Tatung Company

W. Y. Lin, President

(2371 TT)Integrity, Honesty, Industry, Frugality

March 2014

We are Taiwan’s leading provider of integrated solutions for Mechatronic projects, including turnkey power generation, smart grid and corporate energy management systems.

We are expanding our Mechatronics turnkey solutions market presence to ASEAN and China.

We are in the midst of a corporate restructuring program aimed at reducing debt, improving cash flow and enhancing transparency.

We are actively managing our extensive real estate portfolio to realize hidden value and maximize cash flow. Over 95% of this portfolio is located in Northern Taiwan.

Executive Summary

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Consolidated Financial Structure: Our No. 1 priority is to significantly reduce Tatung’s consolidated net debt level over the long term. We also intend to deliver consistent debt reduction on an annual basis.

Core Business: Consistently maintain blended gross margin above 10%, and strive to reach 15%.

Investment Portfolio: Dispose of non-core related and/or underperforming business subsidiaries

Land Assets: Develop our land assets to their highest and best use.

Our Top Priorities

It is painfully clear to us that losses in our ODM monitor business, losses from key investment subsidiaries and high debt levels have prevented investors from recognizing the value of our core power business and our land bank. We set our top priorities for the next five years as:

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Tatung’s Core Strategic Initiatives

Structural Improvement

in Core Business

Operations

Structural Improvement

in Tatung Investment Portfolio

AssetDevelopment

Improved Cash Flow and Reduced Debt

4

Tatung’s Core Strategic Initiatives

Structural Improvement

in Core Business

Operations

Structural Improvement

in Tatung Investment Portfolio

AssetDevelopment

Improve Cash Flow and

Reduce Debt

5

6+ Years of Structural Improvement in Core EarningsBy phasing out low-margin products, we have been able to achieve the following in our core business portfolio:

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• Core operations gross margin reached 9.9% in 9M13 from 5.7% in 2007.

Higher Overall Gross Margin

• SG&A expenses peaked at NT$5.0bn in 2008, and have been held below NT$3.0bn for three straight years (2010-2012). In 9M13, SG&A expenses fell to NT$2.0bn.

Reduced Operating Expenses

• In 2010-9M13, our core operations earned a cumulative operating profit of NT$352m versus a cumulative loss of NT$4.9bn in 2007-2009.

Improved Operating Profits

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2007 2008 2009 2010 2011 2012 9M130%

20%

40%

60%

80%

100%

5% 7% 11% 12% 11% 13% 19%

61% 51% 45% 45% 45% 41% 28%

35%41% 44% 42% 44% 46%

53%

Systems Group Consumer Group Power Group

Revenue Contribution

6+ Years of Structural Improvement in Core Earnings

At the Business Group and Business Unit Level:

• Power and Systems Business Groups: Tatung’s core power and systems solutions groups accounted for 72% of revenues in 9M13, versus 40% in 2007. R&D spending devoted to these two groups now accounts for 55% of Tatung’s total core R&D outlay, versus only 25% in 2007.

• Power: Motor BU exports reached a 6-year high in 2012, growing by 33%, and leading to the best profit performance for the Motor BU in the past 6 years. In 9M13, Motor BU gross margin reached 18% and operating margin 7.2%, surpassing 2012 levels.

• Consumer: In the ODM business unit, unprofitable product lines have been cut (most notably PC monitors), resulting in the elimination of the large losses posted in previous years. In 2010-2012, losses were cut to below NT$300m annually, a big improvement over annual losses of NT$1bn+ in 2007-2009. The ODM business unit now contributes only 7% of total core revenue versus 48% in 2007.

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Core Operations Business Performance

Revenue Operating Profit

Note: Based on unaudited company accounts.

2007 2008 2009 2010 2011 2012 9M13 -

10,000

20,000

30,000

40,000

50,000 43,072

37,276

30,264

38,609 38,408

32,185

17,750

RevenueNT$ mn

2007 2008 2009 2010 2011 2012 9M13 (2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

(1,951) (1,930)

(992)

235 379

(64) (197)

Operating ProfitNT$ mn

Tatung’s Core Strategic Initiatives

Structural Improvement

in Core Business

Operations

Structural Improvement

in Tatung Investment Portfolio

AssetDevelopment

Improve Cash Flow and

Reduce Debt

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Our Achievements:

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• We have shut down or disposed of 4 subsidiaries which posted a combined cumulative loss of NT$3.5bn in 2007-2011.

Disposal of Money-Losing Subsidiaries

• CPT’s net debt fell to NT$22bn in 9M13, from its peak of NT$72bn in 2006.

Significant Reduction in Debt at CPT

• We have reduced capex spending at subsidiaries that are in capital-intensive industries. • CPT has not built a new plant since 2007, and monthly depreciation

expense fell to NT$0.9bn in 9M13 from a peak of NT$2.2bn in 2009. • In 2012-9M13, Green Energy Technology’s total capex spending was

NT$0.7bn versus NT$11.8bn in 2010-2011.

Disciplined Capex Spending at Key Subsidiaries

6+ Years of Structural Improvement in Investment Income

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CPT Has Greatly Reduced its Capital Intensity

Source: CPT audited consolidated financial statements.

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

10,000

20,000

30,000

40,000

50,000

60,000 CPT - Net DebtNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

2,000

4,000

6,000

8,000

10,000 CPT - CapexNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

5,000

10,000

15,000

20,000

25,000

30,000

CPT - DepreciationNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13

(40,000)

(30,000)

(20,000)

(10,000)

-

CPT - Net ProfitNT$ mn

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CPT: Capex Spending

Capex to Sales (x) FY2007   FY2008   FY2009   FY2010   FY2011   FY2012   9M13  Average

CPT (2475 TT) 3.9 7.7 7.9 4.4 4.7 9.9 5.0 6.4

Wintek (2384 TT) 37.1 24.5 9.6 15.2 13.6 13.0 5.8 17.0

AUO (2409 TT) 13.6 23.2 17.0 18.1 15.0 11.4 6.4 15.1

Innolux (3481 TT) 2.8 12.5 24.2 19.5 8.9 3.5 4.3 10.7

Hannstar Display (6116 TT) 4.8 6.6 2.9 8.9 30.4 16.5 15.5 10.7

E Ink (8069 TT) 2.4   7.6   3.6   5.3   6.9   5.3   6.9   5.1

CPT has maintained the local LCD industry’s 2nd lowest capex-to-sales ratio since 2007

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Investment Income AnalysisNT$m

NT$m 2007 2008 2009 2010 2011 2012 9M13

Reported 5,431 (3,229) (9,634) (3,692) 1,563 (3,166) (1,034)

Normalized 5,723 (2,778) (9,590) (3,137) (3,055) (3,166) (1,034)

2007 2008 2009 2010 2011 2012 1H13(12,000)

(10,000)

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

8,000

Reported Investment IncomeNormalized: Ex-2011 Beitou property sale, ex-discontinued/disposed subsidiaires

9M13

Our Future Plans

• We will continue to dispose of non-core related and/or underperforming business subsidiaries.

• We will minimize our exposure to capital-intensive industries and seek

continued reduction in debt levels.

• Shan Chih Asset Development (SCAD, a 100%-owned subsidiary) will continue to realize the value of our real estate assets via development projects.

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Tatung’s Core Strategic Initiatives

Structural Improvement

in Core Business

Operations

Structural Improvement

in Tatung Investment Portfolio

AssetDevelopment

Improve Cash Flow and

Reduce Debt

16

Tatung Land Assets - Taiwan

Total area of land holdings: 464k pings or 1,534k sq meters Book value of land: NT$23.3bn (US$790M @ NT$1 = US$29.5)

*’Northern Taiwan’ does not include Taipei City and New Taipei City. Note: 1 ping = 3.306 sq m = 35.575 sq ft

Land Assets Area (Ping) Area (Sq m) % of Total Total 464,165 1,534,431 100

Taipei City 35,506 117,376 7.6 New Taipei City 90,243 298,323 19.4

Northern Taiwan* 326,770 1,080,235 70.4 Mid-Taiwan 2,700 8,925 0.6

Southern Taiwan 8,946 29,572 1.9

Land Zoning Area (Ping) Area (Sq m) % of Total

Land for Development 154,079 509,354 33%

Land for Production 310,086 1,025,077 67% Total 464,165 1,534,431

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Nankang Tatung Xiyuan Residential Project

• Land Area: 2,312 ping• Gross Floor Area: 13,436 ping• Floor Plan: 148 housing units, 239

parking spaces• Completion: 1Q 2014• Revenues and profits to be booked

in 1H2014.

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Banchiao Phase I Plant Development Plan

•Land Area: 4,095 ping •Gross Floor Area: 25,433 ping •Expected Project Timeline: Pre-sale launch in 2H14, pending final regulatory approval.

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Tatung’s Core Strategic Initiatives

Structural Improvement

in Core Business

Operations

Structural Improvement

in Tatung Investment Portfolio

AssetDevelopment

Improve Cash Flow and

Reduce Debt

20

Our Achievements

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• Consolidated Net Debt peaked at NT$104bn in 2006, and has since been reduced to NT$55bn.

Substantially Reduced Net Debt

• 9M13 monthly depreciation expense of NT$1.2bn is 47% lower than 2008 peak level of NT$2.3bn.

Reduced Depreciation Expense

• 2012 Capex of NT$6.5bn was the lowest since 2004, and 9M13 capex was NT$3.2bn

Disciplined Capex Spending

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Lower debt, less capital spending

Source: Tatung audited consolidated financial statements.

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

20,000

40,000

60,000

80,000

100,000 Tatung - Net DebtNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

3,000

6,000

9,000

12,000

15,000

18,000 Tatung - CapexNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 (15,000)

(10,000)

(5,000)

-

5,000

Tatung - Net ProfitNT$ mn

FY2008 FY2009 FY2010 FY2011 FY2012 9M13 -

5,000

10,000

15,000

20,000

25,000

30,000

Tatung - DepreciationNT$ mn

The Tatung Vision

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The Tatung Vision

• We aim to become one of Asia’s leading turnkey providers of integrated mechatronic systems and energy-saving power solutions.

• Our areas of concentration will be: *Mechatronics systems *Power distribution systems employing end-to-end AMI *Turnkey power generation systems in emerging market countries *Energy saving initiatives and products

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Tatung Total Solutions for the Power Grid

Smart Substation

Advanced Metering

Infrastructure

Energy Management

Renewable Energy

Energy Saving

Energy Storage

Advanced Distribution Automation

System Integration

Smart Home25

Tatung Integrated EMS Capabilities

Central Control/Energy Mgt. System

Air Conditioning LED Lighting Power

SystemsAncillary Systems

Security Control

1. Commercial AC2. Exhaust systems3. Sophisticated water cooling systems

1. Distribution network 2. Turnkey power generation 3. End-to-end Advanced Metering Infrastructure (AMI)

1. Water purification 2. Waste water surveillance system 3. Air compressors 4. Industrial gasses5.UPS systems 6.Reservoir water supply system

1. LED bulbs for commercial applications2. Remote monitoring and management of energy use

1. Electronic security systems2. Access control systems3.Video surveillance systems

Remote management

Routers

System ServerCloud ServiceRemote

Backup

Office Network

Ethernet

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Our Commitment to Shareholders

• We will minimize our exposure to capital-intensive industries and seek continued reduction in debt levels.

• We will continue to dispose of non-core related and/or underperforming business subsidiaries.

• SCAD will continue to realize the value of our real estate assets via development projects.

• We pledge to improve corporate governance and transparency.

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Company Financials

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2008 2009 2010 2011 2012 9M13

-6,855

-9,917

-3,481

1,380

-3,512 -1,593

(1.53)

(2.10)

(0.63)

0.60

(1.52)

(0.69)

EPS ( NTD) Net Income (NT$ million)

2008 2009 2010 2011 2012 9M13

-16.8

-28.3

-10.9

4.3

-11.1

-10.2

ROE %

Five-year Financial Highlights

2929

NT$ million 2008 2009 2010 2011 2012 9M13(IFRS)

Sales Revenue 187,247 118,733 157,911 146,250 107,356 84,494

Gross Profit 10,830 (11,662) 5,325 7,127 612 8,569

OP Profit (14,545) (33,298) (13,803) (11,550) (15,338) (3,257)

Income Before Tax (17,456) (40,451) (14,325) (11,191) (15,142) (4,682)

Net Income to Parent (6,855) (9,917) (3,481) 1,380 (3,512) (1,593)

EPS (NTD$) (1.53) (2.10) (0.63) 0.60 (1.52) (0.68)

Five-year P&L (Consolidated)

YOY (%)

2008 2009 2010 2011 2012 9M13

(18.2) (36.6) 33.0 (7.4) (26.6) 2.3

(67.7) - - 33.8 (91.4) -

- 128.9 (58.5) (16.3) 32.8 (72.2)

- 131.7 (64.6) (21.9) 35.3 (61.7)

- 44.7 (64.9) - - (48.9)

- 37.3 (70.0) - - (48.9)

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Five-year Balance Sheet (Consolidated)NT$ million 2008 2009 2010 2011 2012 3Q13

(IFRS)YOY (%)

2008 2009 2010 2011 2012 3Q13

TOTAL ASSETS 284,267 253,246 238,050 224,536 201,282 204,085 (12.4) (10.9) (6.0) (5.7) (10.4) (6.2)

Cash 31,864 33,315 30,962 31,181 24,603 22,220 (14.2) 4.6 (7.1) 0.7 (21.1) (15.2)

NR & AR 24,257 19,012 19,024 14,940 14,027 17,429 (48.3) (21.6) 0.1 (21.5) (6.1) 8.8

Inventory 26,994 22,665 25,861 24,151 24,494 22,108 0.6 (16.0) 14.1 (6.6) 1.4 (5.7)

Fixed Asset 157,590 136,409 124,205 116,271 105,994 97,077 (7.1) (13.4) (8.9) (6.4) (8.8) (6.4)

TOTAL LIABILITIES 181,305 163,218 155,865 148,439 141,529 142,555 (10.5) (10.0) (4.5) (4.8) (4.7) (3.5)

Bank Loans 118,253 100,240 93,056 96,728 89,996 86,162 (3.8) (15.2) (7.2) 3.9 (7.0) (8.7)

NP & AP 27,544 25,770 27,341 21,119 21,782 26,523 (35.7) (6.4) 6.1 (22.8) 3.1 32.5

Accrued Exp 12,699 15,415 12,217 9,216 9,673 8,608 (18.2) 21.4 (20.7) (24.6) 5.0 14.0

TOTAL EQUITY 102,962 90,028 82,185 76,097 59,753 61,530 (15.6) (12.6) (8.7) (7.4) (21.5) (12.0)

Capital 45,495 55,517 55,521 23,395 23,395 23,395 1.4 22.0 0.0 (57.9) 0.0 0.0

Additional Paid-in Capital 12,095 10,919 11,481 5,958 5,945 856 0.9 (9.7) 5.1 (48.1) (0.2) 30.9

Retained Earnings (18,538) (32,134) (36,112) (2,596) (6,378) 9,845 65.0 73.3 12.4 (92.8) 145.7 (27.0)

Minority 65,761 57,208 51,322 43,339 29,213 28,891 (15.4) (13.0) (10.3) (15.6) (32.6) (15.8)

A/R Turnover Days 69 67 44 42 49

Inventory Turnover Days 56 70 58 66 83

A/P Turnover Days 73 75 64 64 73 31

Tatung Investment Income　 % held Investment IncomeInvestment Company As of 3Q13 2007 2008 2009 2010 2011 2012 9M13CPT 23.1 2,233 (3,595) (9,322) (3,603) (2,871) (2,716) (758)Green Energy Technology 24.3 - 784 50 339 (419) (949) (423)Elitegroup Computer 27.5 218 82 209 39 118 100 295 Shan Chih Asset Development 100.0 1,122 150 728 459 6,742 824 231 Tatung Consumer Products (Taiwan) 99.1 11 20 (13) (320) (160) (259) (192)Tatung Okuma 49.0 86 73 3 42 54 118 152 Forward Electronics 26.8 27 (21) (125) (7) (71) (89) (61)Tatung SM-Cycle 85.3 31 45 39 55 57 87 61 Tatung System Technologies 54.4 81 96 81 73 60 41 34 Tatung Fine Chemicals 46.6 31 14 14 4 (93) 3 (32)Toes Opto-Mechatronics 85.0 67 22 (26) 0 5 4 (28)San Chih Semiconductor 58.2 2,106 185 176 216 56 (9) (14)Chunghwa Electronics Development 99.9 (231) (111) 7 40 (31) (13) 13 Tatung Medical & Healthcare Technologies 95.7 3 (8) (8) 6 (18) (14) (4)Tatung Information Technology (Jiangsu) 100.0 (129) (72) (395) (264) (57) (252) (114)Tatung Vietnam (TVN) 100.0 (121) (152) (90) (96) (170) (136) (99)Tatung Czech 0.0 (97) 49 20 198 30 (21) (29)Tatung Electric Technology (Vietnam) 100.0 - (36) (42) (38) (24) (14) (12)Tatung (Thailand) 100.0 9 (166) (66) 13 11 16 9 Tatung Science and Technology,Inc. 100.0 5 (52) (604) (1) (1) - - Tatung InfoComm 0.0 (10) (214) (15) (554) (1,466) - - Tatung Netherlands B.V. 0.0 (85) (165) (51) - - - - Tatung - Fanuc Robotics 0.0 19 27 19 - - - - Tatung (U.K.) 0.0 (239) (99) 4 - - - - Tatung Atherton 0.0 23 - - - - - - Other Investment Income 272 (83) (226) (291) (191) 113 (62)Total Investment Income 5,431 (3,229) (9,634) (3,692) 1,563 (3,166) (1,034)

Subsidiaries Overseas Production Subsidiaries Former Subsidiaries

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