Far Eastern New Century (TWSE: 1402)

IR publication – April 2019

About FENC

Far Eastern New Century (“FENC”) is a publicly traded company (http://www.fenc.com/?lang=en) in Taiwan with a market capitalization of approximately US$6 billion. It’s a constituent of the MSCI ESG Leaders Indexes and FTSE4Good Emerging Index. FENC is also the flagship company of Far Eastern Group and has diversified businesses ranging from production business, to property development and investments. The production business spans the petrochemical, polyester, and textiles businesses.

Regarding its production business, FENC aims to expand its green material business by increasing its scale of recycled products. After expanding its capacities in Taiwan and Japan, FENC has become one of the world’s largest post-consumer recycled polyester producers. With high quality and speed to market, FENC’s products have been accepted and adopted by well-known global brands including Coca-Cola, Nike and Adidas.

FENC is a global top-three PET producer in terms of capacity and the leading PET producer in Asia. Currently, FENC has production sites in Taiwan, China, and Vietnam. From an Asian producer to a global producer, FENC grew via organic and inorganic growth, including asset acquisitions in the United States in 2018. FENC’s strategy is to strengthen its position as a leading polyester producer by maintaining long-term client partnerships, upgrading its product mix and enhancing research and development capabilities.

Currently FENC has total investment properties of 200,000 pings (662,000 square meters) in Taiwan, the majority of which are located in prime areas of northern Taiwan. The Taipei Far Eastern Telecom Park (Tpark) project in Banqiao, New Taipei City is one of FENC’s development priorities.

The majority of the Company’s investment portfolio is listed companies on the Taiwan Stock Exchange with proven track records, including Asia Cement Co., Far EasTone Telecommunications Co., Far Eastern International Bank, Oriental Union Chemical Co., Far Eastern Department Stores Limited, and Everest Textile Co. Limited, thus providing the Company consistent dividend and investment income each year.

1 Table of Contents

• Company Highlights

• Company Overview

• Strategic Summary

– Production business strategy

– Property development plan

– Dividend policy

– CAPEX

• Financials

• Recent Achievements & CSR

2 Company Highlights

• A constituent of the MSCI ESG Leaders Indexes, FTSE4Good Emerging Index & TWSE CG 100 Index

• Consistent Dividends Payout (refer to page 18)

• Management Efforts on the Production Business (refer to page 7-13) • With a fully integrated polyester value chain, the combined operating margin of the Production Business turned a loss of NT$ -2.2 bn in 2012 to a profit of NT$ 3.5 bn in 2018. The turnaround in operating margin is attributable to:

− Long term client partnerships and a better product mix.

− R&D efforts: The Taiwan in-house R&D center is able to leverage the vertically integrated production line, e.g. recycled-PET, and also cooperates with well-known brand clients to customize specialty products.

− From an Asian to a global producer: FENC grew via organic growth or acquisitions in order to better service existing clients locally, such as Coca Cola, Nike, Columbia, and avoid antidumping duties imposed across borders. (refer to page 8)

− Asia’s largest recycled PET producer: FENC has invested deeply in the recycled PET industry for over 30 years. Capacity expansion starting in Taiwan then Japan to meet strong demand from the brands green missions.(refer to page 12)

• Investment Properties (refer to page 14-17)

• Investments & Others (refer to page 6)

3 Company Overview

• Year of establishment: 1954 • Employees: 32,089 • Asset allocation as of Dec 31, 2018 (Total assets: NT$ 566 billion / Book value per share: NT$ 38.0 /share)

Business Segments Production Sites Capacity (As of Dec 31 2017)

Investment Petrochemical Taiwan & Shanghai PTA: 1.58 mm tons/yr Production & Others 32% Polymer: 2.07 mm tons/yr (Including PET: 1.36 mm tons/yr Telecom) Taiwan, PSF: 494K tons/yr 41% Shanghai, Polyester Filament: 92K tons/yr Suzhou, Polyester Others Property Wuhan, 27% Japan, Nylon 6,6 filaments: 21K tons/yr Malaysia PET Sheets: 132K tons/yr PET films: 20K tons/yr

Production Recycled-PET(R-PET): 225K tons/yr

• Revenue breakdown in 2018 Yarn: 513K spindles/yr Taiwan, Knitted Fabrics: 25K tons/yr Textiles Suzhou, Industrial Fabrics: 21K tons/yr Wuxi, Industrial Yarn: 124K tons/yr Vietnam Investment Apparels: 6 mm dozens/yr & Others Various locations in Total size: 200k pings (Including Property Telecom) Production Northern Taiwan (662k sq meters) 38% 59% Telecom Integrated service provider - mobile, # of subs: 7.2 mm (As of Feb 2019) Property (Far EasTone) fixed line, ISP, etc. 3% Investment & Cement, retail, financial services…etc. Others

Company Overview 4 Strategic Summary

In 2017, 26% of the Production Business revenues is derived Monetization from green products. of Property Business

Transformation of Production Total Solution Business (Products + Services)

Go Stable Go Strategy Investment Green Global Income

Invest in the Sound Financials & Stable Dividend Policy Future

Company Overview 5 Value of Major Investments - Listed Companies

(NT$ million)

Stock code Investees Holdings Book value Market value (2018.12.31) (2019.4.2) 1102 TT Asia Cement 26% 21,972 35,628 1460 TT Everest Textile 26% 1,185 1,454 1710 TT Oriental Union Chemical 31% 6,095 7,092 2606 TT U Ming Marine 0% - - 2845 TT Far Eastern International Bank 16% 6,412 5,965 2903 TT Far Eastern Department Stores 24% 7,320 5,515 4904 TT Far EasTone 38% 29,230 91,446 Total 72,215 147,100

Note: 5,353 million shares of FENC common stock were issued and outstanding as of 31 Dec 2018.

Company Overview 6 A Leading Integrated Polyester Producer

ASIA TOP 1 WORLDWIDE TOP 2 PET Sheet Recycled-PET

WORLDWIDE TOP 3 WORLDWIDE TOP 2 ASIA PACIFIC TOP 1 PET Resin Nonwoven Polyester Staple Fiber Nylon 6,6 Filament

Production business strategy 7 Go Global: From An Asian to A Global Producer

• FENC’s production sites: Taiwan, China, Vietnam, United States, Japan and Malaysia.

• New expansion plans via organic growth or acquisitions:

New Capacity Starts Nameplate Capacity Location Unit Commercial Run 2017 2018 2019(E) 2020(E) Petrochemical PTA Taiwan K Tons/year 1,000* United States 360 PET K Tons/year Polyester Vietnam 400 R-PET Japan K Tons/year 50 Fabrics Vietnam K Tons/year 10.8 Textiles Apparel Vietnam MM Dozens/year 4

Note : * One old PTA line was phased out while the new PTA line in commercial operations, thus the net increase in capacity is 1 million tons/year. ** The Corpus Christi (CC) JV project with Alpek & Indorama is excluded in the above table. CC JV project with an annual planned capacity of PET 1.1 MM and PTA 1.3 MM tons has received FTC approval and has completed the acquisition on 28 Dec. 2018 (EST). Each party has the right to off-take one-third of the capacity and to source its feedstock independently.

Production business strategy 8 Total Solution (I) : Close Customer Partnerships

Production business strategy 9 Total Solution (II) : From Reaction to Creation

• What’s changed? Before: One way communication clients decided materials – Marketing to brands directly: 1) Pull-through strategy: to anticipate future trends by creating Many Many innovative filaments Push fabric clients apparel clients 2) “FEX”: FENC’s B2B total solution Brands Filaments brand  Award winning innovations provider raised its profile amongst brands. fabric apparel – Scale-up of the downstream capacity: Vietnam expansion project is to fill the gap in limited fabric & Currently: Two way communication partnership with brand clients apparel capacity

(Capacity) Fabric clients Apparel clients Pull Fabric Filaments Brands provider Apparel

New New fabric apparel capacity capacity

Production business strategy 10 What Differentiates FENC from Peers?

• Vertical integration: the only producer manufacturing from raw material PTA to providing total solution services to brand clients

• Award winning innovations: modifying polymer “gene” (technology built in) by R&D team and thus producing textiles difficult for peers to clone.  Smart, functional & sustainable textiles.

• Close customer partnerships: chosen as their strategic partners by well-known brands.

Outsourced Feedstock Production Business (Smart from the Start : R&D Efforts)

Green products please refer to page 12 PET Food • Germanium (鍺觸媒) & Naphtha PX PTA titanium catalyst (鈦觸媒) Resin Packaging PET to replace antimony Polyester catalyst (銻觸媒) PET Polymer Non-food • PET heat shrinkable films Natural Packaging • A-PET (Amorphous) sheets Gas Ethylene MEG Polyester Staple Fiber • Nonwoven Non- −Low melt fibers Apparel −Hygiene Polyester • Industrial use −Airbag / safety belt Filament −Tire cord / conveyor belt Nylon Nylon 6,6 Apparel 6,6 Flake Filament TopDry®

Note: 1 Polyester = 0.83 PTA + 0.33 MEG 1 PTA = 0.67 PX + 0.03 acetic acid 1 MEG = 0.6 Ethylene + oxygen + water Production business strategy 11 Go Green: Asia’s Largest Recycled PET Producer

Post-consumer Bottles

Recycled Shredded & bricks Cleaned flakes R-PET chips

• R-PET market: Strong demand from the brands green missions

• Key milestones for brand supply:

 Green products certification:  Secure feedstock supply & add new capacity – Safe for food packaging use – Cooperation with Brands & NGOs to collect waste plastic bottles, e.g. Adidas’s “For the Oceans” program. – China’s plastic waste import ban began in Jan 2018.

R-PET Annual Capacity (K tons/year) 300 225

90 20

2012 2015 2018 2021(E) Production business strategy 12 Invest in the Future: Post Consumer Textile Recycling

• FENC® TopGreen® rTex is a world’s first that will be able to recycle the polyester from all types of post-consumer textiles, including mixed streams.

~ 70% of the ~ 30% of the polyester polyester output output

Commercial Run From Lab to Trial Run

Note: Video introduction please refer to https://www.youtube.com/watch?v=6rs5Eb2uKN8

Production business strategy 13 Land Holdings Owned by FENC

• Total land holdings: approximately 570k pings (1,887k sq meters) • Investment properties as at Dec 31, 2018: approximately 200k pings (662k sq meters)

After disposing investment properties

Gain on disposal of investment properties NT$ 125 BN (P&L)

Special reserve  Unappropriated earnings (Balance sheet) NT$ 35.3 BN

Total distributable Old Book Value New Book Value Market Value income (Market value using (After future “fair value model” under land development) TW IFRS on Dec 31, 2018)

Property development plan 14 Investment Properties – Major Pieces of Land

Banqiao Size: 85,772 pings (283,905 sq meters) Others Book value: 60~65% of investment properties Size: 9,556 pings (31,663 sq meters)

Taipei City (Note a) Size: 1,651 pings (5,465 sq meters) Tau Yuan City Size: 38,270 pings (128,441 sq meters)

Yilan (SPA resort) Size: 32,035 pings (106,036 sq meters) Taishan & Wugu Phase I plan: villa concept, around 200 rooms Size: 16,829 pings (55,704 sq meters) Hualien Size: 9,446 pings (31,266 sq meters)

a) Land holdings in Taipei City include self-use and investment properties b) 1 ping = 3.31 sq m = 35.58 sq ft Property development plan 15 Taipei Far Eastern Telecom Park (Banqiao)

A smart green campus, with sole property ownership, integrated with residential zones (for sale), commercial offices (for lease), a medical center, a college, and a hypermarket in the neighborhood

Developed area Developing area Developing area (2008-2018) (2019-2021) (after 2021)

Residential III New Taipei City Library

TPKC.D North Park

TPKA

Residential II Car Park

• Target tenants for commercial office buildings Taiwan Power South park

Property development plan 16 Development Plan

2008 - 2018 2019 and After (Planned) • No. 1 commercial office building (TPK-A) • Commercial office buildings – 11-floor building, with 2 floor underground parking lot – TPK-C (FETone IDC center) – GFA: 18.7k pings (62k sqm)  11-floor building; GFA of 10.2k pings (33.8k sqm) – TPK-D (No.2 commercial office building) – Current tenants: Amazon Web Service (AWS),  16-floor building; GFA of 17.7k pings (58.5k sqm) Ericsson, Telecom Technology Center, etc.  The combined land area of TPK C&D: 4.7K pings (15k sqm) • No. 1 residential product “California Dream” • No. 2 residential product (Residential IV-part 1) – Close proximity to the Far Eastern Hospital MRT – 27-floor building; land area of 1.5k pings (5k sqm) station – GFA (for sale): 7k pings (23k sqm) – 14-floor building, with 3 floor underground parking lot

– 2 to 4 bedrooms designed for typical Taiwan families

– Sales of phase I in 2009  GFA: 19.3k pings (64k sqm), and around 396 units  ASP at around NT$ 420k/ping (US$ 4k/sqm) – Sales of phase II in 2016  GFA: around 5.5k pings (18k sqm), or 154 units  ASP at around NT$ 553k/ping (US$ 5k/sqm)

• New A-Mart hypermarket started its operation in April 2015

Property development plan 17 Dividends Payout History

2018 Cash Dividend of NT$ 1.8 /share is proposed by the Board of Directors, and the final resolution will be subjected to AGM in June 2019.

Dividend policy 18 CAPEX – Excluding Telecom Business Segment

• Historically, the maintenance CAPEX CAPEX was covered by the depreciation expense

• Re-expansion period starting from 2010 to grow and transform

• Major new CAPEX items: From 2010 to 2015 – Production Business: PTA expansion and energy cost saving projects in Taiwan, 5-year recycled-PET expansion plans in Taiwan and Average Japan, nonwoven hygiene products in China, Depreciation: Nylon 6,6 filament in Taiwan and China. NT$ 6.6 bn – Property Business: the office building TPK-A and the entire infrastructure of the Tpark From 2016 onwards – Vietnam expansion plan: to build the 3rd production site targeting textile products and PET resins for food packaging. – U.S. M&A projects: to acquire M&G PTA & PET assets.

*Including the investment in joint operation of Corpus Christi JV project. (refer to page 8) – R-PET expansion plan: to build a new line in Japan. – Tpark: the construction of new office buildings and residential products. CAPEX 19 Key Financial Highlights (IFRS-consolidated Base)

(NT$ million) 4Q18 4Q17 YoY 2018 2017 2016

Revenues 61,467 100% 58,183 100% 6% 228,662 100% 217,847 100% 215,856 100% Profit from Operations 1,269 2% 3,374 6% -62% 14,784 6% 15,434 7% 14,537 7%

Investment Income(Equity method)-Net 1,339 2% 1,597 3% -16% 6,224 3% 4,114 2% 1,874 1% Interest Expenses-Net (660) -1% (530) -1% n.a. (2,387) -1% (2,119) -1% (2,046) -1% Gain on revaluation of investment property 76 0% (14) 0% n.a. 646 0% 1,040 0% 3,269 2% Others (82) 0% (1,158) -2% n.a. 1,788 1% (1,577) -1% (1,674) -1% Consolidated Income before Tax 1,943 3% 3,269 6% -41% 21,055 9% 16,892 8% 15,960 7% Tax Expenses (197) 0% 387 1% n.a. 2,664 1% 2,691 1% 3,257 1% Consolidated Net Income 2,140 3% 2,882 5% -26% 18,392 8% 14,201 7% 12,703 6% Attributable to: Shareholders of the Company 1,177 2% 1,632 3% -28% 12,028 5% 8,066 4% 6,308 3% Non-Controlling Interests 964 2% 1,250 2% -23% 6,363 3% 6,135 3% 6,395 3% EPS (NT$)(1) 0.24 0.32 2.41 1.61 1.26 Depreciation & Amortization 5,501 9% 5,231 9% 5% 21,104 9% 20,513 9% 19,338 9% EBITDA(Excluding FETone)(2) 9,203 4% 7,779 4% 6,034 3%

Total Assets 565,589 100% 516,766 100% 513,460 100% Total Debt 297,860 53% 261,227 51% 261,268 51% Net Interest-bearing Debt 187,471 33% 168,066 33% 160,148 31% Total Equity 267,729 47% 255,539 49% 252,193 49% Total Shareholders' Equity of Parent Company 203,535 36% 194,360 37% 190,886 37% Non-Controlling Interests 64,194 11% 61,179 12% 61,306 12% Book Value Per Share 38.0 36.3 35.7 Return on Equity 6.0% 4.2% 3.3%

Note: (1) EPS is calculated using adjusted outstanding shares (deducting treasury stock). 20 (2) EBITDA(Excluding FETone) = Profit from operations(excluding FETone) + Depreciation & Amortization(excluding FETone) Performance by Business Segments

(NT$ million) 4Q18 4Q17 YoY 2018 2017 2016 Reclassified for Presentation Purposes Gross Revenue Petrochemical 15,191 8,257 84% 47,512 30,426 31,401 Polyester Production Business 18,765 15,749 19% 71,643 61,970 59,463 Textiles 9,493 8,717 9% 35,906 34,054 33,946 Telecom 22,289 24,788 -10% 86,635 92,070 94,344 Property 3,450 2,991 15% 9,031 7,943 8,896 Investment & Others (1) 2,848 2,465 16% 11,889 11,039 6,935 Subtotal 72,037 62,968 14% 262,616 237,502 234,986 Inter-company Sales 9,227 3,183 190% 27,685 15,281 17,053 Revenue-net 62,809 59,785 5% 234,931 222,220 217,932 Profit from Operations Petrochemical (1,179) (142) n.a. 167 (1,262) (1,275) Polyester Production Business 51 584 -91% 2,778 1,007 693 Textiles (37) 245 n.a. 550 1,091 1,178 Telecom 2,258 2,915 -23% 12,373 14,216 15,024 Property 154 243 -37% 786 760 1,009 Investment & Others (1) 1,227 1,032 19% 4,117 3,809 158 Subtotal 2,475 4,877 -49% 20,772 19,620 16,787 Other Adjustments 136 99 38% 281 187 (174) Reclassified Profit from Operations 2,611 4,976 -48% 21,053 19,808 16,613 For Reconciliation Purposes - Investment Income(Equity method)-Net 1,339 1,597 -16% 6,224 4,114 1,874 - Dividend Income 3 5 -40% 45 259 203 Profit from Operations 1,269 3,374 -62% 14,784 15,434 14,537

Note: (1) Investment & Others segment includes investment income (loss) from equity-method investees, i.e. ACC, OUCC, FEIB and share disposal gain (loss), etc. 21 Recent Achievements & CSR

• Issued NT$ 3 billion green bond in 2018 for investing in green projects • TW (S&P) long-term credit rating: TW A+ • Board independence: Three independent directors • Remuneration & audit committees: Established separately in 2011 and 2015 Environmental • A constituent of the MSCI ESG Leaders Indexes (MSCI ESG Rating – Industrial , Conglomerates: A), FTSE4Good Emerging Index & TWSE CG 100 Index Social • FENC has reached Management Level in the Carbon Disclosure Program (CDP). & • CSR report: awarded “Best Report of the Year” by Taiwan Corporate Sustainability Award (TCSA) in 2017 Governance • CSR achievements: - Awarded “TOP50 Sustainable Corporates”, “Sustainable Water Management Awards”, “Social Inclusion Award”, “Growth through Innovation Awards” & “Circular Economy Leadership Awards” by TCSA in 2017 - Ranked “One of the Top 50 Large Enterprises of Excellence in Corporate Social Responsibility” by CommonWealth Magazine in 2017 - Awarded “Excellence Award in CSR Annual Survey Award - Traditional Industries Group by Global Views Monthly in 2017

• Selected “the 2018/19 TOP10” by ISPO (TopDry® , TopDry® Non-woven & Wind Guard 3D) • Awarded “the 2016/17 Gold Award” by ISPO in Munich (Dynafeed® ) Client • Developed 1st 100% bio-polyester shirt made entirely from plants in April 2016 Relationship • Awarded “the 2016 Sustainability Winner” by Adidas (ocean plastic recycled project) & • Co-Developed 1st bio-PET bottle with Coca-Cola in 2014 Green • Awarded “the 2014 Consumer Decides Award” by Nike Leadership • Awarded “the 2013 Apparel Fabric Supplier of the Year” by Puma • Awarded “2013 Supplier of the Year” by Coca-Cola • Awarded “2013 Supplier Innovation Award” by Nike

22 Q&A

For further information, please contact IR Team, Finance Department IR email box: [email protected] Company website: www.fenc.com

Can also be reached as follows, Carol Wang (886) 2 2733-8000 ext.8537; [email protected] Chialing Chao (886) 2 2733-8000 ext.8470; [email protected] Jarvis Liu (886) 2 2733-8000 ext.8492; [email protected]

23 Disclaimer

This presentation is prepared by Far Eastern New Century Corporation (the “Company”) and is solely for the purpose of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to solicit an offer to buy or form any basis of investment decision for any class of securities of the Company in any jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a brief summary in nature and does not purport to be a complete description of the Company, its business, its current or historical operating results or its future prospects.

This presentation is provided without any warranty or representation of any kind, either expressed or implied. The Company specifically disclaims all responsibilities in respect of any use or reliance of any information, whether financial or otherwise, contained in this presentation. Neither this presentation nor any of its contents may be reproduced to a third party without the prior written consent of the Company.

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