Lotte Chemical Titan Holding Berhad Profile of Senior

Lotte Chemical Titan Holding Berhad

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1. LEE DONG WOO President & CEO

2. LEE JUNG HYENG Executive Vice President,

Manufacturing

3. LEE KWAN HO Senior Vice President, Olefins & Derivatives Business

4. PHILIP KONG CHOCK HOON Executive Vice President, Corporate Planning

5. DAVID TAN GEK SENG Senior Vice President,

Finance and Treasury (CFO)

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Profile of Senior Management Team

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6. CHEONG PENG KHUAN Senior Vice President,

Human Resources and Procurement

7. KIM DONG HYUN Vice President,

Production Support

8. SALEHALDIN BIN NASRON Vice President,

Corporate Affairs, CIO

9. LAU CHEE MING Vice President,

Polymer Business

10. CHAIR LAM SENG Acting Vice President,

Production

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LEE DONG WOOPresident & CEO(for profile, please refer to page 39)

LEE JUNG HYENG Executive Vice President, Manufacturing

Age 53, Korean, Male

Mr Lee Jung Hyeng, is our Executive Vice President, Manufacturing. He obtained his Bachelor degree in Chemical Engineering from Chonnam National University, Korea in 1991.

He began his career with Honam Petrochemical Corp (now known as Lotte Chemical Corporation (“LCC”) in 1991 as Engineer responsible for complex steam and energy supply. In 1999, Mr. Lee was promoted as Manager of Common Utilities and in 2005, he undertook the role of a Safety Manager. In 2010, he was assigned with added responsibilities to manage Naphtha Cracker operations. In the following year he was promoted as General Manager of Production taking charge of Naphtha Cracker and Common Utilities Operations. In 2012, he was assigned as General Manager of Technical & Process Team to further expand his technical knowhow and leadership. In 2014, Mr. Lee was promoted as Vice President of the Manufacturing Division leading Technical & Process and Safety & Environment. Mr. Lee spent his entire career at LCC’s Yeosu Plant making significant contributions to the success of the company.

Mr. Lee has over 27 years of experience in plant operations, utility management, technical process and safety in the

petrochemical industry. He also led many improvement projects, in particular the energy task force team optimizing unit consumption and balance. He joined our Company on 1 Mar 2018 as Executive Vice President, Manufacturing. He is responsible for overseeing and managing all production units, maintenance, technical process, safety, quality, task force and innovation activities.

He has no family relationship with any other director or major shareholder of the Company and has no conflict of interest with the Company.

He has not been convicted for offences within the past five years. There was no public sanction or penalty imposed on him by any regulatory bodies during the financial year.

He does not hold directorship in public and listed companies.

LEE KWAN HOSenior Vice President, Olefins & Derivatives Business(for profile, please refer to page 42)

PHILIP KONG CHOCK HOONExecutive Vice President, Corporate Planning

Age 58, Malaysian, Male

Mr Philip Kong Chock Hoon, is our Executive Vice President, Corporate Planning. He obtained his Bachelor of Law (Hons) degree from Middlesex University, London in 1983 and then qualified as a Barrister-at-Law from Lincoln’s Inn in 1984. In 1985, he was

admitted to the High Court of Malaya as an advocate and solicitor.

Mr Kong began his professional career in 1985 with Shearn Delamore & Co. where his main area of practice was litigation. In 1987, he left legal practice to work as Legal Adviser with the Shell Group of Companies in Malaysia. He joined our Company as General Counsel in 1997 where he was responsible for setting up the legal department and overseeing legal matters relating to our Group. He left our Company in 2001 to join Thames Water, Asia Pacific in Singapore as Legal Manager until 2004. In 2005, he re-joined our Company as General Counsel and was promoted to Senior Vice President, General Counsel in 2008. He was re-designated as Senior Vice President, Corporate Planning on 1 March 2017. He assumed his current position on 1 February 2018. He is responsible for corporate planning and analysis, corporate strategy, investor relations, legal, compliance as well as company secretarial matters.

He has over 34 years of working experience.


He has not been convicted for offences within the past five years. There was no public sanction or penalty imposed on him by any regulatory bodies during the financial year.*

He does not hold directorships in public and listed companies.

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he was re-designated as Chief Financial Officer. He assumed his current position on 1 February 2018.

He has over 36 years of experience in audit and finance functions.




CHEONG PENG KHUANSenior Vice President, Human Resource and Procurement


Mr Cheong Peng Khuan, is our Senior Vice President, Human Resource and Procurement. He obtained his Bachelor in Science Degree majoring in Business Management from Universiti Sains Malaysia in 1985.

He began his career as a clerk with Ban Hin Lee Bank Bhd in 1978 and later pursued his undergraduate studies from 1981 to 1985. He then went on to become a Medical Sales Representative promoting medicine to health professionals before joining Texchem Trading Sdn Bhd in 1987 where he was responsible for trading activities until 1991.

DAVID TAN GEK SENGSenior Vice President, Finance and Treasury (CFO)


Mr David Tan Gek Seng, is our Senior Vice President, Finance and Treasury (CFO). He became a member of the Chartered Institute of Management Accountants, United Kingdom in 1988, and has been a member of the Malaysian Institute of Accountants since 1989 as well as a member of the Chartered Tax Institute of Malaysia since 1995. He later obtained his Masters of Business Administration degree from the University of Strathclyde, United Kingdom in 2000 and became a Certified Internal Auditor accredited by the Institute of Internal Auditors, Inc (United States) in 2005.

Mr Tan began his career in 1981 as an Audit Assistant with Peat Marwick, Mitchell & Co (now known as KPMG) and was with the company until 1983. He went on to join KK San, Liew & Loke as Audit Senior in 1984 and then MBf Finance Bhd in 1987 as an Internal Audit Officer. In 1989, he joined Country View Realty Sdn Bhd as Accountant. He then joined our Company in 1991 as Accounting Manager until 1995. Mr Tan then left our Company in 1995 to join Tru-Tech Holdings Bhd as Group Financial Controller and Company Secretary. In 1999, he joined Professional Conglomerate Sdn Bhd as Financial Controller. He then re-joined our Company in 2000 as Business Planning and Analysis Manager. He was then promoted to Chief Internal Auditor in 2005 before assuming the position of Vice President, Financial Controller and Chief Information Officer in 2008. On 2 June 2017,

Mr Cheong then joined our Company as Sales Manager in 1991 where he was responsible for sales in the Northern Market Region. He became Senior Vice President of the Polymers Business in 2002 where he was responsible for the marketing of all polyolefin products in the domestic and international markets. He was also responsible for the Plastic Technical Centre and Logistics until 2017. He also assumed additional duties heading the human resource department from 2010 to 2017. He assumed his current position on 1 March 2017.

He has over 26 years of experience in sales and marketing in the polyolefins and chemicals industry. He also has experience in managing human resource strategies in the area of staffing, employment law, performance management, employee relations, compensation and benefits.





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KIM DONG HYUNVice President, Production Support

Age 53, Korean, Male

Mr Kim Dong Hyun, is our Vice President, Production Support. He obtained his Bachelor in Mechanical Engineering Degree from Korea University, Korea in 1990.

He began his career as an Engineer with Honam Petrochemical Corp. (now known as Lotte Chemical Corporation) (“LCC”) in 1990 where he was responsible for the engineering of the naphtha cracker at LCC. In 1997, he became a Manager where he was responsible for managing the Mechanical Rotating Section of the Maintenance Department. Mr. Kim then continued to expand his technical leadership on the maintenance rotating, planning and project fronts for many successful projects within LCC.

Mr Kim joined our Company on 28 June 2017 as Vice President, Production Support where he was responsible for managing company-wide maintenance, reliability and engineering.

He has over 27 years of experience in maintenance and engineering within the petrochemical industry.


He has not been convicted for offences within the past five years. There was no

public sanction or penalty imposed on him by any regulatory bodies during the financial year.


SALEHALDIN BIN NASRONVice President, Corporate Affairs and Chief Information Officer


En Salehaldin bin Nasron, is our Vice President, Corporate Affairs and Chief Information Officer. He obtained his Diploma in Banking from Universiti Teknologi MARA in 1983 and Bachelor of Business Administration Degree majoring in Finance and Accounting from Ohio University, United States in 1985. He later obtained his Master of Business Administration in Finance from the University of Manchester, the United Kingdom in 2012.

En Salehaldin began his career in 1985 as a Management Trainee in the General Accounting Department of Goodyear Malaysia Berhad and held various positions in the department until he was promoted to Manager, Treasury Operations in 1992. In 1997, he was made Manager, Corporate Accounting and in 2000, he became Controller. He was promoted to General Manager, Finance and Information Technology in 2002. From 2003 to 2006, he was Financial Advisor and Controller for PT Goodyear Indonesia Tbk, a subsidiary of Goodyear Tire and Rubber Company USA. From 2006 to 2008, he was the Chief


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Financial Officer for Asia Pacific based in Kuala Lumpur for Cognis Oleochemicals (M) Sdn Bhd (now known as Emery Oleochemicals (M) Sdn Bhd), a joint venture company between Cognis GmbH Germany and Malaysia’s Golden Hope Plantations Berhad (now known as Sime Darby Berhad). In 2008, he joined our Group as Finance Director of PT Titan Petrokimia Nusantara and was subsequently promoted to Vice President, Treasury and Credit Control for our Group in 2009. In 2012, he was re-designated as Treasurer and Vice President, Corporate Affairs and assumed his current position on 2 June 2017.

He has over 30 years of experience in the finance, treasury and corporate affairs functions.




* Save for that disclosed in the Company’s Prospectus.

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LAU CHEE MINGVice President, Polymer Business


Mr Lau Chee Ming, is our Vice President, Polymer Business. He obtained his Bachelor in Science Degree from Universiti Kebangsaan Malaysia in 1990.

He began his career in 1990 as a Sales Executive with Texchem Trading Sdn Bhd. He then joined Lotte Chemical Titan (M) Sdn Bhd in 1991 as a Sales Executive and was promoted to Sales Manager in 1994. In 2002, he was promoted to Product Manager for the polyethylene business and was transferred to the Chairman’s Office for a span of six months as Manager in 2003. In 2004, he was transferred to the domestic sales department as Country Manager, responsible for domestic polymer sales.

Mr Lau was re-designated as Regional Manager in 2006 where he was responsible for the export sales department. From 2006 until 2010, he was seconded to PT LCT Nusantara as Commercial Director. In 2010, he was repatriated back to Malaysia and promoted to Director, Polymers Sales and Marketing. On 1 March 2017, following the restructuring exercise of our Company, he was re-designated as Acting Vice President of Polymers Business. He assumed his current position on 1 February 2018.

He has over 26 years of experience in sales and marketing in the polyolefins and petrochemicals industry.




CHAIR LAM SENGActing Vice President, Production


Mr Chair Lam Seng, is our Acting Vice President, Production. He obtained his Bachelor of Science in Chemical Engineering Degree from National Taiwan University, Taiwan in 1991.

Mr Chair began his career in 1992 as a Senior Process Engineer with Petrochemicals (M) Sdn Bhd and was with the company until 1997. He then joined Titan Polyethylene (Malaysia) Sdn Bhd (now known as Lotte Chemical Titan Trading Sdn Bhd) as a Process Engineer in 1997 where he was responsible for overseeing the Distributed Control System and process optimisation for the PE2 Plant. He was subsequently promoted to Senior Manager when he joined our Company in 2010 to oversee production of the PE2 and PE3 plants. On

1 March 2017, he was re-designated to his current position.

He has over 25 years of engineering experience within the petrochemical industry.




Talent

We are committed to nurturing our employees’ talents to take on greater challenges and embrace new opportunities as the Company grows.


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R Corporate Milestones

1991 – 1994Commencement of commercial operations• 1st cracker plant• 1st Polyproplene (PP) plant• 1st Polyethylene (PE) plant

1999 – 2000• Commencement of commercial

operations• 2nd cracker plant• 2nd PP plant• 2nd / 3rd PE plant• Benzene, Toluene & Xylene

(BTX) plant• Plastic Technical Center was

established

2005 JunListing on Bursa Malaysia

2006Indonesia PE 450KTA plant acquisition

2008Commencement of commercial operations• Butadiene (BD) plant• Olefins Conversion Unit (OCU)

plant

LCT’S TRANSFORMATION TIMELINE

1991,PP1 - Inauguration by the Prime Minister

1991, PP1

2000, BTX

2000

1991

2005

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Corporate Milestones

2010 - 2011

2015

2017

2010Acquisition by Lotte Chemical Corporation (LCC) 2011Delisted and privatized

2012• JV with UBE

Industries, Ltd, Mitsubishi Corporation and LCC to set-up Lotte UBE Synthetic Rubber Sdn Bhd to produce synthetic rubber

2016 JanInvestment in Lotte Chemical USA Corporation

2016 JunEstablished PT Lotte Chemical Indonesia • New Indonesia

Cracker Project

2015Commence construction of TE3 Project

2017• Set-up Principal

Hub Company to benefit from MIDA approved tax incentives

• Commence construction of PP3 plant

• Listing on Bursa Malaysia

• Commencement of Commercial Operations of Fluidised Naphtha Cracker (FNC)

2010, Acquisition by Lotte Chemical Corp

2017, Listing

Key expansion and improvement initiatives since Lotte Chemical Corporation’s acquisition in 2010

2012

2016


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The Board of Directors of Lotte Chemical Titan Holding Berhad (“Lotte Chemical Titan” or “the Company”) has a strong commitment to upholding and implementing high standards of corporate governance as well as robust risk management and internal control measures throughout the Group. As integral components of our business, these elements will support sustainable business growth, bolster investor confidence, safeguard our corporate reputation and enhance our ability to deliver continued shareholder value creation.

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Corporate GovernanceOverview Statement

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The Board acknowledges that we bear responsibility for the leadership, oversight, control, development and sustainable growth of the Group as well as for inculcating the appropriate culture and values throughout our organisation. We also take cognisance of the new Malaysian Code on Corporate Governance (“CG Code”) which spells out the prescribed practices to embed greater governance and compliance within the Group. In line with our commitment to upholding high standards, we have taken steps to apply some of the practices highlighted in the CG Code within our corporate governance best practices. By promoting robust and effective governance measures and implementing the necessary checks and balance, we are enabling better decision-making, ensuring accountability and transparency, as well as strengthening stakeholders’ confidence and trust in the Company.

Our Board is pleased to present the Corporate Governance Overview Statement and explain how the Company has applied the three (3) principles which are set out in the CG Code:

(A) Board Leadership and effectiveness;(B) Effective Audit and Risk Management; and(C) Integrity in corporate reporting and meaningful relationship with stakeholders.

Principle A Principle B Principle C

Board Leadership and Effectiveness Effective Audit and Risk Management

Integrity in Corporate Reporting and Meaningful Relationship with Stakeholders

• Roles of the Board, Board Committees, the Chairman, President & CEO, Separation of Roles between the Chairman and the President & CEO and the role of the Company Secretary

• Timely dissemination of information to Directors

• Board Charter

• Code of Conduct and Ethics

• Whistleblowing Policy

• Board Composition

• Board Independence

• Tenure of Independent Directors

• Board Diversity

• Sourcing and nomination of board members

• Chairmanship of Nomination Committee

• Board Evaluation

• Remuneration policy

• Remuneration Committee

• Audit and Risk Management Committee

• Chairmanship of Audit and Risk Management Committee

• Suitability and Independence of External Auditors

• Independence of Audit and Risk Management Committee

• Financial literacy of members

• Risk Management and Internal Control Framework

• Risk Management Committee

• Internal Audit Function

• Communication and engagement between the Company and Stakeholders

• Integrated Reporting

• Timely dissemination of Notice of Annual General Meeting

• Attendance of Directors at general meetings

• Technology to facilitate greater participation of shareholders at general meetings

This statement on our corporate governance practices forms the framework in our core decision making process to ensure continued success in our business operations and long-term sustainability as well as accountability to shareholders and our various stakeholders.


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Governance Framework

A corporate governance framework was established by the Board during the year to strengthen the oversight of operations, corporate governance, compliance, internal control and risk management of the Company.

The fundamental relationships among the Board, its Committees, Management, Shareholders and other Stakeholders are established by the governance structure, illustrated below, through which ethical values as well as strategic and corporate objectives are set, while plans for achieving those objectives and monitoring performance are determined.

Stakeholders

COMPANY SECRETARY

• Sets standards, values, policies and strategic aims

• Ensures we have the resources in place to meet our objective

• Monitors and review material strategic issues, financial performance and risk management

COMPLIANCEOFFICER

• Sets, reviews and recommends overall remuneration policy and strategy

• Reviews and approves remuneration arrangements for executive directors and key senior management

HEAD OF INTERNAL

AUDIT

• Makes recommendations to the Board on its composition and that of its Committees

PRESIDENT & CHIEF EXECUTIVE

OFFICER

Board Oversight, Engagement,

Delegated Authority and Accountability

Engagement, Reporting and Accountability

Engagement

Engagement

ManufacturingO & D

BusinessPolymer Business

Corporate Planning

HR & Procurement

Finance & Treasury

Corporate Affairs, Credit Control & IT

BOARD OF DIRECTORSResponsible for the overall management of the organisation of our business

• Reviews and monitors financial statement

• Oversees external audit

• Reviews internal audit plans

AUDIT AND RISK MANAGEMENT

COMMITTEE

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

The other key elements of our corporate governance programme include the Board Charter, Terms of Reference of the Board Committees, Business Code of Conduct and Ethics, that are accessible on the Company’s website.

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We are committed to openness and accountability. We acknowledge the value of diversity and good succession planning as well as alignment of rewards with our values and strategy. We also recognise that good governance depends on good and effective leadership and a healthy and ethical corporate culture, supported by robust systems and processes and a good understanding of the risks and risk appetite of our organisation.

We are conscious that best practices in the area of corporate governance are continuously evolving, and will therefore continue to anticipate and respond to further corporate governance developments and practices to create a healthy and dynamic corporate culture within our Management.

Key Focus Areas in 2017

We came together as a Board on 31 March 2017 in preparation of the Company’s listing and throughout the year we continued to maintain constructive dialogue that focused on strategy, integrity, and value. The Board believes in integrating environmental, health and safety, as well as sustainability practices in strategic and operational initiatives. Guidance and feedback was provided to Management on strategic and operational initiatives. During the year, the Board reviewed the Group’s Organisation Structure covering finance and business analysis and suggested areas for improving accountability, monitoring and reporting.

The Board through the Nomination Committee is responsible for ensuring that there is a Succession Planning Programme for the Board and key Senior Management. Succession Planning of the Board and key Senior Management was reviewed by the Nomination Committee in January 2018.

The Board is committed to ensuring that a good corporate governance and compliance culture is instilled throughout the organisation. The Board reviewed the compliance programme and compliance updates during the year and provided positive feedback to improve the reporting process.

The Board also reviewed the risk management framework and plan for 2017/2018.

Establishing a sound framework for internal controls is a key responsibility of the Board. The Internal Audit Department was recently established and valuable input was advocated to strengthen the process.

Moving Forward

In seeking to promote consistently high standards of governance throughout the Group that are recognised and understood by all, our key focus areas and priorities from 2018 onwards (in addition to routine matters) will include:

• Leading the development of the Group’s corporate culture, values and vision across the business;• Working to further develop business resilience, flexibility and agility with a focus on key risks, compliance and

internal audit areas;• Pursuing the Long-Term Strategy through, for example, organic growth and improved profitability resulting from

innovation in products and processes, considering acquisitions and investment where appropriate and value adding;

• Ensuring succession planning (for the Board and key Senior Management) is designed to align with the Group’s corporate culture and good practices whilst recognising our commitment to diversity; and

• Strengthening stakeholder engagement to promote long-term success for the benefit of stakeholders.


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Compliance with the CG Code

The Board considers that the Company has complied with the best practices and applied the main principles of the CG Code since the Company’s shares were listed on 11 July 2017 (“Listing Date”) with the exception of the following:

Practice 4.1 The Board comprises a majority of Independent Directors

Practice 4.5 The Board must have at least 30% women Directors

Practice 7.2The Board discloses on a named basis the top five (5) Senior Management’s remuneration in bands of RM50,000

Practice 11.2 Large company is encouraged to adopt integrated reporting

The explanation for these departures and timeline for compliance, where relevant, are disclosed further in this Statement.

PRINCIPLE A. BOARD LEADERSHIP AND EFFECTIVENESS

Overview

The Board is responsible for leading and oversight of the Company, creating value for shareholders and in particular formulating, reviewing and approving the Company’s strategy, budget, significant items of capital expenditure, acquisitions and disposals, as well as risk management, Board and Senior Management appointments.

Additionally, the Board is responsible for ensuring that the Company has the appropriate people, financial resources and controls in place to deliver its strategy and long-term objectives.

The Board has established the following Board Committees from amongst the Board members to ensure good governance in the decision-making process. The Chairman of the Board Committees will report to the Board on the decision or outcome of the Committee meetings:

- Audit and Risk Management Committee;- Nomination Committee; and- Remuneration Committee.

Although the Board has delegated its authority to Board Committees, it does not abdicate its responsibility and at all times exercises collective oversight of the Board Committees.

The Directors believe that the Board and its Committees have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.

Board and Committee agendas are shaped to ensure that discussion is focused on the Company’s strategic priorities and more immediate activities, as well as reviews of significant issues arising during the year.

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The Board and Committees are provided with all the necessary information, including regular management information, the Company’s ongoing financial and strategic performance, updates on environmental, health and safety as well as operational matters in a timely manner. The Board also maintains regular communication with Management, to facilitate proper assessment of matters requiring decision or insight and to enable them to effectively discharge their duties.

Practice 1.1 – Roles and Responsibilities of the Board

The Board’s role consists of two fundamental elements: decision-making and oversight. The decision-making function is exercised through the formulation with Management of fundamental policies and strategic goals and the approval of certain significant actions.

The oversight function concerns the review of Management decisions, compliance, the adequacy of systems and controls and the implementation of policies.

In performing its role, the Board makes major policy decisions, participates in strategic planning, delegates to Management the authority and responsibility for day-to-day affairs as well as reviews Management’s performance and effectiveness.

The relevant economic, environmental, social and sustainability-related issues are considered when meeting long-term objectives.

The Board actively strives and is collectively responsible for promoting the long-term success of the Group by directing and supervising its business and delivering sustainable value to shareholders.

In addition to fulfilling its commitment for increased shareholders’ value, the Board endeavours to uphold the interests of the Group’s customers, employees, suppliers and the communities in which it operates, bearing in mind the circumstances and requirements for a successful business and their roles and responsibilities under the Companies Act 2016.

In discharging its functions and responsibilities, the Board is guided by the Board Charter, Authority Limits, Matters Reserved for the Board as well as matters which have been delegated to the Board Committees, President & CEO and Management via the Executive Committee.

The matters reserved for the Board include the following:

Board Structure

a. Appointment and changes in Directors.b. Appointment and removal of Company Secretary(ies).c. Establishment of Board Committees, their members and the specific terms of reference.

Board Remuneration

a. Recommendation of Directors’ fees for Non-Executive Directors to be approved by shareholders.b. Approval of remuneration packages, including service contracts for Executive Directors.


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Company’s Operations

a. Review and approval of Company strategic plan and annual budget (including capital expenditure budget).b. Approval of capital expenditure exceeding prescribed thresholds based on the formalised limits of authority.c. Approval of investment or divestment in a company, business, property or undertaking.d. Approval of investment or divestment of a capital project which represents a significant diversification from the

Company’s existing business activities.e. Approval of major changes in the activities of the Company.f. Approval of treasury policies and bank mandates of the Company.g. Approval of limits of authority for the Company and the Group.

Financial

a. Approval of financial statements and their release (including financial reports for announcement to Bursa Malaysia Securities Berhad).

b. Approval of the Directors’ Report, Statement on Risk Management and Internal Control for inclusion in the Company’s Annual Report.

c. Approval of interim dividends for payment and the recommendation of final dividend or other distribution for shareholders’ approval.

Others

a. Recommendations for changes in the Company’s Constitution.b. Any other matters requiring the Board’s approval under the limits of authority adopted by the Company and

Group.

The Independent Non-Executive Directors are independent of Management and free from any business or other relationships that could materially interfere with the exercise of their independent judgment. They ensure that the interests of all shareholders are taken into account by the Board and that the relevant issues are subjected to objective and impartial consideration by the Board.

The Non-Executive Director does not participate in the day-to-day management of the Company.

Prioritising effective and timely communication with stakeholders is actively promoted by both the Board and Management. The interests of key stakeholders and their feedback are considered when making strategic decisions.

Practice 1.2 – Role of Chairman

The role of the Chairman is to lead and manage the business of the Board to provide direction and focus, whilst ensuring there is a clear structure for the effective operation of the Board and its Committees. He is consulted in the setting of the agenda for Board discussions to promote effective and constructive debate and to support a sound decision-making process, ensuring that the Board receives accurate, timely and clear information, in particular on the Company’s performance.

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The Chairman of the Board and the Chairman of Board Committees communicate regularly with the Management and other Board Committee Members.

The Chairman of the Board is Tan Sri Dato’ Abdul Rahman bin Mamat who is an Independent and Non-Executive Director.

The Chairman’s responsibilities include the following:

- Providing leadership for the Board so that the Board can perform its responsibilities effectively;- Setting the Board agenda and ensuring that Board members receive complete and accurate information in a

timely manner;- Leading Board meetings and discussions;- Encouraging active participation and allowing dissenting views to be freely expressed;- Managing the interface between Board and Management;- Ensuring the appropriate steps are taken to provide effective communication with stakeholders and that their

views are communicated to the Board as a whole; and - Leading the Board in establishing and monitoring good corporate governance practices in the Group.

Practice 1.3 – Separation of Roles of Chairman and President & CEO

There is a clear division of responsibilities between the role of the Chairman and the President & CEO as defined in the Board Charter.

The separation of authority enhances independent oversight of Executive Management by the Board and helps to ensure that no one individual on the Board has unfettered powers or authority.

The role of the Chairman has been outlined above. The President & CEO is responsible for implementing the Company’s policies, strategies and decisions as guided by the Board and overseeing the day-to-day management and operations of the Company’s business. In doing so, the President & CEO is responsible for ensuring that a sound management structure is in place. The President & CEO is Mr Lee Dong Woo who is assisted by the Management in managing the day-to-day business of the Company, which he consults regularly.


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Practice 1.4 – Role of Company Secretary

The Company Secretary shall be a person who is qualified pursuant to the Companies Act, 2016 and competent in carrying his/her duties. The appointment and removal of the Company Secretary shall be decided by the Board.

The roles and responsibilities of a Company Secretary include, but are not limited to the following responsibilities:

- Manage all Board and Committee meeting logistics, attend and record minutes of all Board and Committee meetings and facilitate board communications;

- Advise the Board on its roles and responsibilities;- Facilitate the orientation of new Directors and assist in Director training and development;- Advise the Board on corporate disclosures and compliance with company and securities regulations as well as

listing requirements;- Manage processes pertaining to the annual shareholder meeting;- Monitor corporate governance developments and assist the Board in applying governance practices to meet the

Board’s needs and stakeholders’ expectations; and- Serve as a focal point for stakeholders’ communication and engagement on corporate governance issues.

The Company Secretarial function is carried out in-house and is supported by external service providers. The Company Secretaries all possess the knowledge and experience to carry out their functions. Continuous professional development is undertaken by the Company Secretaries to improve knowledge and strengthen compliance with relevant laws.

All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with.

Directors’ Training and Development

Following their appointment to the Board, Directors were given a comprehensive orientation on the Group and were provided with a detailed induction of the Group by Management.

The Board’s development activities include updates on governance, changes in prevailing laws impacting the operations of the Group, and also matters of a business nature to provide the Directors with a deeper understanding of the Group’s activities and key issues impacting operations such as sustainability, environmental, safety and health matters. Structured opportunities are provided to build knowledge through initiatives such as visits to the plants and business briefings provided at Board Meetings.

The Independent Directors also visited the plant at Pasir Gudang on 4 December 2017 to deepen their understanding of the business as well as to assess the safety and health measures put in place.

All the Directors have completed the Mandatory Accreditation Programme as specified by Bursa Malaysia.

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During the financial year, members of the Board attended various training programme, forums, conferences and seminars. The details of their participation are as follows:

Name of Director Training Attended

Tan Sri Dato’ Abdul Rahman bin Mamat

• MFRS 9 Training on 7 March 2017

• Boardroom Effectiveness on 13 and 14 March 2017

• Luncheon Talk with Minister of Finance II, YB Johari Abdul Ghani on 16 March 2017

• Islamic Finance & Public Private Partnership (PPP) for Infrastructure Development held on 8 May 2017

• Compliance Conference on 18 May 2017

• One-Day Conference Governance Culture - What’s Possible? held on 24 July 2017

• Effective Internal Audit Function for Audit Committee (AC) Workshop held on 20 October 2017

• Humane Entrepreneurship Symposium: From Asia to the World held on 5-6 December 2017

• Lunch Forum - The Digital Economy: Enter the Fourth Industrial Revolution held on 13 December 2017

Tan Sri Datuk (Dr.) Rafiah binti Salim

• Launching of the Malaysian Code of Corporate Governance, Securities Commission Malaysia on 26 April 2017

• International Director’s Summit 2017; Enhancing Resilience Through Governance for Sustainability on 21 August 2017 and 22 August 2017

• MINDA Power Talk, Corporate Intelligence by Peter Jahne on 24 October 2017

• CG Breakfast Series entitled: Leading change @ the brain held on 5 December 2017

• Highlights of the Latest Amendments to the Listing Requirements, Bursa Malaysia on 20 December 2017

Ang Ah Leck • National GST Conference held on 28 February 2017 – 1 March 2017

• CG Breakfast Series entitled: Leading in a Volatile, Uncertain, Complex, Ambiguous (VUCA) World held on 13 October 2017

• MFRS Conference 2017 - The Future of Financial Reporting held on 19 October 2017

• Budget 2018 Tax Seminar held on 7 November 2017

Cho Seongtaeg • Specialist in Public Disclosure held on 8-9 June 2017

Lee Dong Woo • Insider Trading, Closed Period and Public Disclosure held on 30 May 2017

Lee Kwan Ho • Insider Trading, Closed Period and Public Disclosure held on 30 May 2017

The above table does not include training for Mr. Huh Soo Young, Mr. Kim Gyo Hyun, Mr. Park BeonJin and Mr. Park InGoo who resigned prior to the Company’s listing.

An assessment of training needs was carried out by the Nomination Committee and areas for training were identified in January 2018.


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Practice 1.5 – Information and Support for Directors

Directors are provided with sufficient information and material for Board discussions and meeting materials are circulated at least five business days in advance of Board meetings unless in unavoidable circumstances.

Under the direction of the Chairman, the Company Secretary ensures good information flows within the Board and its Committees and between Senior Management and the Non-Executive Directors. The Company Secretary also facilitates induction and assists with professional development as required.

The deliberations and decision of the Board are recorded in the minutes of meetings and the process for recording abstention by Directors on a particular matter is in place. The minutes are circulated to the Board in a timely manner.

Meetings and Time Commitment

The Board of Directors meets regularly. At least five meetings are planned during the year. The Board will hold additional meetings if and when circumstances require.

Directors are required to allocate sufficient time to the Company to discharge their responsibilities. Time commitment was one of the areas evaluated under the Individual Directors’ evaluation. All Directors were assessed to have provided sufficient time for the discharge of their duties as a Director of the Company.

To facilitate the planning of meetings, an annual calendar is prepared and circulated to the Board. The calendar provides scheduled dates for meetings of the Board, Board Committees as well as the Annual General Meeting.

The Directors met nine (9) times over the course of the financial year ended 31 December 2017 (“FY2017”). The attendance of Directors at Board and Board Committee Meetings during FY2017 is set out below.

Attendance at Board of Directors Meetings

Name of Directors Number of meetings attended by Directors*

Tan Sri Dato’ Abdul Rahman bin Mamat 9/9

Lee Dong Woo (appointed w.e.f. 3.3.2017) 7/7

Lee Kwan Ho 9/9

Cho Seongtaeg (appointed w.e.f. 31.3.2017) 6/6

Tan Sri Datuk (Dr.) Rafiah binti Salim (appointed w.e.f. 31.3.2017) 6/6

Ang Ah Leck (appointed w.e.f. 31.3.2017) 6/6

Huh Soo Young (resigned w.e.f. 31.3.2017) 2/4

Kim Gyo Hyun (resigned w.e.f. 31.3.2017) 2/4

Park BeonJin (resigned w.e.f. 31.3.2017) 3/4

Park InGoo (resigned w.e.f 3.3.2017) 1/2

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Attendance at the Audit and Risk Management Committee Meeting

Name of Directors Number of meetings attended by Committee Members*

Ang Ah Leck (appointed w.e.f. 31.3.2017) 3/3

Tan Sri Dato’ Abdul Rahman bin Mamat 3/3

Tan Sri Datuk (Dr.) Rafiah binti Salim (appointed w.e.f. 31.3.2017) 3/3

* Note: The Company was listed on the Main Market of Bursa Malaysia on 11 July 2017

Attendance at Nomination Committee Meeting and Remuneration Committee Meeting

There were no such Committee meetings held during the financial year as the Company was only listed on the Main Market of Bursa Malaysia on 11 July 2017.

Practice 2.1 – Board Charter

The Board has in place a Board Charter which is accessible on the Company’s website. The Board Charter demarcates the responsibilities between the Board, Board Committees, President & CEO, individual Directors and Company Secretary.

There is clarity in the authority of the Board, its Committees and individual Directors.

The Board Charter serves as a reference to the Directors on the Board’s role, powers, duties and board processes for the effective discharge of their duties.

The Board Charter shall be reviewed periodically or on an ad hoc basis by the Board, and amended and/or updated as and when necessary to ensure consistency of governance practices and adherence to the relevant rules and guidelines. As the Board Charter was only adopted in 2017 in conjunction with the Company’s listing, the Board Charter will be reviewed in 2020.

Practice 3.1 – Code of Conduct and Ethics

The Company has in place a Business Ethics and Code of Conduct which was recently updated to include policies and procedures for managing conflicts of interest as well as preventing the abuse of power, corruption, insider trading and money laundering.

The updated Business Ethics and Code of Conduct will be disseminated to all Directors and employees. All employees are required to read the Business Ethics and Code of Conduct and sign off in acknowledgement.

The Business Ethics and Code of Conduct is accessible on the Company’s website.


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Practice 3.2 – Whistleblowing Policies and Procedures

The Board encourages employees to report genuine concerns in relation to the breach of a legal or ethical obligation including fraud, corruption, criminal activity, breach of law, miscarriage of justice, conflict of interest, abuse and the cover up of any of these in the workplace.

The Company has in place internal control measures as well as a risk management programme to strengthen the process in the organisation including a framework to identify, investigate and combat illegal, unethical or questionable practices.

The Compliance Officer will escalate complaints of a material nature to the Audit and Risk Management Committee.

The Whistleblowing Policy is accessible on the Company’s website and will be periodically reviewed to ensure it stays current and relevant.

Practice 4.1 – Board Composition and Independence

The Board came together only in 2017 in preparation for the Company’s listing of its shares on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Malaysia”).

The Board consists of six members comprising three Independent Directors, two Executive Directors and one Non-Independent Non-Executive Director.

The Board composition complies with the Main Market Listing Requirements of Bursa Malaysia that requires a minimum of two (2) Directors or one-third (1/3) of the Board whichever is higher, to be Independent Directors.

A summary of the key skills and experience of the six (6) members of the Board is set out below.

Directors Tan Sri Dato’ Abdul Rahman bin Mamat

Tan Sri Datuk (Dr.) Rafiah binti Salim

Ang Ah Leck

Lee Dong Woo

Lee Kwan Ho

Cho Seongtaeg

Public Service

Accounting / Finance /Corporate Finance

Audit

Corporate Restructuring

Strategy Formulation

Petrochemical Engineering

Legal/ Regulatory

Human Resource

Sales

Corporate Governance

Internal Control/Risk Management

The qualifications and further details of the experience of the individual members of the Board are available on pages 38 - 43.

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The Board does not meet the CG Code for large companies that require a majority of the Board to be Independent Directors.

To this end, the Board in January 2018, agreed to take the necessary steps to ensure compliance of the requirement to have a majority of the Board comprise of Independent Directors by 11 July 2019.

Prior to listing, all Independent Directors have confirmed that they satisfy the test of independence as defined under Paragraph 1.01 and Practice Note 13 of the Main Market Listing Requirements i.e. that he/she is independent of Management and free from any business or other relationship which could interfere with the exercise of independent judgement or the ability to act in the best interests of the Company.

In the Fourth Quarter ended 31 December 2017, the Independent Directors undertook an assessment of their independence as part of the annual Board evaluation process. This exercise will be carried out by the Independent Directors on an annual basis.

The assessment revealed that the Independent Directors continue to be independent which allows for more effective oversight of Management.

Practices 4.2 and 4.3 – Tenure of Independent Directors

The tenure of an Independent Director shall be for a cumulative term of nine (9) years from appointment as an Independent Director. Where the Board is of the view that an Independent Director should continue beyond the nine (9) year tenure, the Board must justify and seek shareholders’ approval annually. For a Director retained as an Independent Director after the twelfth (12th) year, the Board shall seek shareholders’ approval annually through a two-tier voting process as provided under the CG Code.

None of the Independent Directors have exceeded the nine-year tenure limit as they were only appointed/designated as Independent Directors on 31 March 2017.

The Board Charter sets out the policy to limit the tenure of Independent Directors to nine (9) years.

Practices 4.4 and 4.5 – Board Diversity, Targets and Measures to meet those Targets

The Board has in place a Board Diversity Policy which sets out the approach to diversity on our Board. The Board Diversity Policy incorporates a number of different aspects, such as professional experience, business experience, skills, knowledge, gender, age, ethnicity and educational background.

The Board acknowledges the importance of promoting gender diversity to comply with the recommendations of the CG Code.

The Board has set an aspirational goal of increasing the number of women to at least 30% of the Board’s composition. The Board in January 2018 agreed to take the necessary steps to ensure the 30% target is met by 11 July 2019.


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The current Board composition in terms of gender, age, ethnicity and independence is illustrated below:

The composition of the current Board of Directors was reviewed in January 2018 by the Nomination Committee and recommendations to further strengthen the board composition were put forth to the Board. The Board collectively agreed to expand the current Board composition so as to complement current skill sets and be in alignment with the expected development of the business, regulatory requirements, the CG Code and the Board Diversity Policy.

Practice 4.6 – Sourcing of Directors There is a process in place to source Board candidates. Under the process, Board candidates can be recruited from internal or external sources.

Appointments to the Board will be reviewed by the Nomination Committee and recommendations from them will be submitted to the Board for approval.

Board appointments will be based on attributes that compliment and expand the skills set, experience and expertise of the Board as a whole taking into account the Board’s balance of skills, individual’s merits, Board composition requirements under the CG Code, and Board Diversity Policy.

Age

33%

17%

50%

50 - 5960 - 6970 and Above

GenderMaleFemale

17%

83%

EthnicityBumiChineseKorean

Independence IndependentExecutiveNon-Independent

33%

50%

17%

33%

50%

17%

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The Nomination Committee will also consider the time commitment of the candidate if the candidate has multiple Board representations and their independence where the appointment involves an Independent Director.

None of the Directors hold more than five (5) directorships in public listed companies in compliance with the Main Market Listing Requirements.

The Board has adopted the following processes for the appointment of Directors as illustrated below:

Assess

• Size of board• Character, experience and time• Board diversity• Potential conflict of interest

Search

Selection

Produce a short list:

• Assess potential director’s background, skills and experiences against the agreed profile• Check on the conflicts of interest on

independence issues• Check the number of directorships• Reference

Potential sources

• Independent search firms• Directors, Management and

Major shareholders

Skills, experience and attributes matrix

Make recommendations to the board

Interview the selected candidates

Board approval

Announcement

Organise induction

Step

2

Step

3

Step

5

Step

1

Step

4

Needs analysis and profile development

Nomination

Appointment

No additional Board candidates were appointed during the year.


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Practice 4.7 – Chairmanship of the Nomination Committee

The Nomination Committee comprises of three (3) members which comprises exclusively of non-executive Directors, a majority of whom are independent.

The roles and responsibilities of the Nomination Committee are provided in its Terms of Reference. In identifying candidates for appointment of Directors, the Board will not solely rely on recommendations from the Nomination Committee, members of the Board or major shareholders, but may also utilise independent sources to identify suitably qualified candidates as the circumstances deem fit.

The Chairman of the Nomination Committee is Tan Sri Datuk (Dr.) Rafiah binti Salim who is an Independent Director.

The Nomination Committee did not meet in 2017 as the Company was only listed in July 2017. Nevertheless, the evaluation process of the Directors, Board Committees and individual Directors including the various evaluation forms were presented to the Board in October 2017 for review before the evaluation was carried out.

Succession Planning for the Board is the responsibility of the Nomination Committee. The aim of the succession process is to smoothen the transition upon the retirement, resignation, completion of term of office or any other Board vacancy to ensure that positions are filled and skills gaps addressed. Succession for the Board will be a dynamic and an on-going process and will be reviewed in tandem with the strategic goals of the Company.

The Nomination Committee reviewed the Board Succession Programme in January 2018 and shall review the Board Succession Programme periodically thereafter.

The Nomination Committee is also responsible for the succession planning for the position of President & CEO and monitoring and advising on Management’s succession planning for other Executive Directors and Officers. The Board’s goal is to have a long-term and continuing programme for effective senior leadership development and succession.

The Succession Programme for the President & CEO as well as the other members of the Management team was reviewed in January 2018 and shall be reviewed periodically thereafter.

Practice 5.1 – Evaluation of Board, Board Committees and Individual Directors

A Board evaluation was carried out in October 2017 to assess the effectiveness of the Board, its Committees and each individual Director. The evaluation comprised a Board and Board Committee assessment and self-assessments facilitated by the Company Secretary. There was 100% participation in the evaluation exercise.

The effectiveness of the Board was assessed in the areas of the Board’s responsibilities and composition, meeting process, administration and conduct, interaction and communication with Management and stakeholders, Board engagement, as well as the effectiveness of the Chairman. The Board Committees were all assessed on the structure, expertise of the Committee Chair, criteria for appointment to the Committee Chair, processes, accountabilities, responsibilities and their effectiveness where relevant.

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An assessment was also conducted on the individual Directors. The criteria used in the evaluation involved an assessment to satisfy the fit and proper criteria, contribution and performance, experience, calibre and personality of Directors as well as how they exercised their independent judgement.

The Nomination Committee reviewed the outcome in January 2018 and considered feedback/comments given for improvement.

With a view to raise the bar on performance of the Board and its Committees, the focus of the Nomination Committee was on areas which scored below an average rating of 4.00 (good performance) in developing plans for enhancement.

The results reflect that the Directors’ level of performance, effectiveness of Board Committees and the Board as a whole were good and that there were no areas for major concern. Comments and feedback for improvement include reviewing the Board size and composition to meet the Diversity Policy and the CG Code. Board composition to meet diversity requirements is targeted to be in full compliance by 2019.

The results of these assessments also form the basis for the Nomination Committee’s recommendation to the Board for the re-election of Directors at the forthcoming Annual General Meeting in 2018.

The process to engage an independent consultant to facilitate objective and candid board evaluation is in place. As the Company was only listed in July 2017, an evaluation carried out by an independent consultant will be undertaken by the Company to meet the recommendation under the CG Code by 2020.

In addition to the Board assessment process and based on periodic feedback from the Board, additional measures have been put in place to enhance the board governance process and the Board’s oversight function.

Re-election and Re-appointment of Directors

In accordance with the Company’s Constitution, an election of Directors shall take place each year. At the first Annual General Meeting of the Company, all the Directors shall retire from office, and at the Annual General Meeting in every subsequent year, one-third (1/3) of the Directors for the time being or if their number is not three (3) or a multiple of three (3), then the number nearest to one-third (1/3) shall retire from office and be eligible for re-election provided always that all Directors shall retire from office at least once every three (3) years but shall be eligible for re-election.

In accordance with the Constitution, Tan Sri Dato’ Abdul Rahman bin Mamat and Mr. Lee Kwan Ho will retire and offer themselves for re-election at the Company’s forthcoming Annual General Meeting. The profiles of the Directors who are due for-re-election are set out on pages 38 and 42.


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Practice 6.1 – Remuneration Policy and Procedures for Directors and Senior Management

The Board has in place the process to determine the remuneration of Directors and Senior Management, which takes into account the demands, complexities and performance of the Company, the skills and experience required as well as levels and trends for similar positions in the market, the time commitment required from the Director as well as the additional responsibility of the Chairman of the Board.

In line with the Listing Requirements, salaries payable to the Executive Directors do not include a commission or percentage of turnover, while fees payable to the Independent Directors take the form of a fixed sum and not a commission or percentage of profits or turnover. The fees paid to the Independent Directors and Meeting allowance for attendance at Meetings are in the form of cash. The Non-Independent Non-Executive Directors do not receive fees or benefits from the Company.

The Independent Directors’ remuneration consists of the following components:

Remuneration Component Paid as Details

Fixed fee Cash Fees are paid for service as Directors and serving on Board Committees. Fees paid to Chairman covers his responsibility as Chairman and his service on Board Committees.

Meeting Allowances Cash Meeting Allowances are paid for attendance at Meetings.

Pursuant to the provisions of the Companies Act 2016 and the Main Market Listing Requirements, fees and benefits payable to Directors are subject to annual approval at general meetings. The Company’s Constitution will be amended accordingly.

In this connection, the fees and benefits payable to the Directors from 1 January 2017 until the next Annual General Meeting shall be tabled to the shareholders for approval at the forthcoming Annual General Meeting scheduled on 24 April 2018.

The Remuneration Committee reviewed the Remuneration Policy for the Independent and Non-Executive Directors as well as the Remuneration Policy for Senior Management at their Meeting in January 2018 and their recommendations were tabled to the Board and approved. The Company’s Remuneration Policies are accessible on the Company’s website.

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Practice 6.2 – Remuneration Committee

The Remuneration Committee comprises three (3) members all of whom are Non-Executive Directors and a majority of whom are independent. All members have the appropriate levels of experience and knowledge to provide constructive contribution. The roles and responsibilities of the Remuneration Committee are provided in its Terms of Reference and available in the Company’s website.

The Chairman of the Remuneration Committee is Tan Sri Dato’ Abdul Rahman bin Mamat who is also the Chairman of the Board and an Independent and Non-Executive Director.

Executive Directors may be invited to participate in selected meetings of the Remuneration Committee to provide insights particularly on considerations relating to performance of the Company. The Committee may also draw on the advice and enlist the professional services of experts, if necessary.

In accordance with the Terms of Reference of the Remuneration Committee, the Remuneration Committee is required to meet at least once a year. The Remuneration Committee did not meet in 2017 as the Company was only listed in July 2017.


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Practices 7.1 and 7.2 – Disclosure of Remuneration

In January 2018, the Remuneration Committee reviewed the proposed 2017 performance bonus provisions and annual salary increment of the Executive Directors and key Senior Management for 2018 and submitted their recommendations to the Board. Among the indicators for consideration in determining the distribution of the performance bonus and the annual increment were corporate performance, financial metrics and relevant economic indicators.

The Executive Directors abstained from voting on their individual remuneration.

The Directors’ remuneration paid/payable for the financial year ended 31 December 2017 on an individual basis is set out below:

Group

Fees(RM)

Meeting Allowance

(RM)

Salaries/Allowance

(RM)Bonus

(RM)

Benefits- in-kind

(RM)

Other emoluments*

(RM)

Non-Executive Directors

Tan Sri Dato’ Abdul Rahman bin Mamat 203,424 21,100 - - - 40,000

Tan Sri Datuk (Dr.) Rafiah binti Salim (Appointed w.e.f. 31.3.2017) 136,110 13,500 - - - -

Ang Ah Leck (Appointed w.e.f. 31.3.2017) 136,110 13,500 - - - -

Cho Seongtaeg (Appointed w.e.f. 31.3.2017) - - - - - -

Huh Soo Young (Resigned w.e.f. 31.3.2017) - - - - - -

Park InGoo (Resigned w.e.f. 3.3.2017) - - - - - -

Executive Directors

Lee Dong Woo (Appointed w.e.f. 3.3.2017) - - 831,155 - 153,506 1,000

Lee Kwan Ho - - 1,098,285 - 91,848 16,000

Kim Gyo Hyun (Resigned w.e.f. 31.3.2017) - - 398,396 - 48,452 -

Park BeonJin (Resigned w.e.f. 31.3.2017) - - 431,350 - 36,438 -

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Listed Issuer

Fees(RM)

Meeting Allowance

(RM)

Salaries/Allowance

(RM)Bonus

(RM)

Benefits- in-kind

(RM)

Other emoluments*

(RM)

Non-Executive Directors

Tan Sri Dato’ Abdul Rahman bin Mamat 203,424 21,100 - - - 40,000

Tan Sri Datuk (Dr.) Rafiah binti Salim (Appointed w.e.f. 31.3.2017) 136,110 13,500 - - - -

Ang Ah Leck (Appointed w.e.f. 31.3.2017) 136,110 13,500 - - - -

Cho Seongtaeg (Appointed w.e.f. 31.3.2017) - - - - - -

Huh Soo Young (Resigned w.e.f. 31.3.2017) - - - - - -

Park InGoo (Resigned w.e.f. 3.3.2017) - - - - - -

Executive Directors

Lee Dong Woo (Appointed w.e.f. 3.3.2017) - - - - - -

Lee Kwan Ho - - - - - -

Kim Gyo Hyun (Resigned w.e.f. 31.3.2017) - - - - - -

Park BeonJin(Resigned w.e.f. 31.3.2017) - - - - - -

Note:

* Other emoluments comprised payments paid for contributions in connection with the listing of the Company and company-wide appreciation token.

The aggregate remuneration (including salaries, bonus, allowances, benefits-in-kind or other emoluments) paid or estimated to be paid to the key Senior Management members for the financial year ended 31 December 2017 is set out below.

Remuneration For the financial year ended 31 December 2017

Salaries RM250,001-RM600,000

Bonus and allowances RM200,001-RM1,350,000

Benefits-in-kind RM0.00-RM150,000

Other Emoluments RM0.00-RM50,000

The Company does not comply with the recommendations to disclose the detailed remuneration of each member of Senior Management in bands of RM50,000 on a named basis in order to preserve confidentiality, negative impact arising from the disclosure, and the larger need to maintain a stable work environment to meet long-term strategic goals.


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PRINCIPLE B. EFFECTIVE AUDIT AND RISK MANAGEMENT

Practice 8.1 – Audit and Risk Management Committee Composition and Chairman

The Audit and Risk Management Committee is made up exclusively of Independent Directors based on the Step-Up recommendation of the CG Code and also fulfils the requirements of the Listing Requirements which requires the Committee to comprise no fewer than three (3) members and that all members must be Non-Executive Directors with a majority of them being Independent Directors.

The Chairman of the Audit and Risk Management Committee is not the Chairman of the Board and is an Independent Director. This is in compliance with the Step-Up recommendation of the CG Code as well as the Main Market Listing Requirements.

The role and responsibilities of the Committee as well as their rights are set out in the Terms of Reference contained on the Company’s website.

Details of the activities carried out by the Audit and Risk Management Committee in 2017 are set out on pages 91 to 92.

Practices 8.2 and 8.3 – Oversight and Assessment of the Suitability and Independence of External Auditors

The Company has established a Policy that requires a former key audit partner of the Company’s existing External Auditor to observe a cooling-off period of at least two years before being appointed as a member of the Audit and Risk Management Committee. The Policy also sets out the process to assess the suitability, objectivity and independence of the External Auditor.

The Audit and Risk Management Committee had in October 2017 undertaken an annual assessment of the timeliness, competence, audit quality and resource capacity of Ernst & Young in relation to the audit, the nature and extent of the non-audit services rendered and the appropriateness of the level of fees.

The Audit and Risk Management Committee had also obtained assurance confirming that they are independent in accordance with the terms of all relevant professional and regulatory requirements.

Practice 8.4 – Independence of the Audit and Risk Management Committee

The Audit and Risk Management Committee complies with the Step-Up recommendation of the CG Code requiring all members to be independent.

There is a strong element of independence to fulfil their role objectively and provide a critical and sounding view in ensuring the integrity of financial controls and integrated reporting, and identifying and managing key risk.

There is a process to record declarations of conflict of interest. However, none of the transactions entered into by the Company in 2017 had given rise to any conflict situations with the members of the Audit and Risk Management Committee.

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Practice 8.5 – Financial Literacy of the Audit and Risk Management Committee

The Audit and Risk Management Committee possess the right mix of skills to discharge its duties effectively.

The Committee is chaired by Mr Ang Ah Leck who has been a member of the Malaysian Institute of Accountants since 1987, the Malaysian Institute of Certified Public Accountants since 1984, and the Chartered Tax Institute of Malaysia since 1999. Mr Ang possesses sufficient financial knowledge to provide satisfactory input on financial matters. The Committee also comprises members with legal, corporate and public service backgrounds but whom are financially literate and provide diverse perspectives that strengthen the quality of deliberations. All the Audit and Risk Management Committee Members receive ongoing training and development as detailed on page 63.

Practices 9.1 and 9.2 – Risk Management and Internal Control Framework

The Board has overall responsibility for the Group’s system of internal control, and management of risks. The Company has established a risk management and internal control framework.

The features of the risk management and internal control framework are disclosed on pages 80 - 88.

Practice 9.3 – Establishing a Risk Management Committee

The Board understands and recognises that rigorous risk management is essential for corporate stability and for sustaining the Company’s competitive market position and long-term performance.

The following objectives drive the Company’s approach to risk management:– To support the achievement of the Company’s strategic and operating plan through an effective balance of risk and

reward; – To have a culture that is risk aware and supported by high standards of accountability at all levels; – To achieve a truly integrated risk management approach in which risk management forms part of all key organisational

processes; – To support more effective decision making through better understanding and consideration of material risk exposures; – To improve stakeholder confidence and trust; – To safeguard the Company’s assets – human, property, reputation, knowledge; and– To enable the Board to fulfil its governance and compliance requirements.

Oversight of risk has been delegated to the Audit and Risk Management Committee and Management which is responsible for driving and supporting risk management across the Group. The Audit and Risk Management Committee has responsibility for regularly reviewing the risk management framework to ensure it remains sound.

The Group’s risk management framework set the foundations for an effective and sound system of risk management. In practice these components are executed by various risk programmes which utilise a single risk process that is adapted to different levels and varying contexts (e.g. strategic, operational, fraud prevention and projects). The Group’s strategic risk reporting cycle is embedded in existing business processes and considers all material key risks.

The Company acknowledges that some events may be largely unpredictable and exceed the capacity of even the most robust management methods and structure. In our Risk Management programme, we seek to increase the organisation’s resilience to exceptional events and in turn contribute to a more stable corporate performance.


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Practices 10.1 and 10.2 – Internal Audit Function

The Audit and Risk Management Committee is responsible for oversight of the effectiveness of the Group’s internal control environment.

The Internal Audit Function that was established in 2017 reports directly to the Audit and Risk Management Committee. The Internal Audit Function also outsources some of its activities to an independent internal audit service provider.

The Internal Audit Function is independent of the activities or operating units it conducts the internal control review.

Our internal audit team plays a key role in reviewing the effectiveness of our internal control and risk management framework and reports its findings to the Audit and Risk Management Committee. These reports and associated recommendations are considered and acted upon to maintain or strengthen the internal control environment. The Audit and Risk Management Committee is responsible for approving the scope of the internal audit plan, overseeing the performance of the internal audit team and reporting to the Board on the status of the internal control and risk management system. The combined strength of integrity, management control activities, risk management and internal audit function provide the Group with an effective and sound internal control and risk management framework. Amongst its other duties, the Audit and Risk Management Committee decides the appointment and removal of the Head of Internal Audit, scope of work and, performance evaluation for the internal Audit function. Further disclosure on the internal audit function, including the number of resources, name and qualification of the Head of Internal Audit, the internal audit framework as well as the activities carried out by the Audit and Risk Management Committee in 2017 relating to risk management and internal control is set out on pages 92 - 93.

PRINCIPLE C. INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

Directors’ Responsibility for Preparing the Annual Audited Financial Statements

The Directors are required by the Companies Act, 2016 to prepare financial statements for each financial year which give a true and fair view of the Group and the Company’s state of affairs, results and cash flows. The Directors are of the opinion that the Group uses appropriate accounting policies that are consistently applied and supported by reasonable as well as prudent judgements and estimates and that the financial statements have been prepared in accordance with the Malaysian Financial Reporting Standards and the provisions of the Companies Act, 2016 and the Main Market Listing Requirements.

Corporate Disclosures Policies and Procedures

Practice 11.1 – Communication with Stakeholders

The Company has in place an investor relations function. All communications with analysts, investors and media briefings are channelled through the investor relations unit. The Company also keeps stakeholders informed of the Company’s performance via the quarterly financial reports, the Annual Report and audited financial statements.

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Practice 11.2 – Integrated Reporting

This being the first Annual Report issued since its listing, the Board is of the opinion that further time is required before undertaking an integrated reporting approach. The Board has set a timeline of three (3) years for the adoption of integrated reporting.

Practice 12.1 – Notice of Annual General Meeting

Notice for the Annual General Meeting (“AGM”) was given to shareholders by giving 28 days’ notice prior to the Meeting so that shareholders are given sufficient time to consider the resolutions that will be discussed at the AGM.

A copy of the Notice of AGM can be found on pages 144 - 147 and it is also available on the Company’s website.

Practice 12.2 – Attendance of Directors at General Meetings

All Directors are to be present at the Annual General Meeting to allow shareholders to raise questions and concerns directly to them if required.

Practice 12.3 – Electronic Voting

The Company’s Constitution allows members to vote by proxy subject to the provision governing appointment and validity of proxies as contained in the Constitution.

The Company shall ensure through its Polling Agent that all valid proxy or corporate representatives or attorney appointments are properly received and recorded.

All resolutions put to the shareholders at the forthcoming Annual General Meeting shall be carried out by poll under an electronic voting process.

The Company’s Annual General Meeting will be held in Sime Darby Convention Centre, Kuala Lumpur, which is a central location and easily accessible by members who would like to attend the Annual General Meeting.

CG Report

As required under paragraph 15.25 (2) of Main Market Listing Requirements, the Company’s application of each Practice of the CG Code during the financial year, the explanation for departure as well as the timeline for compliance where relevant, is set out in the Company’s CG Report and can be downloaded at www.lottechem.my.

This CG Overview Statement was approved by the Board of Directors of the Company on 30 January 2018.


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INTRODUCTION

This statement is in line with the Main Market Listing Requirements of Bursa Malaysia

Securities Berhad on the Group’s compliance with the Principles and Best Practices

relating to internal control as stipulated in the Malaysian Code of Corporate Governance.

The Company has put in place a risk management framework which is consistent with the Committee of Sponsoring Organizations of the Treadway Commission’s (“COSO”) framework, and in line with ISO 31000, Risk Management – Principles and Guidelines (a standard relating to risk management codified by the International Organization for Standardization which provides a standard on the implementation of risk management).

RISK MANAGEMENT PHILOSOPHY

It is the Company’s mission to comply with the guiding principles as sets out below:

1. Use the best practices in risk management which are generally aligned with ISO 31000 Risk Management - Principles and Guidelines, to support and enhance our activities in all areas of our organisation;

2. Ensure enterprise risk management is an integral part of all organisational and decision-making processes;3. Use a structured enterprise risk management programme to minimise reasonable foreseeable disruptions to

operations, injuries to people and damage to the environment and property;4. Train our people to implement risk management effectively; and5. Strive to continually improve our risk management practices.

ROLES AND RESPONSIBILITIES

Board of Directors (“Board”)

The Board is responsible for reviewing and monitoring of the Group’s system of risk management and internal controls to ensure its adequacy and integrity, and its alignment with business objectives.

However, it should be noted that risk management and control systems is not about totally eliminating risks but managing them. As such, it can only provide reasonable but not absolute assurance against any material loss or failure. The Board has established a process for identifying, evaluating, monitoring and managing high and significant risks that may adversely affect our business, operating results, cash flow and financial condition, as well as for enhancing this process where necessary.

This process has been put in place since 9 August 2017 and up to the date of approval of this statement.

Statement on Risk Management and Internal Control

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Audit and Risk Management Committee (“ARMC”)

The ARMC is a Board Committee established by the Board to assist it in the risk, internal control and governance oversight within the Group. The ARMC is governed by clearly defined terms of reference and authority for areas within their scope.

The ARMC oversees Senior Management’s activities in managing the key risk areas of the Company to ensure that the risk management and internal controls are in place and functioning effectively, and that there is an ongoing process to continuously manage the Company’s risks proactively. Some of the specific duties of the Committee include:

• To review the adequacy and effectiveness of internal control and governance processes;• To review the risk governance structure of the Group;• To review and assess the adequacy of risk management policies and the framework for identifying, measuring,

monitoring and managing significant risks as well as the extent to which these are operating effectively;• To review Management’s periodic reports on risk exposure, risk portfolio composition and risk management

activities; and• To conduct any such other functions as may be agreed to by the ARMC and the Board.

Risk Management Working Committee (“RMWC”)

The RMWC is a Senior Management committee established to implement the direction of the ARMC. The main responsibilities of the RMWC are as follows:

• Ensure the continuous assessment, identification, measurement, and monitoring of all principal risks of the Company;

• Coordinate and prioritise the risk management activities of the Company to ensure all principal risks are adequately managed;

• Ensure that a comprehensive enterprise-wide risk management policy and framework is in place to provide a strong control environment;

• Ensure the Company’s risk management strategies are continuously aligned with its business strategies and risk tolerance, where risks are considered in the Company’s long-term plans and investment or capital allocations;

• Ensure that adequate resources, expertise, and information to manage risks are available throughout the Company; and

• Propagate a risk awareness culture among the Company’s stakeholders, in particular all staff levels in the Company, by way of continuous risk training and education.

Risk Management Function (“RMF”)

The RMF within the Corporate Affairs Department is set-up to assist the Board, ARMC and RMWC in discharging their risk management responsibilities. These responsibilities include assisting in the development of the risk management framework, policies, processes and procedures; ensuring that the line management of each functional unit carries out all risk management responsibilities; and maintaining the risk register for the Group. In addition, the RMF is also tasked with monitoring and reporting the key risks as identified by the line departments and facilitating the quarterly risk review.


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The RMF, under the guidance of RMWC, and to the extent it deems necessary, will also carry out specific responsibilities by collaborating with line management to achieve the following:

• Establish, maintain and continuously monitor the process of identifying, measuring, and monitoring risks throughout the Group by the respective risk owners, with appropriate periodic reporting of all risk activities;

• Ensure the risk owners implement all risk treatment programmes as approved by the RMWC, and that the progress of these programmes is continuously monitored and reported;

• Ensure risk management policies, procedures and framework are in place and that they are effectively functioning, continuously monitored, reviewed and reported inclusive of but not limited to the following risks:

– Strategic Risks;– Operational Risks including the framework to address Compliance, Internal & External Fraud, Occupational

Health and Safety, IT Security, Physical Assets Security, Insurance, Business Continuity (minimisation of major business interruptions or catastrophic loss), Human Capital and Environmental Risks;

– Financial Risks;– Market Risks; and – Legal and Regulatory Risks

Line Management

All directors, managers, risk owners and staff have responsibility for assisting in the identification of potential risk exposures and for developing and implementing associated risk mitigation plans for unacceptable exposures. Additional responsibilities include:

• Managing risk on a day-to-day basis;• Promoting risk awareness within their operations;• Incorporating risk management as a regular management meeting item to allow the consideration of exposures

and to prioritise work in the light of effective risk analysis; and• Ensuring that risk management is incorporated at the conceptual stage of projects as well as throughout a

project.

Internal Audit Department (“IAD”)

The Internal Audit Department reports to the ARMC. The activities of the IAD are guided by the Internal Audit Charter and Annual Audit Plan that are approved by the ARMC.

The IAD function independently reviews the adequacy and integrity of the system of internal controls in managing the key risks, and reports these accordingly to the ARMC on a quarterly basis. Where weaknesses have been identified as a result of the reviews, improvement measures are recommended to strengthen controls and follow-up audits are conducted by the IAD to assess the status of implementation thereof by Management. In carrying out its work, the IAD focuses on areas of priority as directed and approved by the ARMC.

The IAD is working towards performing the services in accordance with the International Professional Practices Framework (IPPF) that is issued by The Institute of Internal Auditors.


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RISK MANAGEMENT FRAMEWORK

Risk Governance and Oversight

The risk governance structure is depicted in the diagram below:

In addition to our risk governance structure, we have adopted the Three Control Gate approach for effective risk management.

Heads of departments together with their team members are the first control gate and are accountable for all risks identified under their respective areas of responsibilities. They are also responsible for the continuous development of the risk management capabilities of their staff and for ensuring that risk management is embedded in all key processes and activities.

The RMF team with oversight by the RMWC is responsible for the second control gate. The RMF team sets direction, defines policy and monitors the risk management activities of the Group.

The third control gate is controlled by the Internal Audit (“IA”) team. The IA team reports directly to the ARMC and provides independent assurance of the adequacy and reliability of governance, internal control and risk management processes.

1st Control Gate

Management

Control

Internal

Control

Measures

Risk Management Function

(within Corporate Affairs Dept.)

Group Internal Audit

2nd Control Gate 3rd Control Gate

1st control gate is the line department which performs day to day r isk management activities

2nd control gate provides oversight function and sets directions, define policy and provide assurance

Internal Audit is the 3rd control gate offering independent challenge to the levels of assurance provided by business operations and oversight functions

Risk Management Committee (Senior Management)

Board of Directors/ARMC


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Risk Management Framework and Process

Our Enterprise Risk Management framework, process and relevant guidelines are generally aligned with ISO 31000: 2009.

Within this framework, the Company has an established and structured process for the assessment (which includes identifying, analysing and evaluating), treatment, monitoring as well as continuously reviewing risks and the effectiveness of its mitigation strategies. We have also made available an in-house developed Risk Assessment System to support the risk management and reporting processes.

Risk tolerance is determined using a risk impact and likelihood matrix with an established risk tolerance boundary demarcating those risks that are deemed to have exceeded risk tolerance and those which have not. Descriptive risk treatment guidance is in place stipulating the actions to be taken for each type of risk.

• Risk Policy• Authority and Organisation• Roles & Responsibilities


GOVERNANCE

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• External Context• Internal Context• Risk Criteria• Define Analysis Structure

• Risk Identification• Risk Analysis• Risk Evaluation

• Risk Treatment Strategy• Risk Treatment Action

Plan

• Risk Monitoring & Reporting

• Risk Assessment System

• System Enhancement• Periodic Training• Embedded Culture

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How Risks Are Treated

Our business is subject to a number of risk factors, many of which are outside our control. The treatment of selected high impact and high likelihood risks are outlined below:

Industry Risks Mitigation Measures

Cyclicality in the petrochemical industry and fluctuations in

crude oil prices may adversely affect our business, operating

results, cash flow and financial condition.

• Enhance operational excellence (increase plant capacity

and utilisation rate) to be more cost competitive.

• Prudent financial management and maintenance of a

strong balance sheet.

• Strengthen value and supply chain.

Our operations and production processes are subject to

significant operating hazards and risks, for which we may not

be fully insured, including but not limited to the following:

• Leakages and ruptures to pipelines and storage tanks;

• Mechanical failure and power outages; and

• Prolonged equipment breakdown or plant shutdown.

• All risks property damage insurance is in place.

• Periodic maintenance and refurbishment of machinery and

equipment.

• Implementation of a risk-based inspection programme in

line with the DOSH SSI regulation 2014.

• Yearly risk engineering survey conducted by insurers.

Limitations on, or disruptions in, the supply of feedstock,

and fluctuations in feedstock prices may result in increased

operating expenses and adversely affect our results of

operation, cash flow and margins.

• Diversify supply sources/suppliers.

• Strict assessment of suppliers’ capabilities.

• Maintain close collaboration with reliable suppliers.

• Pricing risks managed by spreading out price counting.

• Price counting set around 30 days prior to cargo arrival.

We are subject to health and safety laws and regulations and

are exposed to environmental compliance and clean-up costs

• Full compliance with safety and environmental laws and

regulations.

• Carry out process safety audits.

• Implement recommended actions by the Department

of Environment (DOE) and Department of Occupational

Safety and Health (DOSH).

• Perform Guided Self-Regulation (GSR) environmental

mainstreaming as recommended by the DOE.

We sell our products in a highly competitive market that may

not allow us to preserve our market position.

• Differentiate ourselves to a certain extent in the domestic

markets by the range and quality of our products, speed

of delivery and high level of customer service.


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Business Risks Mitigation Measures

We may be affected by negative publicity or other matters arising from the actions of LCC and/or the Lotte Group of companies or other investigations or allegations involving their officers and major shareholders that may lead to reputational crisis.

• Manage stakeholders’ expectation by being more transparent.

• Regular dialogue with major investors, in particular institutional investors.

• Deliver financial results as budgeted.

• Stress the fact that we are a separate legal entity with separate corporate governance and code of conduct.

A cyber-incident may result in a business interruption loss as systems are unavailable both internally and externally. Exceptional expenses are incurred and revenue reduced through loss of business.

• Firewall installed to detect external threats and intrusions.

• Use of spam and email virus filtering system to filter malicious software and emails.

• Antivirus in place for servers desktops and laptops.

• Disaster recovery site set-up with real time replication of critical servers.

Our performance may be affected by the loss of key members of our management or our inability to hire or retain qualified personnel.

• Step-up succession planning initiatives for key positions.

• Intensify efforts to retain personnel.

Existing and proposed expansion plans may not be completed on schedule or within budget which may have an adverse impact on our future growth and prospects.

• Strengthen project and contractor management.

• Leverage on parent company expertise in project management and delivery.

• Monitor project progress at various levels up to Board level.

OTHER KEY ELEMENTS OF INTERNAL CONTROL SYSTEMS

Organisation structure

The Group has an established organisation structure with clear defined lines of authority, responsibility and accountability to meet its business strategies and objectives within a reasonable control environment.


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Business Code of Conduct and Ethics and Whistleblowing Policy

The Group has in place a Business Code of Conduct and Ethics to provide guidance to employees for moral and ethical behaviour that is expected from the employees in following laws, policies, standards and procedures.

A Whistleblowing Policy is established to provide appropriate communication and feedback channels which facilitate whistleblowing in a transparent and confidential manner to enable employees and stakeholders to raise genuine concerns about possible improprieties, improper conduct and other malpractices within the group in an appropriate way.

Delegation of Authority

The Group has established Authority Limits for approving revenue and capital expenditure. Major capital investments, acquisitions and disposals exceeding a certain threshold or execution of long-term contracts require the relevant Committee or Board approval.

Business Process

The Group has in place well-established and documented business processes which are aligned with the strategic objectives and goals.

Annual Business Plans and Budgets

Operating plans and budgets are prepared by the respective Heads of Business Divisions on an annual basis. The Group’s operating plan and budgets are presented to the Board for deliberation and approval.

Actual performance against budget is monitored by the Board for corrective actions where necessary.

Monitoring by Senior Management

Regular management and operation meetings are conducted by Senior Management personnel which includes the President & CEO on financial and operational performance.

Monitoring by the Board

Board meetings are held at least once a quarter with a formal agenda on matters for discussion. The Board is kept updated on the Group’s activities and operations regularly.

Compliance Function

Monitoring of compliance with regulatory and legal requirements by the Compliance division.


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REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

As required by paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the External Auditors have reviewed this Statement on Risk Management and Internal Control. Their review was performed in accordance with Recommended Practice Guide (RPG) 5: Guidance for Auditors on Engagements to report on the Statement on Risk Management and Internal Control, issued by the Malaysian Institute of Accountants. RPG 5 (Revised) does not require the External Auditors to, and they did not, consider whether the Statement covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk and control procedures. RPG 5 (Revised) also does not require the External Auditors to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the Annual Report will, in fact, remedy the problems.

Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement of Risk Management and Internal Control is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and effectiveness of the group’s risk management and internal control system.

CONCLUSION

For the financial year under review and up to the date of issuance of the financial statements, the Board is satisfied with the adequacy and effectiveness of the Group’s risk management and internal control system. The Board has received assurance from the President & CEO and Chief Financial Officer that the Group’s risk management and internal control system, in all material aspects, is operating adequately and effectively. In providing the above assurances by the President & CEO and the Chief Financial Officer, similar assurances have been obtained from the Risk Management Working Committee confirming the adequacy and effectiveness of the risk management practices and internal control systems within their respective areas.

For the financial year under review, there were no material control failures or adverse compliance events that directly resulted in any material loss to the Group.

This Statement does not include the state of risk management and internal control of the Company’s joint ventures and associate companies, which have not been dealt with as part of the Group.

This Statement was approved by the Board of Directors of the Company on 8 March 2018.


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The Board of Directors of Lotte Chemical Titan Holding Berhad (“Lotte Chemical Titan”

or “the Company”) is pleased to present the Audit and Risk Management Committee

(“ARMC”) Report of the Group for the financial year ended 31 December 2017.

COMPOSITION AND ATTENDANCE

The ARMC comprises three members, namely:

Chairman : Mr Ang Ah Leck (Independent Non-Executive Director)

Members : Tan Sri Dato’ Abdul Rahman bin Mamat (Independent Non-Executive Director) Tan Sri Datuk (Dr.) Rafiah binti Salim (Independent Non-Executive Director)

All the members are independent and financially literate. None of the members were former key audit partners of our existing External Auditors. The composition of the ARMC meets the requirements of paragraph 15.09 of the Main Market Listing Requirements and the Malaysian Code on Corporate Governance (“CG Code”).

The ARMC Chairman, Mr Ang Ah Leck has been a member of the Malaysian Institute of Accountants since 1987, the Malaysian Institute of Certified Public Accountants since 1984, and the Chartered Tax Institute of Malaysia since 1999. The Chairman of the ARMC is also not the Chairman of the Board. Mr Ang therefore fulfils the requirement of paragraph 15.10 of the Main Market Listing Requirements and the CG Code.

The ARMC Members and their attendance record are detailed in the Corporate Governance Overview Statement.

MEETINGS

Following the Company’s listing on 11 July 2017, the ARMC met three times in 2017. The President & CEO, the other Executive Director, the CFO and Senior Management were invited to facilitate communication and provide clarification on issues tabled to the Committee.

The Company Secretary acts as the Secretary of the ARMC. The External Auditors attended one meeting during the year.

The ARMC Members are provided with the agenda and relevant Committee papers before each Meeting. Minutes of each meeting were recorded and tabled for confirmation at the next Meeting and subsequently presented to the Board for notation.

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In 2017, the Chairman of the ARMC presented to the Board, the Committee’s recommendations and also highlighted matters of concern raised by the Committee and External Auditors.

The Head of Internal Audit was present in two meetings to table the Internal Audit Plan, Internal Audit Charter, Budget, allocated resources and Internal Audit Report.

AUTHORITY AND DUTIES

The Terms of Reference of the ARMC are available on the Company’s website.

REVIEW OF THE ARMC

An annual assessment and evaluation on the performance and effectiveness of the ARMC was undertaken by the ARMC based on a self-evaluation in October 2017. The ARMC and its members were assessed in various areas including the areas of personal attributes, skills and competency, quality of contribution, understanding of processes, conduct of meetings, quality and depth of information reviewed by the Committee, as well as the reporting process to determine whether the ARMC had carried out its duties in accordance with its Terms of Reference.

The outcome of the assessment revealed that the ARMC and its members had discharged their functions, duties and responsibilities in accordance with the Terms of Reference.


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SUMMARY OF ACTIVITIES

The ARMC carried out the following activities during the financial year:

Financial Reporting

Reviewed the quarterly unaudited financial results of the Group through discussions with Management before making recommendations to the Board for approval.

The areas of discussion included among others:

– accounting treatment of significant transactions and the underlying activities that led to such transactions; – significant matters highlighted, and how these matters were addressed; and– adapting the format of the quarterly financial results in compliance with changes under the Main Market Listing

Requirements.

Internal Audit

a. Reviewed the adequacy of the scope, function, competency and resources of the internal audit and determined that it had the necessary authority to carry out its work;

b. Reviewed and approved the internal audit charter, internal audit annual budget and audit plans;

c. Reviewed the resource requirements for the year and assessed the performance of the internal audit function. Rating on areas such as scope of audit, sufficiency of resources, competency and effectiveness were used to assess the internal audit function;

d. Reviewed and recommended to the Board, the appointment of an External Consultant for the Internal Audit Services based on a co-sourcing arrangement;

e. Reviewed the Internal Audit Reports by the Internal Auditors detailing their findings and recommendations with respect to system and control weaknesses. The Internal Audit Reports for the financial year covered the Disclosure of Related Party Transactions for the first quarter ended 31 March 2017 and investment of IPO Proceeds.

f. Reviewed the independence of the Internal Auditors, taking into consideration the difficulties encountered in the course of audit, including any restrictions on the scope of activities or access to required information; and

g. Met with the Internal Auditors once without the presence of Management.


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External Audit

a. Reviewed with the External Auditors the audit planning memorandum, audit strategy, scope of work and audit focus for the year;

b. Reviewed the performance of the External Auditors; c. Reviewed the proposed audit and non-audit services to be provided by the External Auditors for 2017. The non-

audit services were mainly for the services rendered in relation to the Company’s Initial Public Offering. Upon reviewing the nature and scope of the non-audit services, the ARMC was satisfied that they were not likely to create a conflict of interest or impair the independence and objectivity of the External Auditors; and

d. Held discussions with the External Auditors without the presence of Management.

The Audited Financial Statements for the financial year ended 31 December 2017 were reviewed by the ARMC in March 2018.

Risk Management, Compliance and Others a. Reviewed the Risk Management Framework, Risk Management Programme and Timeline;

b. Reviewed the Compliance Framework, objectives, scope of activities timeline and resources put in place;

c. Reviewed the Compliance Report and Compliance Programme to ensure compliance with the CG Code; and d. Reviewed Related Party Transactions entered into by the Company or the Group and to determine if such

transactions were undertaken on an arm’s length basis and normal commercial terms and on terms not more favourable to the related parties than those generally available to the public; to ensure that the Directors report such transactions annually to shareholders via the Annual Report; and to review conflicts of interest that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of Management’s integrity.

INTERNAL AUDIT FUNCTION

The internal audit function of the Company is performed by an in-house Internal Audit (“IA”) team which reports directly to the ARMC. The IA team was established in July 2017.

The initial priority of the ARMC during its inaugural meeting was to set up the operations of the internal audit function and establish the Internal Audit Charter before it was presented to the Board for approval. The scope and responsibilities of the IA team include the evaluation of the adequacy and effectiveness of the governance, risk management, and internal controls. The Company has engaged an internal audit services consultant for some audit assignments (co-sourcing services) to support and enhance the IA function.


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The internal audit activities were carried out based on a risk-based audit approach. It took into consideration the Company’s strategic, operational, reporting and compliance risk, input from the ARMC and Management. In order to maintain its independence and objectivity, the IA team has no operational responsibility and authority over the audited activities.

The IA team reports the audit findings and recommendations, together with Management’s action plan to the ARMC. The IA team also monitors the progress of the corrective actions and reports the status to the ARMC on a quarterly basis.

The Internal Audit activities during the financial year is summarised below:

• Preparation of the IA Charter, annual budget and audit plan for the ARMC’s approval;• Reviewed of the Investments of IPO Proceeds to determine the adequacy of the internal controls and compliance

with the ‘Use of Proceeds’ as stated in Section 4.7 of the Prospectus dated 16 June 2017, investment policies, procedures and relevant regulations;

• Reviewed of Related Party Transactions and any conflict of interest situation that may arise, determine their accuracy and completeness for disclosure;

• Recommendations for improvement where weaknesses and/or non-compliances were found; and• Follow-up reviews of actions taken or to be taken by Management on audit recommendations and updates on

their status to the ARMC.

The Internal Audit Function is headed by Puan Wan Julaiha Wan Sulong who is a member of the Malaysian Institute of Accountants (MIA) and a member of the Institute of Internal Auditors (IIA). She obtained her Bachelor of Accounting degree from the International Islamic University, Malaysia. She is supported by two staff with seven years of experience in internal audit area and three years experiences in tax reporting and regulatory compliance respectively. Both of these staff each hold a Bachelor’s degree in Accounting.

The IA team attends training to enhance their competencies and roles in the internal audit process. Internal Audit staff received an average of 40 hours of continuing professional education during fiscal year 2017.

The total cost incurred for internal audit function for the financial year was RM245,270.


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1. UTILISATION OF PROCEEDS RAISED FROM CORPORATE PROPOSAL

The Company was listed on the Main Market of Bursa Malaysia Securities Berhad (“Listing”) on 11 July 2017. In conjunction with the Listing, the Company undertook a public issue of 580,000,000 new ordinary shares at an issue price of RM6.50 per share, raising gross proceeds of RM3,770 million (“IPO proceeds”). On 4 July 2017, the Company undertook a share buyback exercise which was completed on 18 July 2017 whereby the Company received valid acceptances from 4,125 shareholders holding a total of 34,808,000 ordinary shares in the Company amounting to RM226.252 million (“Buy Back Offer”). As a consequence of the Buy Back Offer, the IPO proceeds was reduced by the equivalent amount of RM226.252 million to RM3,544 million. The status of the utilisation of the gross proceeds for the financial year ended 31 December 2017 is as follows:

Details of use of proceeds

Estimated timeframe for use

from the date of Listing Amount (RM’000)

Actual amount of utilisation

(RM’000)Unutilised amount

(RM’000)

Funding of the following projects:

(I) Integrated Petrochemical Facility

Within 36 months 2,588,044 - 2,588,044

(II) TE3 Project Within12 months 220,000 220,000 -

(III) PP3 Project Within 12 months 620,000 305,000 315,000

Estimated listing expenses Within 6 months 115,704 82,551 33,153

Total 3,543,748 2,936,197

The utilisation of the proceeds as disclosed above should be read in conjunction with the prospectus of the Company dated 16 June 2017.

2. AUDIT AND NON-AUDIT FEES

The fees payable to the external auditors, Ernst & Young in relation to the audit and non-audit services rendered to the Company and its subsidiaries for the financial year ended 31 December 2017 are as follows:

The Company (RM’000)

The Group

(RM’000)

Audit fees 100 807

Non-audit fees 2,941 3,240

The non-audit services were mainly for the services rendered by the external auditors in relation to the Company’s Initial Public Offering.

Additional Compliance Information

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3. MATERIAL CONTRACTS INVOLVING DIRECTORS, CHIEF EXECUTIVE AND MAJOR SHAREHOLDERS’ INTEREST

Save as disclosed in the prospectus of the Company dated 16 June 2017, there were no material contracts entered into by the Company and its subsidiaries involving the interest of the directors, chief executive or major shareholders, either still subsisting at the end of the financial year ended 31 December 2017 or entered into since the end of the previous period.

4. RECURRENT RELATED PARTY TRANSACTIONS

The Company will only be seeking its first shareholders’ mandate for the Recurrent Related Party Transactions (“RRPT”), following its listing on 11 July 2017, at the forthcoming Annual General Meeting to be held on 24 April 2018. The details of the shareholders’ mandate are disclosed in the Circular to shareholders for the forthcoming Annual General Meeting.


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Our Commitment to Sustainability

About This Section

The release of the inaugural Sustainability Report (the “Report”) marks an important

milestone in our sustainability reporting journey. Our reporting period is from 1

January 2017 to 31 December 2017, unless otherwise stated. This Report covers

the operations of Lotte Chemical Titan Holding Berhad (“LCT”) and the following

active subsidiaries located in Malaysia and Indonesia:

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a) Lotte Chemical Titan (M) Sdn Bhd (“LCTM”)b) Lotte Chemical Titan Corporation Sdn Bhd

(“LCT Corporation”)c) PT Lotte Chemical Indonesia d) PT Lotte Chemical Titan Tbke) PT Lotte Chemical Titan Nusantara

This Report has been prepared in reference to the Sustainability Reporting Guide and Toolkits, issued by Bursa Malaysia Securities Berhad (“Bursa Malaysia”). In preparing this report, we have engaged an external consultant to both facilitate and strengthen our reporting approach from the business sustainability perspective.

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Organisational Context and Outlook

Petrochemical products are used principally as building blocks for a wide variety of materials and applications. Key market end-use sectors include the transportation, packaging, construction, agriculture, textiles, consumer goods and electronics sectors. Whilst the petrochemical industry is global, market demand growth for chemicals is highest in developing countries. Asia has become a major consumer and demand driver for petrochemical products. This is attributable to the rapid expansion of Asia’s industrial and manufacturing sectors as well as its large population base and rising income levels.

Today, there is a growing trend amongst petrochemical producers to expand their plant facilities. They leverage on sustainable manufacturing practices and

How We Create Value

technological innovation to enhance their operational efficiencies and ensure they remain competitive. KPMG International’s Thought Leadership publication titled “Asia Pacific’s Petrochemical Industry: A Tale of Contrasting Regions”, reported that securing steady and capable talent with the right technical expertise remains one of the main challenges in the ASEAN region – as business competition in the petrochemical industry intensifies, the war for talent is likely to step up too. The exaggerated misperception that plastics are the main root cause of environmental problems has also magnified over the years, resulting in increased efforts by petrochemical producers to manage the sustainability impact arising from operational activities throughout the business value chain.

Did you know?

The base materials to produce polyethylene (“PE”) and polypropylene (“PP”) are ethylene and propylene. They consist of the most common and resourceful molecules on the earth – carbon and hydrogen. The production, utilisation and end of life phases of PE and PP DO NOT produce toxic substances that harm the environment.

PE and PP are used in almost every aspect of our daily lives. PE and PP products are generally inert and non-toxic, and are well-regulated for food and beverage application by the European Union (“EU”), the United States of America (“USA”) and China, among other geographies.

The 3Rs – Reduce, Reuse & Recycle methodology is the best way to mitigate the environmental issues associated with plastic. The EU and countries such as Japan, Taiwan and Singapore are good examples of geographies that effectively manage plastic wastes and pollution.


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Cooler and warmer – energy efficient

Plastic insulation can cut heat or cold loss in houses by up to 70%.

Weight loss with plastics

A modern mid-range car contains about 11% plastic material components. A lighter car will consume lesser fuel and hence contribute to lower CO2 emissions.

More light for less energy

Innovative technology and special plastic lenses are used in today’s LED industry and they are two times brighter than conventional lighting which uses the same amount of energy.

Aircraft fuel reduction with plastics

The wing boxes of an Airbus A380 use plastics fibre composites, which reduce the weight of the aircraft by 1.5 tonnes. The lighter aircraft can fly further and carry more cargo by using the same amount of fuel.

Plastics and the Environment – Towards a Peaceful Coexistence

How We Create Value

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LCT’s sustainability aspirations are anchored on our Core Values, namely Customer Focus, Originality, Performance, Partnership and Passion, upon which our business strategies are formulated. They underscore our commitment to striking a balance between achieving business growth and creating long-term value for our stakeholders.

Since the United Nations General Assembly adopted the 2030 Agenda for Sustainable Development in September 2015, the Sustainable Development Goals (“SDGs”) have attracted great interest from many businesses and business associations. The introduction of the SDGs was a clarion call to all businesses to find ways to strengthen their business strategies to evolve and thrive through sustainable transformation. From a local context, Malaysia too embarked on its five-year development plan i.e. the Eleventh Malaysia Plan (“11MP”) covering the period 2016 to 2020, which in many respects, mirrors the multi- dimensional nature of the SDGs. The 11MP was formulated with the “rakyat” or the people at the centre of all development efforts.

Plastics and the Environment – Towards a Peaceful Coexistence

Diagram 1 on the following page demonstrates the intrinsic connection between LCT’s Core Values, the relevant Strategic Thrust of the 11 MP, the SDGs and our sustainability initiatives that are focused on three (3) themes which are Realising Shared Values, Redefining Business in Society and Recognising Our Talent.

As the Lifetime Value Creator, we are committed towards Realising Shared Values, through our continuous contribution towards the development of the local petrochemical industry and the development of a wide spectrum of innovative products, infused with sustainability considerations. We embrace and recognise that the focus on environmental impact and community engagements are gaining momentum in the region and will propel us towards Redefining Business in Society. As a responsible employer, Recognising Our Talent is essential, as we seek to build a wide assortment of talented employees for the growth of business operations and the broader petrochemical industry, whilst placing great focus on their well-being at the workplace.

Our “Sustainability Equation” – Sustainability Inspired Strategy


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2

2 4

4

1

1

1

1

5

4 QUALITYEDUCATION 5 GENDER

EQUALITY

3

6

11 SUSTAINABLE CITIESAND COMMUNITIES

11 SUSTAINABLE CITIESAND COMMUNITIES

13 CLIMATEACTION

13 CLIMATEACTION

16 PEACE, JUSTICEAND STRONGINSTITUTIONS

9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 12 RESPONSIBLE

CONSUMPTIONAND PRODUCTION

12 RESPONSIBLECONSUMPTIONAND PRODUCTION

Improvingwellbeing for all

Pursuing green growthfor sustainabilityand resilience

Pursuing green growthfor sustainabilityand resilience

Enhancinginclusiveness towardsan equitable society


Strengtheninginfrastructure to support economic expansion

6 CLEAN WATERAND SANITATION

Re-engineeringeconomic growth forgreater prosperity

Improvingwellbeing for all


Accelerating humancapital developmentfor an advanced nation

4 QUALITYEDUCATION 5 GENDER

EQUALITY 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE6 CLEAN WATER

AND SANITATION

11 SUSTAINABLE CITIESAND COMMUNITIES 13 CLIMATE

ACTION 16 PEACE, JUSTICEAND STRONGINSTITUTIONS

12 RESPONSIBLECONSUMPTIONAND PRODUCTION

Diagram 1: Connecting our Core Values with our sustainability initiatives and our contribution towards the relevant SDGs and Strategic Thrusts of the 11 MP

Legend – United Nation Sustainable Development Goals (“SDGs”)

SDG #4: Quality Education

SDG #5: Gender Equality

SDG #6: Clear Water and Sanitation

SDG #11: Sustainable Cities and Communities

SDG #12: Responsible Consumption & Production

SDG #13: Climate Action

SDG #16: Peace, Justice and Strong Institutions

SDG #9: Industry, Innovation and Industrialisation

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Recognising OurTalent

Realising Shared Value

Redefining Business in Society

Cus

tom

er F

ocus

Orig

inal

ity

Pass

ion

Part

ners

hip

Perf

orm

ance

Legend – Eleventh Malaysia Plan (“11MP”)

2Improvingwellbeing for all

1Enhancinginclusiveness towardsan equitable society

3Accelerating humancapital developmentfor an advanced nation

4Pursuing green growthfor sustainabilityand resilience

5Strengtheninginfrastructure to support economic expansion

6Re-engineeringeconomic growth forgreater prosperity

Strategic Thrust 1: Enhancing inclusiveness towards an equitable society

Strategic Thrust 2: Improving wellbeing for all

Strategic Thrust 3: Accelerating human capital development for an advanced nation

Strategic Thrust 4: Pursuing green growth for sustainability and resilience

Strategic Thrust 5: Strengthening infrastructure to support economic expansion

Strategic Thrust 6: Re-engineering economic growth for greater prosperity


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Our “Architecture” of Value Creation

Diagram 2 on the following page demonstrates how we create value by applying a holistic approach. This sees us taking input from our capitals in the form of

various resources (e.g. skilled talent, technology, etc.) and transforming these through our business activities and interactions to produce beneficial outcomes for our business and various stakeholder groups.

How We Create Value

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Diagram 2: Our Value Creation Model

Creating value for our shareholders• Enhance shareholder value through

financial gains

Skilled talent

Examples of our capitals/ valuable assets

Sustainable manufacturing and customer value creation• Application of technological

innovation to enhance productivity and efficiency whilst minimising waste generation and energy consumption (e.g. recycling of by-products)

• Provide innovative products and value-added services to meet customer demand/ consumption in major industries

• Fortify the local petrochemical industry through business expansion

Minimising impact on the environment• Manage/ reduce

the environmental impact arising from plant operations (e.g. electricity consumption, waste generation, water consumption)

Implementation of Sustainability Initiatives for managing Economic, Environmental and Social Impacts

Performance Monitoring and Future Orientation

Managingsustainability matters

across various business operations


Recognising Our Talent

Redefining Business in

Society

Customer Focus

Perform

ancePartnership

Pas

sion

Originality

Sustainability Governance

Out

com

es/

valu

e cr

eate

d fo

r ou

r bu

sine

ss a

nd o

ur s

take

hold

ers

Sus

tain

abili

ty a

s ke

y en

able

rB

usin

ess

inpu

ts

Talented workforce• Career growth

and professional development

• Uplift the capabilities of talent within the petrochemical industry

Technology/ Equipment Financial capital

Resources for manufacturing(e.g. materials such as feedstock, electricity, etc.)

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The Value Our Sustainability Governance Brings

In 2017, we established a Sustainability Working Group (“SWG”) at the management level, as part of efforts to strengthen our governance ecosystem. The Executive Vice President of Corporate Planning, as Chairman of the SWG, is supported by representatives from various departments.

The SWG is tasked with identifying, assessing and prioritising sustainability matters that are material to LCT; driving the implementation and monitoring of company-wide sustainability management under the supervision of the President and Chief Executive Officer to ensure alignment with the overall strategy; and facilitating the sustainability reporting process within the Company in meeting the regulatory requirements and subsequently making recommendations for approval.

How We Create Value

Establish & oversee the implementation of the Company's overall strategies, taking into account the economic, environmental and social impacts (“sustainability matters”) to support LCT’s long-term value creation

Oversee the delegation of duties of Board of Directors in the implementation of sustainability strategies as set by the Board, including supervising LCT’s sustainability performance across the Company’s day-to-day operations

Drive the implementation and monitoring of company-wide sustainability initiatives, under the supervision of the President and Chief Executive Of�cer to ensure alignment with the overall strategy, including sustainability disclosures in meeting the regulatory requirements

Board ofDirectors

President &Chief ExecutiveOf�cer

SustainabilityWorking Group(“SWG”)

Our SustainabilityGovernance Structure

The value our sustainability governance structure brings

The President and Chief Executive Officer is responsible for overseeing the implementation of sustainability strategies set by the Board of Directors (the “Board”) and for providing progress status updates on the Company’s sustainability management activities (including sustainability disclosure) to the Board. The Board is ultimately responsible for setting the overall corporate strategies, the marketing and human resources plan as well as the risk management framework, by considering the economic, environmental and social considerations to support LCT’s long-term value creation. Diagram 3 below illustrates our sustainability governance structure.

Diagram 3: Our Sustainability Governance Structure and keys responsibilities

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In our effort to address issues concerning the business and its operating environment, it is imperative that we identify the key matters to pay attention to. In doing so, we started off by identifying all possible matters across LCT’s business value chain followed by the screening of the said matters. We gave due consideration to disclosure requirements, business risks as identified in our risks

Identifying and Defining What Matters Most

register, and emerging sustainability risks as reported in industry specific publications and international voluntary reporting standards (e.g. Global Reporting Initiative Standards – Sector Disclosures). The identified matters were further categorised into three broad themes, i.e. Realising Shared Values, Redefining Business in Society and Recognising Our Talent.

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Stakeholder groups Engagement channels Focus areas How do we respond

Inte

rnal

Sta

keho

lder

s

Board of Directors • Board meetings• Company events

• Corporate governance• Company strategy

Theme 1: Realising Shared Values (page 109-115)

Investors/ Shareholders

• Analyst briefings• Media releases

• Company financial performance

• Corporate Governance• Responsible business• Open and transparent

communication


Employees • Employee Engagement Survey• Learning and development

programme• Employee performance

appraisal• Corporate volunteering

programme• Employee on-boarding training

• Occupational safety & health

• Fair remuneration• Fair employment practices• Career development

opportunities

Theme 3: Recognising Our Talent (page 125-135)

Ext

erna

l Sta

keho

lder

s

Government/ Regulatory Bodies

• Ongoing meetings• Participation in programme

organised by government/ regulatory agencies

• Responsible business• Compliance to applicable

laws


Theme 2: Redefining Business in Society (page 116-124)

Theme 3: Recognising Our Talent (page 125-135)

Customers • Online platform (e.g. Corporate website)

• Customer Satisfaction Survey• Customer audits

• Quality of products & services

• Production capacity• Research & Development• Data security & protection

Theme 1: Realising Shared Values(page 109-115)

Suppliers/ vendors/ contractors

• One-on-one meetings• Periodic performance

evaluation

• Agreeable contracts• Terms of payments• Maintaining partnerships


Local Communities • Online platforms (e.g. social media & online applications)

• Corporate volunteering programme (e.g. community events, knowledge-sharing initiatives & partnerships with non-governmental organisations)

• Community development• Responsible products &

services


Theme 2: Redefining Business in Society (page 116-124)

Industry/ trade association

• Annual reports• Industry collaborative

programme

• Manufacturing practices• Industry outlook• Collaborations


Media/ Analyst • Press conferences and events• Media releases• Media interviews

• Company performance• Responsible business• Corporate Governance

Theme 1: Realising Shared Values(page 109-115)

Maintaining Our “Chemistry” With Our Stakeholders

We actively listen to our stakeholders in order to appreciate their concerns in relation to our operating environment. Table 1 below presents how we engage various stakeholder groups through multiple engagement channels throughout the year. Such engagements are

Table 1: Summary of stakeholder engagement channels, key focus areas and our initiatives to respond to them

pivotal to understanding how various parties perceive our achievements and the areas we could improve on. In 2017, guided by an external consultant, we conducted surveys with our internal stakeholders to gauge their perception of the level of importance of the

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identified sustainability matters. In the coming years, we will look at undertaking a structured approach to prioritise our internal and external stakeholder groups and subsequently expand our scope of engagement to external stakeholders. We adopted a defined materiality assessment process to identify and assess the significance of sustainability matters to our business and stakeholders.

Spearheaded by the SWG, we conducted a sustainability risk assessment exercise to determine the level of significance of each sustainability matter to the Company. The outcome of materiality assessment is presented in Diagram 4 below.

Materiality Assessment: Defining What Matters Most

The outcome of the materiality assessment was presented and approved by the Board of Directors. Customer Value Creation, Environmental Management, Sustainable Manufacturing, Regulatory Compliance, Human Capital Development, Business Development, Human Rights & Fair Employment Practices, Data Security and Protection, Community Development and Occupational Safety & Health are the top 10 material sustainability matters which are of high importance to our stakeholders and business. The details of our initiatives in managing these material sustainability matters are discussed in the following pages.

Diagram 4 Materiality Matrix

Signi�cance of LCT's Sustainability Impacts

Ove

rall

In�u

ence

on

Sta

keho

lder

Ass

essm

ents

and

Dec

isio

ns

Low High

Low

Hig

h Occupational Safety & Health

Sustainable Supply Chain Management

CommunityDevelopment

Data Security& Protection

Business Development

Human Rights & Fair Employment Practices

Human Capital Development

Environmental Management

Sustainable Manufacturing

RegulatoryCompliance

Customer ValueCreation

Diagram 4: Materiality Matrix

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Our sustainability matters

Stakeholder groupsHow do we manage these matters?

Directors/ Employees Regulators Customers Suppliers

Shareholders/ investors

Local Community

Customer Value Creation • • • Refer to

pg. 109

Environmental Management • • • • • Refer to

pg. 116-121

Sustainable Manufacturing • • • • Refer to

pg. 110-111

Regulatory Compliance • • • • • Refer to

pg. 112

Human Capital Development • Refer to

pg. 125-127

Business Development • • • Refer to

pg. 113

Human Rights & Fair Employment Practices

• • • Refer to pg. 128-131

Data Security & Protection • • • • • Refer to

pg. 114

Community Development • • Refer to

pg. 122-124

Occupational Safety & Health • • • Refer to

pg. 132-135

Sustainable Supply Chain Management • • Refer to

pg. 115

Diagram 5: Importance of sustainability matters to stakeholders across value chain

Legend

Theme 1: Realising Shared Values

Theme 2: Redefining Business in Society

Theme 3: Recognising our Talent

Materiality Assessment: Defining What Matters Most

In Diagram 5, each sustainability matter is mapped against the relevant part of LCT’s business value chain that are impacted most.

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We conduct regular visits to customer sites in order to exchange information on technical matters as well as to offer support on matters regarding our products. Annual gatherings with key customers are organised which encourage the development of rapport between customers and LCT’s Management. Furthermore, we have participated in Chinaplas, the Annual Asia Pacific Petroleum Conference (APPEC), and the Asia Petrochemical Industry Conference (APIC). All these events are Asia’s largest industry-specific conferences and serve as platforms to strengthen relationships and connectivity with our overseas customers/potential customers.

We also conduct annual customer satisfaction surveys for our major customers domestically and overseas to assess their views on quality and packaging of materials, technical services, delivery, and aftersales management. The customer opinions gathered through these surveys are deliberated upon and the relevant departments are tasked with making improvements as per the survey findings.

Customer Value Creation

For mutual growth, we work closely with our customers to understand their needs and expectations which helps us in providing the highest levels of customer satisfaction. We are in constant communication with our customers as their feedback is invaluable in helping us maintain the highest level of quality in all that we do.

Quality products, timely delivery, and customer service are the aspects most valued by our customers. Operational excellence and strict quality control allow us to maintain our quality, while effective management of the supply chain aids us in providing dependable and timely deliveries. By developing a customer-centric approach, we are able to extend trade credits, standby inventories, and flexible trade terms to deserving customers. This allows them some flexibility in conducting business with us. This is on top of our extensive market intelligence evaluation of customers. Continuous communication is another activity we undertake to ensure customers are consistently satisfied.

LCT’s role as the “Lifetime Value Creator” is underscored through its continuous

contribution towards the development of the local petrochemical industry

and development of a wide spectrum of products, infused with sustainability

considerations


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Sustainable Manufacturing

Sustainable manufacturing or green initiatives have gained traction in recent times as product manufacturers race to be at the top of their game when it comes to sustaining the business and operating environment. In line with our commitment to provide our customers with value added services which include product development and improvement, technical and fabrication process training, and the development of custom-made products for the benefit of our customers, we established the Plastic Technical Centre (“PTC”) in 2000. This initiative has led to the development of 75 new product grades and the provision of technical and fabrication process training to more than 5,000 employees on the customer side.

We also work closely with our Korean controlling shareholder, Lotte Chemical Corporation (“LCC”) which possesses a large footprint in the petrochemical industry. Through such collaborations, we receive invaluable


Recycledrate

Steam

2,501,022

370,770

10,4772,149,348

284,333

5,833 100%

Methane Hydrogen

2016 2017

Weight of Gases Generated and Recycled Quantities (tonnes) at our Malaysia operating sites

support through the centralised petrochemical research facility in South Korea which oversees research and development projects thus allowing operating sites to concentrate on operational efficiency. Aside from this, LCC provides technical support in the form of sharing operational best practices which contributes significantly to our improved production efficiencies and operational discipline. Other than that, we have benefitted from the secondment of managers and industry experts from LCC, which has encouraged cooperation and the transfer of knowledge of the market and operations as a whole.

Diagram 6 below illustrates the collection and recycling of steam, hydrogen, methane gas which are reused as fuel source or input for production process in our Malaysian sites. Our Indonesian site do not produce hydrogen and steam and do not utilise methane.

Diagram 6: Steam, Methane & Hydrogen gas recycling at our Malaysian Plant Sites

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As part of our efforts to maintain operational excellence, we strive to recycle 100% fuel source. Between the years 2016 and 2017, the difference in weight of the fuel source produced was mainly due to a turnaround plan in motion and a water disruption incident which led to reduced plant production. We also had two steam turbines replaced during a turnaround initiative in July 2017 at our naphtha cracker plant. We intend to reduce the steam consumption at our naphtha cracker plants and this is expected to lead to approximately a 6% reduction in our annual steam consumption. Preheaters which utilise hot streams in naphtha plants to heat up process streams have been installed to reduce our reliance on steam which collectively contributes to the reduction of steam consumed annually by approximately 2%.

The Company owns and operates 14 plants across Malaysia and Indonesia which are supported by on-site facilities including co-generation plants, tank farms, and waste water treatment facilities. Such facilities reduce our reliance on external utility suppliers and reduce our cost of goods. Furthermore, we benefit from the proximity of our facilities to our customers, resulting in shorter delivery time, lower transportation cost, and overall impact to the environment. In 2017, our Indonesian site normalised an Ethylene Recovery Unit (“ERU”) to recover wasted gas of the reactor. Besides that, we installed a Variable Speed Drive (“VSD”) on a motor utilities pump which helped save electricity.

We leverage on the scale of our integrated production facilities in Malaysia to achieve operational stability and optimal plant utilisation. In Malaysia, integration

within and across our sites, beginning at the intake of feedstock to the manufacture of our products, allows us to achieve efficient production streams and reduce cost and wastage in each step of our production chain. Aside from this, we have improved the reliability, stability and output of our plants through debottlenecking projects and equipment modification.

With regard to the quality of our products, we have established three laboratories to ensure quality control of our petrochemical and polymer production. These laboratories form the Quality Management Section, comprising of the Monomer Laboratory and Polymer Laboratory. To determine the quality of shipments supplied to us, we perform tests on each shipment before acceptance. For instance, each naphtha shipment is usually accompanied by a Certificate of Analysis and tested prior to unloading. All other incoming materials are controlled upon arrival for quality assurance. Polymer products are tested in-process and finished products before grading them in accordance with specifications. The product release slip issued states the product quality and grade, clearing the product for sale. A Certificate of Analysis is issued for prime grades and a non-compliance note is issued for products that do not meet specifications. A Certificate of Analysis is issued for both monomer and polymer products sales.

In our efforts to increase the quality of products delivered to our customers, we have made improvements to the packaging of our products, reduced instances of multiple handling, and put in place enhanced export shipment capabilities. Furthermore, we undertake preventive maintenance, calibration and verification of quality control equipment on a periodic basis.

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Regulatory Compliance

Compliance to local laws is pivotal to sustaining our business and to maintaining our reputation within the environment in which we operate. Credibility is a currency which is imperative for sustaining our business and one way we maintain our credibility is through compliance with local laws and regulations.

All business and support departments are tasked with ensuring they comply with regulations affecting their area of work or operations. A compliance division was formed shortly after the listing of LCT on the Bursa Stock Exchange. It reports to the Audit and Risk Management Committee. Its functions include establishing an operating compliance framework and promoting a compliance culture throughout the Group.

LCT’s Business Ethics and Code of Conduct (“BECOC”) sets forth the fundamental policies and procedures applicable to all employees and clearly defines the acceptable practices within the Company. With regard to the reporting of regulatory and ethical breaches, our


Whistleblowing Policy (“WP”) sets the tone for reporting of any breaches observed by any employee. This policy allows for a complainant to approach their direct supervisor, the Compliance Officer or the President & CEO. The BECOC and WP are both discussed in the Corporate Governance Overview Statement.

Subsequent to LCT’s listing, training on regulatory requirements was conducted among top management. A company-wide briefing via a Townhall meeting was also conducted covering related party transactions, insider trading and corporate disclosure.

In Malaysia, various training topics such as misconduct, work ethics and core values are incorporated into the Company’s orientation programme. In Indonesia, the training sessions generally touch upon topics such as creating awareness on regulatory policies or initiatives. Positive reinforcement is deemed helpful in ensuring that our people are constantly reminded about the importance of complying with regulatory and ethical requirements. We achieve this through awareness sessions, briefings, trainings, and workshops for employees.

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Business Development

In maintaining the sustainability of our business, we have invested in various projects in order to remain competitive in the industry. These projects include the TE3 Project or Fluidised Naphtha Cracker (“FNC”) which is a K-COT catalytic cracking reactor attached to our NC2 Plant to create a larger output of propylene and ethylene using a more efficient technology. The FNC commenced commercial operation on 16 December 2017. Construction of a new polypropylene production plant (“PP3”) to complement the TE3 project by utilising the additional propylene feedstock is underway. The PP3 is expected to begin commercial operation in the second half of 2018. A joint venture with LCC for the construction and operation of an ethane cracker plant and a monoethylene glycol (“MEG”) plant in the United States is scheduled to commence commercial operation in the second half of 2019.

LCT is currently at the final stage of a Front End Engineering & Design (“FEED”) study to determine the downstream configuration of the Integrated Petrochemical Facility in Indonesia. This facility will comprise a cracker plant as well as polyolefins, olefins and derivatives plants.

In addition to this, the Environment Impact Assessment (“EIA”) is progressing well and is expected to be finalised by the end of 2018.

The Integrated Petrochemical Facility is expected to be completed in the year 2023. This development is slated to create over 1,000 full time jobs plus various business opportunities for related businesses upon the commissioning of the facility. This facility would propel LCT to the forefront of Southeast Asia’s petrochemical industry.

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Data Security and Protection

In its 2017 publication, “Crossing the Line”, KPMG International reports that companies identified cyber security as a major business enabler in building trust and stakeholder confidence. The publication emphasised that companies which disregard controls to safeguard data privacy and which do not have data security as part of their business strategy, may be exposed to the risk of extinction.

At LCT, the Risk Management Department (“RMD”) is tasked with ensuring the relevant policies and frameworks are in place for the mitigation of risks associated with Information Technology (“IT”) Security and Physical Assets Security in order to protect the Company’s sensitive data.

To mitigate these risks, we have put in place some additional measures that include the installation of firewalls on our systems to detect external threats, the usage of email spam and virus filtering solutions to detect and filter malicious attachments and emails, the installation of antivirus solutions for servers, desktops


and laptops, and a disaster recovery site set-up allowing real time replication of business critical applications. Furthermore, data loss prevention and pre-resignation security checks are in place to manage sensitive data and prevent leakage of Company intelligence properties.

Periodic assessments on the IT Infrastructure are conducted to ensure that current controls/ practices are sufficient and that they comply with policies and procedures. Due to our strict monitoring and protection measures, LCT has not experienced any data breaches in relation to its Malaysian or Indonesian sites.

To ensure users of our Malaysian sites are aware of information security threats, we publish IT newsletters on a quarterly basis. Users of both our Malaysian and Indonesian sites have access to monthly Information Security newsletters which are published on the Company’s intranet. Information security awareness training is also conducted annually. All employees in Indonesia have to sign the Information Security Confidential Pledge and undertake IT security training.

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Sustainable Supply Chain Management

To reduce our impact on the environment, we continue to undertake measures to integrate sustainability within our supply chain.

The supply of feedstock (i.e. ethylene and naphtha) is one of the most critical aspects of our supply chain and we have in place a number of initiatives to secure the supply of our feedstock. Our Integrated Petrochemical Facility in Indonesia will allow us to reduce reliance on external suppliers especially during times of volatility in the price of feedstock. This also enables us to reduce reliance on third-party local suppliers for our feedstock. Besides that, we maintain good relationships with a number of suppliers to provide continued supply without having to rely too heavily on a single supplier. This is managed by establishing a three-year supply agreement for our ethylene and catalyst supply for our Indonesian

site. In January 2018, our Malaysian subsidiary signed a three-year agreement with a Middle Eastern-based oil company for the supply of naphtha.

We are also continuously looking at improving our own output of propylene and ethylene through various expansionary projects such as the TE3 Project. We almost entirely depend on third-party logistic providers to have our goods shipped to Malaysia and Indonesia. This creates the necessity to properly manage relations with these parties aside from ensuring mutually beneficial contract terms.

We also perform periodic assessments of our vendors with a focus on product and service quality. Such assessments would assist us to ensure that suppliers and vendors would render products and services which are in line with our strict requirements.

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LCT recognises that managing the environment is as vital as making profits. We strive to implement measures to mitigate our impact on the environment, thus allowing us to operate our business while watching over the environment in the areas where we operate. Environmental governance at LCT encompasses regulations, practices, policies, and institutions that shape how we interact with the environment around us. Our commitment to this can be observed through our environmental governance in these ways:

We are actively involved in various certification programme and environmental assessments in order to proactively

LCT is a responsible corporate citizen that embraces and recognises that the focus

on environmental impact and community engagement is gaining momentum in the

region and will continue to redefine the business ecosystem


respond to our stakeholders’ needs as well as secure objective grounds for the implementation of eco-friendly management. LCT has established an environmental impact assessment system allowing for real time tracking of impacts that occur during the production process. Data collected is monitored and managed in real time.

LCT has introduced good environmental management practices and set in place an Emergency Response System. A total of 12 environmental-related training sessions were conducted for the purpose of creating awareness on available equipment, process controls, and impact on neighbouring communities.

Reinforcement of environmental prevention activities

Improvements to environmental monitoring system

Implementation of an Emergency Response System

DOE-endorsed Guided Self-Regulation (“GSR”)

Sustainability in the supply chain


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Air Emission

Our air emission management is guided by industry best practices, which spell out ways to safeguard the environment and manage our air emissions. The Company complies with environmental regulations in whichever country of operation set by the local environmental authorities. In Malaysia, we decided in 2017 to incorporate a Guided Self-Regulation approach by using the Environmental Mainstreaming Tools endorsed by the Department of Environment (“DOE”).

We deploy various air emission control mechanisms throughout our operations. For instance, a 24-hour online monitoring system known as the Continuous Emission Monitoring System (“CEMS”) is installed at various boilers within our Malaysian operating plants. This monitoring system is directly connected to the DOE’s monitoring system allowing them visibility of our emissions. Aside

from this, we utilise natural gas as fuel for most of our operations to minimise any detrimental effects on the environment. On top of this, LCT had in 2017, decided to upgrade the existing CEMS to a Predictive Emission Monitoring System (“PEMS”). The PEMS is one of the latest alternative technologies utilising empirical methods to monitor emissions and we have approved its installation on three of our gas turbines and boilers by a DOE registered consultant/ contractor.

We also perform periodic inspections and assessments to make certain that our air emissions are within the acceptable threshold. A third-party Skim Akreditasi Makmal Malaysia (“SAMM”)1 accredited lab was appointed to perform quarterly flue gas emissions monitoring besides periodic isokinetic tests on our boilers. Diagram 7 below depicts the type of air emission and concentrations:

NOx

SOx

Dust

CO2

0.014

0.005

0.007

2.005

1.942

0.147

0.173

0.008 0.161

0.149

0.027 0.042

0.034 0.057

20172016

Average Concentration/Volume of Emissions(g/Nm )

Air Emissions

3

MalaysiaOperating Entities

IndonesiaOperating Entities

Types of pollutants

Permissible limit for air emissions

Malaysia (g/Nm3) Indonesia (g/Nm3)

Nox ≤ 2 ≤ 10

Sox ≤ 0.2 ≤ 0.6

Dust 0.5 120

Diagram 7: Air Emissions

1 Skim Akreditasi Makmal Malaysia (SAMM), a national unified laboratory accreditation scheme that provides a credible accreditation service to testing and calibration laboratories, in which the certificates are accepted internationally.

Legend

NOx - Nitrogen OxidesSOx - Sulphur OxidesCO2 - Carbon Dioxide

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Due to our prudent conduct and close monitoring, we experienced no breach in regulatory emission limits for the year 2017. In the event of non-compliance, the relevant personnel are alerted about the monitoring results. The said personnel would then be responsible for identifying abnormalities or design flaws within the air emission equipment.

Another initiative at our Malaysian plants involved voluntary implementation of the Leak Detection and Repair (“LDAR”) programme on fugitive emissions for the purpose of air quality improvement and the working environment. Currently, the installation of covers for oily pits is in the pipeline and we will seek for Management’s approval once the engineering study by our Technical Team is completed.

Furthermore, we installed covers for the wastewater treatment plant (“WWTP”) oily pits in order to manage odour emissions. Odour monitoring is conducted within a 5 km radius of our facility with third party labs appointed to also monitor noise and vibrations.

Water Management

Water plays a pivotal role in helping LCT maintain stable operations. It is imperative for us to make sure a continuous supply of water is in place and that water consumption and discharge activities within our processes are managed efficiently.

Water consumption is monitored at each plant site through the installation of meters at water inlets. This allows constant monitoring of consumption and enables us to maintain consumption within acceptable levels. Additionally, we implement water reduction initiatives and are constantly on the lookout for water recycling opportunities. The following Diagram 8 depicts our water consumption. We have in place various initiatives to manage water consumption. One such initiative is the periodic preventive maintenance on our Dilution Steam Generator (“DSG”) which allows for improved steam generation abilities hence reducing the amount of waste water flowing to the treatment plant.

Waste Management

Waste makes the biggest impact on the environment and our ecosystem as a whole. Due to increasing waste-intensive production activities, waste management is crucial for mitigating the impact of waste on the environment and ecosystem.

At LCT, we implement sustainability guidelines that improve waste management in plant sites connected to our business. Our goal is to avoid and minimise the generation of waste wherever possible thereby resulting

WaterConsumption

82,783

83,156

11,748,092

11,281,439

2016 2017

Total amount of waterconsumed (m3)

Water Management




Diagram 8: Water Consumption

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in a continuous search for solutions to effectively manage waste. In our daily operations, we implement waste minimisation programme to monitor and track sources and causes of waste generation. This initiative reduces waste generation and simultaneously educates employees about mitigating and ultimately reducing waste generation. We build and maintain scheduled waste shelters to properly store scheduled waste and prevent the discharge of hazardous materials. In addition, we have implemented the Electronic Scheduled Waste Information System (“eSWIS”) to track our scheduled waste management in Malaysia. These records are reported to the DOE on a monthly basis.

Some wastes common to the petrochemical industry are known to be hazardous and have the potential to harm our environment and relevant stakeholders. Our goal is to eliminate the discharge of hazardous waste in our supply chain. Across all our worksites, stringent standards and procedures are implemented to handle and store hazardous waste. For instance, our Merak plant in Indonesia houses all solid and liquid hazardous waste in

a dedicated centre for a maximum period of 90 days. Waste is then disposed by third party companies with a permit for the transportation and treatment of hazardous waste. We also ensure that our waste disposal system is in accordance with Management of Toxic and Hazardous Waste Substances regulations.

Employees are provided training on proper handling of material upon recruitment and refresher courses throughout their employment.

The introduction of a scheduled waste reduction programme in accordance with the Environmental Quality (Scheduled Waste) Regulations 2005 underscores our efforts in taking proactive steps to handle waste. This programme provides a systematic approach to ensure wastes are safely treated, recovered or disposed in accordance with prescribed schedules.

Within our Malaysian operations, we regularly monitor contamination levels of our waste water in order to prevent any unwanted discharge of chemicals. Process

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water and storm water runoffs from our ethylene plants are treated in a waste water treatment plant prior to discharge. Water treatment consists of oil separation, coagulation, air flotation, aeration and sludge separation. Our treatment plants possess the capacity to process approximately 75 cubic metres per hour. We perform waste water analysis daily, and provide the results to DOE on a monthly basis for transparency and monitoring.

We operate a biological waste water treatment plant to ensure a systematic control of water pollutants. We design, operate, and maintain our waste water treatment plants to meet stringent DOE requirements for waste water treatment. We have also appointed a SAMM-accredited laboratory to carry out weekly sample analysis in line with DOE requirements.

In Indonesia, our waste water treatment facility utilises the aerobic treatment to remove pollutants in waste water generated from plant processes prior to their discharge into the sea. Our daily monitoring of pollutant controls on discharged water from our waste water treatment facility and periodical monitoring of sea water pollutants and


biota are governed by Government Regulation No. 82 of 2001 on Water Quality Management and Water Pollution Control; Ministry of Environment Regulation No. 68 of 2016 on Domestic Waste Water Quality Standard; and Ministry of Environment Regulation No. 12 of 2006 on the Licensing Requirements and Procedures of Waste Water Discharge.

We regularly conduct waste analysis to ascertain if waste from our production process has impacted our surroundings. The Company also prevents any environmental impact due to waste by thoroughly managing stored waste. This is encouraged to minimise waste generation while the types of waste generated are separated for ease of recycling.

We also maintain a systematic approach towards managing spill accidents. We have constructed protective spill control dykes around our storage facilities, designed concrete slabs to contain all types of toxic materials, and provided spill control cabinets fully equipped with spill absorbent pads and booms at core locations within our plants.

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ElectricityConsumption(kWh)

213,853,620

653,900,853

587,936,389

209,731,320



2016 2017

ElectricityConsumption

To promote an awareness of spill control mechanisms among our employees, we undertake annual case studies and refresher courses. Daily plant trenching and monthly oily sewer surveys are conducted to identify any unwanted leakages.

Energy Management

Energy management, as an integral part of combating climate change, calls for the need to efficiently utilise energy resources in order to effectively mitigate any detrimental effects on the environment. Our operations also require a constant supply of electricity and any prolonged outages may adversely affect our business.

As part of our efforts to manage energy consumption and subsequently reduce our carbon emissions, we have implemented initiatives such as replacing all lamps at our Tanjung Langsat site with energy saving light-emitting diode (“LED”) lamps. Aside from this, we have installed a VSD for our cooling water pumps at our Merak site and utilise a low Global Warming Potential refrigerant in our vaporiser system. Our electricity consumption is highlighted in Diagram 9 as follows:

Further efforts would be taken to improve energy consumption such as enhancing the energy management system and identifying obsolete machinery which could be retrofitted to improve energy consumption.

Diagram 9: Electricity Consumption

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Community Development

Today, companies operate in a community-conscious landscape. Recognising the importance of community development and contributions to society is crucial if we are to stay relevant in the business world. LCT has in place a Corporate Social Responsibility (“CSR”) Vision which has its cornerstone the values of warmth, of dreams, and of being human. The Vision directs us to return a part of our profits to society, undertake voluntary participation which creates sense of reward, and create the passion for community service based on our philosophies.

We support local communities by offering our time, skill and monetary contributions. This act of support allows trust to be built amongst our stakeholders. Before engaging in any CSR activities, our CSR Committee undergoes a systematic process to evaluate and select community service initiatives that complement our medium and long-term social contribution strategies. Based on LCT’s CSR Vision 2017, the CSR Committee and volunteers have identified activities that support individuals as well as selected organisations and communities in the hopes of instilling integrity, service, passion, plus a sense of reward and responsibility towards society at large.


Donation to Impoverished Families

Every year, we bring our people and the society together through various exciting community outreach activities. One of our most prominent contributions comes in the form of monetary donations. We carefully consider families facing financial difficulties and offer financial assistance to them. Further inspection of beneficiary homes and living conditions are conducted to select final benefactors of this programme. To date, families living in extreme poverty have benefitted from this programme. In Indonesia, we have donated rice sacks and participated in the goat fattening process in conjunction with the Eid celebration which benefited 680 families located in Gerem and Rawa Arum village in close proximity to our Merak plant.

Education Assistance to Outstanding Students

We also offer scholarships to outstanding undergraduates to pursue their tertiary education at local universities. In Malaysia, education assistance was given to undergraduates pursuing diploma and degree studies. As part of our commitment to support and provide equal education opportunities for the younger generation, we collaborate closely with schools in Pasir Gudang. Monetary assistance was awarded to 200 shortlisted students with exemplary academic and extra-curricular achievements from impoverished backgrounds at an award ceremony held at Pasir Gudang’s branch office. Similarly, in Indonesia, we offer scholarships to undergraduate students to pursue their tertiary education at UNTIRTA University, organise site visits and provide apprenticeship programmes to high school and university students.

Our commitments and efforts in enhancing educational programmes were recognised by Pejabat Pendidikan Daerah Pasir Gudang. We were honoured as one of the Rakan Strategik Sekolah Daerah Pasir Gudang in Malaysia. This award is given to companies which supported Pasir Gudang schools. We were chosen by all schools from Pasir Gudang as one of the best companies that continuously support and contribute in education sector.

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Donations to Orphans and the Elderly

We also extended our assistance to special needs schools, orphans and old folk homes. We have sponsored washrooms, dormitories, and classroom facilities to create a more conducive learning environment for students with special needs. Besides that, we have sponsored furniture and washing machines to orphans from Pusat Jagaan Qaseh, Asrama Kebajikan Ar-Rayyan and Carehaven Orphans House as well as the elderlies from Pertubuhan Kebajikan Nur Ehsan.

In August 2017, we organised a recreational trip for the orphans to Angry Bird Theme Park. Our desires to bring happiness and to improve the lifestyle of the community have brought us closer. We had wonderful time together with the children during the trip.

Improving Infrastructure of Local Communities

We believe a beneficial and worthwhile contribution comes in the form of improving the living conditions and elevating the lives of less fortunate communities. In working towards this, we have participated in improving public facilities such as jetty and shelter repainting, restoring a mini bus stop and sponsoring two football goal posts in Kg Perigi Acheh. In Taman Mawar, Pasir Gudang, a new bus stop was constructed. In Indonesia, we have participated in the construction of public toilets and the remodelling of a local masjid. We have also provided common equipment to the Pencak Silat Association with an improved water pump facility at a local school and renovated a fisherman shelter.

Breaking of fast during Ramadhan

During the holy month of Ramadhan in June 2017, we organised a weekly food distribution programme for the Pasir Gudang community. Children and families alike were given Bubur Lambuk to break their fast. We place great emphasis on our relationships with local communities. As such, we aim to maintain positive and friendly relationship with the locals through periodic face-to-face meetings to hear what the locals have to say. Similarly, in Indonesia, we organised a breaking of fast session for orphan children at a local neighbourhood during the month of Ramadhan.

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Community Engagement

In November 2017, Pasir Gudang community welcomed their first running event organised by Local Authority Council – Majlis Perbandaran Pasir Gudang (‘MPPG’) in Malaysia. The objective is to promote healthy lifestyle in Pasir Gudang community. There are 2 categories of the run i.e the Open 7 KM and Fun Run 5 KM. Lotte Chemical Titan as one of the sponsors was invited to flag off the run.

Collaboration between Small Enterprise Development and Local Manpower Office

In Indonesia, we showed our support towards the development of quality workmanship by organising workshops to train local communities. In 2017, we conducted training on automotive skillsets and tailoring to local communities.

Tree Planting

In 2017, we donated and planted 25,000 trees at Lebak Banten to support Banten Province’s environmental programme.

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In operating our business, the quality and performance of our employees are crucial in order to deliver success. To ensure this, we focus on developing and nurturing our talent on top of creating a positive work culture amongst employees. We believe a strong emphasis on human capital development will help drive business growth and success.

Our commitment towards our people does not stop after recruitment. We continuously ensure all employees

LCT is a responsible employer that seeks to build a diverse pool of talented employees

for the growth of business operations and the broader petrochemical industry, whilst

placing great focus on their well-being at the workplace


Table 2: Training Programme

Type of Training

Examples of training programme

Malaysia Indonesia

Technical training • Waste Water-Inspection and Schematic• Switchgear Power & Transformer (LV-HV)• Technician Certification Module Program• Instrument Temperature Transmitter

Training• Distributed Control System• Process Trending Tool - Honeywell PHD• Centrifugal Pump & Oiler

• Process Flow Diagram, Reactor, Degassing Colum, Pelletiser

• Hazop• IT security• Piping & Instrumentation Diagram • Distributed Control System/Safety Interlock

Control System)

Non-technical training • The Assertive & Effective Leader at Work• Employment Law & Discipline Effectiveness

• Supervisory Programme• Motivation Programme• Communication Skills Programme• ISO & Halal Management

have the opportunity to grow and develop in their roles after joining us. We develop our people through a range of learning and development programme such as technical and non-technical trainings, coaching, mentoring, on-the-job training and job rotations. Table 2 below depicts the various training programmes in place to facilitate employee development. In addition to that, Diagram 10 on the following page illustrates the average training hours spent on these programme.

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A reduction in annual average training hours per employee was observed at our Malaysian sites due to the two major turnaround exercises and the commissioning of a new production line, which necessitated our workforce being deployed to provide support. We will look at making up for lost learning time in the coming years. Meanwhile, our Indonesian site saw an annual average increase of five hours mainly due to the increase in safety training session provided to the workforce on site.

It is important that our people feel empowered every day in realising their career goals. We offer career development programmes designed to realise an employee’s full potential and encourage value creation.

Malaysia Operating Entities

Indonesia Operating Entities

Year 2016

Year 2016

Year 2017

Year 2017

35.8hours/ employees/ year






To ensure our business and people remain under the leadership of competent people, the Human Resource & Procurement Department has implemented a succession plan and programme. As part of our succession structure, a formal induction programme is carried out for all new management staff to align their goals and actions with the company’s objectives, policies and plans.

On top of that, we reward our core talent every year with the opportunity to complete a 1.5 year Global MBA programme at Seoul National University. Upon graduation, they are assigned to management positions with greater job scope and responsibility within the Company.

Diagram 10: Average Training Hours

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After identifying key positions, a selective nomination and rigorous evaluation process helps us to identify the top 80% potential successors through a 360 Degree Evaluation and Competencies Assessment. Once completed, training and improvement programmes are rolled out to prepare the potential successors to take on leadership positions. The bottom 20% will be kept in view for the next round of successor nominations and screening.

Our commitment towards our people’s career development does not stop there. We continue to offer programme such as the “Immediate & Sustainable Development Plan” targeted at experienced employees with managerial positions and the “Long-term & Improved Development Plan” aimed at younger talent with the potential to take on future leadership positions. Both programmes, though targeting different age groups, serve a common purpose – to reduce any competency gap and support employees’ career growth for the immediate and longer-term.

In support of our succession programme, we conduct regular engagement surveys to assess and identify any challenges and obstacles faced by current potential successors. Through this survey, we intend

on continuously improving the effectiveness of the succession programme.

In the engineering sector, our engineers are given opportunity to broaden and strengthen their technical skill and knowledge through sophisticated technical training, project attachment and exchange programme with LCC South Korea. In September 2017, we sent two technical service engineers to LCC Research & Development Centre in South Korea for a two month intensive training on LCC’s products and services.

We strongly believe that the future of the Company rests on the shoulders of the millennials who will be our future leaders. In our efforts to continuously support and nurture the next generation of leaders, we offer internship placements to undergraduates to learn the ropes of the industry. Approximately 40 internship placements were granted to graduates to gain valuable insights as well as exposure within the industry. Also, as part of our strong commitment towards corporate social responsibility, job opportunities are granted upon graduation in hopes of producing young talents who do not fear failure, seek self-development, and who are willing to cooperate and coexist alongside people and society.

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Human Rights and Fair Labour Practices

Human rights are closely linked to fair labour practices. It entails according people their rights to proper food, health, safety and income and is embedded throughout business operations and business relationships. At LCT, we recognise the importance and benefits of diversity in the workplace. Our company comprises of mostly Malaysians and Indonesian employees and is slowly but surely recruiting people from diverse backgrounds, education and experiences. This would represent a workplace where diversity is embraced. In line with this, we forbid any discriminatory treatment due to gender, age, religion, race or education. Our workforce profile, including gender, age and nationality is shown in Diagram 11.



81.4%

18.6%

81.2%

18.8%

81.8%

18.2%

81.6%

18.4%

Year 2016 Year 2017

Year 2016 Year 2017

Gender


Age Group


Year 2016 Year 2017

Year 2016 Year 2017

Above 50 years old30-50 years old

Below 30 years old

Above 50 years old30-50 years old

Below 30 years old

11.3%

29.4%59.3%

11.8%

29.2%59.0%

14.4%

26.8%58.8%

12.9%

27.9%59.2%

Malaysia Operating Entities Indonesia Operating Entities

Year 2016 Year 2017 Year 2016 Year 2017

Local talents hired (%) Local talents hired (%)

98.1 98.297.1 98.2

Respecting human rights is a fundamental part of any successful business. At LCT, our aim is to ensure that human rights are not only communicated, but also embedded across all business functions and the decision-making process. We are especially vigilant against unlawful child labour and sexual harassment at the workplace and are highly committed towards eradicating such conduct. Since women and children are most vulnerable within business activities within the value chain, we have taken steps to organise anti-sexual harassment and other human rights-related training programmes to prevent exploitation of women and child labour.

Diagram 11: Employee Profile

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We have also incorporated human rights and workplace safety related policies in our Business Ethic & Code of Conduct (BECOC) handbook which is handed to every new recruits during the on boarding day.

To ensure the quality and performance of our employees, we believe in compensating our talents appropriately. Our unique biennial salary benchmarking exercise ensures that we provide competitive salary packages for our employees based on local context and fair wage practices. This strategy helps us maintain our status of the top percentile player in the industry. It also serves as our talent retention strategy.

We also place strong emphasis on employee welfare and benefits. Our approach aims to provide and support employee wellbeing, engagement as well as promote employee rights. At LCT, processes are in place, to provide a safe and conducive work environment to eradicate sexual harassment and workplace violence for our employees. This way, our employees are afforded peace of mind and the guarantee of safety at their workplace.

In an era where women are not afraid to demand for equal rights and access to opportunities as men, it is essential to incorporate female-driven benefits. These include welfare for female engineers such as female talent nurturing, lactation rooms and designated parking bays for pregnant employees.

On top of this, we offer comprehensive healthcare benefits, ranging from outpatient treatment to hospitalisation and dental treatments. We also provide subscription to sports and recreation membership for employees and their family members, to encourage proper work-life balance. From time to time, we also organise family-oriented activities such as family days and sports tournaments as an incentive for our people and their families to unite together.

We believe that highly motivated employees are essential for delivering success and that they bring competitive advantages to the business. What our employees feel and think about their journey and experience with the Company is extremely important. Employee Satisfaction Surveys are conducted to gauge our employees’ level of satisfaction, loyalty, advocacy and pride within their organisations. The outcome of the Employee Satisfaction Survey is presented in Diagram 12.

2016 2017


By Country IndonesiaOperating Entities

Employee SatisfactionRate (%)

71%

87%97%95%

Diagram 12: Employee Engagement Survey Results

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Increased satisfaction rate in our Malaysian sites may be attributed to various improvement initiatives undertaken by the Company such as a salary review in 2017, better rewarding contributions, and encouraging open communication. An internal survey also showed that employees are confident of their leaders and believe that their leaders care about their wellbeing besides providing clear direction. In addition to that, the survey also showed that there is a need to improve the communication between employees and their reporting lines by way of future developmental needs and interests. Hence, we will proactively put in place action plans to encourage dialogue and communication sessions between the parties involved to promote development improvement programmes in the area of people management. The reduced percentage of employee engagement is mainly due to the two major turnarounds and commissioning


of a new production line which may have dampened opportunities for engagement. With Management’s clear direction and effort to engage employees, our Indonesian site saw a 2% year-on-year improvement on their employee satisfaction rate.

It is important that managers and employees are in consistent and close communication with each other to address issues and jointly decide the appropriate course of action to resolve those issues. To ensure this, we established the Joint Communication Consultation (“JCC”), an engagement platform to facilitate communication among all levels of employees. Chaired by the Senior Vice President of Human Resources and twenty-five elected and eight appointed members across different business units and functions, the JCC conducts monthly meetings, attended by an external advisor. It

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2016 2017


By Country IndonesiaOperating Entities

Employee AttritionRate (%) 3.4%

3.0%

1.5%

2.0%

Diagram 13: Employee Attrition Rate

hopes to encourage and secure mutual exchange of information regarding employer-employee relations, employee welfare, health and safety as well as to resolve issues that employees may face. In 2017, no major employee dissatisfaction or industrial court issues were raised. Our efforts to date have proven successful as the attrition rates over the years, have shown significant decline, which further implies improved relationships with our people. In 2017, we registered a 1.5% attrition rate, the lowest level in the past three years. Refer to Diagram 13 below for the details of our attrition rate:

In Malaysia, we target our attrition rate to be below the industry average, i.e. 7.1% in 2016 and 8.3% in 2017. We have been successful in maintaining our attrition rate within the set target. The reduction in attrition rate is mainly due to our competitive remuneration and benefit packages, rewards recognising contributions, open communication channels, and the promotion of harmony in the work environment.

The improved performance in Indonesia was due to a recent salary adjustment which saw certain levels of employee receiving pay at market rates.

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Occupational Safety and Health

Our commitment to standards and policies help us avoid and mitigate negative safety and health related impacts. Guided by our Health, Safety, & Environmental (“SHE”) Policy, process safety is especially crucial in our industry as it helps prevent untoward incidents such as explosions and toxic releases. In developing our SHE Policy, we looked to the U.S. Occupational Safety and Health Administration (OSHA) 1910.119 and developed our own 16 process safety elements. Process Safety Awareness training sessions are periodically conducted to ensure that employees are aware of and understand the importance of process safety.

At LCT, we take standards and policy compliance seriously. To this end, we have implemented an occupational safety and health management system to prevent workplace accidents and to protect our employees’ safety and health. The Occupational Health, Safety and Environment (“OSHE”) Steering Council, is led by the top management personnel of LCT. The Plant SHE Committee comprising management and employee representatives, conducts quarterly meetings


to raise and address concerns relating to safety, health and environmental issues. In Indonesia, our occupational safety and health management system is applied through a dedicated safety committee which conducts monthly routine meetings. Apart from this, safety talks are conducted for all employees and contractors on a weekly basis to ensure that safety measures are understood by all employees and contractors.

In 2017, LCT participated in Malaysian Society for Occupational Safety & Health’s (“MSOSH”) Occupational Safety & Health Awards 2016 and won five Gold Awards in August 2017 for our outstanding performance in upholding health and occupational standards in our daily business operations and functions. The assessment was performed by MSOSH’s appointed auditors at LCT’s premises in May 2017. The assessment verified the implementation of MSOSH’s recommendations in managing occupational health and safety practices at the workplace. In Indonesia, our Merak Plant was awarded the Silver Award from the Ministry of Manpower of the Republic of Indonesia for its implementation of an Occupational Safety and Health Management System.

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We continuously work on establishing a robust health and safety culture across our operations. Our goal in upholding an optimal safety and health performances is supported by extensive training programmes such as the Process Safety Management (“PSM”) programme, Behavioural Safety programmes such as TAKE TWO, and a DuPont-based Safety Card Observations programme. Other internal and external occupational safety and health training sessions touch upon topics to educate and create awareness on issues relating to permit to work, confined space hazards, chemical management, radiation hazards, legal safety and health regulations.

In the petrochemical industry, employees and contractors receive a safety orientation course to familiarise themselves with permit to work system, management and handling of hazardous substances and OHSAS 18001 awareness.

In addition, we ensure Safety Data Sheets (“SDS”) are communicated and easily accessed online for our employees’ reference. This provides all the necessary training on handling new chemicals and substances. We also provide sufficient Personal Protective Equipment (“PPE”) based on the employees’ job requirements.

We simulated a spill, fire and explosion drill at our sites in Johor between 21 and 22 October 2017. The drill required a coordinated response from LCT staff, Pasir Gudang Emergency Mutual Aid (PAGEMA) members, Fire and Rescue Department, Police Department and the Ministry of Health of Johor. The emergency response drill allowed for the evaluation of potential glitches and identification of unaddressed complications.

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Our company-wide initiative in creating a safe working environment has been extended further with the establishment of medical clinics accompanied with trained medical personnel at every Malaysian worksite. At our Pasir Gudang and Tanjung Langsat worksites, three fire trucks and fire water storage tanks are readily available. The fire-fighting system implemented also corresponds to the United States National Fire Protection Association and Malaysian Fire and Rescue Operations, which provides internationally-recognised safety practices and procedures. Similarly, in Indonesia, our worksites are equipped with one fire truck and fire water storage tanks with two fire pumps. The fire-fighting system is also designed in accordance with the United States National Fire Protection Association.

2016 2017

OccupationalHealth & SafetyNumber of reportedsafety related accidents

3

1

We actively monitor our employees’ health in our day-to-day operations. To firmly establish health and wellbeing in our culture, we provide regular health checks and evaluation by trained health consultants for employees.

We are proud to have been OHSAS 18001-certified since 2005. We continue this effort by carrying out monthly Environmental, Health and Safety (“EH&S”) audits which are conducted by Vice Presidents or Managers. Moreover, quarterly EH&S audits are conducted with participation for all levels of the organisation. The total number of accidents recorded in 2016 and 2017 is illustrated in Diagram 14.


Diagram 14: Number of safety related accidents report in Malaysia operating entities

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Our desired target for loss time accidents is always zero. Unfortunately, our Malaysian site saw one instance of this in the year 2017. This was however, a decline from the previous year. Our Indonesian site had no reported incidents in the last year. Such a performance could be attributed to the various initiatives undertaken such as awareness creation, enforcement of safety rules, and effective supervision by site supervisors. Besides that, a total of 333 training sessions were conducted in Malaysia for the year 2017. These encompassed Contractors Safety Orientation Courses, Contractor Work Supervisor Awareness Trainings, and Employees Health, Safety, & Environment Awareness Trainings.


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List of Properties

Location

Registered/ beneficial

Owner*Existing

use

Tenure of land/ Age of building

(years) Land area

Net book value as at 31.12.2017

RM’000

Date of last revaluation/

date of acquisition

(if no revaluation

is done)

(1) 1 piece of industrial land bearing postal address PLO 425, Jalan Perak, Pasir Gudang Industrial Estate, 81700 Pasir Gudang, Johor on H.S.(D) 189009 P.T. No. PTD 109065 in the Mukim of Plentong, District of Johor Bahru and buildings erected thereto comprising:

LCTM Industrial land

Leasehold 60 years

expiring on 26 November

2051

28.02 acres 23,680 January 1997Revaluation

- 5 production plants, 1 cogeneration plant, 1 single-storey technical station, 1 material store and 1 single-storey office.

5 – 18

(2) 1 piece of industrial land bearing postal address PLO 426, Jalan Tembaga 3, Pasir Gudang Industrial Estate, 81700 Pasir Gudang, Johor on H.S.(D) 189010 P.T. No. PTD 109066 in the Mukim of Plentong, District of Johor Bahru- currently used for three flare

stacks


Leasehold 60 years

expiring on 26 November

2051


(3) 1 piece of industrial land bearing postal address PLO 257, Jalan Tembaga 4, Pasir Gudang Industrial Estate, 81700 Pasir Gudang, Johor on PN6731 Lot No. 51758 (previously known as HSD 162760 PT No. PTD 90011) in the Mukim of Plentong, District of Johor Bahru and buildings erected thereto comprising:


Leasehold 60 years

expiring on 20 May 2050


- 2 production plants, 3 material stores, 1 maintenance workshop, 1 control room, and 1 single-storey warehouse and 1 single-storey manufacturing office

18 – 23

AD

DIT

ION

AL

CO

RP

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Location


Owner*Existing

use


(years) Land area


RM’000


date of acquisition

(if no revaluation

is done)

(4) 1 piece of industrial land bearing postal address PLO 312, Jalan Tembaga 4, Pasir Gudang Industrial Estate, 81700 Pasir Gudang, Johor on H.S.(D) 162764 P.T. No. PTD 90015 in the Mukim of Plentong, District of Johor Bahru and buildings erected thereto comprising:


Leasehold 60 years

expiring on 20 May 2050


- 2 production plants, 2 double-storey offices, 1 maintenance office, 1 maintenance workshop, 1 control room and 1 double-deck warehouse, 1 single-storey canteen, 1 safety and security office

17 - 25

(5) 1 piece of industrial land bearing postal address PLO 8, Persiaran Tg. Langsat, Tg. Langsat Industrial Estate, 81700 Pasir Gudang, Johor on H.S.(D)310853 P.T.D 2855 in the Mukim of Sg Tiram, District of Johor Bahru and buildings erected thereto comprising:


Leasehold 60 years

expiring on 14 February 2061

100.0 acres 83,192 August 1997Acquisition

- 2 production plants, 1 cogeneration plant, 1 flare stack, 1 single-storey multi-purpose building, 2 single-storey warehouses, 2 single-storey technician station, 1 guard shed and parking bays, 3 material stores, 1 maintenance workshop, 1 control room and 1 single-storey office (Plastic Technical Centre)

16 - 17


138

Location


Owner*Existing

use


(years) Land area


RM’000


date of acquisition

(if no revaluation

is done)

(6) 1 piece of land held under HGB Certificate No.14 at Gerem. Jl. Raya Merak Km.116, Kel. Rawa Arum – Cilegon thereto comprising:

PT LCT Nusantara

Vacant land

Leasehold 30 years

expiring on 18 October 2019

4.03 acres 1,929 October 1989Acquisition

- Access route to PE1 Plant (Indonesia), PE2 Plant (Indonesia) and PE3 Plant (Indonesia)

.

(7) 1 piece of land held under HGB Certificate No.2 at Rawa Arum. Jl. Raya Merak Km.116, Kel. Rawa Arum – Cilegon thereto comprising:

PT LCT Nusantara

Vacant land

Leasehold 30 years



- Access route to PE1 Plant (Indonesia), PE2 Plant (Indonesia) and PE3 Plant (Indonesia)

.

(8) 1 piece of land held under HGB Certificate No.17 at Rawa Arum Jl. Raya Merak Km.116, Kel. Rawa Arum and buildings erected thereto comprising:

- 3 production plants (namely PE1 Plant (Indonesia), PE2 Plant (Indonesia) and PE3 Plant (Indonesia)), administration building, warehouse, workshop and technical office and parking area

PT LCT Nusantara

Industrial land

Leasehold 30 years



(9) 1 piece of land held under HGB Certificate No.18 at Rawa Arum Jl. Raya Merak Km.116, Kel. Rawa Arum - Currently used as staff car park

area

PT LCT Nusantara

Vacant land

Leasehold 30 years



(10) 1 piece of land held under HGB Certificate No.20 at Rawa Arum Jl. Raya Merak Km.116, Kel. Rawa Arum

PT LCT Nusantara

Vacant land

Leasehold 30 years


92.51 acres 18,581 November 1995

Acquisition

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Annual Report 2017

139

Location


Owner*Existing

use


(years) Land area


RM’000


date of acquisition

(if no revaluation

is done)

(11) 1 piece of land held under HGB Certificate No.838 at Kotabumi Jl. Palam Putri, RT 007 RW 14 Kotabumi, Purwakarta, Cilegon and buildings erected thereto comprising:- housing complex comprising 5

residential houses and 1 function hall

PT LCT Nusantara

Residential Leasehold 20 years


3.22 acres 2,523 August 1984Acquisition


residential houses

PT LCT Nusantara





residential houses, 1 function hall, 1 diesel house and 1 security post

PT LCT Nusantara



1.10 acres 799 October 1986Acquisition


residential houses

PT LCT Nusantara


expiring on 25 August 2027

0.39 acres 299 October 1991Acquisition

(15) 1 piece of land held under HGB Certificate No.3045 at Warnasari Village, District of Citangkil, Cilegon City, Banten Province

PT LC Indonesia

Vacant land

Leasehold 30 years


79.35 acres 145,447 March 2017Acquisition


140

Location


Owner*Existing

use


(years) Land area


RM’000


date of acquisition

(if no revaluation

is done)

(16) 1 piece of land held under HGB Certificate No.3046 at Warnasari Village, District of Citangkil, Cilegon City, Banten Province

PT LC Indonesia

Vacant land

Leasehold 30 years


35.62 acres 65,271 March 2017Acquisition

Notes:

Lotte Chemical Titan (M) Sdn Bhd abbreviated as LCTM.

PT Lotte Chemical Titan Nusantara abbreviated as PT LCT Nusantara.

PT Lotte Chemical Indonesia abbreviated as PT LC Indonesia.

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Analysis of Shareholdings

Class of shares : Ordinary shares

Voting Rights : One vote per share

Issued Shares : 2,307,791,500 ordinary shares

DISTRIBUTION OF SHAREHOLDINGS

Size of ShareholdingsNo. of

Shareholders %No. of

Shares %Less than 100 29 0.382 200 *1

100 – 1,000 2,310 30.430 1,810,764 0.0791,001 – 10,000 3,949 52.022 16,766,800 0.73710,001 – 100,000 1,066 14.042 33,721,250 1.483100,001 – 113,649,174(less than 5% of issued shares*2)

236 3.108 492,892,986 21.684

113,649,175 (5% of issued shares*2) and above

1 0.013 1,727,791,500 76.014

TOTAL 7,591 100.000 2,272,983,500 100.000

Notes:*1 Less than 0.001%*2 Excluding a total of 34,808,000 Lotte Chemical Titan Holding Berhad (LCTH) shares bought back by LCTH and retained as treasury

shares as at 23 February 2018.

THIRTY LARGEST SHAREHOLDERS

Name of Shareholders No. of Shares %

1. Maybank Securities Nominees (Asing) Sdn BhdPledged Securities Account for Lotte Chemical Corporation

1,727,791,500 76.014

2. Citigroup Nominees (Tempatan) Sdn BhdEmployees Provident Fund Board

89,312,300 3.929

3. Lembaga Tabung Haji 52,907,500 2.3274. HSBC Nominees (Asing) Sdn Bhd

HSBC-FS P for HSBC Pooled Asia Pacific ex Japan Equity Fund23,732,500 1.044

5. Kumpulan Wang Persaraan (Diperbadankan) 23,500,000 1.0336. CIMB Group Nominees (Tempatan) Sdn Bhd

Yayasan Hasanah (AUR-VCAM)21,572,100 0.949

AS AT 23 FEBRUARY 2018


142

THIRTY LARGEST SHAREHOLDERS (Cont’d)


7. AmanahRaya Trustees BerhadAmanah Saham Bumiputera

21,000,000 0.923

8. Citigroup Nominees (Tempatan) Sdn BhdExempt AN for AIA Bhd

19,134,800 0.841

9. Cartaban Nominees (Tempatan) Sdn BhdPAMB for Prulink Equity Fund

18,440,400 0.811

10. Citigroup Nominees (Asing) Sdn BhdExempt AN for Citibank New York (Norges Bank 1)

16,500,000 0.725

11. Citigroup Nominees (Tempatan) Sdn BhdKumpulan Wang Persaraan (Diperbadankan) (VCAM Equity FD)

13,930,100 0.612

12. Citigroup Nominees (Asing) Sdn BhdExempt AN for Citibank New York (Norges Bank 14)

11,492,000 0.505

13. RHB Nominees (Tempatan) Sdn BhdOSK Capital Sdn Bhd for Yayasan Islam Terengganu

10,000,000 0.439

14. HSBC Nominees (Asing) Sdn BhdBBH and Co Boston for Vanguard Emerging Markets Stock Index Fund

7,616,747 0.335

15. AmanahRaya Trustees BerhadAS 1Malaysia

7,373,500 0.324

16. HSBC Nominees (Asing) Sdn BhdJPMCB NA for Vanguard Total International Stock Index Fund

7,114,909 0.313

17. AmanahRaya Trustees BerhadAmanah Saham Wawasan 2020

6,000,000 0.263

18. AmanahRaya Trustees BerhadAmanah Saham Malaysia

6,000,000 0.263

19. AmanahRaya Trustees BerhadAmanah Saham Bumiputera 2

6,000,000 0.263

20. HSBC Nominees (Asing) Sdn BhdHSBC BK PLC for Asia ex Japan Equity (LXG HGIF)

5,065,200 0.222

21. HSBC Nominees (Asing) Sdn BhdJPMCB NA for JPMorgan Asean Fund (BK EastAsia TST)

4,781,100 0.210

22. Permodalan Nasional Berhad 4,000,000 0.17523. Cartaban Nominees (Tempatan) Sdn Bhd

PAMB for Prulink Dana Unggul3,442,000 0.151

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Annual Report 2017

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THIRTY LARGEST SHAREHOLDERS (Cont’d)


24. Cartaban Nominees (Tempatan) Sdn BhdPBTB for Takafulink Dana Ekuiti

3,360,000 0.147

25. Alliancegroup Nominees (Tempatan) Sdn BhdPledged Securities Account for Goh Choon Kim

3,265,100 0.143

26. AmanahRaya Trustees BerhadAmanah Saham Didik

3,000,000 0.131

27. HSBC Nominees (Asing) Sdn BhdTNTC for British Columbia Investment Management Corporation

2,957,500 0.130

28. Citigroup Nominees (Asing) Sdn BhdUBS AG for Dymon Asia Equity Master Fund SPC (DAEMSP)

2,514,800 0.110

29. Citigroup Nominees (Tempatan) Sdn BhdEmployees Provident Fund Board (RHBIslamic)

2,149,600 0.094

30. HSBC Nominees (Asing) Sdn BhdJPMCB NA for JPMorgan Asian Investment Trust PLC

1,879,200 0.082

Total 2,125,832,856 93.526

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS(According to the Register of Substantial Shareholders as at 23 February 2018)

DirectNo. of Shares %

Lotte Chemical Corporation 1,727,791,500 76.014

DIRECTORS’ SHAREHOLDINGS(According to the Register of Directors’ Shareholdings as at 23 February 2018)

DirectNo. of Shares %

Tan Sri Dato’ Abdul Rahman bin Mamat 30,000 0.001

Lee Dong Woo 22,500 *3

Lee Kwan Ho 22,500 *3

Ang Ah Leck 30,000 0.001

Cho SeongTaeg - -

Tan Sri Datuk (Dr.) Rafiah binti Salim 32,500 0.001

Notes:*3 Less than 0.001%


144

NOTICE IS HEREBY GIVEN that the 2018 Annual General Meeting of the Company will be held at the Ballroom 3, Sime Darby Convention Centre, 1a Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Tuesday, 24 April, 2018 at 2.00 p.m. to transact the following business:

AGENDA

1. To receive the Audited Financial Statements for the financial year ended 31 December 2017 and the Reports of the Directors and Auditors thereon.

2. To re-elect the following Directors who are retiring by rotation pursuant to Article 94 of the Company’s Constitution:

i. Tan Sri Dato’ Abdul Rahman bin Mamatii. Mr. Lee Kwan Ho

Resolution 1 Resolution 2

3. i. To approve the payment of Directors’ Fees amounting to RM475,644.00 for the financial year ended 31 December 2017.

ii. To approve the payment of Directors’ remuneration and benefits (excluding Directors’ Fees) to the Non-Executive Directors up to an amount of RM360,100.00 for the period from 1 January 2017 until the next Annual General Meeting of the Company.

Resolution 3

Resolution 4

4. To declare a final single tier dividend of 23 sen per ordinary share for the financial year ended 31 December 2017. Resolution 5

5. To re-appoint Messrs. Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 6

As Special Business:

6. To consider and if thought fit, to pass the following ordinary resolution:

Ordinary Resolution

i. Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading in Nature and Contracts entered into from time to time which are necessary or would facilitate the day-to-day operations

“THAT subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiaries to enter into Recurrent Related Party Transactions of a revenue or trading in nature and contracts entered into from time to time with Related Party(ies) as specified in Section 2.1.2 of the Circular to Shareholders dated 23 March 2018 which are necessary for the day-to-day operations; in the ordinary course of business, based on normal commercial terms which are not more favourable to the Related Party(ies) than those generally available to the public and are not detrimental to minority shareholders of the Company (“Shareholders’ Mandate”) and such approval shall continue to be in force until:

Resolution 7

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(i) the conclusion of the next AGM of the Company following the forthcoming AGM at which the Shareholders’ Mandate is passed, at which time such Shareholders’ Mandate will lapse, unless by a resolution passed at the meeting, the authority for the Shareholders’ Mandate is renewed;

(ii) the expiration of the period, within which the next AGM of the Company is required to be held pursuant to Section 340(2) of the Companies Act 2016 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or

(iii) revoked or varied by resolution passed by the shareholders in general meeting,

whichever is the earlier.

AND THAT the Directors of the Company be authorised to complete and do all such acts and things as they may consider expedient or necessary to give full effect to the Shareholders’ Mandate.”

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that subject to the approval of the shareholders at the 2018 Annual General Meeting to be held on 24 April 2018, a final single tier dividend of 23 sen per ordinary share in respect of the financial year ended 31 December 2017 will be paid on 8 June 2018. The entitlement date for the dividend payment is on 18 May 2018.

A Depositor shall qualify for the entitlement to the dividend only in respect of:

(a) Securities transferred into the Depositor’s Securities Account before 4.00 p.m. on 18 May 2018 in respect of transfers; and

(b) Securities bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the rules of Bursa Malaysia Securities Berhad.

By Order of the Board

Philip Kong Chock Hoon (MACS 01402)Cynthia Gloria Louis (MAICSA 7008306)Chew Mei Ling (MAICSA 7019175)Company Secretaries

Kuala Lumpur23 March 2018


146

Notes:

1. In respect of deposited securities, only Members whose names appear in the Record of Depositors on 17th April 2018 (General Meeting Record of Depositors) shall be entitled to attend, speak and vote at this 2018 Annual General Meeting.

2. A member entitled to attend and vote at the above meeting is entitled to appoint not more than two (2) proxies to attend and vote instead of him/her save for a member who is an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 and holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which such member may appoint in respect of each omnibus account it holds. There shall be no restriction as to the qualification of the proxy and a proxy duly appointed to attend and vote at a meeting of the Company shall have the same rights as the member to speak at the meeting.

3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her holding(s) to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if the appointer is a corporation, either under its Common Seal or attorney duly authorised in writing.

5. The Form of Proxy must be deposited at the office of the Company’s Share Registrar, Tricor Investor & Issuing House Services Sdn Bhd, Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting.

Explanatory Notes to Ordinary and Special Business

1. Item 1 of the Agenda - Audited Financial Statements for financial year ended 31 December 2017

The Agenda No. 1 is meant for discussion only as Section 340(1)(a) of the Act does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this item of the Agenda is not put forward for voting.

2. Resolution 4 - Directors’ remuneration and benefits

The Directors’ remuneration and benefits (excluding Directors’ Fees) comprise meeting allowances and other emoluments payable to the Non-Executive Directors from 1 January 2017 until the next Annual General Meeting of the Company (“the Relevant Period”).

In determining the estimated total Meeting Allowances for the Relevant Period, the Board has considered various factors, among others, the size of the Board and Board Committees as well as the number of meetings scheduled to be held during the Relevant Period.

3. Resolution 7- Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading in Nature and Contracts entered into from time to time which are necessary or would facilitate the day-to-day operations

The proposed Ordinary Resolution 7, if approved, will allow Lotte Chemical Titan Group to enter into Recurrent Related Party Transactions pursuant to Paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Further information on the Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading in Nature and Contracts entered into from time to time which are necessary or would facilitate the day-to-day operations is set out in the Circular to Shareholders of the Company dated 23 March 2018 which is dispatched together with the Company’s 2017 Annual Report.

Notice of Annual General Meeting

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The following is the statement made pursuant to paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad:

Directors who are standing for re-election at the 2018 Annual General Meeting of the Company, are as follows:

i) Tan Sri Dato’ Abdul Rahman bin Mamat; andii) Mr. Lee Kwan Ho

The details of the Directors seeking for re-election are set out in the Directors’ profiles appearing on page 38 and 42 of the Annual Report.

The details of the shareholding of the Directors seeking for re-election are stated on page 143 of this Annual Report.

Statement Accompanying Notice of Annual General Meeting


148

I/We NRIC No./Company No.

of

being a member / members of LOTTE CHEMICAL TITAN HOLDING BERHAD (222357-P) hereby appoint the following person(s):

Name NRIC/ Passport No AddressNo. of shares to be represented by proxy

1.

2.

For a member who is an authorised nominee with omnibus account, please state the details of the proxies as above if more than two (2) on your letterhead and to attach the same to this Form of Proxy.

or failing him/her/them, THE CHAIRMAN OF THE MEETING, as my/our proxy/proxies, to vote for me/us on my/our behalf at the 2018 Annual General Meeting of the Company to be held at Ballroom 3, Sime Darby Convention Centre, 1a Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Tuesday, 24 April, 2018 at 2.00 p.m. and at any adjournment thereof in the manner as indicated below in respect of the following Resolutions:

RESOLUTIONS FOR AGAINST

Resolution 1 Re-election of Tan Sri Dato’ Abdul Rahman bin Mamat as a Director.

Resolution 2 Re-election of Mr. Lee Kwan Ho as a Director.

Resolution 3 To approve the payment of Directors’ Fees.

Resolution 4 To approve the payment of Directors’ Remuneration and Benefits.

Resolution 5 To declare a final single tier dividend.

Resolution 6 To re-appoint Messrs. Ernst & Young as Auditors of the Company.

Resolution 7 Proposed Shareholders’ Mandate for Recurrent Related Party Transactions

Please indicate with an “x” in the appropriate space how you wish your vote(s) to be cast. If no instruction as to voting is given, the proxy/proxies may vote or abstain from voting at his/her/their discretion.

Date: Signature of Shareholder(s)

Notes:

1. In respect of deposited securities, only Members whose names appear in the Record of Depositors on 17th April 2018 shall be entitled to attend, speak and vote at this 2018 Annual General Meeting.

2. A member entitled to attend and vote at the above meeting is entitled to appoint not more than two (2) proxies to attend and vote instead of him/her save for a member who is an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 and holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which such member may appoint in respect of each omnibus account it holds. There shall be no restriction as to the qualification of the proxy and a proxy duly appointed to attend and vote at a meeting of the Company shall have the same rights as the member to speak at the meeting.

3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her holding(s) to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if the appointer is a corporation, either under its Common Seal or attorney duly authorised in writing.

5. The Form of Proxy must be deposited at the office of the Company’s Share Registrar, Tricor Investor & Issuing House Services Sdn Bhd, Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting.

PERSONAL DATA NOTICEBy submitting the proxy form, the shareholder or proxy accepts and agrees to the collection, use and disclosure of their personal data by the Company (or its agents or service providers) for the purpose of preparation and compilation of documents relating to the AGM (including any adjournment thereof).

Form of ProxyNo. of shares held

CDS Account no.

HOLDING BERHAD (Company no. 222357-P)

Then fold here

1st fold here

The Share Registrar

Tricor Investor & Issuing House Services Sdn Bhd (11324-H)Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi,59200 Kuala Lumpur, Malaysia

AFFIX STAMP

Fold this flap for sealing

HOLDING BERHAD (Company no. 222357-P)

151

We enrich people’s lives by providing

superior products and services that

our customers love and trust

MISSION

사랑과 신뢰를 받는

제품과 서비스를 제공하여

인류의 풍요로운 삶에 기여한다

LO

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MIC

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N H

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7-P

)

www.lottechem.my

6th Floor, Bangunan Malaysian Re, No. 17 Lorong Dungun,Damansara Heights, 50490 Kuala Lumpur, Malaysia.

Tel : +603-2093 4222 Fax : +603-2093 5688

ANNUAL REPORT 2017PART I - CORPORATE & SUSTAINABILITY

Lifetime Value Creator

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Documents

Lotte Chemical Titan Holding Berhad Profile of Senior