Orders and Certification*Certified: Laptop A Cover, Global Brand *Advanced Certification: Handset back cover, 2 Top 5 Chinese Brands *Initial Certification: Automobile, Center interior ‘B’ Pillar

Prospects*Revenues: High*Margins: High

Risks*Raw material price increase*CFRTP cost falls

*Facilitates wireless handset charging – no metal content *Other applications: shoe support plates, audio speaker, motorcycle helmets & components

Other

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Nano CoatingProduct Attributes*Water-based and no heavy metal content*Exceeds electro-plating for hardness, and for resistance to abrasion, salt spray, etc. *No pollution to air/water*Diverse color choices

Certification: *Advanced: Laptop PC back cover and keyboard frame, Global Brand, scale shipments possible in 2019.*Initial: Plastic handset back plate, Chinese brands *Initial: Aluminum handset back plate, Global Brand

Prospects*Revenues: High*Margins: Above-average to High Risks

*Higher initial material cost for some applications*Installed electro-plating base of some casing producers.

*More stringent waste-water regulation in China is positive for demand.*Initial VOC of 8% vs. 35-40% for solvent-based coatings. *3% VOC after baking vs. limit of 15%.*Lowers end-to-end cost for coating plants.

Other

The scale of the Global Electro-Plating Market was US$15.0bn in 2017

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Biomaterial Technology

• Input for PU/EVA Foam: Applications are insulation materials for construction, protective packaging, surfboards, etc.

• Lightweight sandwich panel for construction and building-use.

• Our client is using the pictured mid-sole to seek certification with top athletic shoe brands this year and next.

• Samples sent to mattress cushion and bicycle saddle producers

• 90% of the 3.5bn athletic shoes produced annually use EVA-based midsoles

• Our additive provides a cost advantage, enhances support and shock absorption, and is VOC free

• Combines wood and pulp by-product with PU or EVA – up to 20% by volume – to increase organic content

Biomaterial Attributes

Certification & Other Key Points

Other Product Applications

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High Performance PSA

• We aim to gain a 5%+ market share for polarizer-use PSA within 5 years.

• We have recently been certified by two Chinese polarizer manufacturers

• Certification is in process with the China-based plant of the largest Taiwan-owned producer of polarizers

• Global polarizer production is dominated by Japanese and Korean producers, who use domestic sources of adhesives.

• Chinese LCD and Touch Panel producers have prioritized domestic production of polarizers

• The size of the global market for polarizer adhesives is US$280m

• New purpose-built, high performance PSA plant with automated reactor recently completed

• Most promising application is use in polarizers. Gross margin outlook for this application is attractive.

• Adhesives for Optically Clear Adhesive films is potentially a bigger market, but will be slower to develop.

Key Points

Market Fundamentals

Prospects

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Additional Growth Drivers

Construction Materials

• Have spent last 5 years training sales and application team for ASEAN mkt

• Focus products are high strength non-shrink grout, fireproof grout & fast curing waterproofing membrane

Water-Based Industrial Paints

• To reduce VOC emissions, the China Gov’t is pushing for less use of solvent-based coatings

• We have strong sales and R&D capabilities in WB industrial coatings

• Focus applications are furniture, wood coatings, window shadings and metal materials & goods

Non-Woven Adhesives

• China Diaper Adhesives market is US$230m

• Our clients are Tier 2 & 3 players

• We are using our innovative high wet strength and ultra soft adhesives to target Tier 1 brands

Flexible Packaging

• New product area for NanPao

• Revenues small, but growing fast

• Targeting the Tier 1 customers of our global peers in each segment with ‘me too’ and ‘me too +’ adhesives

• Applications are drinks, snacks, shampoo, detergent, etc.

Insulating Glass Sealant for Doors

& Windows• US$150m market in

the US for IGS• Silicone used in

90%+ of China’s RMB 6bn window & door sealant mkt

• We are co-operating with Asian-based equipment makers to introduce Hot Melt IGS windows & doors into China

Financial Performance

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Financial Performance

Year 2015 2016 2017 2018-Q3

Revenue 14,421,835 14,473,785 14,615,008 11,755,738

Gross Profit 4,280,863 4,608,708 3,922,991 2,752,104

Operating Profit 1,620,404 1,856,204 1,192,972 618,395

Income before tax 1,546,897 1,882,358 1,160,753 746,006

Income after tax 1,089,949 1,391,063 917,003 557,174

EPS (NT$) 10.59 13.32 8.22 4.86

Summary

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Advantages Vales Vision

• Focus on specialty chemicals and materials

• Committed to provide high value-added products, services and solutions

• A world-class corporate with high regard to sustainability and giving back to society

• Total solution provider• Less immune to

economic cycles• Core material supplier• Extensive and innovative

research

• Established more than 50 years and has established a good reputation and stable customer base

• Rich product pipeline to meet customers' needs for different purchases purpose and from different customer groups

• Solid R&D and business team

Appendix

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2013-1H17 Balance Sheet

Glossary of Key Terms

HMA – Hot Melt Adhesive: In industrial use, hot melt adhesives provide several advantages over solvent-based adhesives. Volatileorganic compounds are reduced or eliminated, and the drying or curing step is eliminated.

PSA – Pressure Sensitive Adhesive: Pressure-sensitive adhesive (PSA, self-adhesive, self-stick adhesive) is adhesive which forms abond when pressure is applied to marry the adhesive with the adherend. No solvent, water, or heat is needed to activate the adhesive.PSAs are usually designed to form a bond and hold properly at room temperatures.

PUD – Polyurethane Dispursions: These adhesives are fully-reacted, linear polymers that are emulsified and dispersed in water. It is aconsidered a green compound, as it does not require solvents to cure and has very low or no VOC.

PUR – Polyurethane Reactive Adhesive: These adhesives are capable of curing by absorbing the moisture in the air. It is a considereda green compound, as it has very low or no VOC. Hot Melt Adhesives are a type of PUR adhesive.

Tm – Melting temperature

VOC – Volatile Organic Compounds: Compounds that have boiling points roughly in the range of 50 to 250 degrees Celsius. VOCs areregulated by law, especially indoors, where concentrations are the highest. Harmful VOCs typically are not acutely toxic, but havecompounding long-term health effects.

TPU – Thermoplastic Polyurethane: Thermoplastic polyurethane is any of a class of polyurethane plastics with many properties,including elasticity, transparency, and resistance to oil, grease and abrasion. Technically, they are thermoplastic elastomers composed ofhard and soft segments.

ZDHC: The ZDHC Roadmap to Zero Programme takes a holistic approach to tackling the issue of hazardous chemicals in the globaltextile, leather and footwear value chain. To learn more, see roadmaptozero.com.

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R&D Focus

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Disclaimer

•The information contained in this confidential document ("Presentation") has been prepared by Nanpao Resins Chemical Group (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.

Thank You!

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