SUNSPRING · Sunspring Overview 7 • Sunspring is the manufacturing solution provider for global kitchen & bath fitting brands • Key products: components and modules for faucets,

SUNSPRING OVERVIEW

Sep 2017

S u n s p r i n g Is Y o u r M o s t R e l i a b l e S o u r c e

Disclaimer 2

• The information contained in this confidential document ("Presentation") has been prepared by Sunspring (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,

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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

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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

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• 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

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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,

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• 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.


SUNSPRING IS YOUR MOST

RELIABLE SOURCE

3


Executive Summary

Sunspring is a leading supplier of global kitchen & bath plumbing fitting

brands, serving a US$4.5 bn total addressable market globally.

Zinc products are our strategic focus and we are the No.1 supplier

worldwide for zinc components in the global kitchen & bath plumbing

industry.

Over the last 40 years, Sunspring has built a strong customer base of well-

known global brands, who capture >60% of North American and European

market through these long-term partnerships.

Zinc conversion trend presents a major industrial opportunity; Sunspring is

well-positioned to leap.

Sunspring aims to be the best total solution provider in a market with great

potential opportunity through disciplined investment in automation and

talent.

4


Agenda

Company Highlights

Core Strengths

Strategies for Sustainable Growth

Financial Performance

5


6

Company Highlights

Core Strengths




Taichung, Taiwan Headquarters, Innovation

Technology Center and

Sunspring Automation

Employee: 1,000-

Zhaoqing & Zhuhai, Guangdong Manufacturing facility

Employee: 4,300+

Kentucky & Michigan, USA Manufacturing facility

North Carolina, USA Distribution facility

Employee: 100-

Sunspring Overview 7

• Sunspring is the manufacturing solution provider for global kitchen & bath fitting brands

• Key products: components and modules for faucets, showering, and accessories

• Year of establishment: 1974

• Ticker: 2062 TW

• 2016 Revenue:NT$6.2bn

• Market capitalization: NT$ 62bn (as of Sep 30, 2017)

• Total employee number: 5,400-

• 6 locations globally, including 5 manufacturing plants


Sunspring Timeline 8

1997 Zhaoqing, Guangdong

1st China manufacturing

facility

1974 Chang Hwa, Taiwan

Sunspring founded

1999 Taichung, Taiwan

Headquarter established

2001 Los Angeles, USA

1st US distribution facility 2002 North Carolina, USA

2nd US distribution facility

2004 Zhuhai, Guangdong

2nd China manufacturing

facility 2006 Kentucky, USA

Acquired Gamco

2007

Michigan, USA

Acquired H&H Tubing

2015 Taichung, Taiwan

Innovation & Technology

Center and Sunspring

Automation established

2007

Listed on TWSE


Sunspring Serves the Fitting Industry

• *Source: Fittings& Fixtures- Freedonia, World Plumbing to 2018, Feb 2015.

• ** Source: Company estimates. Based on Sunspring customers purchasing amount in faucet components/modules

9

Kitchen & Bath Plumbing

Fixture

Cabinet

Furniture

Brass Zinc Plastic

Fitting & Fixture

Ceramic

Fitting

Global market size

estimate

$9bn**

$4.5bn**

Market segments we serve

$86bn*


Kitchen & Bath Plumbing 10

Fitting Fixture Cabinet & Furniture


11

Company Highlights

Core Strengths




Core Strengths

No. 1 Zinc Solutions

Solid Customer Portfolio & Partnership

Dedicated Management

Team

12

Kitchen & Bath Fitting Industry


Johnny C.F. Yang Founder/ Group President

50+ yrs. experience

Scott Yang Chairman/ CEO

20+ yrs. experience

Dedicated Management Team 13

Joyce Yang Sr. VP of CEO office 15yrs.+

Ken Slusher Sr. VP of Operations, North America 35yrs.+

Curtis Shih Sr. VP of Manufacturing, China 35yrs.+

Stone Tsai Sr. Director of Innovation & Technology 35yrs.+

Jing-Fa Cheng Sr. Director of Operations, China

Jeff Yang Sr. Director of Innovation & Technology 30yrs.+

Minson Wang Sr. Director of Innovation & Technology 25yrs.+

Richard Hu Sr. Director of Customer Service 35yrs.+

Robert Wang Sr. Director of Customer Service

Jeans Yeh Senior VP of IT 30yrs.+

Feng-Yao Ko Sr. Director of Customer Service 30yrs.+

Jing-Fang Huang Sr. Director of Innovation & Technology 40yrs.+

Micro Su Sr. Director of HR 20yrs.+

40yrs.+

30yrs.+

Yu-Chun Chou Sr. Director of Innovation & Technology 20yrs.+


Solid Customer Portfolio & Partnership

North America

64%

Asia 16%

Europe 20%

Global Sales Mix

* Other includes home improvement hardware

and other applications

Kitchen & Bath 90%

Other* 10%

Industries Served

14

Our customers account for > 60% of faucet market share in North American and Europe

Note：Y201709YTD


Business Strategy 15

Finished

Goods

Zinc Modular

Components

Brass

Plastic

Deliver on Customer Expectations

Reduce Operational Cost

Speed To Market

Functional Decorative

OD

M

OE

M

Mo

du

lar

Com

po

nent

Com

po

nent

Be the “Solution Provider” in Zinc, Brass, Plastic


No. 1 Zinc Solution Provider 16

Global No. 1 zinc die casting manufacturer in kitchen & bath

plumbing fitting

61% 64% 68% 70% 72% 74% 73%

34% 32% 29% 27% 25% 23% 24%

5% 4% 3% 3% 3% 3% 3%

2011 2012 2013 2014 2015 2016 201709YTD

Product Mix: Nearly 70% from Zinc

Zinc Brass Other

Note: Zinc includes zinc components and modules. Brass includes brass components and modules.


Sunspring Value Proposition 17

Background

• Zinc is 1/3 of the material cost of copper

• Regulation changes favorable to Zinc conversion

• Zinc conversion to extend from US to Europe & Asia

• Housing demand – US remains stable and Europe has bottomed out

Our Effort

• Sunspring is an early mover since 1990s

• Sunspring masters the Zinc production with stable yield & shorter lead time

• Sunspring partners with all global brands for Zinc solutions

• Sunspring’s solid financials will support its leadership on all fronts

Sunspring Answers

On-going Zinc

Conversion

From Zinc to Total

Solution


Sunspring Offers the Best Solutions 18

0

50

100

Regular Brass Low/No-LeadBrass

SunspringHybrid

Manufacturing costs for faucet components

Regular

Brass = 100 20-40%

3-13%

Savings

*Note: Hybrid modules: zinc body + no-/low-lead brass or plastic waterway

Increased demand for quality coupled with more stringent

regulations

Push for continued cost reduction, both

in product and processes

Global market requires rapid

response capability to capitalize on

emerging opportunities

Source: Company estimates


Competitive Zinc Solutions 19

Our new hybrid modules* provide 20-40% cost-saving vs

regular brass

*Note: Hybrid modules: zinc body + no-/low-lead brass or plastic waterway


We Aim to Be a Total Solution Provider 20

We intend to achieve our goal by

Extending our leadership position in Zinc solutions

Using Zinc solution as a platform to integrate other services

Offering one stop manufacturing solution to customers

Gaining market share

Market segments we serve

In-house* Others

Sunspring, ~4%

In-house*

Others Sunspring, >10%

Now Future

Source: Company estimates * Note: Customer in-house manufacturing


21

Company Highlights

Core Strengths




Investment for Sustainable Growth 22

• Resolve capacity bottleneck

• Improving China labor management

Optimizing existing manufacturing facility

• Three-stage automation program: Manufacturing efficiency and quality improvement

• New plant in Taichung: Capacity expansion in Central Taiwan Science Park

• Enhancement to management team for future growth

Solutions with long-term perspectives

Invest for Future Growth with Disciplined Financing


Automation: Aim for sustainable growth

and minimize financial volatility

23

• Maintain a sustainable gross margin ~25%

• Aim to manage operating expenses ~10%

• Disciplined capex management

• Optimize China labor management

Interim goals

• Produce sustainable growth and minimize volatility in financial performance

Long-term goals


Stage I (2012-2015) Stage II (2015-2019) Stage III (2016-2022)

Focus Automation for existing manufacturing process

Integrated Cell Automation Intelligent Manufacturing System

Key Objective Improve yield stability & reduce labor dependency

Stabilize yield rate & efficiency, reduce material handling wastes rate

Improve yield & optimize efficiency, real time process control

Capacity New - Innovation & Tech Center- Taichung -

Total Zinc: 13,200 MT/yr Brass: 4,800 MT/yr

Zinc: 18,000 MT/yr Brass: 4,800 MT/yr

Zinc: 18,000 MT/yr Brass: 4,800 MT/yr

24

Note: Metric ton (MT)

Three-Stage Automation Roadmap

2012-2013 2014-2015 2016-2017 2018-2019 2020-2021 2022-2023

China Manufacturing Operation

North America Manufacturing Operation

Taiwan Manufacturing Operation

Manufacturing Automation

Integrated Cell Automation

Intelligent Manufacturing System




Innovation & Technology Center




25

Company Highlights

Core Strengths




Key Financial Indicators 26

5,353

5,928 6,170

6,777

6,195

3,055

20.1%

26.3%

22.4% 23.0%

25.5%

19.2%

2012 2013 2014 2015 2016 201709YTD

Gross Margin %

Revenue NT$ million

540

961

682 732

826

306

10.1%

16.2%

11.1% 10.8%

13.3%

6.8%

2012 2013 2014 2015 2016 201709YTD

Operating Margin %

Operating Profit NT$ million


Key Financial Indicators 27

328

905

622 624

746

197

2.01

5.55

3.82 3.83 4.58

1.21

2012 2013 2014 2015 2016 201709 YTD

EPS (NT$)

Profit attributable to owners of the parent (NT$ million)


5-Year Income Statement 28

NT$ Million 2012 2013 2014 2015 2016 201709

YTD YoY (%)

2012 2013 2014 2015 2016

Sales Revenue 5,353 5,928 6,170 6,777 6,195 4,524 0.1 10.7 4.1 9.8 (8.6)

Gross Profit 1,073 1,559 1,380 1,558 1,579 868 4.8 45.2 (11.5) 12.8 1.3

Operating Profit 540 961 682 732 826 306 32.6 78.0 (29.0) 7.3 12.9

Income before Tax 553 1,110 788 809 967 298 9.6 100.5 (29.0) 2.7 19.5

Net Income 328 905 622 624 746 197 (20.3) 176.1 (31.3) 0.3 19.6

EPS (NT$) 2.00 5.55 3.82 3.83 4.58 1.21 (20.6) 176.1 (31.2) 0.3 19.1

Gross Margin (%) 20.1 26.3 22.4 23.0 25.5 19.2

Operating Margin (%) 10.1 16.2 11.1 10.8 13.3 6.8

Net Margin (%) 6.1 15.3 10.1 9.2 12.0 4.3

ROE (%) 7.8 20.1 12.6 12.6 14.0 3.7

ROA (%) 5.7 13.4 7.9 7.3 7.0 2.0


5-Year Balance Sheet

NT$ Million 2012 2013 2014 2015 2016 201709

YTD YoY (%)

2012 2013 2014 2015 2016

TOTAL ASSETS 5,911 7,844 8,341 9,733 11,854 12,574 (4.8) 32.7 6.4 16.7 23.5

Cash 1,499 3,096 2,595 386 670 530 (3.5) 106.6 (16.1) (85.1) 73.8

NR & AR 1,140 1,220 1,380 1,512 1,342 1,116 12.9 7.0 13.1 9.6 (11.2)

Inventory 691 853 1,011 1,275 1,177 1,769 (5.1) 23.5 18.5 26.1 (7.6)

Fixed Asset 2,206 2,364 2,778 4,808 7,567 7,919 (13.4) 7.2 17.5 73.1 57.4

TOTAL LIABILITIES 1,770 2,956 3,357 4,595 6,361 7,208 (5.6) 67.1 12.0 36.9 38.4

Bank Loans 1,017 2,075 2,276 3,455 5,035 5,770 (9.5) 104.0 9.7 51.8 45.7

NP & AP 260 298 363 477 404 488 (25.4) 14.7 21.8 31.4 (15.3)

TOTAL EQUITY 4,141 4,888 4,984 5,138 5,493 5,366 (4.4) 18.0 3.0 3.1 6.9

A/R turnover days 73 73 77 78 76 74 Inventory turnover days 61 64 71 80 101 109

A/P turnover days 26 23 25 29 28 25

29


30

Quarterly Financials

1,283

1,563 1,624

1,458 1,398

1,541 1,594 1,637 1,541

1,693 1,700 1,842

1,644

1,455 1,536 1,560 1,530 1,525 1,469

194 267 291 209

158 167 173

184 158 161

166 246

221 163 201 241 182

99 25

203 234 254 214

89

118 199

216

125 110

174 214 215 116 207 208 185

5 8

25.6% 27.7% 26.5% 25.3% 21.6% 22.0% 22.3% 23.4% 22.6% 21.4% 22.0%

25.7% 25.4% 23.9% 24.8% 27.8%

23.6% 19.5%

14.3%

15.1% 17.1% 17.9% 14.4%

11.3% 10.9% 10.9% 11.2% 10.3% 9.5% 9.7% 13.4% 13.4% 11.2% 13.1% 15.4%

11.9% 6.5%

1.7%

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

NTD Million

Net Sales Operating MarginNet Income (Attribute to Parent) Gross Margin RateOperating Margin Rate


Passion Dedication Excellence Integrity Reliability

PRIDE

Thank You for Your Attention !

Documents

SUNSPRING · Sunspring Overview 7 • Sunspring is the manufacturing solution provider for global kitchen & bath fitting brands • Key products: components and modules for faucets,