Business Overview

6. INFORMATION ON OUR GROUP 6. INFORMATION ON OUR GROUP 6.1 OUR COMPANY 6.1.1 Background and history Our Company was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 3 August 1991 as a private limited company under the name of Flexiscope (M) Sdn Bhd. We commenced business on 29 November 1991. On 19 September 1991, we changed our name to Titan Holdings Sdn Bhd and to Titan Petrochemicals & Polymers Sdn Bhd on 13 August 1997. We converted into a public company on 26 September 1997. We subsequently changed our name to Titan Chemicals Corp. Bhd on 9 December 2004 and was listed on the Main Board (now known as Main Market) of Bursa Securities on 23 June 2005. Our Company is an investment holding company. The principal activities of our subsidiaries, associates and the joint operation of our associate, LC USA, are set out in Section 6.2 of this Prospectus. On 16 JUly 2010, LCC entered into the sale and purchase agreements with Union Harvard Investments S.R.L., CGDC Investments Corporation, Permodalan Nasional Berhad and AmanahRaya Trustees Berhad to acquire a total of 1,249,603,888 of our Shares, representing approximately 72.32% of our issued share capital, for a total cash consideration of RM2.9 billion (equivalent to RM2.35 per Share). As LCC’s direct shareholding in our Company had increased from 0% to 72.32% upon completion of the Acquisition, LCC was obliged to undertake an unconditional take-over offer to acquire all our remaining Shares not already owned by LCC for a cash consideration of RM2.35 for each Share (“Offer Price”) (“Offer”), valued at RM1.1 billion. The Offer Price represents a premium of 35.8% over the 5-day volume weighted average market price (“VWAMP”) of our Shares up to 14 July 2010, being the last trading day before the Acquisition, of RM1.73. The total value of the Acquisition and the Offer represented an illustrative market capitalisation of about RM4.0 billion. As stated in the Independent Advice Circular in relation to the Offer dated 29 November 2010 (“lAC”), the Offer Price represents the following: (i) PER of 13.25 times (“Offer PER”) which was within the range of the PER of the selected comparable companies of between 10.22 times and 19.91 times but slightly lower than the average of 15.30 times; and
(ii) EV/EBITDA multiple of 7.29 times (“Offer EVIEBITDA multiple”) which was within the range of the EV/EBITDA of the selected comparable companies of between

3.44 times and 14.09 times but slightly lower than the average of 7.82 times. The Offer closed on 24 December 2010 with LCC holding 99.57% of our issued share capital, following which, LCC compulsorily acquired all our remaining Shares for which acceptances were not received pursuant to the Offer. We were subsequently delisted from the Main Market of Bursa Securities in 2011 (“Delisting”). We were subsequently converted into a private limited company and changed our name to Titan Chemicals Corp. Sdn Bhd on 8 March 2011 and to Lotte Chemical Titan Holding Sdn Bhd on 20 December 2012. On 28 March 2017, we converted into a public company. 6. INFORMATION ON OUR GROUP (Cont’d) The Acquisition was a strategic move by LCC in line with its long-term goal to become a global petrochemical company through overseas expansion and development of new businesses to allow LCC to transform and become one of the most competitive petrochemical players in Asia. With our significant presence in Malaysia and Indonesia, LCC expected to strengthen its overseas operations by securing international production bases in high growth markets and in areas with access to competitive feedstock through the Acquisition. 6.1.2 Key developments since the Delisting Since the Oelisting, we have focused on optimising our operations through continued efficiency enhancements and ongoing works to improve the productivity and reliability of our plants and processes. As our controlling shareholder, LCC is also a global petrochemical company and one of Asia’s largest chemical companies, we have benefited from its operational expertise and industrial know-how. In addition, we have also undertaken several capital expenditures and investments to further increase our production capacities to address our long-term growth. A summary of the key developments to our business since the Oelisting up to the LPO is set out below. Commencement of Delisting from Main commercial Debottlenecking Investment in lC Market of Bursa  operation of  of PP2 Plant  USA  Securities  TBA Plant  Commencement  of construction of  PP3 Plant  I

Commissioning of Debottlenecking of Expectednew TBA Plant PP1 Plant completion of TE3 Commencement Project of construction of facilities of NC2 Plant (TE3 Project) (i) Maximise value of production through internal recycling as well as increased product range To maximise the value of our production through recycling the use of by-products from our plants into our processes, we constructed and commissioned the TBA Plant in 2012 where the TBA Plant uses excess C4 Raffinate-1 from our BO Plant as feedstock. The cost of constructing the TBA Plant was RM59.5 million which was funded entirely using internally generated funds. With the commercial operation of the TBA Plant in 2013, we further diversified our product portfolio with the addition of TBA as a derivative product and excess by­products generated by the TBA Plant such as C4 Raffinate-2.

 

 

6. INFORMATION ON OUR GROUP (Cant’d) (ii) Further increase in plant capacity and consequently, production through debottlenecking works We continue to carry out debottlenecking works to increase the capacity of our plants which involve simple modification of existing equipment to remove operational constraints known as bottlenecks. Since the Delisting, we have carried out debottlenecking work on our polypropylene plants, as follows: (a) PP1 Plant The debottlenecking works on our PP1 Plant which commenced in May 2015 and was completed in March 2016 had involved the following: (i) installing an additional reactor jacket water cooler which allows us to feed more propylene into our plants by reducing the heat generated from the reactor; and
(ii) upgrading the extruder gear pump reducer that can run at higher speeds which can lead to a higher product yield.

The cost of the debottlenecking works on our PP1 Plant was approximately USD1.7 million (equivalent to RM7.3 million) which was funded entirely using internally generated funds. Following the debottlenecking exercise, the nameplate capacity of our PP1 Plant increased by 10.7% from 150 KTA to 166 KTA. (b) PP2 Plant The debottlenecking works on our PP2 Plant which commenced in May 2015 and was completed in June 2016 had involved the installation of new and higher-capacity propylene feed pumps. The cost of the debottlenecking on our PP2 Plant was approximately USDO.6 million (equivalent to RM2.6 million) which was funded entirely using internally generated funds. Following the debottlenecking exercise, the nameplate capacity of our PP2 Plant increased by 14.2% from 240 KTA to 274 KTA. We also recently completed the turnaround for the NC2 Plant in March 2017. A turnaround is a scheduled maintenance involving a complete shutdown and comprehensive maintenance checks of the plant which lasts about 30 days. (iii) Improved operations and operational efficiencies through additional equipment modification and equipment replacement Emergency shutdowns causes significant disruption to our operations as our plants are not able to operate at all or at full capacity. Our plant utilisation rates are also affected by shutdowns which in turn affects production volumes because it takes about two weeks for our plants to return to optimal efficiency. 6. INFORMATION ON OUR GROUP (Cont’d) To allow us to identify and rectify abnormal items before occurrence of failures leading to emergency shutdowns, we carried out several equipment modification as well as equipment replacement initiatives by carrying out, among others: (a)  chronic equipment rectification survey;  (b)  unreliable instrument rectification survey; and  (c)  unreliable analyser survey,
which enabled us to identify and rectify abnormal items before occurrences of failures leading to emergency shutdowns. This had resulted in a significant decline in emergency shutdowns for our plants from 236 days in 2009 to 27 days in 2016. The significant reduction in emergency shutdowns has resulted in a stable production and higher utilisation rate from 2014 to 2016. We also implemented the following projects since the Delisting which have allowed us to improve the average utilisation rate of all our plants in both Malaysia and Indonesia from 80% for the year ended 31 December 2009 to 91% for the year ended 31 December 2016: (a) installation of an additional furnace in our NC2 Plant in 2012 to maintain consistency of production and prevent interruptions to the production process even during furnace decoking and scheduled shutdowns;
(b) replacement of the following equipment during the turnaround at the Pasir GUdang site in March 2017 to enhance the reliability of our power systems and minimise risk of disruption in our plant operations:
(i) two of our older, smaller-rated capacity 351V1VA transformers with newer, higher-rated 55 MVA 132/22kV transformers at 132kV substation to increase the capacity of each transformer by 57%; and
(ii) all 22kV feeders in the 132kV substation with double 22kV bus facilities and a reliable load-shedding scheme which acts to cut the power supply to major power users such as extruders in polyolefin plants when there is insufficient power supply. This will allow the two crackers to continue operations at the time when there is insufficient power supply.

 

With the replacement of these equipment, our Pasir Gudang site now has sufficient power capacity to cater for the entire existing Pasir Gudang complex as well as after completion of our TE3 Project and PP3 Project despite there being only one transformer and two gas turbines in service. (c) modification works to the pygas feed pump in the BTX Plant in October 2015. These initiatives have allowed us to improve our plants utilisation rate in lVIalaysia, as shown in Section 7.6.5 of this Prospectus. 6. INFORMATION ON OUR GROUP (Cont’d) (iv) Capital expenditure and investments Since the Delisting and up to the LPD, we have incurred a total of RM3,553.0 million for the following capital expenditure and investments to further increase our production capacities: (a) TE3 Project TE3 Project involves the construction of facilities attached to our existing NC2 Plant involving the use of the K-COT to create a larger output of ethylene and propylene as well as by-products. We began implementing the TE3 Project in 2015 and expect to complete it in the second half of 2017 with commercial operation in late 2017. Up to the LPD, we have incurred RM1,260.3 million which was funded entirely using internally generated funds. With the completion of the TE3 Project, we expect our production capacities to increase as follows: (i) for ethylene, by 93 KTA from 700 KTA to 793 KTA;
(ii) for propylene, by 170 KTA from 379 KTA to 549 KTA, if we re­commence operations for our OCU Plant after completion of the TE3 Project, depending on the market prices of ethylene and propylene then; and

(iii) for BTX, by 134 KTA from 155 KTA to 289 KTA; (b) PP3 Project PP3 Project involves the construction of a new polypropylene plant to complement the TE3 Project. We began implementing the PP3 Project in March 2017 and expect to complete and commence commercial operations in the second half of 2018. Up to the LPD, we have incurred RM28.4 million which was funded entirely using internally generated funds. With the completion of the PP3 Project, we will expand our polypropylene production capacity by 200 KTA. (c) US Shale Gas Project In April 2016, we invested in LC USA which has undertaken the US Shale Gas Project comprising: (i) the US Ethane Cracker Plant, which we expect to increase our overall production capacity of ethylene by 1,000 KTA. The construction of the cracker plant commenced in the first half of 2016 with commercial operation expected to commence in the second half of 2019; and
(ii) the US MEG Plant which we expect will produce 700 KTA of MEG and derivatives each year. The development of the US MEG Plant commenced in the first half of 2016 with commercial operation expected to commence in the second half of 2019.

6. INFORMATION ON OUR GROUP (Cont’d) As at the LPD, we have incurred RIV12,264.2 million which was funded entirely using internally generated funds. 6.1.3 The listing of our Group Our Board is of the view that this is an opportune time to introduce LCT to the Malaysian equity market via our IPO to allow us to raise the necessary funds to expand our business. Our prospects are supported by the following growth drivers as set out in the IMR Report: (i) demand growth for petrochemicals in Asia Pacific during 2017 to 2027 to continue to outpace the rate of new supply additions in the region. As a result, Asia Pacific is expected to remain a significant importer of various chemical intermediates and polymers. The demand growth for both ethylene and propylene is forecasted to be over 3% to 4% CAGR over the period of 2017-2027;
(ii) consumption of polyolefins in Southeast Asia is expected to grow at a CAGR of 4.4% over the period of2017 to 2027. Overall, total consumption of Asia Pacific is forecast to grow at around 4.5% CAGR over the same period; and

(iii) developing markets provide significant consumption growth potential for material substitution. Petrochemical polymers are substituting basic materials such as wood, glass, metals, paper and card in packaging, automotive and building and construction industries. We view these factors as indicators of long term growth opportunities and potential for our Group as they bode well for our strategies and future plans: (i) using part of the proceeds from our IPO for the Integrated Petrochemical Facility which is intended to allow the intake of naphtha to produce ethylene which is the feedstock for our Indonesian plants. This in turn will allow us to significantly increase our production of polyethylene products; and
(ii) pursuing growth through selective mergers and acquisition opportunities to further expand and diversify our product portfolio.

Our IPO will also enhance our visibility and profile, and provide a platform for us to develop our brand equity to support our expansion.

 

6. INFORMATION ON OUR GROUP (Cont’d) Our Listing is also in line with LCG’s objective to position us as its regional hub in Southeast Asia. We represented 53% capacity share in polyethylene production and 100% capacity share in polypropylene production in Malaysia as well as a 57% capacity share in polyethylene production in Indonesia. We are the fourth largest producer of polyolefin products in Southeast Asia by production capacity in 2016, with a 42% capacity share in olefins production in Malaysia and 29% capacity share in polyolefin production in Indonesia. The increase in the value of our Group is also supported by the measures that we have implemented since the Delisting, coupled with improved market conditions from the time of the Acquisition, as follows: (i) Increase in our production volume and higher sales volume At the time of the Acquisition, our production volume for the year ended 31 December 2009 was 2,398 KTA. For the years ended 31 December 2014, 2015 and 2016, our production volume were higher due to more stable operations and higher utilisation rate, as follows: Production volume increase (KTA) 0.1%

2014 2015 2016 During these years, we also experienced an increase in our sales volume in line with the higher production volume, as follows: Sales volume increase (KTA) 0.4% 1,993.47.4% 1,847.6

2014 2015 2016 The lower sales volume in 2014 was a result of the unplanned shutdown due to power outage but the relatively stable production in 2015 and 2016 led to higher sales volume. Our sales volume for the year ended 31 December 2009, being the last year prior to the Acquisition, was 1,559 KTA. 6. INFORMATION ON OUR GROUP (Cont’d) (ii) Improvement in our profitability and margins Based on the latest available audited financial statements of our Group at the time of the Acquisition, our revenue, gross profit and PATAMI of our Group were RM5,607.0 million, RM845.2 million and RM523.9 million respectively for the year ended 31 December 2009. We continued to be profitable since the Delisting save for the year ended 31 December 2014 mainly due to higher feedstock prices and unplanned shutdown in 2014 as further explained below. Our revenue and PATAMI/(LATAMI) for the years ended 31 December 2014,2015 and 2016 are as follows: Year ended 31 December 2014 2015 2016 (RM million) Revenue 8,611.2 8,147.8 8,136.6 Gross profit 236.1 1.319.1 1,981.9 PATAMI/(LATAMI) (19.2) 613.2 1,315.4 As can be seen from the table: • our revenue for the years ended 31 December 2014,2015 and 2016 were significantly higher than our revenue for the year ended 31 December 2009, increasing by more than 45%; • our gross profit for the years ended 31 December 2015 and 2016 were also higher than our gross profit for the year ended 31 December 2009, increasing by more than 100% for the year ended 31 December 2016; and • our PATAMI for the years ended 31 December 2015 and 2016 were also higher than our gross profit and PATAMI for the year ended 31 December 2009, increasing by more than 100% for the year ended 31 December 2016. We registered a loss for the year ended 31 December 2014 due to the following reasons: (a) higher feedstock prices resulting from higher crude oil prices. Our feedstock prices are closely related to crude oil prices because naphtha is a product from the refining of crude oil; and
(b) our plants in Malaysia suffered an emergency shutdown for a period of 38.3 days caused by a power outage and as a result, all production in Malaysia ceased during this period. This has resulted in a lower production volume and sales volume. Please refer to Section 7.12 of this Prospectus for further information on the unplanned shutdown of our plants in 2014.

Notwithstanding, we registered a gross profit of RM236.1 million for the year ended 31 December 2014.
6. INFORMATION ON OUR GROUP (Cont’d) Our favourable performance for the years ended 31 December 2015 and 2016 were primarily due to the following factors: (a) Lower feedstock prices We use naphtha as a primary feedstock to produce other types of feedstock for our plants such as ethylene and propylene. Naphtha comprised of 78.6%, 74.4% and 68.6% of our costs of feedstock for the years ended 31 December 2014, 2015 and 2016, respectively. During these years, the average purchase price of naphtha as set out in the IMR Report had declined in line with the decline in crude oil prices as tabulated below: Year ended 31 December 2014  2015  2016  USD  RM  USD  RM  USD  RM  Naphtha (per MT)  861.4  2,819.6  490.7  1,916.9  398.4  1,650.9  % increase/(decrease)  (43.0)  (32.0)  (18.8)  (13.9)
Brent crude oil (per 99.2 324.7 52.8 206.3 44.1 182.7 barrel) % increase (46.8) (36.5) (16.5) (11.4) (Source: IMR Report) Naphtha price has been on a declining trend, from USD861.4 per tonne (equivalent to RM2,819.6 per MT) in 2014 to USD398.4 per tonne (equivalent to RM1,787.2 per MT) in 2016. The reduction was in line with the decline in crude oil prices from USD99.2 per barrel (equivalent to RM346.7 per barrel) in 2014 to USD44.1 per barrel (equivalent to RM197.8 per barrel) in 2016. At the time of the Delisting, the price of naphtha was USD938.2 per tonne (equivalent to RM2,892.9 per MT) with the crude oil at USD111.4 per barrel (equivalent to RM343.5 per barrel). (b) Higher gross profit margin As we generally pass changes in feedstock price directly to our customers by changing the price of our products, the average sales price of our product over the same periods also declined. The average sales price of our products in 2014, 2015 and 2016 are as follows: Year ended 31 December % change from 2014  % change from 2015 to  2014  to 2015  2015  2016  2016  (RM per MT, except percentages)  Polyolefins products Polypropylene(1 )  5,394  (11.9%)  4,754  (3.8%)  4,573
6. INFORMATION ON OUR GROUP (Cant’d) Year ended 31 December Olefins and derivative products(1) -Ethylene -Propylene -Benzene -Toluene -Butadiene(3) -TBA -By-products(4) % change % change from 2014 from 2015 to 2014 to 2015 2015 2016 2016
(RM per MT, except percentages) 4,282 (2.0%) 4,197 (1.0%) 4,157 _(2) _(2)4,125 3,942 (33.5%) 2,621 (1.0%) 2,596 3,583 (24.8%) 2,696 (5.0%) 2,561 4,134 (15.7%) 3,486 26.2% 4,398 2,529 (18.8%) 2,053 (7.3%) 1,904 2,724 (29.0%) 1,933 (12.3%) 1,695 Notes: (1) Produced from our plants in Malaysia.
(2) We did not have any propylene sales in 2015 and 2016 as it was more profitable for us to use the propylene which we produced as feedstock for our internal operations.
(3) Despite the decrease in feedstock prices, our average sales price of butadiene increased largely due to demand in China and India for synthetic rubber, a product made from butadiene.
(4) Our by-products comprise primarily pygas, fuel oil, light cycle oil, C4 Raffinate-2, mixed aromatics and C5 Non Aromatics.

As adjustment in sales price of our products would not be in the same quantum and same timing as the reduction in the feedstock price because changes in sales price would also depend on market conditions and customer demand for the products which has resulted in higher margin are shown below: Gross margin (%) 50.6% 500.0% 16.2 2.7 2014 2015 2016 Our gross margin for the year ended 31 December 2009, being the last financial year prior to the Acquisition, was 15.1 %. I Company No.: 222357-P I
6. INFORMATION ON OUR GROUP (Cont’d) For illustrative purposes only, we have compared our PER and EV/EBITDA mUltiples to that of selected companies listed on foreign stock exchanges in Asia, involved in olefin and polyolefin production and exposed to the petrochemical industry cycles, as stated in the lAC. These selected companies are not considered identical or directly similar to our Group in terms of, among others, geographical operations, scale of operations, composition of business activities, asset base and risk profile. Country  of  Market capitalisation  Name of company  listing  Principal activities  (RM billion)  PER (times)(1)  EV/EBITDA (times)(2)  As at the LPD  As at the LPD”  As at the LPD”
LCC South Korea LCC manufactures a wide range of petrochemical products such as 46.50 5.43 2.88 HOPE, PP and ethylene glycol. The company’s products are used in manufacturing, general housewares, pipes, films, fabrics, bottles, containers and automotive parts LG Chem Ltd (“LG South Korea LG Chem is a chemical manufacturer. The company’s products include 76.55 13.70 5.52 Chem”) petrochemicals, plastic resins, and engineering plastics. LG Chem also produces industrial and electronic materials Formosa Plastics Taiwan Formosa Plastics manufactures and markets plastic materials and 80.60 12.73 12.91 Corporation chemical fiber products. The company’s products include PVC resins, (“Formosa Plastics”) HOPE, tairylan acrylic fiber, acrylic acid and ester, carbon fiber, caustic soda, PVC modifier and calcium carbonate Formosa Taiwan Formosa Petrochemical refines crude oil and markets petroleum and 145.28 11.36 6.98 Petrochemical petrochemical products. The company operates refineries and naphtha Corporation cracking plants that provide products such as gasoline, diesel, jet fuel, (“Formosa fuel oil, naphtha, ethylene and LPG. Formosa Petrochemical also owns3 Petrochemical”) utility centers and generates electricity Hanwha Chemical South Korea Hanwha is a chemical manufacturer. The company’s products include a 18.25 4.73 4.16 Corporation line of chlorine and hydrochloric acid. Hanwha also produces resins (“Hanwha”) including LOPE and PVC 4.73 2.88 9.59 6.49

 

I~~:rage ti9h 13.70 12.91 LCT Malaysia We are an investment holding company and our subsidiaries are 19.75 14.25 5.19 principally involved in the manufacture and sale of petrochemical products, investment holding and general trading * Source: lAC A Source: S&P Capital IQ 68 6. INFORMATION ON OUR GROUP (Cont’d) Notes: (1) Based on trailing 12-months PATAMI
(2) Based on EV over trailing 12-months EBITDA

Our PER as at the LPD of 14.25 times falls just above the range of PER of the selected companies of between 4.73 times and 13.70 times. Our EV/EBITDA multiple as at the LPD of 5.19 times falls within the range of EV/EBITDA mUltiple of the comparable companies of between 2.88 times and 12.91 times. Although our PER of 14.25 times is higher the average PER of the selected companies of 9.59 times, our EV/EBITDA mUltiple is lower than the average EV/EBITDA multiple of the selected companies of 6.49 times. From the time of the Delisting, the average PER has declined by approximately 37% from 15.30 times at the time of the Delisting to 9.59 times as at the LPD. However, the decline in the average EV/EBITDA multiple is lower at about 17% from 7.82 times at the time of the Delisting to 6.49 times as at the LPD, using the same set of comparable companies. 6.1.4 Share capital As at the date of this Prospectus, our issued share capital is RM2,046,813,683(1) comprising 1,727,791,500 Shares. There is no change in our issued share capital for the past three years preceding the LPD. Note: (1) Includes the amount standing to the credit of our share premium account and capital redemption reserve as at 31 December 2016, which has become part of our share capital upon commencement of the Act on 31 January 2017. Notwithstanding this, we may, within 24 months upon the commencement of the Act, use the amount standing to the credit of our share premium account and capital redemption reserve in accordance with the Act. [COmpany No.: 222357-P 6. INFORMATION ON OUR GROUP (Cont’d) 6.2 OUR SUBSIDIARIES AND ASSOCIATES Our current group structure is set out below: 100% 100% 100% 100%

 

 

 

~CT ~
100% 100% 100% 100% 100% 40% 10%
LCTM
LCT Trading LCT International SB LCT Capital Titan Petrochemicals Titan Vinyl
LCT Corporation Titan Ethylene Glycol Titan Chemicals International Titan Leasing LC USA Lotte Ube

+-99.998% PT LC Indonesia 99.60% PT Titan Trading 0.40% PT LCT Nusantara

100%
LC Louisiana LACC South Wealth Finance
0.15% * Listed on the Indonesia Stock Exchange 70

6. INFORMATION ON OUR GROUP (Cont’d) Our subsidiaries, associates and joint operation of LC USA as at the LPD are as follows: Date and place Our of effective incorporation Issued share equity Name /formation capital interest Principal activities %
Our subsidiaries LCTM 1 August 1986/ (1)RM1 ,799,007,106 100.0 Manufacture and sales of Malaysia petrochemical products and polyolefin resins LCT Trading 27 April 1988/ RM292,500,000 100.0 Sales of petrochemical Malaysia products and polyolefin resins and marketing arm for its related companies  LCT International S8  17 October 2007/ Malaysia  (1)RM624,870,002  100.0  Investment holding  LCT Capital  26 December 2003/ Labuan  USD30,340,001  100.0  Dormant(2)  Titan Petrochemicals  10 June 1988/ Malaysia  RM560,000,000  100.0  Dormant(3)  Titan Vinyl  31 March 1988/ Malaysia  RM1,000  100.0  Dormant(4)  LCT Corporation  16 October 1995/ Malaysia  RM90,000,000  100.0  Trading provision services  of of  goods manag and ement  Titan Ethylene Glycol  13 October 1995/lV1alaysia  RM1,000  100.0  Dormant(S)  Titan Chemicals International  3 March 2006/ Labuan  USD100  100.0  Dormant(6)  Titan Leasing  18 July 2008/ Labuan  USD20,000  100.0  Dormant(?)  PTLC Indonesia  9 June 20161 Indonesia  USD60,300,000  100.0  Has not business(8)  comm enced  Subsidiary of LCTM  LC Singapore  26 March 20101 Singapore  USD2  100.0  Dormant(9)  Subsidiary of LCT Trading  Titan Trading Corp.  3 May 20041 Hong Kong  HKD1  100.0  Dormant(1D)  Subsidiary of LCT International S8  PT LCTTbk  30 July 19881 Indonesia  lOR 1,391,603,500,000  9004  Investment holding, and distribution  import  Subsidiaries of PT LCT Tbk  LCT International Ltd  19 October 20071 Labuan  USD188,400,002  9004  Investment holding

6. INFORMATION ON OUR GROUP (Cont’d) Date and place Our of effective incorporation Issued share equity Name Iformation capital interest Principal activities %
PT Titan 8 October 20101 USD250,000 90A Dormant(11) Trading Indonesia
Subsidiary of LCT International Ltd Chemical 17 October USD146,000,002 90A Investment holding Brothers 20011 Mauritius
Subsidiaries of Chemical Brothers South Wealth 3 July 20011 USD1 90.4 Investment holding Finance British Virgin Islands
PT LCT 15 August USD128,750,000 90.4 Engaged in the polyethylene Nusantara 19901 Indonesia industry and wholesale trading (main distributor and importer) Our associates LC USA 9 April 20141 USD3 40.0(12) Investment holding United States
Lotte Ube(13) 11 January . RM184,050,000 10.0 Manufacture and trading of 20121 Malaysia synthetic rubber Subsidiary of LC USA LC Louisiana 15 October USD351 ,000,000 40.0(14) Has not commenced 20151 United business(15) States Joint operation of LC USA LACC 17 June 20151 USD694,053,994.50 36.0(16) Has not commenced United States business(17) Notes: (1) Includes the amount standing to the credit of the share premium account as at 31 December 2016, which has become part of the share capital upon commencement of the Act on 31 January 2017. Notwithstanding this, the company may, within 24 months upon the commencement of the Act, use the amount standing to the credit of its share premium account in accordance with the Act.
(2) Established as a special purpose vehicle incorporated to facilitate the financing arrangements of LCTM, which were fUlly settled in 2014, and the company has remained dormant since.
(3) Established for the purpose of manufacture and sale of petrochemical products until 1 September 2004 when it ceased its business operation and has been dormant since then.
(4) Established for the purpose of carrying on the business of manufacture and dealing in thermoplastic and petrolic products particularly vinyl chloride monomer, poly vinyl chloride, ethylene dichloride and all other similar materials, but has been dormant since its incorporation.

 

6. INFORMATION ON OUR GROUP (Cant’d) (5) Established for the purpose of carrying on the business of manufacture and dealing in thermoplastic and petrolic products particularly ethylene glycol, ethylene oxide, ethylene, polyethylene, (including LOPE, LLOPE and HOPE) and all other similar materials, but has been dormant since its incorporation.
(6) Established for the purpose of undertaking a bond issuance which did not materialise, hence it has been dormant since its incorporation.
(7) Established for the purpose of leasing of vessel until January 2011 when it ceased its business operation and has been dormant since then.
(8) Established for the purpose of engaging in the manufacturing and sale of products in the basic organic chemical industry derived from crude oil, natural gas and coal including BTX, butadiene, ethylene, polyethylene, polypropylene and propylene, as well as related activities, but has not commenced business.
(9) Established for the purpose of time chartering of vessel until 2011 and subsequently, for the purpose of providing marketing services to LCT Trading from 1 September 2013 until November 2014 when it ceased its business operation and has been dormant since then.
(10) Established for the purpose of marketing of polyolefin products in Singapore and China until 1 September 2013 when it ceased its business operation and has been dormant since then.
(11) Established for the purpose of being the main distributor and importer of BOPP film, polyethylene, polypropylene and ethylene, but has been dormant since its incorporation.
(12) The remaining 60% equity interest is held by LCC.
(13) Lotte Ube is regarded as an associate of our Group as we are able to exercise significant influence over it due to the following reasons:
(i) based on the agreement among the shareholders of Lotte Ube, Lotte Ube’s board of directors will consist of six directors of which our Group is entitled to appoint one director; and
(ii) our Group is a key supplier of raw materials and utilities to Lotte Ube.

 

(14) LC Louisiana is a wholly-owned subsidiary of LC USA (i.e. effective equity interest of 40%).
(15) Established for the purpose of production of MEG, but it has not commenced business.
(16) LACC is a joint operation of LC USA, our 40%-owned associate, in which LC USA owns 90.0% equity interest (i.e. effective equity interest of 36%). The remaining 10.0% equity interest in LACC is owned by Eagle US 2 LLC.
(17) Established for the purpose of production of ethylene, but it has not commenced business.

 

6. INFORMATION ON OUR GROUP (Cont’d) Details of our subsidiaries, associates and joint operation of LC USA as at the LPD are set out below: 6.2.1 Our subsidiaries (i) LCTM (Company No. 154990-W) LCTM was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 1 August 1986 as a private limited company under the name of Asia Polymer (M) Sdn Bhd. The company changed its name to Asia Pacific Polymer (M) Sdn Bhd on 24 June 1987, to Titan Polypropylene (M) Sdn Bhd on 25 February 1989, to Titan Himont Polymers (M) Sdn Bhd on 31 May 1989, to Titan PP Polymers (1V1) Sdn Bhd on 10 June 1996 and to Titan Petchem (M) Sdn Bhd on 9 December 2004 before assuming its present name on 20 December 2012. It is principally involved in the manufacture and sales of petrochemical products and polyolefin resins. It commenced business in December 1991. As at the LPD, LCTM’s share capital is RM1,799,007,106 compnslng 133,410,000 ordinary shares and 165,871 RCNCPS. As at the LPD, the holders of the RCNCPS are as follows: Name No. of RCNCPS % LCT 101,934 61.5 Titan Petrochemicals 63,937 38.5
Total 165,871 100.0 The salient terms of the RCNCPS as set out in LCTM’s Memorandum and Articles of Association are as follows: Issue price Maturity date Dividend Conversion At a par value of RM1.00 each and a premium of RM9,999 per RCNCPS. None. The holder of RCNCPS shall have the right to receive a preferential dividend (“Preferential Dividend”) at such percentage of the amount paid up on the RCNCPS held by the holder as shall be determined by the board of directors from time to time and payable when and if declared by the board of directors. The Preferential Dividend may be a cash or non-cash dividend as may be decided by the board of directors at the time of the declaration of a dividend. The Preferential Dividend would be non-cumulative and would be paid in priority to payment of any dividend to any holder of ordinary shares or shares of other class in LCTM. All or part of the RCI\JCPS shall be convertible at any time after the date of issuance of such RCNCPS into such number of fUlly paid ordinary shares on such terms and in such manner as may be determined by LCTM’s board of directors. 74
6. INFORMATION ON OUR GROUP (Cont’d) Ranking Voting rights Status Redemption Except with the consent of the holder of the RCNCPS, no further shares shall be issued by LCTM ranking in priority to the RCNCPS nor the rights and privileges of such shares be altered. The RCNCPS shall have the right to rank in priority in respect to dividend and return of capital to the ordinary shares and all other classes of shares, if any, for the time being of LCTM, but shall not have any further rights to participate in profits or assets. The holders of RCNCPS shall have the right to receive notice of general meetings, reports, balance sheets and to attend any meeting convened for the purpose of reducing the capital or winding up or where the proposal to be submitted to the meeting directly or indirectly affects the rights attached to the RCNCPS and to vote thereat either in person or by proxy and only for such purpose. Upon the winding up of LCTM, the holder of the RCNCPS shall have right to payment: (a) of all arrears of the Preferential Dividend and for purpose of avoidance of doubt, the term “arrears of Preferential Dividend” means the Preferential Dividend declared and not paid prior to the order for winding up of LCTM; and
(b) of all capital paid up on the RCNCPS in priority to the ordinary shares and all other classes of shares, if any, but not the right to any further participation in the surplus profits or assets of LCTM.

SUbject always to the provisions of Section 61 of the CA 1965 and of any statutory modifications or re­enactments for the time being in force, the RCNCPS shall be redeemed in the manner and on the following terms: (a) LCTM may at any time, apply any profits or moneys of LCTM which may be lawfully applied for the redemption of all or any of the RCNCPS;
(b) the RCNCPS shall be redeemed at a redemption price as may be determined by LCTM’s board of directors;
(c) LCTM shall give to the holders of the RCNCPS notice in writing of its intention to redeem the same and fixing the time and place for the redemption;
(d) at the time and place so fixed each such holder shall be bound to surrender to LCTM the certificate for his RCNCPS to be redeemed and LCTM shall pay to him the amount payable in respect of such redemption; and

75
6. INFORMATION ON OUR GROUP (Cant’d) (e) all RCNCPS redeemed in accordance with the foregoing provisions shall rank for Preferential Dividend declared but not paid up to the date of the redemption.
There is no change in LCTM’s issued share capital for the past three years preceding the LPD. LCTM is our wholly-owned sUbsidiary. As at the LPD, LCTM has a direct sUbsidiary, LC Singapore, details of which are set out in Section 6.2.1.1 (i) of this Prospectus. As at the LPD, LCTM does not have any associate. (ii) LCT Trading (Company No. 170232-H) LCT Trading was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 27 April 1988 as a private limited company under the name of Polietilena Asia Pasifik (Malaysia) Sdn Bhd. The company changed its name to Asia Pacific Polyethylene (Malaysia) Sdn Bhd on 24 May 1988, to Titan Polyethylene (Malaysia) Sdn Bhd on 21 March 1989 and to Titan Trading Corp. Sdn Bhd on 24 November 2005 before assuming its present name on 20 December 2012. It is principally involved in the sales of petrochemical products and polyolefin resins and marketing arm for its related companies. It commenced business in September 1993. As at the LPD, LCT Trading’s share capital is RM292,500,000 comprising 292,500,000 ordinary shares. There is no change in LCT Trading’s issued share capital for the past three years preceding the LPD. LCT Trading is our wholly-owned sUbsidiary. As at the LPD, LCT Trading has a direct sUbsidiary, Titan Trading Corp., details of which are set out in Section 6.2.1.2(i) of this Prospectus. As at the LPD, LCT Trading does not have any associate. (iii) LCT International 58 (Company No. 792180-A) LCT International SB was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 17 October 2007 as a private limited company under the name of Titan International Corp. Sdn Bhd. On 20 December 2012, the company assumed its present name. It is an investment holding company. It commenced business in January 2008. As at the LPD, LCT International SB’s share capital is RM624,870,002 comprising 2 ordinary shares and 62,487 RCNCPS, all of which are held by us. 6. INFORMATION ON OUR GROUP (Cont’d) The salient terms of the RCNCPS as set out in LCT International SB’s lVIemorandum and Articles of Association are as follows: Issue price Maturity date Dividend Conversion Ranking Voting rights Status At a par value of RM1.00 each and a premium of RM9,999 per RCNCPS. None. The holder of RCNCPS shall have the right to receive Preferential Dividend at such percentage of the amount paid up on the RCNCPS held by the holder as shall be determined by the board of directors from time to time and payable when and if declared by the board of directors. The Preferential Dividend may be a cash or non-cash dividend as may be decided by the board of directors at the time of the declaration of a dividend. The Preferential Dividend would be non-cumulative and would be paid in priority to payment of any dividend to any holder of ordinary shares or shares of other class in LCT International SB. Allor part of the RCNCPS shall be convertible at any time after the date of issuance of such RCNCPS into such number of fully paid ordinary shares on such terms and in such manner as may be determined by LCT International SB’s board of directors. Except with the consent of the holder of the RCNCPS, no further shares shall be issued by LCT International SB ranking in priority to the RCI\JCPS nor the rights and privileges of such shares be altered. The RCNCPS shall have the right to rank in priority in respect to dividend and return of capital to the ordinary shares and all other classes of shares, if any, for the time being of LCT International SB, but shall not have any further rights to participate in profits or assets. The holders of RCNCPS shall have the right to receive notice of general meetings, reports, balance sheets and to attend any meeting convened for the purpose of reducing the capital or winding up or where the proposal to be submitted to the meeting directly or indirectly affects the rights attached to the RCNCPS and to vote thereat either in person or by proxy and only for such purpose. Upon the winding up of LCT International SB, the holder of the RCNCPS shall have right to payment: (a) of all arrears of the Preferential Dividend and for purpose of avoidance of doubt, the term “arrears of Preferential Dividend” means the Preferential Dividend declared and not paid prior to the order for Winding up of LCT International SB; and 77
6. INFORMATION ON OUR GROUP (Cont’d) (b) of all capital paid up on the RCNCPS in priority to the ordinary shares and all other classes of shares, if any, but not the right to any further participation in the surplus profits or assets of LCT International SB.
Redemption Subject always to the provisions of Section 61 of the CA 1965 and of any statutory modifications or re­enactments for the time being in force, the RCNCPS shall be redeemed in the manner and on the following terms: (a) LCT International SB may at any time, apply any profits or moneys of LCT International SB which may be lawfully applied for the redemption of all or any of the RCNCPS;
(b) the RCNCPS shall be redeemed at a redemption price as may be determined by LCT International SB’s board of directors;
(c) LCT International SB shall give to the holders of the RCNCPS notice in writing of its intention to redeem the same and fixing the time and place for the redemption;
(d) at the time and place so fixed each such holder shall be bound to surrender to LCT International SB the certificate for his RCNCPS to be redeemed and LCT International SB shall pay to him the amount payable in respect of such redemption; and
(e) all RCNCPS redeemed in accordance with the foregoing provisions shall rank for Preferential Dividend declared but not paid up to the date of the redemption.

 

There is no change in LCT International SB’s issued share capital for the past three years preceding the LPD. As at the LPD, LCT International SB has: (a) a direct subsidiary, PT LCT Tbk; and
(b) indirect subsidiaries, LCT International Ltd, Chemical Brothers, South Wealth Finance, PT LCT Nusantara and PT Titan Trading.

Details of PT LCT Tbk, LCT International Ltd, Chemical Brothers, South Wealth Finance, PT LCT Nusantara and PT Titan Trading are set out in Sections 6.2.1.3(i), 6.2.1.4(i), 6.2.1.5(i), 6.2.1.6(i), 6.2.1.6(ii) and 6.2.1.4(ii) of this Prospectus, respectively. As at the LPD, LCT International SB does not have any associate. (iv) LCT Capital (Company No. LL04059) LCT Capital was incorporated in Labuan under the Offshore Companies Act 1990 on 26 December 2003 as a private limited company under the name of Titan Capital (L). On 20 December 2012, the company assumed its present name. It is currently dormant. 78
6. INFORMATION ON OUR GROUP (Cont’d) As at the LPD, LCT Capital’s share capital is USD30,340,001 comprising one ordinary share and 3,034 RPS, all of which are held by us. The salient terms of the RPS as set out in LCT Capital’s Memorandum and Articles of Association are as follows: Issue price Maturity date Dividend Conversion Ranking Voting rights USD10,000 per RPS. None. At the discretion of the directors of LCT Capital, a non­cumulative preferential dividend may be paid on the RPS out of all profits or surpluses available for distribution at a rate to be determined by the directors of LCT Capital from time to time of the redemption amount of the issued and outstanding RPS as at the date that the dividend is declared. Dividends may be paid on one class of shares entitled to dividend to the exclusion of any other class of shares entitled to dividends. None. The right to rank in regard to return of capital and dividend in priority to the ordinary shares and all other classed of shares, if any. The holders of the RPS have the right to receive notice of meetings, reports and balance sheet of LCT Capital provided that RPS shall not entitle the holders to attend and/or vote at any meeting of shareholders of LCT Capital or by way of written resolution by virtue of their holdings except on a resolution for the winding­up or a resolution for reduction of capital or a resolution for any amendment of the Memorandum and Articles of Association of LCT Capital affecting the rights and priVileges to the RPS or as otherwise stipulated in the provision of the Offshore Companies Act 1990.
6. INFORMATION ON OUR GROUP (Cant’d) Status Redemption In the event of liquidation, dissolution or winding-up of LCT Capital, whether voluntary or involuntary, or upon distribution of its assets among its members for the purpose of winding-up its affairs or upon a reduction or distribution of its share premium account, the holders of the RPS shall be entitled to the following in priority to any payment to the holders of any other shares in the capital of LCT Capital: (a) receive the redemption amount of the issued and outstanding RPS (including premium) paid up on the RPS held by them; and
(b) any arrears and accruals of the dividend on the RPS held by them, whether declared or earned, or not, calculated down to the date of such repayment. For the avoidance of doubt, “arrears and accruals of the dividend on the RPS” means the preferential dividend declared and not paid and claimed.

Except as otherwise mentioned above, the RPS shall not confer on the holders any further right to participate in LCT Capital’s profits or surplus assets. Subject to the provisions of Section 55 of the Offshore Companies Act 1990 and of any statutory modification or re-enactment for the time being in force, LCT Capital shall have the right, at any time after the date of allotment of any RPS redeem the whole or any number of the issued and outstanding RPS on payment for each share to be redeemed of the redemption amount of the RPS, and no more. LCT Capital shall give notice in writing of such redemption to the holders of the RPS to be redeemed and fixing the time and place for the redemption and surrender of the RPS to be redeemed unless the holders of the shares to be redeemed waive such notice. Any waiver, whether given before or after the redemption, will cure any default in giving such notice. The shareholder must surrender the necessary number of share certificates to LCT Capital. Upon LCT Capital paying the redemption amount of the shares to be redeemed, the holders of the redeemed shares will thereafter have no rights against LCT Capital in respect of such shares. For greater certainty, if not all of the issued and outstanding preferred shares are to be redeemed, the shares to be redeemed may be selected in such manner as the directors of LCT Capital determine and need not be selected either in proportion to the number of shares registered in the name of each shareholder or from every or any particular holder of RPS. If a part only of the shares of any class represented by any certificate are to be redeemed then a new certificate representing the shares which are not to be redeemed shall be issued at the expense of LCT Capital.
6. INFORMATION ON OUR GROUP (Cant’d) There is no change in LCT Capital’s issued share capital for the past three years preceding the LPD. As at the LPD, LCT Capital does not have any subsidiary or associate. (v) Titan Petrochemicals (Company No. 171052-0) Titan Petrochemicals was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 10 June 1988 as a private limited company under the name of Asia Pacific Petrochemicals (M) Sdn Bhd. On 9 March 1989, the company assumed its present name. It is currently dormant. As at the LPD, Titan Petrochemicals’ share capital is RM560,000,000 comprising 560,000,000 ordinary shares. There is no change in Titan Petrochemicals’ issued share capital for the past three years preceding the LPD. Titan Petrochemicals is our wholly-owned subsidiary. As at the LPD, Titan Petrochemicals does not have any subsidiary or associate. (vi) Titan Vinyl (Company No. 169646-H) Titan Vinyl was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 31 March 1988 as a private limited company under the name of Asia Pacific Monomer (Malaysia) Sdn Bhd. On 14 October 1994, the company assumed its present name. Titan Vinyl is currently dormant. As at the LPD, Titan Vinyl’s share capital is RM1,000 comprising 1,000 ordinary shares. There is no change in Titan Vinyl’s issued share capital for the past three years preceding the LPD. Titan Vinyl is our wholly-owned subsidiary. As at the LPD, Titan Vinyl does not have any subsidiary or associate. (vii) LCT Corporation (Company No. 363632-W) LCT Corporation was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 16 October 1995 as a private limited company under the name of Titan Styrene (M) Sdn Bhd. On 7 October 2016, the company assumed its present name. It is principally involved in the trading of goods and provision of management services. It commenced business on 1 January 2017. As at the LPD, LCT Corporation’s share capital is RM90,000,000 comprising 90,000,000 ordinary shares. The changes in LCT Corporation’s issued share capital for the past three years preceding the LPD are as follows: Date of No. of Cumulative issued allotment shares Consideration share capital RM 3 November 2,999,000 Cash 3,000,000 2016 1 March 2017 87,000,000 Cash 90,000,000 81
6. INFORMATION ON OUR GROUP (Cont’d) LCT Corporation is our wholly-owned subsidiary. As at the LPD, LCT Corporation does not have any subsidiary or associate. (viii) Titan Ethylene Glycol (Company No. 363377-A) Titan Ethylene Glycol was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 13 October 1995 as a private limited company under its present name. Titan Ethylene Glycol is currently dormant. As at the LPD, Titan Ethylene Glycol’s share capital is RM1,000 comprising 1,000 ordinary shares. There is no change in Titan Ethylene Glycol’s issued share capital for the past three years preceding the LPD. Titan Ethylene Glycol is our wholly-owned subsidiary. As at the LPD, Titan Ethylene Glycol does not have any subsidiary or associate. (ix) Titan Chemicals International (Company No. LL05262) Titan Chemicals International was incorporated in Labuan under the Offshore Companies Act 1990 on 3 March 2006 as a private limited company under the name of Titan Trading International (L). On 5 June 2007, the company assumed its present name. Titan Chemicals International is currently dormant. As at the LPD, Titan Chemicals International’s share capital is USD100 comprising 100 ordinary shares. There is no change in Titan Chemicals International’s issued share capital for the past three years preceding the LPD. Titan Chemicals International is our wholly-owned subsidiary. As at the LPD, Titan Chemicals International does not have any subsidiary or associate. (x) Titan Leasing (Company No. LL06625) Titan Leasing was incorporated in Labuan under the Offshore Companies Act 1990 on 18 July 2008 as a private limited company under its present name. Titan Leasing is currently dormant. As at the LPD, Titan Leasing’s share capital is USD20,000 comprising 20,000 ordinary shares. There is no change in Titan Leasing’s issued share capital for the past three years preceding the LPD. Titan Leasing is our wholly-owned subsidiary. As at the LPD, Titan Leasing does not have any subsidiary or associate. (xi) PT LC Indonesia (Company No. 00.00.1.20.00071) PT LC Indonesia was incorporated in Indonesia under the Establishment Deed NO.6 made before Mina NG, SH, Magister Kenotarian, Notary in Jakarta on 9 June 2016 and approved by the Ministry of Law and Human Rights Decree No. AHU-0028027.AH.01.01.TAHUN 2016 dated 9 June 2016, on 9 June 2016 as a private limited company under its present name. It has not commenced business and will be conducting the FEED study for the Integrated Petrochemical Facility in the second quarter of 2017. 82 6. INFORMATION ON OUR GROUP (Cont’d)
As at the LPD, PT LC Indonesia’s authorised share capital is USD150,000,000 comprising 150,000,000 ordinary shares of USD1 each and its issued and paid-up share capital is USD60,300,000 comprising 60,300,000 ordinary shares of USD1 each. The changes in PT LC Indonesia’s issued and paid-up share capital from the date of incorporation up to the LPD are as follows: Cumulative Date of Par issued and allotment No. of shares value Consideration paid-up share capital USD USD
9 June 2016 300,000 1.00 Cash 300,000 28 November 60,000,000 1.00 Cash 60,300,000 2016 PT LC Indonesia is our 99.998%-owned subsidiary and the remaining 0.002% equity interest is held by our indirect wholly-owned subsidiary, LC Singapore. As at the LPD, PT LC Indonesia does not have any subsidiary or associate. 6.2.1.1 Subsidiary of LCTM (i) LC Singapore (Company No. 201006464Z) LC Singapore was incorporated in Singapore under the Companies Act (Chapter 50) on 26 March 2010 as a private company limited by shares under the name of Titan Gas Pte Ltd. On 21 December 2012, the company assumed its present name. LC Singapore is currently dormant. As at the LPD, LC Singapore’s issued share capital is USD2 comprising two ordinary shares. There is no change in LC Singapore’s issued share capital for the past three years preceding the LPD. LC Singapore is a wholly-owned subsidiary of LCTM which in turn is our wholly­owned subsidiary. As at the LPD, LC Singapore does not have any subsidiary or associate. 6.2.1.2 Subsidiary of LCT Trading (i) Titan Trading Corp. (Company No. 899159) Titan Trading Corp. was incorporated in Hong Kong under the Companies Ordinance (Chapter 622) on 3 May 2004 as a private limited company under the name of Sino Tribute International Limited. On 3 November 2005, the company assumed its present name. Titan Trading Corp. is currently dormant. As at the LPD, Titan Trading Corp.’s share capital is HKD1 comprising one ordinary share. There is no change in Titan Trading Corp.’s issued share capital for the past three years preceding the LPD. Titan Trading Corp. is a wholly-owned sUbsidiary of LCT Trading which in turn is our wholly-owned subsidiary. As at the LPD, Titan Trading Corp. does not have any subsidiary or associate. 83
6. INFORMATION ON OUR GROUP (Cont’d) 6.2.1.3 Subsidiary of LCT International S8 (i) PT LCT Tbk (Company No. 09.03.1.46.61721) PT LCT Tbk was incorporated in Indonesia under the Establishment Deed No. 19 made before Ny. Rukmasanti Hardjasatya, SH, Notary in Jakarta on 9 December 1987 amended by Deed No. 53 made before Ny. Rukmasanti Hardjasatya, SH, Notary in Jakarta dated 18 july 1988 and approved by the Ministry of Law and Human Rights Decree No. C2-6603.HT.01.01.Th.’88 dated 30 July 1988, on 30 July 1988 as a private limited company under the name of PT Fatrapolindo Nusa Industri. The company was listed on Indonesia Stock Exchange on 27 February 2002 and changed its name to PT Titan Kimia Nusantara Tbk on 11 April 2008 before assuming its present name on 15 April 2013. It is principally involved in investment holding, import and distribution, and commenced business in June 1990. As at the LPD, PT LCT Tbk’s authorised share capital is IDR2,000,000,000,000 comprising 8,000,000,000 ordinary shares of IDR250 and its issued and paid­up share capital is IDR1,391,603,500,000 comprising 5,566,414,000 ordinary shares of IDR250 each. There is no change in PT LCT Tbk’s issued and paid-up share capital for the past three years preceding the LPD. PT LCT Tbk is a 90.4%-owned subsidiary of LCT International SB which in turn is our wholly-owned subsidiary. The 5,032,280,695 shares in PT LCT Tbk are held by our wholly-owned subsidiary, LCT International SB. As at the LPD, PT LCT Tbk has: (a) direct subsidiaries, LCT International Ltd and PT Titan Trading; and
(b) indirect subsidiaries, Chemical Brothers, South Wealth Finance and PT LCT I\lusantara.

The remaining 9.6% equity interest in PT LCT Tbk is held by public shareholders including Maybank IB who holds 4.4% equity interest in PT LCT Tbk. Details of LCT International Ltd, PT Titan Trading, Chemical Brothers, South Wealth Finance and PT LCT Nusantara are set out in Sections 6.2.1.4(i), 6.2.1.4(ii), 6.2.1.5(i), 6.2.1.6(i) and 6.2.1.6(ii) of this Prospectus, respectively. As at the LPD, PT LCT Tbk does not have any associate. 6.2.1.4 Subsidiaries of PT LCT Tbk (i) LCT International Ltd (Company No. LL06183) LCT International Ltd was incorporated in Labuan under the Offshore Companies Act 1990 on 19 October 2007 as a private limited company under the name of Fatra International Holding Ltd. The company changed its name to Titan International Holding Ltd on 6 August 2009 before assuming its present name on 28 December 2012. It is principally involved in investment holding and commenced business in January 2008. As at the LPD, LCT International Ltd’s share capital is USD188,400,002 comprising 188,400,002 ordinary shares. There is no change in LCT International Ltd’s issued share capital for the past three years preceding the LPD. 84 6. INFORMATION ON OUR GROUP (Cont’d)
LCT International Ltd is a wholly-owned subsidiary of PT LCT Tbk. PT LCT Tbk is a 90.4%-owned subsidiary of LCT International SB which in turn is our wholly-owned subsidiary. As at the LPD, LCT International Ltd has: (i) a direct subsidiary, Chemical Brothers; and
(ii) indirect subsidiaries, South Wealth Finance and PT LCT Nusantara.

Details of Chemical Brothers, South Wealth Finance and PT LCT Nusantara are set out in Sections 6.2.1.5(i), 6.2.1.6(i) and 6.2.1.6(ii) of this Prospectus, respectively. As at the LPD, LCT International Ltd does not have any associate. (ii) PT Titan Trading (Company No. 09.03.1.46.66625) PT Titan Trading was incorporated in Indonesia under the Establishment Deed No.28 made before Fathiah Helmi, SH, Notary in Jakarta on 22 September 2010 and approved by the Ministry of Law and Human Rights Decree No.AHU­47604.AH.01.01.Tahun 2010 dated 8 October 2010, on 8 October 2010 as a private limited liability company under its present name. PT Titan Trading is currently dormant. As at the LPD, PT Titan Trading’s authorised share capital is USD1,OOO,OOO comprising 1,000,000 ordinary shares of USD1 each and its issued and paid­up share capital is USD250,000 comprising 250,000 ordinary shares of USD1 each. There is no change in PT Titan Trading’s issued and paid-up share capital for the past three years preceding the LPD. PT Titan Trading is a 99.6%-owned subsidiary of PT LoUe Chemical Titan Tbk which is a 90.4%-owned subsidiary of LoUe Chemical Titan International Sdn Bhd which in turn is our wholly-owned subsidiary. The remaining 0.4% equity interest is held by PT LCT Nusantara, details of which are set out in Section 6.2.1.6(ii) of this Prospectus. As at the LPD, PT Titan Trading does not have any subsidiary or associate. 6.2.1.5 Subsidiary of LCT International Ltd (i) Chemical Brothers (Company No. 35967) Chemical Brothers was incorporated in the Republic of Mauritius on 17 October 2001 under the name of Portbello Holdings Limited under the former International Companies Act 1994 and is now recognised under the Companies Act 2001 as a private limited company. On 8 April 2003, the company assumed its present name. It is principally involved in investment holding and commenced business in March 2003. As at the LPD, Chemical Brothers’ share capital is USD146,000,002 comprising 100,000 ordinary shares of USD1.00 par value each. There is no change in Chemical Brothers’ issued share capital for the past three years preceding the LPD. 6. INFORMATION ON OUR GROUP (Cont’d) Chemical Brothers is a wholly-owned subsidiary of LCT International Ltd. LCT International Ltd is a wholly-owned subsidiary of PT LCT Tbk which is a 90.4%­owned subsidiary of LCT International SB which in turn is our wholly-owned subsidiary. As at the LPD, Chemical Brothers has direct subsidiaries, South Wealth Finance and PT LCT Nusantara. Details of South Wealth Finance and PT LCT Nusantara are set out in Sections 6.2.1.6(i) and 6.2.1.6(ii) of this Prospectus, respectively. As at the LPD, Chemical Brothers does not have any associate. 6.2.1.6 Subsidiaries of Chemical Brothers (i) South Wealth Finance (Company No. 452211) South Wealth Finance was incorporated in the British Virgin Islands on 3 July 2001 under the International Business Companies Act (Cap 291) of the British Virgin Islands as an international business company under its present name. South Wealth Finance was automatically re-registered as a business company limited by shares under the Business Companies Act of the British Virgin Islands on 1 January 2007. It is an investment holding company and commenced business in March 2003. As at the LPD, South Wealth Finance’s authorised share capital is USD50,000 divided into one class and one series of 50,000 shares of USD1 par value each, and its issued and paid-up share capital is USD1 comprising one share of USD1 par value. There is no change in South Wealth Finance’s issued and paid-up share capital for the past three years preceding the LPD. South Wealth Finance is a wholly-owned subsidiary of Chemical Brothers. Chemical Brothers is a wholly-owned subsidiary of LCT International Ltd. LCT International Ltd is a wholly-owned subsidiary of PT LCT Tbk. PT LCT Tbk is a 90.4%-owned subsidiary of LCT International SB which in turn is our wholly­owned subsidiary. As at the LPD, South Wealth Finance does not have any subsidiary or associate. (ii) PT LCT Nusantara (Company No. 09.03.1.20.09616) PT LCT Nusantara was incorporated in Indonesia under the Establishment Deed No. 68 made before Moendjiati Soegito, SH, Notary in Jakarta on 19 July 1990 amended by Deed No. 74 made before lVIoendjiati Soegito, SH, Notary in Jakarta on 10 August 1990 and approved by the Ministry of Law and Human Rights Decree No. C2-4808.HT.01.01-TH.90 dated 15 August 1990, on 15 August 1990 as a private limited company under the name of PT Petrokimia Nusantara Interindo. The company changed its name to PT Titan Petrokimia Nusantara on 7 April 2006 before assuming its present name on 18 March 2013. It is principally engaged in the polyethylene industry and wholesale trading (main distributor and importer) and commenced business in February 1993. As at the LPD, PT LCT Nusantara’s authorised share capital is USD515,000,000 comprising 515,000,000 ordinary shares of USD1 each and its issued and paid-up share capital is USD128,750,000 comprising 128,750,000 ordinary shares of USD1 each. There is no change in PT LCT Nusantara’s issued and paid-up share capital for the past three years preceding the LPD. 86
6. INFORMATION ON OUR GROUP (Cont’d) PT LCT Nusantara is a wholly-owned subsidiary of Chemical Brothers where 99.85% is held by Chemical Brothers while the balance 0.15% is held by South Wealth Finance, a wholly-owned sUbsidiary of Chemical Brothers. Chemical Brothers is a wholly-owned subsidiary of LCT International Ltd. LCT International Ltd is a wholly-owned subsidiary of PT LCT Tbk which is a 90.4%­owned subsidiary of LCT International SB which in turn is our wholly-owned subsidiary. As at the LPD, PT LCT Nusantara does not have any sUbsidiary or associate. 6.2.2 Our associates (i) LC USA (Company No. 61-1735683) LC USA was incorporated in the United States under the laws of the State of Delaware on 9 April 2014 as a private corporation under its present name. It is an investment holding company and commenced business in September 2015. As at the LPD, LC USA has 3,000 authorised shares of common stock of USDO.01 each and 300 issued shares of common stock of USDO.01 each. The changes in LC USA’s issued shares of common stock from the date of incorporation up to the LPD are as follows: No. of Date of issued shares of Cumulative issued allotment common stock Consideration share capital USD 10 April 2014 100 Cash 1.00 18 March 2016 20 Cash 1.20 21 April 2016 80 Cash 2.00 27 March 2017 100 Cash 3.00 LC USA is our associate. The shareholders of LC USA and their shareholdings in LC USA as at the LPD are as follows: No. of issued shares of Shareholder common stock % LCT 120 40.0 LCC 180 60.0 As at the LPD, LC USA has a direct subsidiary, LC Louisiana, and a joint operation, LACC. Details of LC Louisiana and LACC are set out in Sections 6.2.2.1 and 6.2.2.2 of this Prospectus, respectively. As at the LPD, LC USA does not have any associate. (ii) Lotte Ube (Company No. 974674-M) Lotte Ube was incorporated in Malaysia under the CA 1965 and deemed registered under the Act on 11 January 2012 as a private limited company under the name of Malaysian Synthetic Rubber. On 26 February 2014, the company assumed its present name. Lotte Ube is principally involved in manufacture and trading of synthetic rubber and commenced business in August 2015. 87
6. INFORMATION ON OUR GROUP (Cant’d) 6.2.2.1 The shareholders of Lotte Ube and their shareholdings in Lotte Ube as at the LPD are as follows:  Shareholder  No. of ordinary shares  %  LCT  18,405,000  10.0  LCC  73,620,000  40.0  USE Industries Ltd  73,620,000  40.0  Mitsubishi Corporation  18,405,000  10.0
As at the LPD, Lotte Ube does not have any subsidiary or associate. Subsidiary of LC USA LC Louisiana (Company No. 47-5345661) LC Louisiana was formed in the United States under the laws of the State of
Delaware on 15 October 2015 as a limited liability company under its present name. It has not commenced business pending completion of the construction and commercial production of the US MEG Plant. As at 26 May 2017, LC Louisiana’s total capital contribution is USD431 ,000,000. The changes in LC Louisiana’s total capital contribution from the date on which LC Louisiana was formed up to 26 May 2017 are as follows: Date of Cumulative contribution Contribution amount contribution amount USD USD Initial capital contribution 100.00 100.00 Contribution credit 16,277,292.34 16,277,392.34 5 January 2016 60,000,000.00 66,277,392.34 3 February 2016 13,000,000.00 79,277,392.34 24 March 2016 30,000,000.00 109,277,392.34 26 April 2016 10,000,000.00 119,277,392.34 25 May 2016 20,000,000.00 139,277,392.34 24 June 2016 20,000,000.00 159,277,392.34 26 July 2016 10,000,000.00 169,277,392.34 26 August 2016 22,000,000.00 191,277,392.34 26 September 2016 30,000,000.00 221,277,392.34 26 October 2016 24,722,607.66 256,000,000.00 26 November 2016 25,000,000.00 281,000,000.00 21 December 2016 10,000,000.00 291,000,000.00 25 January 2017 40,000,000.00 331,000,000.00 24 February 2017 20,000,000.00 351,000,000.00 6. INFORMATION ON OUR GROUP (Cont’d) 6.2.2.2 Date of contribution 27 March 2017  Contribution amount USD 30,000,000.00  Cumulative contribution amount USD 381,000,000.00  26 April 2017  35,000,000.00  416,000,000.00  26 May 2017  15,000,000.00  431,000,000.00
LC Louisiana is a wholly-owned subsidiary of LC USA which in turn is our 40%­owned associate. As at the LPD, LC Louisiana does not have any subsidiary or associate. Joint operation of LC USA LACC (Company No. 47-4404387) LACC was formed in the United States under the laws of the State of Delaware on 17 June 2015 as a limited liability company under its present name. It has not commenced business pending completion of the construction and commercial production of the US Ethane Cracker Plant. As at 26 May 2017, LACC’s total capital contribution is USD864,053,994.50. The changes in LACC’s total capital contribution from the date on which LACC was formed up to 26 May 2017 are as follows: Date of Cumulative contribution Contribution amount contribution amount USD USD Initial capital contribution 100.00 2 September 2015 2,710,000.00 2,710,100.00 23 September 2015 10,301,500.00 13,011,600.00 4 November 2015 3,992,288.00 17,003,888.00 3 December 2015 9,470,144.00 26,474,032.00 5 January 2016 122,498,009.50 148,972,041.50 2 February 2016 and 3 33,780,911.00 182,752,952.50 February 2016 29 February 2016 26,301,042.00 209,053,994.50 24 March 2016 35,000,000.00 244,053,994.50 26 April 2016 30,000,000.00 274,053,994.50 25 May 2016 30,000,000.00 304,053,994.50 24 June 2016 40,000,000.00 344,053,994.50 26 July 2016 30,000,000.00 374,053,994.50 26 August 2016 50,000,000.00 424,053,994.50 26 September 2016 40,000,000.00 464,053,994.50 26 October 2016 40,000,000.00 504,053,994.50 6. INFORMATION ON OUR GROUP (Cant’d) Date of Cumulative contribution Contribution amount contribution amount USD USD 22 November 2016 50,000,000.00 554,053,994.50 21 December 2016 40,000,000.00 594,053,994.50 25 January 2017 50,000,000.00 644,053,994.50 24 February 2017 50,000,000.00 694,053,994.50 27 March 2017 50,000,000.00 744,053,994.50 26 April 2017 60,000,000.00 804,053,994.50 26 May 2017 60,000,000.00 864,053,994.50 LACC is a joint operation of LC USA, our 40%-owned associate, in which LC USA owns 90.0% equity interest. The remaining 10.0% equity interest is owned by Eagle US 2 LLC. As at the LPD, LACC does not have any subsidiary or associate. Save for the following, our Group does not have any outstanding warrants, options, convertible securities or uncalled capital as at the date of this Prospectus: (i) the issuance of 165,871 RCNCPS at an issue price of RM1 0,000 for each RCNCPS by LCTM;
(ii) the issuance of 62,487 RCNCPS at an issue price of RM10,000 for each RCNCPS by LCT International SB; and

(iii) the issuance of 3,034 RPS at an issue price of USD10,000 for each RPS by LCT Capital. None of our Shares and the shares in our subsidiaries were issued and allotted at a discount or have any special terms. Our issued Shares and the issued shares in our subsidiaries are fully paid-up. As at the LPD, neither our Company nor our subsidiaries are involved in any bankruptcy, receivership or similar proceedings. 7. BUSINESS OF OUR GROUP 7.1 OVERVIEW We are an integrated petrochemical producer with two principal product categories, namely: (i) polyolefins, comprising polyethylene and polypropylene; and
(ii) olefins, comprising ethylene and propylene, and other derivatives such as butadiene, TBA, benzene and toluene.

Polyolefins are used to produce a variety of consumer and industrial products including packaging film, trash bags, automotive parts, plastic bottles and caps, compounds for wire and cable insulation, while olefins are used as primary feedstock for the production of polyolefin products. For the year ended 31 December 2016, polyolefin product sales accounted for 80% of our total revenue. In 2016, we represented 53% capacity share in polyethylene production and 100% capacity share in polypropylene production in Malaysia as well as a 57% capacity share in polyethylene production in Indonesia. We are the fourth largest producer of polyolefin products in Southeast Asia by production capacity in 2016, with a 42% capacity share in olefins production in Malaysia and 29% capacity share in polyolefin production in Indonesia. We own and operate 14 plants, and the products produced and nameplate production capacity for each of our plants as at the LPD in Malaysia and Indonesia are as follows: Year of commencement of Nameplate commercial production capacity Plant Product(s) operations as at the LPD (KTA) Plants in our Pasir Gudang site (Malaysia) NC1 Plant Ethylene, propylene 1994 430 NC2 Plant Ethylene, propylene 1999 649 BTX Plant Benzene, toluene 2000 155 BO Plant Butadiene 2007 100 OCU Plant Propylene 2008 115 TBA Plant TBA 2012 110 PP1 Plant Homopolymer/Copolymer 1991 166 PP2 Plant Homopolymer/Copolymer 1999 274 PE1 Plant HOPE 1993 220 Plants in our Tanjung Langsat site (Malaysia) PE2 Plant LOPE 1999 230 PE3 Plant HOPE 2000 115 Plants in our Merak site (Indonesia) PE1 Plant (Indonesia) HOPE 1993 125 PE2 Plant (Indonesia) HOPE 1993 125 PE3 Plant (Indonesia) LLOPE 1998 200 Note: (1) The OCU Plant is our olefins conversion unit which produces propylene through a reactor using ethylene and a particular form of C4 as feedstock. We commissioned our OCU Plant in 2007 but do not currently operate it due to high market prices of ethylene that do not justify the operation of the OCU Plant from a cost-efficiency perspective. Upon completion of the TE3 Project, we plan to re-commence operations for our OCU Plant, depending on market prices of ethylene and propylene then. 7. BUSINESS OF OUR GROUP (Cont’d) Our plants are supported by on-site facilities such as co-generation plants, tank farms and waste water treatment facilities across Malaysia and Indonesia. These on-site facilities lower our costs of production and reduce our dependency on external utility suppliers. We sell our products into both domestic and export markets. We have a diverse domestic customer base in Malaysia and Indonesia comprising principally plastic fabricators serving the packaging, household automotive and construction markets. Our sales and distribution network spans the four cities of Johor Bahru, Kuala Lumpur, Penang and Jakarta. We also export to a broad range of customers in about 60 countries including Southeast Asia, China, the ISC, South Korea and Europe. We are well-positioned to compete effectively in these key markets with our production competitive advantage and the existing free trade agreements within Southeast Asia and with China. In 2000, we established the PTC in 2000 to provide our customers with value-added services, including product development and improvement, technical and fabrication process training and the development of custom made products for our customers. Since its establishment and up to the LPD, the PTC has developed a total of 75 new product grades and provided technical and fabrication process training to more than 5,000 of our customers’ employees. Moving forward, we intend to continue expanding our product portfolio to meet the increasing domestic and global demand. As such, we have four on-going projects to equip us with the necessary infrastructure to meet such demands: • The TE3 Project which is expected to enhance our existing NC2 Plant by installing the K­COT to create a larger output of propylene and ethylene.
• The PP3 Project which involves the construction of a new polypropylene plant to create 200 KTA additional supply of polypropylene.
• The US Shale Gas Project which is a joint venture with LCC to construct and operate an ethane cracker plant and a MEG plant in the United States.
• The Integrated Petrochemical Facility which is part of our expansionary plan to develop our plant in Indonesia and increase our production of polyethylene.

Our financial performance has shown significant improvements since 2014. Through a series of productivity optimising measures, lower feedstock prices following the decline in crude oil prices coupled with increased average sales prices of our products, we registered strong growth in profits the recent years, with an increase of more than 100% in PATAMI from RM613.2 million in the year ended 31 December 2015 to RM1 ,315.4 million in the year ended 31 December 2016 although there was a slight decline in our revenue of 0.13% from RM8, 147.8 million in the year ended 31 December 2015 to RM8,136.6 million in the year ended 31 December 2016. 7.2 COMPETITIVE STRENGTHS Our competitive strengths are as follows: (i) Market leadership in attractive markets We have a 53% capacity share in polyethylene production and 100% capacity share in polypropylene production in Malaysia as well as a 57% capacity share in polyethylene production in Indonesia in 2016. With respect to polyolefin products, we are the fourth largest producer of polyolefin products in Southeast Asia by production capacity in 2016, with a 42% capacity share in olefins production in Malaysia and 29% capacity share in polyolefin production in Indonesia. In terms of derivative products, we are the sole producer of butadiene in Malaysia with a 100% capacity share in butadiene production. 7. BUSINESS OF OUR GROUP (Cont’d) While we sell our products to customers in Malaysia and Indonesia, we also focus on Southeast Asia, which is collectively the seventh largest economy in the world. Our favourable positioning in Southeast Asia is underpinned by our production facilities in Malaysia and Indonesia. As a result, we are strategically placed to serve the Southeast Asian market, a growing market with strong consumer demand and increasing infrastructure investment. Given the strong correlation between consumer and petrochemical demand, we expect demand for our products to increase in the future as the total consumption of polyolefins in Southeast Asia is forecasted to grow at a CAGR of 4.4% in the period between 2017 and 2027. Our presence in Southeast Asia also keeps us connected to other key Asian economies. Selling from Malaysia and Indonesia, we benefit from the CEPT Scheme in the ASEAN FTA for our sales within ASEAN. We also benefit from being part of the ASEAN-China FTA for our sales to China and from IVIICECA for our sales to India. We are well positioned within the Southeast Asian market where we share close proximity to our feedstock suppliers and our clients. We therefore have additional flexibility to vary our production volumes based on customer demands across these markets. In 1991, we became the first producer of polyolefin products in Malaysia and received Pioneer Status from MIOA in 1995. This gave us an early leadership position in the market in an industry characterised by high barriers to entry for domestic products. Our first-mover advantage in the polyolefins market in lVIalaysia facilitated our expansion of sales at an opportune time when consumption of polyolefin products in Malaysia began to increase on a yearly basis. Our brands, TITANEX®, TITANLENE®, TITANZEX®, TITANPRO®, TITANVENE®, are well established in our domestic markets over the past decade, underpinning our reputation in the region for producing products that are differentiated by performance, reliability, customisation and value. (ii) Long-standing relationship with diverse customer base Customer loyalty is an important aspect of our business. We have long-term relationships spanning more than 10 years with many of our regular customers whom we considered as our key customers, and no single customer accounted for more than 10% of our consolidated revenue in the last three financial years. We have maintained good customer retention rates by developing a customer-centric approach, some of the key elements of which are: • we produce a range of polymer grades, specifically 33 grades of HOPE, 13 grades of LOPE, nine grades of LLOPE and 28 grades of polypropylene, which allows us to customise our products to tailor to specific customer needs;
• our PTC provides our customers with product solutions and value-added services, including new product applications, development, and customer training sessions to drive innovation and product customisation for our key customers;
• we can extend trade credits, standby inventories and flexible trade terms to our customers to cater to their preferences; we closely monitor our credit to customers and recorded zero bad debt as at the LPO;
• we strive for stable, timely and dependable deliveries, all of which are valued by customers in our industry; and
• we have a region-wide marketing and sales force that provides coverage for our customers across many markets which is supported in China by agents of Lotte Chemical Trading Shanghai, a subsidiary of our controlling shareholder, LCC.

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7. BUSINESS OF OUR GROUP (Cont’d) Our leading role as a producer of polyolefin products in the domestic markets of Malaysia and Indonesia, together with our key customer bases there positions us to compete effectively with imported polyolefin products, which still account for a significant share in both of these markets. (iii) We benefit from integrated production facilities in lVIalaysia and overall operational know-how We capitalise on the scale of our integrated production facilities in Malaysia, apply operational excellence to achieve operational stability and optimal plant utilisation, and benefit from production efficiency initiatives designed to optimise our profitability in the long run. Flexibility and scale of production facilities In Malaysia, we benefit from integration within and across our sites, from the intake of feedstock to the manufacture of our products. This allows us to achieve efficient production streams and reduce logistics costs and product wastage in each step of our production chain. Our naphtha crackers produce a wide range of products, including ethylene, propylene, and a spectrum of by-products which we use in manufacturing butadiene, benzene, toluene and TBA. This balances our overall product portfolio by facilitating production flexibility to alter our product mix and production levels in response to market conditions, and diversifies our revenue base from the sale of derivative products. For example, in the last two years, we benefited from market price rises for butadiene due to increasing demand for synthetic rubber used in the production of automobile tyres. Our tank storage capacity of 155.1 KT of naphtha, which can hold up to three weeks’ worth of naphtha consumption and our price-risk management approach allows us to ensure an uninterrupted and stable supply of naphtha feedstock at competitive prices. Operational excellence and production efficiencies We have increased our plants’ nameplate capacities over their original nameplate capacity through debottlenecking and continuous efficiency enhancements. Our on­going works to improve the productivity and reliability of our plants include scheduled turnarounds, debottlenecking and equipment modifications. Through our productivity enhancement and operating efficiencies, we achieved a record high annual production volume of 2,703 KTA for the year ended 31 December 2016. Our total plant utilisation rate for our crackers improved from 95% for the year ended 31 December 2014 to 101% for the year ended 31 December 2015 and stabilised at 100% for the year ended 31 December 2016. In addition, we reduced our crackers’ energy consumption from 130.9kwh/ton for the year ended 31 December 2014 to 117.1 kwhlton for the year ended 31 December 2015 and stabilised it at 119.0 kwhlton for the year ended 31 December 2016, demonstrating improvements in our efficiencies in the production process. 7. BUSINESS OF OUR GROUP (Cant’d) (iv) Robust operating cash flow and balance sheet to support our future growth We are able to leverage on our strong and stable operating cash flow as well as earnings to support future growth in our business. Our robust operating cash flow, coupled with our low debt-to-equity ratio, supports our future growth. Our strong financials have allowed us to pursue attractive growth investments such as our on­going TE3 Project, PP3 Project and the US Shale Gas Project. For more information on these projects, please refer to Sections 4.7.1 and 7.6.8 of this Prospectus. Our proactive working capital and credit management efforts also resulted in stable average trade receivables turnover days of 32.3, 32.2 and 35.5 days for the years ended 31 December 2014, 2015 and 2016, respectively. We also incurred low maintenance capital expenditures of RIVI32 million, RM1 million and RM24 million for the years ended 2014, 2015 and 2016, respectively. Our net debt-to-equity ratios’ were 5%, 1\llN and N/N as at 31 December 2014,2015 and 2016, respectively. Our end of year cash and cash equivalents were R/VI184.0 million, RM1,511.0 million and RM1,040.3 million as at 31 December 2014, 2015 and 2016, respectively. Our strong balance sheet has provided us with sufficient cash flow to pursue growth investments and also pay dividends. (v) Strong and experienced management team We are led by an experienced management team comprising local and expatriate industry veterans with a strong understanding of the petrochemical industry within our domestic markets and Southeast Asia. Each member of our senior management team has long-standing experience in excess of 20 years in their respective fields. They lend experience across a broad range of business activities, including operations, product development, finance, sales and marketing. Our management team has demonstrated their ability to manage the company through multiple business cycles. They have a track record for delivering projects for plant improvements successfully. Our newly-appointed President and Chief Executive Officer, /VIr. Lee Dong Woo, has almost three decades of experience in the petrochemical industry. He began his career at LCC (previously known as Honam Petrochemical Corp.) in 1989 and last held the position of Director, Research and Development in LCC. Mr Lee also holds a Doctorate in Polymer Engineering from Chungnam National University, Korea. Mr Lee’s industry background, combined with the experience of the other members of our management team, will drive our focus on product innovation and value-added solutions and contribute to maintaining customer loyalty. (vi) Support from our controlling shareholder, LCC Since being acquired by LCC in 2010, our business has benefited from LCC’s wide­reaching presence in the petrochemical industry. Petrochemicals remain a core business for LCC and LCC operates a centralised petrochemical research facility in South Korea that oversees research and development projects. With the support from LCC for our on-going initiatives and expansion efforts, we are able to pursue further plans for growth and regional expansion in Southeast Asia. We also benefit from technical support provided by LCC in terms of production and operational efficiencies. LCC’s sharing of operational best practices has also contributed significantly to our improved production efficiencies and also improved our operational discipline. In addition, we benefit from the secondment of managers and industry experts from LCC, which encourages collaboration and facilitates the exchange of professional knowledge and market understanding. 1 Computed as total loans and borrowings less cash and bank balances (net debt) divided by total equity in the period. 2 Not applicable as our total cash and bank balances exceeds our total loans and borrowings in the period. 7. BUSINESS OF OUR GROUP (Cont’d) 7.3 STRATEGIES AND FUTURE PLANS (i) Pursue value-accretive organic growth through strategic new plant additions We expect our on-going initiatives to expand capacity and secure a stable, long-term relationship with a wide customer base to lead to higher margins and greater return potential. We also aim to capitalise on our infrastructure to further displace imports and capture a greater market share within the Malaysian, Indonesian and Southeast Asian markets. Our focus areas for investment currently include our TE3 Project, PP3 Project and Integrated Petrochemical Facility. These projects form part of our expansion plans to establish ourselves as a regional petrochemical hub in Southeast Asia and are slated for completion within the next five years. For more information on these projects including their estimated investment cost and the allocation of proceeds from our Public Issue which will be used for each project, please refer to Section 4.7.1 of this Prospectus. Apart from enhancing our production capacity, we expect the Integrated Petrochemical Facility, together with our existing plant in Merak, Cilegon, Banten Province, Indonesia, to strengthen our presence in the Indonesian market. We plan to further streamline our operations alongside the Integrated Petrochemical Facility, which includes constructing an additional polyethylene plant in Malaysia in tandem with our Indonesian project to utilise the excess supply of ethylene produced. We expect this to add to our long-term plans to expand our market share and vary our product portfolio. (ii) Pursue growth through selective merger and acquisition opportunities In addition to our focus to expand our core business, we intend to pursue opportunistic investments which could provide us attractive returns, such as in ventures involving the utilisation of cost competitive feedstock to further diversify our exposure or increase our presence in new markets. Attractive investments involving cost competitive feedstock In April 2016, through our investment in LC USA, we invested in a minority stake of a shale gas project in Lake Charles, Louisiana, United States. The highly cost­competitive ethane feedstock in the United States makes this an attractive investment opportunity for us. As set out in the IMR Report, the production cost of ethylene for shale gas cracker projects in the United States is typically lower than the production cost of ethylene in the Asian market in recent years. We expect the US Shale Gas Project to be EPS accretive to us beginning from the first half of 2019, when the shale gas cracker is scheduled to commence commercial production and subsequently, enhance our geographical reach and increase our profile beyond the Asian markets. We intend to pursue other investment opportunities similar to the US Shale Gas Project to enhance our profitability. Product diversification We have the expertise and know-how for a wide range of products and by-products. We may selectively pursue opportunities to further diversify our product portfolio, particularly in products further downstream that offer greater value-add. We are also considering opportunities in products with higher value-add, such as specialty products, to streamline our commoditised business and expand our portfolio of downstream and specialised chemicals products. 7. BUSINESS OF OUR GROUP (Cont’d) Market diversification We plan to explore opportunities to enter new markets in Southeast Asia to further strengthen our presence as a regional hub for petrochemical products. (iii) Continuous initiatives to improve operating efficiencies and increase cost savings As we develop our business, two of our key focus areas are improving productivity and increasing cost savings. We intend to continue increasing our production capacity and productivity through strategic enhancement initiatives and investing in new facilities. Productivity enhancements Through debottlenecking projects, efficiency enhancements and equipment modifications, we have improved the reliability, stability and output of our plants. We experienced a 91% reduction in emergency shutdown days between 2009 and 2016, and an increase in nameplate capacity of many of our production plants. For instance, we increased the nameplate capacity of our polypropylene plants in Malaysia by 12.8% following debottlenecking activities in 2016, and aim to continuously update and improve our plant performance and productivity. The cost of these debottlenecking activities has already been budgeted in as part of our capital expenditure. Cost savings We expect to benefit from greater economies of scale from our new projects which will result in increased capacity of our plants. Our new plants are expected to further amplify the impact of our optimisation efforts. We also plan to review our support and utilities facilities to further improve our energy efficiency and achieve even greater cost savings throughout 2017. These optimisation initiatives include the normalisation of our ethylene recovery unit to reduce the hydrocarbon loss amount in Indonesia and the replacement of steam turbines for major compressors in both crackers to reduce steam consumption in Malaysia. (iv) Continue to focus on talent development and management continuity programmes We are led by a highly experienced management team supported by our skilled workforce, and have been able to retain our talent through our commitment and focus on employee empowerment and regular engagement. Through our management team’s commitment and focus on employee empowerment and regular engagement, we have enjoyed a low attrition rate of 3.4% in Malaysia and 1.3% in Indonesia for the year ended 31 December 2016. One of our objectives is to ensure a pipeline of skilled labour and we aim to achieve this through our ground-up development initiatives. For example, we offer 12-month apprenticeship programmes to train skilled technicians, as well as tertiary or university scholarship programmes for students in relevant fields of studies, such as chemical engineering, who will then join us after graduation. We are also actively invested in management continuity, with a strong reserve of experienced team members coupled with a succession plan. We have worked closely with human resource consultants to implement programmes based on their findings that involve early identification of key positions, selective nomination of potential successors and a rigorous evaluation process. 97
7. BUSINESS OF OUR GROUP (Cant’d) (v) Continual commitment to corporate governance and EH&S initiatives We are committed to achieving and sustaining high standards of corporate governance and overall business sustainability which will contribute to our brand equity and loyalty. We strive to promote best practice corporate governance values, such as balanced rights and interests between stakeholders including shareholders, customers, employees, contractors, suppliers and the community, and the operation of an independent board of directors and transparent, responsible and ethical management by professional managers. We endeavour to follow the MCCG, and have set out the following responsibilities in our board charter to achieve a high standard of corporate governance: • to oversee and review the conduct and performance of our Company and the President and Chief Executive Officer against set goals and objectives to evaluate whether the business is properly managed;
• to identify principal risks and ensure the implementation of appropriate systems to manage these risks;
• to develop and implement an investor relations programme or shareholders’ communications policy; and
• to review and monitor the adequacy and integrity of internal control systems, risk management and management information systems including systems for the operation of the designated account into which the proceeds of our IPO earmarked for the Integrated Petrochemical Facility as set out in Section 4.7.1 (i) of this Prospectus are deposited pending full use and compliance with applicable laws, regulation, rules, directives and guidelines.

In our EH&S policies, we aim to maintain operational excellence through initiatives such as regUlar health and safety training programmes on process safety management and behavioural safety programmes. We aim to achieve and maintain our target of no major accidents. We are also focused on sustainability and promoting environmental awareness through our EH&S policies and initiatives. This includes the “1,000 plants for Indonesia”, a tree planting project where we collaborated with the Environment Agency of the City of Cilegon to plant 1,000 trees in celebration of Environment Day in 2015. 7.4 BACKGROUND Established in 1991, we were Malaysia’s first standalone producer of polyolefins. Today, we are Malaysia’s largest integrated producer of olefins and polyolefins. We are also the fourth largest polyolefins producer in the Southeast Asia in terms of production capacity, using predominantly naphtha as our production feedstock. Our sites are located in Malaysia and Indonesia and we currently own and operate 14 plants (including two crackers in Malaysia), which are supported by on-site facilities, including two co-generation plants, three tank farms and three waste water treatment facilities. Our sites in Malaysia are located in Pasir Gudang and Tanjung Langsat in the state of Johor, and our site in Indonesia is located Merak, Cilegon, Banten Province. We began our operations in Indonesia in 2006 when we acquired PT Petrokimia Nusantara Interindo (now PT LCT Nusantara), and we are currently Indonesia’s largest polyethylene producer, operating three plants with a combined nameplate capacity of 450 KTA. This acquisition boosted our overall polyethylene capacity by about 80%, from 565 KTA to 1,015 KTA, making us one of the largest producers of polyethylene in Southeast Asia. 7. BUSINESS OF OUR GROUP (Cant’d) Our key milestones The following table highlights our key milestones: 1991 1993 1994 1996 1999 2000 2004 2006 2008 2010 2012 2013 2015 2016 January 2017 March 2017 Commencement of commercial operations of our first polypropylene plant. Commencement of commercial operations of our first polyethylene plant. Commencement of commercial operations of first cracker. Debottlenecking of our PP1 Plant, increasing our polypropylene production capacity from 100 KTA to 130 KTA. Commencement of commercial operations of our second cracker, second polypropylene and polyethylene plants. Commencement of commercial operations of our BTX Plant and third polyethylene plant. Establishment of our PTC.
Debottlenecking of our NC2 Plant, increasing the cracker production capacity from 495 KTA to 649 KTA. Debottlenecking of our NC1 Plant, increasing our cracker production capacity from 345 KTA to 430 KTA. Acquisition of PT Petrokimia Nusantara Interindo (now PT LCT Nusantara). Commencement of commercial operations of our BD Plant and OCU Plant. Debottlenecking of our PP1 and PP2 Plants, increasing their production capacities from 130 KTA to 150 KTA and 200 KTA to 240 KTA, respectively.
Acquisition of controlling stake in our Company by LCC (formerly known as Honam Petrochemical Corp.). Entry into a joint venture with UBE, Mitsubishi and LCC to set up Lotte Ube for the production of synthetic rubber. Commencement of commercial operations of our TBA Plant. Commencement of construction of TE3 Project. Establishment of PT LC Indonesia for the development of an Indonesian cracker plant as part of the Integrated Petrochemical Facility. Investment in LC USA for the development of the US Shale Gas Project. Debottlenecking of our PP1 and PP2 Plants, increasing their production capacities from 150 KTA to 166 KTA and 240 KTA to 274 KTA, respectively.
Setting-up of the Principal Hub Company through our wholly-owned subsidiary, LCT Corporation as part of the tax incentive introduced under the 2015 Malaysian Budget.
Commencement of construction of the PP3 Plant as part of the PP3 Project.
7. BUSINESS OF OUR GROUP (Cont’d) 7.5 PRODUCTS We have two principal product categories, namely: • polyolefins, comprising polyethylene and polypropylene; and • olefins, comprising ethylene and propylene, and other derivatives comprising butadiene, TBA, benzene and toluene. Our strategy in managing our product mix is to focus on profitability and product mix cycle optimisation. As a product moves through its product mix cycle, we regularly review our product mix, retaining product grades that have a positive margin contribution and discontinuing low margin and low volume products. We also plan our production schedule in order to optimise the product mix cycle to reduce the volume of transition grades, which are those products that do not meet a specific product specification. A product mix cycle varies between 30 to 45 days, and we typically plan ahead of that cycle to determine whether a change in our product mix is needed based on customer demand and market pricing. There is no downtime or interruption to our production process during the process of changing our product mix. We ensure production efficiency by maximising our inventories to sustain our monthly sales volumes. 7.5.1 Polyolefin We have eight plants that produce a broad range of polyolefin products, with combined nameplate capacities of 1,015 KTA of polyethylene and 440 KTA of polypropylene as at the LPO. (i) Polyethylene Polyethylene is the most widely-consumed thermoplastic in the world by volume. We produce three types of polyethylene, namely HOPE, LOPE and LLOPE where:
(a) HOPE products are characterised by greater toughness and superior mechanical strength, coupled with higher service temperature limits.
(b) LOPE products are easy to process and have good strength and clarity.
(c) LLOPE products offer improved strength, chemical resistance and a higher melting point than LOPE, making them suitable for high strength film applications.

We offer our customers 55 grades of polyethylene across all three categories. (ii) Polypropylene Our polypropylene plants are configured to manufacture polypropylene homopolymer as well as polypropylene random copolymer and impact copolymer. We offer 28 grades of polypropylene comprising 12 grades of polypropylene homopolymer and 16 grades of polypropylene random and impact copolymer. As at the LPO, we are the sole producer of polypropylene in Malaysia. Polypropylene is a versatile polyolefin that is light-weight with high optical clarity, low moisture vapour transmission and the ability to be drawn and oriented into fibres. 7. BUSINESS OF OUR GROUP (Cont’d) The following table sets out our main polyolefin products and their primary uses: Product Primary Uses HDPE HDPE is used to manufacture grocery, merchandise and trash bags, food containers for items such as frozen desserts and margarine, bottle caps and closures, liners for cereal and cracker boxes, plastic drink cups, dairy crates, bread trays, pails, safety equipment such as hard hats, house wrap for insulation, bottles for household and industrial chemicals, milk bottles, juice bottles, and large tanks for storing liquids such as agricultural and lawn care chemicals. LDPE LDPE is used to manufacture food packaging films, plastic bottles for packaging food and personal care items, dry cleaning bags, ice bags, pallet shrink wrap, heavy-duty bags for mulch and potting soil, bOil-in-bag bags, coatings on flexible packaging products, and coatings on paper board such as milk cartons. LLDPE LLDPE is used to manufacture garbage and lawn-leaf bags, industrial can liners, housewares, lids for coffee cans and margarine tubs, dishpans, home plastic storage containers, kitchen trash containers, large toys such as outdoor gym sets, drip irrigation tubing, protective coating for telephone wires and film, shrink wrap for multi-packaging canned food, bag-in­box bags, produce bags and pallet stretch wrap. Polypropylene Polypropylene is used to manufacture fibres for carpets, rugs and upholstery, housewares, automotive battery cases, running boards and bumpers, grid-type flooring for sports facilities, fishing tackle boxes, bottle caps and closures, metalised film for food packaging, high clarity thin walled containers and hot filled containers. 7.5.2 OIefins and derivatives Our olefin products consist of ethylene and propylene, and derivatives such as butadiene, TBA, benzene, toluene and by-products from which some of our derivative products are extracted. The following table sets out our main olefin and derivative products and their primary uses: Product Primary Uses Olefins  Ethylene  Propylene  Derivatives  Butadiene
Ethylene is used as a raw material to manufacture polyethylene, ethylene oxide, ethanol, ethylene dichloride, ethyl benzene and PVC. Propylene is used to produce polypropylene, acrylonitrile and propylene oxide, and used in the production of polyurethane plastics. Butadiene is used to produce synthetic rubber. Styrene-butadiene rubber is the material most commonly used for the production of automobile tyres. Butadiene is mixed with styrene or acrylonitrile to create polymers that are tough and elastic.
7. BUSINESS OF OUR GROUP (Cont’d) Product Primary Uses TBA TBA is used as a solvent, a denaturant for ethanol, an ingredient in paint removers and an octane booster for gasoline. Benzene Benzene is used to produce styrene, phenol and cyciohexane, which are used in the production of nylon, plastics, rubber and polystyrene. Polystyrene is used in insulation, packaging and drink cups. Toluene Toluene is used as an octane enhancer in gasoline, a chemical feedstock for benzene and/or paraxylene production, a core ingredient in toluene diisocyanate and a solvent in paints and chemicals. When we produce ethylene and propylene, we also produce pygas and mixed C4 as by-products, which we consume internally in the production of our other derivative products such as butadiene, TBA, benzene and toluene. Of the ethylene we produced in the years ended 31 December 2014,2015 and 2016, we consumed about 99% for our polyethylene plants in Malaysia and Indonesia and sold the excess to customers. We typically use all of our propylene output for the production of our polypropylene products. In the years ended 31 December 2014, 2015 and 2016, we purchased a small amount of propylene totalling to about 30 KTA in aggregate to supplement our polypropylene production. 7.5.3 Product certification and regulatory compliances Our products have the following certifications and/or meet the following major regulatory requirements: • Underwriters Laboratories (“UL”) Recognition: UL Recognition is a certification provided by the non-profit testing institution Underwriters Laboratories in the United States, which evaluates and certifies the safety of plastic parts. Some of our products are listed by UL. Representative samples of these products have been evaluated by UL and meet applicable safety standards.
• EU Food Contact Compliance: Regulation (“EU”) No. 10/2011 regulates the material and articles which are intended to come into contact with food. All monomers and additives that are used for our products are listed in the Union List of Authorised Substances.
• The Food and Drug Administration of the U.S. Department of Health and Human Services: Our products comply with Code of Federal Regulations (“CFR”) Title 21, Part 177.1520 pertaining to substances for use as basic components of single and repeated use food contact surfaces pertaining to olefin polymers.
• Registration, Evaluation, Authorisation and Restriction of Chemicals (“REACH”) Regulation (EC) 1907/2006: Polymers are generally exempt from registration provisions. Our products do not contain any of the proposed hazardous and restricted substances above the limit for this standard.

7. BUSINESS OF OUR GROUP (Cant’d) • Japan Hygienic Olefin and Styrene Plastics Association (“JHOSPA”) certification: Our products exported and marketed in Japan are registered and certified under JHOSPA in order to meet the standard and compliance requirements in Japan on use of raw materials in the manufacturing of food utensils, containers and packaging materials. As LCTM was not a member of JHOSPA in the past, certification of LCTM’s products was registered under name of our customers and agents operating in Japan. In March 2017, we registered LCTM as a member of JHOSPA and are in the process of transferring all JHOSPA certification held under the name of our customers and agents to LCTM. 7.6 PRODUCTION 7.6.1 Production facilities We currently own and operate a total of 14 plants, including our two crackers, across three sites in Malaysia and Indonesia, which are supported by on-site facilities such as co-generation plants, tank farms and waste water treatment facilities. On-site support facilities lower our production costs and reduce our dependency on external utility suppliers. In relation to our leased sites, we are reqUired to dismantle and remove our manufacturing facilities to restore the land to its original condition at the end of our lease. (i) Malaysia Our sites in Malaysia have 11 plants with a total nameplate capacity of 2,564 KTA as at the LPD. These plants are located on our two integrated sites at Pasir GUdang and Tanjung Langsat in the state of Johor, which are 12 kilometres apart and connected by our dedicated underground pipelines. We operate an integrated production system, which allows us to maximise the yields of our feedstock and operate efficiently. This lowers our cost of production per unit. Our Pasir GUdang site, which measures about 122 acres (or approximately 49.37 hectares), is owned by us and is held under four individual 60-year leasehold titles. Our two naphtha and tank farm sites are located beside our Pasir Gudang Site under 36-year leases, which expire in 2052 and are leased from the Johor Port Authority. Another tank farm is located on a 20 acre (or approximately 8.09 hectares) site leased from TNB under a 30-year lease expiring in 2028. Our 100 acre (or approximately 40.47 hectares) Tanjung Langsat site is leased from the State Authority under a 60 year lease which expires in 2061. It currently has 30 acres (or approximately 12.14 hectares) of unutilised land available for future development. Part of our Tanjung Langsat site has been leased to one of our associates, Lotte Ube, where it currently operates a polybutadiene plant. Our Pasir Gudang site will be fully utilised once our PP3 Project commences commercial operations in the second half of 2018. Our production facilities are close to Johor Port and the Port of Tanjung Pelepas, providing access to Asia’s main shipping lanes and are also served by the highways of Malaysia’s national road network.
7. BUSINESS OF OUR GROUP (Cont’d) The plan below sets out the current layout of our sites in Pasir Gudang and Tanjung Langsat in Malaysia: MAP OF PASIR GUDANG AND TANJUNG LANGSAT SITES
(ii) Indonesia Our Indonesian site is located in Merak, Cilegon, Banten Province, Indonesia and supports three plants with a combined capacity of 450 KTA of polyethylene depending on production mix. The site is 316.75 acres (or approximately 128.18 hectares) comprising of: (i) 77.85 acres (or approximately 31.50 hectares) utilised for existing PE plants; (ii) 8.88 acres (or approximately 3.59 hectares) for parking area and access routes purposes, (iii) 6.23 acres (or approximately 2.52 hectares) for residential house for staff and (iv) 223.79 acres (or approximately 90.56 hectares) of unutilised land for future development. 7. BUSINESS OF OUR GROUP (Cant’d) Our Indonesian site is served by an offshore berth with jetty access. The plan below sets out the current layout of our site in Merak, Cilegon, Banten Province, Indonesia:
We obtain about 80% of our naphtha feedstock from suppliers located in the Middle East. However, volume incentives from our suppliers are limited due to the sufficiency of market demand for naphtha. Nevertheless, we benefit from lower delivery costs attributable to our close proximity to the Middle East, compared to naphtha consumers in North Asia who receive feedstock through North Asian ports. Our crackers were designed to crack naphtha and a blend of naphtha and LPG, although historically we have used naphtha as feedstock. Different feedstock grades and blend alternatives, including different grades of naphtha, produce varying ethylene, propylene and by-products yields. We use a specialised software, SPYRO (developed by Technip) to determine the optimum output of ethylene and propylene that can be extracted based on the type and quality of naphtha received from suppliers. We purchase our feedstock based on our evaluation of feedstock price and quality that would optimise our product yield in terms of profit margins and volume. We purchase from a range of naphtha suppliers depending on the availability, quality and feedstock prices offered by each supplier. In addition, we periodically evaluate other feedstock alternatives and their potential economic viability within the designed processing capability to determine whether they are economically viable. 7. BUSINESS OF OUR GROUP (Cant’d) 7.6.2 Operational flexibility All our plants operate on a continuous basis, unless anyone of them is shut down for planned maintenance work or otherwise due to unscheduled interruptions. We have two interconnected crackers, which optimises the sharing of infrastructure while allowing each cracker to operate independently. This allows energy and feedstock optimisation to lower operating costs, and reduces the potential impact on polyolefin production in the event of scheduled or emergency shutdown of either cracker. This also gives us flexibility during turnarounds. When one cracker is shut down due to a turnaround, we are able to continue our operations through the other cracker. Both crackers are controlled from one central control room, which also oversees the operation of our derivative plants, co-generation plants and one of our polyethylene plants. Our polyolefin plants are also configured to provide flexibility and cost efficiency. One of these plants is a swing plant that allows us to switch between production of LLOPE and HOPE based on market demand. We do not incur significant additional costs from the operation of a swing plant. In addition, our dedicated LOPE and HOPE lines allow focused production of these two polyethylene products which have the largest volume, allowing longer product runs and reducing the volume of transition grades. 7.6.3 Integration One of the operational advantages of our Malaysian site is the integration of our production processes. Our crackers and polyolefin plants are integrated in several important ways. Utilities on our sites are optimised and controlled from the central control room including electricity supply from both the co-generation plants, TI\IB’s power grid, steam supply from the co-generation heat recovery steam generators and seven boilers on site, as well as water, nitrogen and natural gas distribution, which allows us to optimise our energy costs. We also recover off-gas streams, a by-product of our polyolefin plants which we route back to our crackers for clean-up and recycling as additional feedstock. This recovery increases the overall yield of our polyolefin plants and reduces the amount of product wastage. This gives us a cost advantage compared to facilities that do not have a cracker and have to install separate purification equipment. Integration also reduces our logistics and storage costs, giving us greater ability to schedule maintenance turnarounds according to market conditions. The captive power and steam supply enhances reliability and in turn, plant utilisation. 7. BUSINESS OF OUR GROUP (Cant’d) The chart below sets out an overview of the integrated operations between our crackers, plants, and co-generation plants: GR….Cl’lbHloi

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HDPEPIAIH(: f””lil:l”~~( LLDPE pl;;{,

The OCU Plant is our olefins conversion unit which produces propylene through a reactor using ethylene and a particular form of C4 as feedstock. We commissioned our OCU Plant in 2007 but do not currently operate it due to high market prices of ethylene that do not justify the operation of the OCU Plant from a cost-efficiency perspective. Upon completion of the TE3 Project, we plan to re-commence operations for our OCU Plant, depending on market prices of ethylene and propylene then. The OCU Plant was last operational in December 2012 and our cost of investment was USD57.6 million (or equivalent to RM248.3 million) which was incurred from 2005 to 2008. 7.6.4 Product mix cycle optimisation We manage our product mix to maximise economic returns, and are often able to switch between products depending on market conditions because of the integrated and flexible nature of our plant configuration. We perform a site-wide optimisation exercise every week, which includes a review of our facilities’ results against the previous week’s and the preparation of a forecast for the following week, including on feedstock and product pricing. Using this model, our business teams plan production schedules for the following weeks and make appropriate plant adjustments. 107
~pany No.: 222357-P I 7. BUSINESS OF OUR GROUP (Cont’d) 7.6.5 Plant performance We regularly monitor our plants’ performance by tracking a number of performance indicators commonly used in the petrochemical industry. (i) Nameplate production capacity and technology The following table sets out the products produced and nameplate production capacity for each of our plants as at the LPD in Malaysia: Plant  Product(s)  Year of commencement of commercial operations  Technology  Licensorl Technology provider  Nameplate production capacity as at the LPD (KTA)  NC1 Plant  Ethylene, propylene  1994  Stone & Webster Ultra Selective Cracking, Stone & Webster Advanced Recovery System, Stone & Webster Engineering Corporation Ethylene process, Nippon Petrochemicals Co Ltd Spent Caustic Treating Technology, Institut Francais du Petrole Hydrogenation C3. C4 and pyrolysis gasoline hydrogenation process  JGC Corporation! Technip Stone & Webster  430  NC2 Plant  Ethylene, propylene  1999  Stone & Webster Ultra Selective Cracking, Stone & Webster Advanced Recovery System, Stone & Webster Engineering Corporation Ethylene process, Nippon Petrochemicals Co Ltd Spent Caustic Treating Technology, Institut Francais du Petrole Hydrogenation C3, C4 and pyrolysis gasoline hydrogenation process  JGC Corporation! Technip Stone & Webster  649  BTX Plant  Benzene, toluene  2000  Extraction and hydrogenation process  Thyssen Krupp Uhde  155  BO Plant  Butadiene  2007  BASF  ABB Lummus  100  OCU Plant  Propylene  2008  Olefins conversion process  ABB Lummus  115  TBA Plant  TBA  2012  LCC TBA Process  LCC  110  PP1 Plant  Polypropylene (Homopolymer! Copolymer)  1991  Spheripol process  LyondeliBasel1  166
108

I Company No.: 222357-P I 7. BUSINESS OF OUR GROUP (Cont’d) Plant PP2 Plant  Product(s) Polypropylene (Homopolymer! Copolymer)  Year of commencement of commercial operations 1999  Technology Spheripol process  Licensor! Technology provider LyondellBasell  Nameplate production capacity as at the LPD (KTA) 274  PE1 Plant  HOPE  1993  UNIPOL Gas Phase Polyethylene process and EXXPOL metallocene process  Univation Technologies  220  PE2 Plant  LOPE  1999  High Pressure Tubular polyethylene process  Exxon Mobil  230  PE3 Plant  HOPE  2000  Mitsui CX-process  Mitsui  115
The following table sets out the products produced and nameplate production capacity as at LPD for each of our plants in Indonesia: Year of Nameplate commencement of production commercial Licensor! Technology capacity as at the Plant Product(s) operations Technology provider LPD (KTA) PE1 Plant (Indonesia) HOPE 1993 INEOS Europe Limited 125Innovene ™ G PE2 Plant (Indonesia) HOPE 1993 INEOS Europe Limited 125Innovene ™ G PE3 Plant (Indonesia) LLDPE 1998 INEOS Europe Limited 200Innovene ™ G 109

7. BUSINESS OF OUR GROUP (Cont’d) (ii) Plant utilisation The following table sets out our plant utilisation by plant for the periods indicated. Plant utilisation is calculated by dividing production volume during the particular year by the average nameplate capacity during the particular year. It can be affected by the number of lost days of production as a result of emergency plant shutdowns due to factors such as disruptions in power supply or mechanical breakdowns, and scheduled maintenance. We achieve plant utilisation rates exceeding 100% when our plant performs optimally and maintenance shutdowns are shorter than planned. Three months ended 31 For the year ended 31 December March
Plant 2014 2015 2016 2017 Malaysia Crackers: NC’I Plant 95% 102% 101% 94% NC2 Plant 94% 100% 99% 38% Average plant utilisation rate(2): 95% 101% 100% 60%
Olefins and derivatives: STX Plant 77% 90% 89% 26% SO Plant 75% 87% 86% 41% OCU Plant 0%(1) 0%(1) 0%(1) 0% TBA Plant 64% 75% 73% 31% Average plant utilisation rate(2): 55% 64% 63% 24%
Polyolefins: PP1 Plant 88% 98% 103% 57% PP2 Plant 97% 108% 107% 69% PE1 Plant 91% 105% 103% 44% PE2 Plant 100% 103% 99% 73% PE3 Plant 101% 101% 97% 74% Average plant utilisation rate(2l: 95% 103% 102% 63%
Average plant utilisation rate (Malaysia)(2) 87% 95% 94% 55%
Indonesia Polyolefins: PE1 Plant (Indonesia) 86% 77% 79% 79% PE2 Plant (Indonesia) 95% 75% 86% 113% PE3 Plant (Indonesia) 68% 64% 69% 62% Average plant utilisation rate(2): 80% 71% 76% 81%
Average plant utilisation rate(2l: Crackers 95% 101% 100% 60% Olefins and derivatives 55% 64% 63% 24% Polyolefins 91% 93% 94% 70% Overall 86% 91% 91% 58%
Notes:
(1) The OCU Plant is our olefins conversion unit which produces propylene through a reactor using ethylene and a particular form of C4 as feedstock. We commissioned our OCU Plant in 2007 but do not currently operate it due to high market prices of ethylene that do not justify the operation of the OCU Plant from a cost-efficiency perspective. Upon completion of the TE3 Project, we plan to re-commence operations for our OCU Plant, depending on market prices of ethylene and propylene then. 110 7. BUSINESS OF OUR GROUP (Cant’d)
(2) Average plant utilisation is calculated by dividing the aggregate production volume of the relevant plants during the particular year by the average nameplate capacity during the particular year of the relevant plants, further details as set out below: Three months ended 31 For the year ended 31 December March Plant 2014 2015 2016 2017 (MT, except percentages) Malaysia  Crackers: Aggregate production volume Aggregate nameplate capacity Average plant utilisation rate  1,022,370 1,079,000 95%  1,086,901 1,079,000 101%  1,077,287 1,079,000 100%  159,963 266,055 60%  Olefins and derivatives: Aggregate production volume Aggregate nameplate capacity Average plant utilisation rate  264,620 480,000 55%  307,528 480,000 64%  304,137 480,000 63%  28,399 118,356 24%  Polyolefins: Aggregate production volume Aggregate nameplate capacity Average plant utilisation rate  910,338 955,000 95%  757,514 735,000 103%  751,080 735,000 102%  156,219 247,809 63%  Crackers, olefins and derivatives and polyolefins: Aggregate production volume Aggregate nameplate capacity Average plant utilisation rate  2,197,328 2,514,000 87%  2,151,943 2,294,000 95%  2,132,504 2,294,000 94%  344,582 632,220 55%  Indonesia  Polyolefins: Aggregate production volume Aggregate nameplate capacity Average plant utilisation rate  361,508 450,000 80%  317,830 450,000 71%  344,249 450,000 76%  89,469 110,959 81%
Overall: Aggregate production volume 2,558,836 2,700,629 2,702,675 434,049 Aggregate nameplate capacity 2,964,000 2,964,000 2,964,000 743,178 Average plant utilisation rate 86% 91% 91% 58% Our olefins and derivatives plants’ lower plant utilisation in 2014 was due to a power outage in October 2014, resulting in 38.3 days of emergency shutdown out of a total of 71 days of emergency shutdown in that year. For further details regarding this incident, please refer to Section 7.12 of this Prospectus. Our Indonesian plants’ lower plant utilisation in 2015 was due to constraints in the supply of ethylene in Indonesia, further details as set out in Section 12.2.5 of this Prospectus. 7. BUSINESS OF OUR GROUP (Cont’d) The table below sets out a breakdown of scheduled and emergency shutdowns for all of our plants for the years indicated: Three months For the year ended 31 December ended 31 March Scheduled  Emergency  Scheduled (Days)  Emergency (Days)  (Days)  (Days)  Plant  2014  2015  2016  2014  2015  2016  2017
Malaysia NC1 Plant 4.2 NC2 Plant 8.8 0.3 53.8 0.0 BTX Plant 15.9 14.6 30.1 6.0 0.3 0.1 65.7 BD Plant 23.8 0.1 5.1 37.2 OCU Plant TBA Plant 19.4 0.8 52.0 PE1 Plant 19.6 0.3 0.4 9.5 1.3 36.1 0.9 PE2 Plant 8.9 9.0 14.1 9.0 2.7 1.8 25.6 0.6 PE3 Plant 9.1 15.9 7.3 7.5 2.5 1.3 18.7 0.2 PP1 Plant 2.4 9.7 4.1 12.8 0.2 1.1 22.9 0.5 PP2 Plant 14.5 4.6 7.0 1.4 6.6 12.1 0.7 Sub-Total 113.8 49.9 60.7 ~ 8.6 ~ 323.5 2.9 Indonesia PE1 Plant (Indonesia) 16.7 60.5 14.7 17.6 3.8 4 11.7 PE2 Plant (Indonesia) 19.7 81.5 10.3 4 PE3 Plant (Indonesia) 13.1 26.9 18.5 6.6 15.9 11.5 6.9 18.0 Sub-Total 49.5 169.1 43.5 24.2 23.7 15.5 18.6 18.0 163.3 219 104.3 95.3 32.3 26.8 342.07 20.90Grand Total To prevent the power outages which we had experienced in 2014, we introduced technical and operational improvements, including upgrading our transformer, improving the “load-shedding” capabilities at our plants to allow for automatic shutdowns of our plants if a failure recurs, allowing our crackers to stay operational, and coordinating line switching procedures with TNB, our external power supplier. “Load-shedding” occurs when a plant is shut down in order to preserve sufficient electricity for the operation of our cracker plants. The overall number of emergency shutdown days of our plants decreased from 71 days in 2014 to 8.6 days and 11 days in 2015 and 2016, respectively. 7.6.6 Maintenance We periodically shut down our plants as part of scheduled maintenances. Sometimes we shut down our plants because of unscheduled occurrences such as power outages. We conduct turnarounds, which are scheduled maintenance involving a complete shutdown and comprehensive maintenance checks, at three to six-year intervals depending on business conditions and our plant operating status. We also implement debottlenecking works during turnarounds to increase plant capacity through simple equipment modifications to remove operational constraints known as bottlenecks. We typically conduct turnarounds across all our plants on staggered basis to minimise interruptions to our business operations. Historically, each plant turnaround lasts about 15 to 20 days. Our crackers are designed to operate continuously for at least six years between turnarounds, with each cracker turnaround lasting about 30 days. During these turnarounds, we purchase a portion of our feedstock and olefin products from external suppliers to restrict the impact on our polyolefin productions. 112 7. BUSINESS OF OUR GROUP (Cont’d)
We also carry out repair and maintenance works that do not require us to shut down our plants, for example replacing equipment parts such as pumps. We conduct minor planned maintenance every quarter for our polyolefin plants and each maintenance shutdown lasts between three to four days. We recently completed a turnaround for our NC2 Plant in March 2017 and are scheduled to perform a turnaround for our NC1 Plant in July 2017. We estimate that the total costs for the turnarounds of our NC1 and NC2 Plants will be between about RM70 million to RM80 million. We enhanced our maintenance planning capability by utilising a structured planning programme that allows for the scheduling of predetermined equipment-specific maintenance and conditions monitoring. Our preventive maintenance programme keeps our maintenance costs at reasonable levels. Accordingly, our incurred maintenance costs represented about 16.9%,22.8% and 24.6%, respectively, of total plant fixed manufacturing costs for the years ended in 31 December 2014,2015 and 2016. In addition, we installed on-line real time condition monitoring for all of our critical service equipment, including our key rotating equipment such as gas turbines, steam turbines and compressors. This helps ensure that appropriate measures are being taken to optimise the long-term reliability of key rotating equipment. We maintain an inspection programme for our equipment which includes external thickness readings of plant piping and corrosion rates monitoring on an equipment-by-equipment basis. We have in place a risk-based inspection process approved by the MDOSH which extends the intervals between maintenance turnarounds and reduces the scope, duration and cost of maintenance. 7.6.7 Capacity improvements As a result of debottlenecking implemented during turnarounds, the current nameplate capacity of our plants has increased significantly over their original nameplate capacities. The following table sets out the original nameplate capacity and nameplate capacity as at the LPD for some of our plants. We determined the improved nameplate capacity of our plants through an internal analysis of our production data. Year of commencement Original Nameplate of commercial nameplate capacity as Plant operations capacity at the LPD % Increase (KTA) (KTA) (%) Malaysia NC1 Plant 1994 345 430 24.6 NC2 Plant 1999 495 649 31.1 BTX Plant 2000 128 155 21.1 PP1 Plant 1991 100 166 66 PP2 Plant 1999 200 274 37 PE1 Plant 1993 200 220 10 PE2 Plant 1999 200 230 15 PE3 Plant 2000 100 115 15 Indonesia PE1 Plant (Indonesia) 1993 100 125 25 PE2 Plant (Indonesia) 1993 100 125 25 7. BUSINESS OF OUR GROUP (Cont’d) 7.6.8 Proposed improvements and modifications projects and other capital expenditure As part of our long-term plan for growth to meet increasing domestic and global demand for our products, we have four on-going projects as at the LPD which we expect to fund using funds generated from our operations, financing activities and the net proceeds to us from our IPO. • TE3 Project We commenced our TE3 Project in 2015. Our TE3 Project involves the construction of facilities attached to our existing NC2 Plant. For further details on the TE3 Project, please refer to Section 4.7.1 (ii) of this Prospectus. • PP3 Project We commenced our PP3 Project in March 2017 which involves the construction of a new polypropylene plant in Pasir Gudang, Johor. For further details on the PP3 Project, please refer to Section 4.7.1 (iii) of this Prospectus. • US Shale Gas Project The US Shale Gas Project, comprising of (i) the US Ethane Cracker Plant and (ii) the US MEG Plant, is being undertaken by LC USA, a joint venture between us and LCC, through two sUbsidiary project companies, LACC and LC Louisiana. We injected USD168.0 million (equivalent to RM724.2 million) into LC USA in March 2017, bringing our total investment in LC USA to USD511.0 million (equivalent to RM2,202.7 million) and LCC has invested USD766.0 million (equivalent to RM3,301.8 million) into LC USA. As at the LPD, there are no outstanding capital contributions required from us or LCC. 7. BUSINESS OF OUR GROUP (Cont’d) The details of the summarised below: LCT

Total investment in LC USA uptothe LPD ­USD511.0 million (equivalent to RM2,202.7 million)
40%
US Shale 1 LCUSA Gas Project and the parties involved are LCC
Total investment in LC USA uptothe LPD­USD766.0 million (equivalent to RM3,301.8 million)
60% I
Responsible for undertaking the US Shale Gas Project, comprising the US MEG Plant and US Ethane Cracker Plant
I 100% 1
LC Louisiana
Responsible for the development of the US MEG Plant located in Lake Charles, Louisiana to produce MEG and derivatives where the total project cost is USD1,106.0 million (equivalent to RM4,767.4 million) Summary of project information Mechanical  completion  expected  in  the  second half of 2018  Commercial  operation  is  expected  to
commence in the second half of 2019 Expected production capacity of 700 KTA of MEG and derivatives each year Note: I Ooinloperation) 90% LACC Responsible for the development of the US Ethane Cracker Plant located in Lake Charles, Louisiana to crack shale gas-based ethane for the production of ethylene where the total project cost is USD1.877.0 million (equivalent to RM8,090.8 million), to be financed by LC USA (USD1,652 million I equivalent to RM7,120.9 million), and Eagle US 2 LLC (USD225.0 million I equivalent to RM969.9 million) Summary of project information Mechanical  completion  expected  in  the  second half of 2018  Commercial  operation  is  expected  to
commence in the second half of 2019 Expected production capacity of 1,000 KTA of ethylene each year ‘—-_._­
I Axiall Corporation 100% Eagle US 2 LLC 10%(i) ~__–.J I
(i) If Eagle US 2 LLC decides to fund its maximum commitment amount, its stake will increase to 12%. Eagle US 2 LLC also has a call option, exercisable for a period of up to three years from mechanical completion of the US Ethane Cracker Plant, to increase its stake in LACC to 50%. 7. BUSINESS OF OUR GROUP (Cont’d) The sources of funds for LC USA’s contributions towards for the US Shale Gas Project of USD2,758.0  million  (equivalent  to  RIVI11,888.4  million)  are  as  follows:  Description of source  Amount
(USD million) (RM million) (i) Syndicated term loan facility dated 31 1,594.0 6,870.9 October 2016
(ii) Shareholders’ funds contributed by both LCC 1,164.0(1) 5,017.4(1) and us in proportion to shareholding in LC USA

Total 2,758.0 11,888.4 Note:
(1) LC USA’s shareholders’ funds remaining after funding the US Shale Gas Project is USD113.0 million (equivalent to RM487.1 million) • Integrated Petrochemical Facility We plan to set up an integrated petrochemical facility in Merak, Cilegon, Santen Province, Indonesia as part of our initiative to expand our existing facilities there. For further details on the Integrated Petrochemical Facility, please refer to Section 4.7.1 (i) of this Prospectus. 7.6.9 Feedstock and other raw materials Our olefin plants use naphtha feedstock, while our polyolefin plants in Malaysia use ethylene and propylene as feedstock, and our polyethylene plants in Indonesia use ethylene as feedstock. The following table sets out certain information on our feedstock usage for all our plants for the years indicated: For the year ended 31 December 2014  2015  2016  Internal  External  Internal  External  Internal  External  Product  Usage  Supply  Supply  Usage  Supply  Supply  Usage  Supply  Supply  (KT)  (KT)  (KT)  Naphtha  1,910.3  1,935.9  2,028.5  2,011.5  2,020.6  2,026.4  Propylene  375.2  374.3  7.8  410.6  398.1  6.7  416.4  389.7  26.5  Ethylene  938.1  648.0  287.3  930.6  688.8  245.5  943.2  687.6  257.8  We  source  naphtha  for  our  olefins  plants  primarily  through  fixed  term  supply
agreements and, if required, through spot market purchases. For the year ended 31 December 2016, our largest naphtha suppliers by volume include Abu Dhabi National Oil Company (“ADNOC”), Itochu Petroleum Co. (Singapore) Pte. Ltd (“Itochu”) and Shell International Eastern Trading Company. Naphtha from the Middle East is shipped principally in large long range international vessels, with delivery taking about 14 days from the vessels’ departure to their arrival at our jetty. We source a large part of our naphtha feedstock from the Middle East, with our remaining requirements from Southeast Asia and South Asia. 116
7. BUSINESS OF OUR GROUP (Cont’d) Naphtha prices are typically determined based on the average market price 15 to 30 days before shipment arrival, with payment secured through a letter of credit procured by us. For FOB shipment, we are responsible freight and insurance while CFR shipment only insurance. Payment is typically due 30 days after the date the bill of lading is issued. We generally store naphtha in quantities sufficient to support about two weeks of operations. We have never experienced any significant disruption in naphtha supply. As naphtha is a globally traded commodity, in the event of an unanticipated supply disruption, we would be able to access the spot market to meet our demands. Spot market prices are typically more volatile and vary according to supply and demand. We produce a significant portion of the ethylene and the significant portion of propylene feedstock required in our production of polyethylene and polypropylene, as set out in the table above. This reduces the risk of disruption in feedstock supply by third party producers as well as storage needs. However, when our polypropylene plants are operating at their optimal plant utilisation, they usually require an additional 30 KTA of propylene which we source from the spot market. Our polyolefin plants in Malaysia use ethylene and propylene as feedstock, and our polyethylene plants in Indonesia use ethylene as feedstock. Our naphtha crackers in Malaysia produce substantially all of the ethylene and propylene requirements of our Malaysian polyolefin plants, as well as a portion of the ethylene requirements for our Indonesian plants. A portion of the supply of ethylene from the crackers to Indonesia is made through arrangements with trading houses. However, we typically do not produce enough ethylene to fully meet the requirements of our Indonesian plants. We therefore supplement our ethylene production with ethylene purchases from external parties for our Indonesian plants. In the event that we have any excess production of ethylene or propylene, we sell such excess in the spot market. 7.6.10 PTe One of our strategies is to provide our customers with value-added services, including product development and improvement, technical and fabrication process training and the development of products custom-made to the requirements of our customers. We perform these activities through our PTC located at our Tanjung Langsat site in Malaysia. We established the PTC in 2000 to be a leading research and development laboratory for product applications, and a technical training and consultancy hub for the polyolefin industry. The PTC is equipped with comprehensive analytical and physical laboratory testing instruments and plastic fabrication facilities. These facilities are operated by a team of trained and dedicated technical professionals. Our PTC engineers regularly visit key domestic customers in Malaysia and Indonesia as well as our overseas customers in Asia including China, Taiwan and India to provide technical support services and assistance. The PTC team, which works closely with LCC R&D centre and process technology licensors for our plants, develops new product grades to meet market demand and customer requirements. We receive support from LCC R&D centre in the form of technical assistance (including industry know-how), and support from process technology licensors in the form of technology maintenance. We also provide training to customers in new product usages and applications. As at the LPD, we have provided technical and fabrication process training to more than 5,000 of our customers’ employees. Since its establishment and up to the LPD, the PTC has developed a total of 75 new product grades -42 in polyethylene, 29 in polypropylene, and four in compounding. 7. BUSINESS OF OUR GROUP (Cont’d) Compounding is the process of creating a grade by mixing or blending in additives and other materials to achieve the desired properties. The following sets out some characteristics of the new product properties and applications developed at the PTC: • Polyethylene new products: LLOPE geomembrane with excellent mechanical properties, IVIOPE film with enhanced mechanical properties, large containers and intermediate bulk container for blow molding processes, oxo­biodegradable resin for blown film processes, low VOC outgassing LOPE film resin for electronic devices packaging, high flow HOPE polyolefin.
• Polypropylene new products: Superb clarity random copolymer polyolefin, fast cycle time random copolymers, high flows homopolymer for thin walled injection molding application with good clarity and fast cycle time, random copolymer for extrusion coating application on BOPP and woven fabric, high flow impact copolymer with excellent stiffness for home appliances, high line speed homopolymer metallisable BOPP polyolefin.

Our proposed future product development plans and timing are as follows: Year Products 2017-2018 Enhanced moisture and gas barrier HOPE, organoleptic HOPE for injection and compression molding, high crystallinity polypropylene, high impact strength random copolymer polypropylene, heat sealable BOPP and MOPE which is specifically developed for the plastic fuel tank in automobiles 2019 -2023 Melt blown for non-woven applications, polypropylene terpolymer, mLLOPE, high melt strength polypropylene, antimicrobial polypropylene polyolefin, polyethylene breathable film, high clarity impact copolymer polypropylene, expandable polypropylene foam and random copolymer polypropylene which is specifically designed for hot water pipes. 7.6.11 Electricity supply and power generation facilities We own and operate two power co-generation plants, one at each of our Pasir Gudang and Tanjung Langsat sites, which supply power to our production facilities. In addition, one of our crackers is also equipped with a power generation facility which we use as an internal back-up power source. Our Pasir GUdang power co-generation plant has a power capacity of 50.0MW and our Tanjung Langsat power co-generation plant has a power capacity of 39.0MW. These plants are powered by a mixture of natural gas sourced from Petronas Chemicals and fuel gas from our two crackers. We have a lateral pipeline, metering stations and other necessary equipment for the delivery of natural gas between our Pasir Gudang and Tanjung Langsat sites. The power produced by our co-generation plants is sufficient to meet the power requirements of our production facilities at our Tanjung Langsat site. We receive additional power supply from TNB to meet the power requirements of our production facilities at Pasir GUdang. This is done pursuant to a 10 year agreement with TNB which can be extended for a further 10 years. The current agreement will expire in July 2018. We are currently in the process of negotiating a new agreement with TNB. 7. BUSINESS OF OUR GROUP (Cont’d) The following table sets out the power and steam production capacity at each of our power plants: Pasir GUdang Tanjung Langsat Co-Steam Co­Steam generation turbine generation turbine Utility Plant 1 generator Plant 2 generator Total Power (MW/hour) 42.0 8,0 21.0 18.0 89.0 Steam (MT/hour) 160.0 80.0 240.0 7.6.12 Jetty facilities We have shared access to two jetties at Pasir Gudang, as well as dedicated access to a third and fourth jetty built on land owned by JPB. The jetties are conveniently located adjacent to our plants and are owned and operated by JPB. The jetties can accommodate long range international tankers which, due to the larger shipments (up to 55 KT of naphtha), allow for lower naphtha shipping costs compared to smaller vessels. We also have access to a container jetty for polyolefins shipments and utilise the nearby Johor Port and Port of Tanjung Pelepas for export purposes. Our Merak site in Indonesia receives imported ethylene feedstock thro~gh a single offshore berth with jetty access. The berth is able to accommodate tankers ranging from 2,500 to 12,500 DWT with an overall length of 60 to 160 metres and a draft of 8.5 metres. 7.6.13 Tank storage We own three tank farms situated on land we lease from Johor Port Authority and TNB, These tanks have a total storage capacity of 155.1 KT of naphtha, 8.8 KT of benzene and toluene, 18.0 KT of ethylene and propylene, and 6.7 KT of pygas. The naphtha tanks can store sufficient naphtha to support up to three weeks of production. The propylene and ethylene tanks have storage sufficient to support up to six days of production. The three tank farms and their pipelines can operate independently in case of failure as there are back-up contingencies in all tank facilities. Our Merak site is equipped with a 12 KT, double containment-type cryogenic tank for the storage of liquid ethylene at a temperature of -104°C. We also store our butane-1 in a large sphere tank with a capacity of 2.35 KT at 4.7 barg pressure. Our receiving terminals are designed to provide flexibility in storing and delivering feedstock to our crackers. We unload the naphtha and other feedstock from one of the four jetties to one of the three tank farms located in our plant sites. Interconnecting pipelines between the tank farms and the crackers are designed to facilitate a consistent and reliable supply of feedstock by enabling the switch to another tank in the event that the operation of anyone tank is disrupted. Our tank farms and receiving facilities can receive shipments of up to 55 KT each from long range international vessels. We also have two naphtha storage terminals located at the Johor Port with a combined capacity of about 155.1 KT to ensure flexibility and sufficient feedstock reserves for up to three weeks, in the event of supply disruption. 7. BUSINESS OF OUR GROUP (Cont’d) 7.6.14 Pipelines Our Pasir Gudang production facilities are connected by a network of pipelines to the tank farms and jetty facilities leased from JPB. These pipelines deliver materials, including naphtha, to our production facilities. We also use these pipelines to ship out some of our finished products for sale, including ethylene, propylene, butadiene, TBA, benzene and toluene, to the jetty facilities. Our Pasir GUdang and Tanjung Langsat production facilities are also linked by underground pipelines, which deliver ethylene, propylene, butene and natural gas from Pasir GUdang to Tanjung Langsat, and purge gas from Tanjung Langsat to Pasir GUdang. Because of these facilities, we are able to recycle this gas stream to maximise production of ethylene and further maximise yield. We own and operate these pipelines, which are equipped with back-up pumps to allow unrestricted flow in the event of pump failure. For our Indonesian site, we arrange for ethylene to be delivered by PT Chandra Asri through their 15-kilometre pipeline which is connected to our facility. It operates up to 34 barg and is installed with a mass balance type leak detection system. Our Merak site is further supported by other utilities pipelines for the supply of hydrogen and nitrogen, from PT Air Liquide Indonesia and PT Air Product Indonesia and natural gas from PT Sadikun Niagamas Raya. 7.6.15 Product storage We have six warehouses in Malaysia for storage of polyethylene and polypropylene with a combined capacity of up to 75 KT of finished products. We usually store about one month’s supply of inventories. Of our six warehouses, three are located at the Pasir Gudang site and the remaining three are located at the Tanjung Langsat site. We have two warehouses in Indonesia located at our Merak site for the storage of polyethylene with a combined capacity of up to 28 KT of finished products. We usually store about half a month’s supply of inventories. 7.6.16 Water supply We receive water supply for our Malaysian production facilities from Syarikat Air Johor, the local water utility, through a dedicated pipeline. The water is treated water for general consumption purposes and does not require further treatment prior to being utilised in our facilities, other than additional purification required for the production of steam. We have water storage capacity of about 35,840 cubic litres in total on the sites to maintain supply for up to one day of operation in the event of a disruption in water supply. We receive water supply for our Indonesian production facilities from PT Sauhbahtera Samudera, the local water utility, through a dedicated pipeline. The water is treated water for general consumption and does not require further treatment prior to being utilised in our facilities, other than additional purification for the production of steams. We have an industrial water storage capacity of about 187 cubic meters and demineralised water storage capacity of about 386 cubic meters in total on the sites to maintain supply for up to three days of operation, in the event of shutdown disruption in water supply shortfall. 7. BUSINESS OF OUR GROUP (Cont’d) 7.6.17 Production process Our naphtha cracker production facilities convert naphtha feedstock into ethylene, propylene and by-products in a two-step process of cracking and separating. Our two crackers are capable of cracking naphtha, or a combination of naphtha and LPG. Historically, we have operated primarily using naphtha as feedstock. The following diagram depicts our production processes in Malaysia and Indonesia: Products produced I sold by LeT .. + HOPE I Shampoo Bollie Fishing Net Flexible Packaging LOPE ~., Iii! :i\~i~
1·_····­Foam Paper Coaling e’.PP Automobile Transparent Medical Infusion –
Parts plastic container Bottle C4 Raffinate-2(3) Onsile OCUl2) :4-.. TBA ACryliC •…
\ Acid Resin ” ‘ ,-‘ Imitation
155.1KT • Marble storage C4-Raffinale 1!’lt tank capable of ). BO • Tyre
.~”” Synthetic~ Rubberstoring up
to 3 weeks of
BTX
production Insect Repenent Bleach Paint
Support facilities
Itld(‘)nliJa
~ Ethylene(4) ~ Shampoo Bottle Fishing Net Flexible Packaging ,,,~ Wire & Cable ~ FlexibleLLOPE
….” lilaPackaging Notes: (1) 99% consumed internally.
(2) Our OCL! Plant is designed to process a mix of C4 Raffinate-2 from our TBA Plant and ethylene to produce high purity polymer grade propylene. We commissioned our OCU Plant in 2007 but do not currently operate it due to high market prices of ethylene that do not justify the operation of the OCU Plant from a cost-efficiency perspective. Upon completion of the TE3 Project, we plan to re-commence operations for our OCU Plant, depending on market prices of ethylene and propylene then.
(3) Our TBA Plant uses C4 Raffinate-1 which is produced as a by-product from our BD Plant. The C4 Raffinate-2 is a by-product from our TBA Plant which can be processed by our OCU Plant to produce high purity polymer grade propylene. As our OCU Plant is not operational, we currently export C4 Raffinate-2 or if there is delay in shipment such that there is no capacity for additional C4 Raffinate-2 to be stored, the remaining C4 Raffinate-2 will be recycled to the cracker.
(4) Ethylene is sourced internally and from third parties.

I Company No.: 222357-P 7. BUSINESS OF OUR GROUP (Cant’d) The following table sets out our production volumes and percentage of total production volumes for our primary products for the periods indicated:  Product Polyolefin Products Polyethylene(1) Polypropylene Total polyolefin products  2014 Volume (KT) 907.7 364.2 1,271.9  For the year ended 31 December 2015 Percentage of Percentage of total total production Volume production (%) (KT) (%) 35.5 900.4 33.3 14.2 405.8(2) 15.0 49.7 1,306.2 48.4  2016 Volume (KT) 909.9 411.3 1,321.2  Percentage of total production (%) 33.7 15.2 48.9  Three months ended 31 March 2017 Percentage of total Volume production (KT) (%) 100.0 29.0 60.0 17.4 160.0 46.4  Olefins and Derivative I Other Products Ethylene Propylene Benzene Toluene Butadiene TBA OCU Total Olefins and Derivative I Other Products  648.0 374.3 76.5 42.7 75.1 70.3 0 1,286.9  25.3 14.6 3.0 1.7 2.9 2.8 0 50.3  688.8(2) 398.1 (2) 90.3 48.5 86.5 82.2 0 1394.4  25.5 14.7 3.3 1.8 3.2 3.0 0 51.6  687.6 25.4 389.7 14.4 93.8 3.5 43.9 1.6 85.6 3.2 80.8 3.0 0 0 1,381.4 51.1  86.3 69.9 6.7 3.3 10.1 8.3 0 184.6  25.0 20.3 1.9 1.0 2.9 2.4 0 53.6  Total  2,558.8  100  2,700.6  100  2,702.6  100  344.6  100  Notes:
(1) Contains production volumes for our Malaysian and Indonesian operations.
(2) In 2014, our production was reduced due to an emergency shutdown of our plants in Malaysia. In 2015 and 2016, we carried out plant stability improvement works and maintenance programmes on our plants in Malaysia, which brought production figures closer to the nameplate capacity of each plant.

122

7. BUSINESS OF OUR GROUP (Cont’d) Olefin plants We have two crackers with a combined nameplate capacity of 700 KTA of ethylene and 379 KTA of propylene as at 31 Oecember 2016. Both crackers employ Stone & Webster’s ultra-selective cracking technology and advanced recovery system, which we selected for its high product yields and energy efficiencies. We crack feedstock, primarily naphtha, in a tubular furnace in the presence of steam, and convert the heavier hydrocarbons into lighter fractions, primarily ethylene and propylene, and heavier fractions, the mixed C4 streams and pygas stream. We separate polymer-grade ethylene and propylene in the cold section and then distribute them to the downstream polyolefin plants. We then feed the mixed C4 stream to the BO Plant to produce butadiene and to the TBA Plant to produce TBA. We feed the pygas stream to the BTX Plant for benzene and toluene production. Polyethylene plants HOPE and LLOPE process in Malaysia. Our HOPE/LLOPE plant in Malaysia utilises the Univation Unipol technology and allows us to use the same processing equipment to produce both HOPE and LLOPE, depending on market demand. Ethylene feedstock, the comonomers and hydrogen are first treated to remove impurities. These are then passed through a low pressure, gas-phase polymerisation reactor containing a fluidised reaction bed. Upon polymerisation, granular resins are conveyed to a nitrogen vessel for purging of residual hydrocarbons. The purged resins are then combined with additives and extruded to form the final product. LOPE process. The LOPE plant employs ExxonMobil’s tubular process, which was selected for its ability to produce high quality, high clarity film resins. In this process, ethylene feedstock is first compressed and fed into a tubular reactor. The front stream is heated and organic peroxides are injected into the reactor to initiate the polymerisation reaction. Heat from the exothermic reaction is removed by the water in the jackets on the reactor tubes and by the side streams. At the reactor exit, the pressure of the polymer/ethylene mixture is reduced and quench stream further cools the mixture. The polymer is separated from the unreacted ethylene and the latter is recycled. The LOPE is then extruded to form the final product. HOPE process. The HOPE plant is based on Mitsui’s CX-process and allows for the production of bimodal HOPE. Ethylene, the main raw material, is pre-mixed with hydrogen and comonomers. The feed and catalyst are then fed continuously into the polymerisers. For the polymerisation reaction, a low pressure hexane slurry is employed. Upon polymerisation, the slurry is withdrawn and separated into liqUid and gas phases, and the separated gas is sent back to the polymeriser. The polymer is then dried, blended and extruded to form the final product. HOPE and LLOPE process in Indonesia. Our Indonesian plant is based on INEOS Innovene’s process from INEOS Technologies, which allows for the production of HOPE and LLOPE. In the HOPE process applied for the PE1 Plant and PE2 Plant, the catalyst is mixed with ethylene to produce prepolymer powder, which is injected continuously into a main polymerisation reactor with ethylene, the main raw material, and pre-mixed with hydrogen and comonomers. The LLOPE process applied for PE3 Plant, where the feed and catalyst are directly fed continuously into the polymerisation reactor. Fluidisation technology is applied to obtain the polymerisation reaction, the powder is withdrawn and separated into solid and gas phases, and the separated gas is then sent back into the polymeriser. The polymer is then blended with various additives and extruded to form the final product. 7. BUSINESS OF OUR GROUP (Cont’d) Polypropylene plants We have two polypropylene plants with a combined nameplate capacity of 440 KTA as at the LPO. Both plants utilise LyondeliBasell’s Spheripol process. In this process, polymerisation occurs in liquid propylene within a loop tubular reactor to produce homopolymer and random copolymers. For the production of impact copolymers, polymer from the first reactor is fed to a gas phase fluidised bed reactor and ethylene is introduced into the process. Unreacted monomer is flashed in a two-stage pressure system and recycled back to the reactor without treatment. Various additives are blended with polymer powder to improve its storage and processing qualities. The mixture is then extruded and pelletised. LyondeliBasell’s Spheripol technology was chosen for both our polypropylene plants based on its competitiveness in product performance acceptance, technology longevity, competitive operating cost and range of products produced. BTX Plant Thyssen Krupp Udhe’s benzene recovery system is employed at the BTX Plant. Pygas from the crackers is fed into an extraction unit where the BTX products are selectively dissolved in a proprietary solvent and then separated using distillation to final product purity requirements. The final products, benzene and toluene, are then piped into storage tanks for sale. Benzene and toluene are extracted from pygas using a solvent. By-products such as crude xylene and heavier components are also produced. BD Plant Our BO Plant is designed to extract butadiene from mixed C4. We use the BASF process (licensed by ABB Lummus Global), which is a combination of extractive and conventional distillations, to perform this separation. We selected the BASF butadiene process because of its flexibility and applicability to different types of feedstock and product specifications. TBA Plant Our TBA Plant uses a particular form of C4 which is produced as a by-product from our BO Plant. We use a catalyst to create a reaction between water and isobutenes (one of the components in the particular form of C4) to produce TBA. Technology from our TBA process is licensed from our parent company. OCU Plant Our OCU Plant is designed to process a particUlar form of C4 from our TBA Plant to produce high purity polymer grade propylene using a process licensed by ABB Lummus Global. We mix the C4 feed with ethylene feed in a reactor. Propylene is formed by metathesis of ethylene and butene. 7. BUSINESS OF OUR GROUP (Cont’d) 7.6.18 Business interruptions Our plants in Malaysia and Indonesia have not experienced any business interruptions for the past three years ended 31 December 2014 to 2016 other than a power outage at our Pasir Gudang site in October 2014 which led to the shutdown of all our plants in Malaysia for an aggregate of 38.3 days. For more information on the power outage incident, please refer to Section 7.12 of this Prospectus. From 1 January 2017 to LPD, our plants in Malaysia suffered a period of shutdown between two and 11 days in April 2017 caused by an interruption in water supply. One of our plants restarted its operations within two days from its shutdown, followed by our other plants on a staggered basis. The controlled shutdown resulted in a decrease in our production volume by approximately 75 KT. As set out in Note (2) in Section 7.6.5(ii) of this Prospectus, the aggregate production volume of our plants for the past three years ended 31 December 2014 to 2016 were between 2,558 KT and 2,703 KT. 7.7 SALES, MARKETING AND DISTRIBUTION Introduction We sell our products in both domestic and export markets. For the year ended 31 December 2016, polyolefin product sales accounted for 80% of our total revenue. For the year ended 31 December 2016, domestic sales accounted for almost 67.2% of our total sales revenue. In that same year, 38.7% of our revenue were from sales to customers in Malaysia, 28.5% from sales to customers in Indonesia and 11.3% from sales to customers in China. We seek to be recognised as a reliable supplier and have developed long-standing relationships with our major customers in our domestic markets and major export markets, such as in Southeast Asia and China. Our market position is a function of our ability to offer a broad range of polypropylene and polyethylene products, our product quality, our provision to our customers of value-added services such as product development and training offered through the PTC, and our marketing and distribution network. We market our products in both the domestic and international markets under the TITANEX® (HOPE), TITANPRO® (PP), TITANLENE® (LOPE), TITANZEX® (bimodal HOPE) and TITANVENE® (LLDPE/HDPE) brands. We sell our derivatives products mainly to trading houses. 7. BUSINESS OF OUR GROUP (Cont’d) The following table sets out our sales revenue, by overall sales as well as geographical location of production: Overall revenue by geographical breakdown Year ended  Year ended  Year ended  31 December 2014  31 December 2015  31 December 2016  % Total  % Total  % Total  RM million  revenue  RM million  revenue  RM million  revenue  Malaysia  3,313.2  38.5  3,164.8  38.8  3,149.5  38.7  Indonesia  2,506.4  29.1  2,349.3  28.8  2,316.7  28.5  China (including  Hong Kong)  788.0  9.2  1,099.7  13.5  923.2  11.3  Southeast Asia(1)  1,054.4  12.2  795.1  9.8  789.7  9.7  Others(2)  949.2  11.0  738.9  9.1  957.5  11.8  Total  8,611.2  100.0  8,147.8  100.0  8,136.6  100.0
Notes: (1) Excluding Malaysia and Indonesia
(2) Others include the ISC, Northeast Asia, North America, Africa and Oceania.

We benefit from being part of the ASEAN FTA, which has removed intra-regional tariffs for imports and exports to markets within Southeast Asia. For the years ended 31 December 2014 to 2015, revenue from our sales in Malaysia and Indonesia fell due to the decline of crude oil prices resulting in a decline in the prices of our products, and remained stable in the year ended 31 December 2016. Our revenue from sales in China increased in the year ended 31 December 2015 due to higher production volumes attributable to stable plant operation and inventory optimisation. This reflected our strategy to widen our customer base in China in preparation for our future expansion. Domestic markets Products and markets For the year ended 31 December 2016, we represented 53% capacity share in polyethylene production and 100% capacity share in polypropylene production in Malaysia as well as a 57% capacity share in polyethylene production in Indonesia. Domestic polyolefins sales in Malaysia registered a CAGR (by volume) of 3.1 % per annum over the years ended 31 December 2012 to 2016. Domestic polyethylene sales in Indonesia registered a CAGR (by volume) of 1.7% per annum over the years ended 31 December 2012 to 2016. A significant portion of our production in Indonesia is for the domestic market, with 86% of our revenue attributable to sales in Indonesia in 2016. Our largest customer in Indonesia accounted for 16% of this revenue. We have a diverse domestic customer base of direct and indirect customers in Malaysia and in Indonesia, comprising principally plastic fabricators serving the packaging, household, automotive and construction markets. Direct customers are customers we supply directly to, and our indirect customers are customers we supply to through distributors. As an early entrant into the polyolefins segment in Malaysia, we enjoy a first-mover advantage and have built strong relationships with our domestic customers. About 94% of our domestic revenue in Malaysia for the year ended 31 December 2016 was attributable to customers that have been customers for more than five years. In Indonesia, about 95% of our domestic revenue for the year ended 31 December 2016 was attributable to customers that have been customers for more than five years. 7. BUSINESS OF OUR GROUP (Cont’d) Our domestic customers typically place orders on a monthly basis. Product prices for domestic sales are benchmarked against the relevant global benchmark, which are quoted in USD and are generally adjusted on a monthly basis. Customers are quoted, invoiced and required to pay the RM/IDR equivalent of such USD prices. We offer standard credit terms of 30 to 45 days to our domestic customers in Malaysia and Indonesia, sUbject to periodic credit reviews. Our long operating history in Malaysia and Indonesia has allowed us to acquire a good understanding of the credit quality of our key customers, resulting in a low bad debt record. We gain a competitive advantage in the domestic market as most overseas suppliers sell on the basis of a letter of credit. We require corporate, bank or other guarantees from certain customers that benefit from credit terms. We sell to all other customers on the basis of a letter of credit or on a cash basis. Sales and distribution infrastructure Our domestic sales and distribution network comprises of four sales offices located in Johor Bahru, Kuala Lumpur, Penang, and Jakarta. Our team of sales staff ensure that we enjoy comprehensive coverage of all our markets. Our Indonesian sales office in Jakarta is exclusively responsible for domestic sales within the country, including products produced by our Malaysian plants. We use a network of third party logistics providers to deliver our products throughout Malaysia. We have developed close working relationships with these logistics providers, chosen on the basis of their cost, reliability and nationwide reach within Malaysia. The proximity of our facilities to Malaysia’s main transport networks, combined with the ability to deliver shipments to Malaysia’s principal destinations in a single day, allows us to minimise warehousing needs and enhance the reliability of product delivery to customers in Malaysia. In addition, our strategic location on the way from Singapore to Malaysia allows us to benefit from lower transportation rates offered for under-utilised backhaul traffic from Singapore to Malaysia. In Indonesia, we engage a logistics provider to deliver our products throughout the country. Export markets Products and markets We also export our products to a broad range of customers in about 60 countries. Our major export markets are China (including Hong Kong), Southeast Asia, the ISC, South Korea and Europe. Key competitive determinants in these export markets are price, product quality, consistent supply and customer relationships. We are well-positioned to compete effectively in our key export markets and at a significant competitive advantage in our key Asian markets, benefitting from applicable free trade agreements with Southeast Asia and China. We have built strong relationships with our key export polyolefins customers. About 65% of our export polyolefins revenues for the year ended 31 December 2016 were attributable to customers who have been our customers for more than five years. China is a huge consumer of polyolefins. China’s total polyolefins demand in 2016 was estimated at about 46 million tons or about 30 percent of the global market. China accounted for about 34% of our export revenue for polyolefins by value for the year ended 31 December 2016. Our key export markets in Southeast Asia include Vietnam, Thailand and the Philippines. In the ISC, we export primarily to India and to a lesser extent, Pakistan, Bangladesh and Sri Lanka. 7. BUSINESS OF OUR GROUP (Cont’d) Our overseas customers typically place orders in USD on a monthly basis. We benchmark our product prices for export sales against the relevant global benchmark, which are quoted in USD and adjusted on a monthly basis. We quote, invoice and require customers to pay in USD. We conduct all export sales through letters of credit or telegraphic transfers before shipment. Sales and distribution infrastructure We market our products into China mainly through Lotte Chemical Trading Shanghai, which has offices in Shanghai, Beijing, Hong Kong, Shenzhen, Qingdao, Guangzhou and Chongqing. Lotte Chemical Trading Shanghai is a wholly-owned subsidiary of LCC. We also have an agency agreement with LCC to market our products in Europe, Japan and Hong Kong. We make almost all of our sales to China with Lotte Chemical Trading Shanghai acting as our agent in the sale process. We pay a sales commission to Lotte Chemical Trading Shanghai for each completed transaction. We aim to increase our direct sales to overseas end-users by providing value-added services including product training and development, as we have done in our domestic markets in Malaysia and Indonesia, and further aim to increase our direct customer base in Indonesia. 7.8 MAJOR CUSTOMERS AND SUPPLIERS We have a wide base of customers to ensure there is no over dependence on any single customer. For the year ended 31 December 2016, our top ten customers collectively accounted for 23% of our sales revenue for all products. Most of our customers are based in our domestic markets of Malaysia and Indonesia. We also sell benzene and toluene to a network of trading houses and directly to domestic customers in Malaysia, and sell butadiene mostly to third party customers. We produce TBA largely for export purposes to South Korea. None of our customers contributed more than 10% of our sales revenue for all products in the years ended 31 December 2014,2015 and 2016. The table below sets out major suppliers who accounted for 10% or more of our cost of goods sold: Year ended 31 December
2014 2015 2016 Purchases % of cost Purchases % of cost Purchases % of (RM million) of goods (RM million) of goods (RM million) cost of
sold sold goods sold ADNOC 1,671.8 20.0% 1,573.2 23.0% 1,068.5 17.4% Itochu 1,506.8 18.0% 754.2 11.0% 804.0 13.1% Our two largest suppliers are ADNOC and Itochu, who collectively account for about 32% of our cost of goods sold for the year ended 31 December 2016. Please refer to Section 7.6.9 of this Prospectus. We have a wide base of naphtha suppliers, mostly from overseas including Shell International Eastern Trading Company, Vitol Asia Pte Ltd, Total Trading Asia Pte Ltd, and Saudi Aramco Products Trading Company. We routinely review our supplier portfolio to ensure that we are able to secure supply of our principal raw materials at competitive prices. As such, we ensure we do not depend on any single supplier for feedstock. 7. BUSINESS OF OUR GROUP (Cont’d) 7.9 COMPETITION Domestic markets In Malaysia, we compete primarily against various joint ventures between Petronas Chemicals and international petrochemical companies. In addition, we compete in the domestic markets against imports, mainly from Singapore and to a lesser extent, from the Middle East and Thailand. Malaysia imposes a tariff of 10% on imports of polyethylene and polypropylene products, except from Southeast Asian countries, China, Japan and Australia under various free trade agreements. We benefit from a number of competitive advantages. These include the proximity of our facilities to our customers, which results in shorter delivery times and lower transportation costs, the quality of our products, reliability of delivery as well as our long-term customer relationships based on value-added services such as those we offer through the PTC. We also distinguish ourselves from our overseas competitors by offering key local customers credit terms. Most overseas competitors require local customers to arrange letters of credit prior to delivery. In Indonesia’s domestic polyethylene market, we compete primarily against PT Chandra Asri and imports, mainly from Singapore, Thailand and Malaysia. Indonesia imposes a tariff of 5­15% on imports of polyethylene and polypropylene except from the Southeast Asia countries, which enjoy a no-tariffs trading structure under the CEPT Scheme for AFTA. Export markets Within our key export markets, we compete primarily against international and regional petrochemical companies. In the Southeast Asian markets, we compete against importers from Thailand, Singapore, South Korea and Taiwan. Our key advantages in these markets are our early entry and the resultant market share we have since achieved, zero tariffs (under the CEPT Scheme for AFTA), lower transportation costs compared to North Asian producers, and cultural ties between our sales personnel and customers. In addition, we have developed strong relationships with end-users in these countries and benefit from selling directly to these customers instead of through trading houses. In the Chinese market, apart from competing with domestic producers, we compete against other importers, primarily from South Korea, the Middle East, Singapore, Taiwan and Japan. Many of these competitors have a larger market share in China than we do. Nonetheless, we have an advantage over our competitors outside Southeast Asia for polypropylene and linear low-density polyethylene as tariffs for these two products do not apply under the ASEAN-China FTA. In the ISC, we compete against importers from the Middle East, Korea, Singapore and Thailand. We have built a strong reputation in this market based on the quality and consistency of our products. As a result of these and our direct sales to key accounts, we have been able to enjoy a premium in the ISC market. Our key advantages in the ISC market are our strong relationships with end-users due to our early market entry, lower tariffs, and lower transportation costs compared to North Asian producers. We benefit under N1ICECA which came into force in 2011 and enjoy lower tariff rates for our polyolefin exports from Malaysia to the Indian market. 7. BUSINESS OF OUR GROUP (Cant’d) 7.10 TECHNOLOGY AND TRADEMARKS The following table sets out certain information in respect of the technology used for each of aur primary products. Product Company Technology Licensor Validity of rights Ethylenel LCTM Stone & Webster Ultra Technip Stone & The rights to use such Propylene Selective Cracking Webster processes shall survive the termination of the agreement. LCTM Stone & Webster Technip Stone & The rights to use such Advanced Recovery Webster processes shall System survive the termination of the agreement.
LCTM Stone & Webster JGC Corporation The right to use such Engineering process shall survive Corporation Ethylene the termination of the process agreement. LCTM Nippon JGC Corporation The right to use such Petrochemicals Co process shall survive Ltd Spent Caustic the termination of the Treating Technology agreement. LCTM Institut Francais du JGC Corporation The right to use such Petrole Hydrogenation process shall survive C3, C4 and pyrolysis the termination of the gasoline agreement hydrogenation process LOPE LCTM High Pressure Tubular ExxonMobil The rights to use such polyethylene process processes shall survive the expiration of the agreement. Polypropylene LCTM Spheripol process LyondellBasell The rights to use such processes shall survive the termination of the agreement. Benzene and LCTM Extraction and Thyssen Kru pp The rights to use such toluene hydrogenation Uhde processes shall process survive the termination of the agreement. HOPE LCTM Mitsui CX-process Mitsui The rights to use such processes shall survive the expiration of the agreement. LLOPEI HOPEI LCTM UNIPOL Gas Phase Univation The rights to use such mLLOPE Polyethylene process processes shall I EXXPOL survive the metal/ocene process termination of the aomemf!nt. 7. BUSINESS OF OUR GROUP (Cont’d) Product Company Technology Licensor Validity of rights BO/Propylene LCTM BASF / Olefins ABB Lummus The rights to use such conversion process Global processes shall survive the termination of the agreement. TBA LCTM LCC TBA Process LCC The rights to use such processes shall survive the termination of the agreement. LLOPE/ HOPE PT LCT Innovene™ G INEOS Europe The rights to use such Nusantara Limited process shall survive the termination of the agreement. Information technology In Malaysia and Indonesia, our information technology infrastructure includes computerised inter-related information systems to support key functions, including our business enterprise systems software which includes production planning, logistics, plant maintenance, financials, human resource management and customer relationship management. Our group functions within our offices in Pasir Gudang, Tanjung Langsat, Penang, Kuala Lumpur, and the terminal in Johor Port are interconnected. The Jakarta office and Merak site are also connected with the Malaysia operations through global networking. This interconnectivity has vastly improved the management of information across our company and contributed to improved levels of service and performance. Our business enterprise systems software is licensed by LCC under a perpetual, non-exclusive licence. The licence entitles us to utilise all related proprietary information and selected third party databases. The business enterprise systems’ computer hardware and servers are hosted and maintained by LCC at Seoul, Korea. Localised systems licence and our infrastructure are directly owned and maintained by us. Trademarks We have applied for and obtained registration for our trademarks TITAN EX®, TITANZEX®, TITANPRO®, TITANLENE® and TITANVENE® in Malaysia and Indonesia. The registration of our TITANPRO® and TITANVENE® trademarks in Indonesia expired in 2016, we have filed for the renewal of these trademarks. 7.11 QUALITY CONTROL We have three laboratories to ensure the quality control of our petrochemical and polymer production. Our first laboratory was established in February 1991 and other laboratories were set up throughout the years to form the current Quality Management Department, comprising of: • Monomer Laboratory is responsible for quality inspection and control of feedstock, in­process and products including ethylene, propylene, benzene, toluene, butadiene and TBA;
• Polymer Laboratory 1 is responsible for quality inspection and control of in-process and products for polymer plants for polypropylene and HOPE, and quality assurance of incoming raw material for polymer products;

7. BUSINESS OF OUR GROUP (Cont’d) • Polymer Laboratory 2 is responsible for quality inspection and control of in-process and products for polymer plants for HOPE and LOPE and quality assurance of incoming raw material for polymer products; and
• HOPE/LLOPE Laboratory, which is responsible for quality inspection and product development of in-process and products for PE1 Plant (Indonesia), PE2 Plant (Indonesia) and PE3 Plant (Indonesia).

We also maintain a quality control unit and laboratory at our production facilities to monitor our feedstock and other materials and products for compliance with contract specifications. We generally rely on the product quality history of our long-term naphtha suppliers to ensure quality control of our feedstock. Each naphtha shipment is typically accompanied by a certificate of analysis and tested prior to unloading. There are rare occasions where we will unload the shipment before the completion of testing on a need to and case by case basis, such decisions depend on the cargo’s origin, loadport certificate of analysis review and plant acceptance. For long-term suppliers with established records, we may reduce certain testing requirements, such as trace contaminant testing. We control all other incoming materials upon arrival for quality assurance. We reject or at best conditionally accept materials that do not conform to specified standards. With exception to monomer feedstock suppliers, we issue supplier corrective action requests to suppliers in the case of a rejection or conditional acceptance, which requires a response within seven working days. We evaluate the performance of our materials suppliers annually. For polymer products release, we test all in-process and finished products and grade them according to specifications. We release a product release slip stating the product quality and grade, clearing the product for sale. We issue a Certificate of Analysis for prime grade and a non-compliance note for products that do not meet specifications. For monomer products sales, we also issue a Certificate of Analysis accordingly. To increase the quality of products delivered to our customers, we improved the packaging of our products, reduced multiple handling and enhanced export shipment capabilities. We undertake preventive maintenance, calibration and verification of quality control equipment on a periodic basis, the frequency of which depends on equipment type and specifications. 7.12 ENVIRONMENT, HEALTH AND SAFETY Health and safety We are SUbject to Malaysian and Indonesian regulations on compliance with occupational health and safety standards. In Malaysia, we have received awards given by the MSOSH in recognition of our health and safety record every year since 1994. In 2015, we received four gold awards and one silver award from the MSOSH. Awards for 2016 have not yet been determined as performance assessments are still underway as at the LPO and the awards will be announced in July 2017. In Indonesia, our Merak plant received a Silver Award from the Ministry of Manpower of the Republic of Indonesia for its implementation of the Occupational Safety and Health Management System in 2015. In October 2016, our Merak plant received a 7,629,610 safe man hours award without accident from the Governor of Banten Province of the Republic of Indonesia. Occupational safety and health management system We place great emphasis on safety and health standards. Across Malaysia and Indonesia, we have implemented an occupational safety and health management system to prevent workplace accidents and ensure optimal safety and health performance. I Company 1\10.: 222357-P
7. BUSINESS OF OUR GROUP (Cont’d) Since 2005, we have achieved OHSAS 18001 certifications in Malaysia. In order to ensure the highest safety and health standards are observed, we carry out monthly Vice Presidents/Managers EH&S audits and quarterly plant EH&S audits participated by all levels of the organisation including the supporting groups. Safety and health training programs such as Process Safety Management (“PSM”), and Behavioral Safety programs such as TAKE TWO and Safety Card Observations based on the DuPont training programs are regularly conducted for employees and contractors. In Indonesia, we apply the occupational safety and health management system with a dedicated safety committee which conducts monthly routine meetings. Apart from such internal measures, we also conduct safety talks for all employees and contractors every week to ensure that our safety measures are understood by all of our employees and contractors. We provide our employees with in-house and external occupational safety and health trainings related to permit to work, confined space hazards, chemical management, radiation hazards, legal safety and health regulations. For chemical substances handled in our workplace, we ensure Safety Data Sheets (“50S”) are readily available online on our employees’ legacy EH&S system for their reference. In addition, any new chemicals have to be registered prior to use. SDS trainings are also provided to all employees who are handling the said substances and they are able to refer to the Safety Data Sheets in real time. We have a medical clinic at each of our Malaysian sites and medical personnel manning both sites. In addition, we have fire-fighting facilities on both sites in Malaysia. These include three fire-trucks at our Pasir Gudang and Tanjung Langsat sites and other emergency response vehicles, as well as fire water storage tanks. The fire-fighting system was designed in accordance with the requirements of the United States National Fire Protection Assocation in force at the time of construction and complies with the requirements of the Malaysian Fire and Rescue Operations. Our Merak site in Indonesia has a medical clinic, one ambulance and a medical personnel. We also have fire fighting facilities, these include one fire-truck and other emergency response measures as well as fire water storage tanks with dedicated two fire pumps. The fire fighting system was designed in accordance with the requirement United States National Fire Protection Agency. Incidents Black smoke incident at Pasir Gudang Site On 21 October 2014, at about 12.15 p.m., our Pasir Gudang site experienced severe power shortages. This was later determined to have been caused by a chameleon entering our Sub­Station Electrical 22KV cable termination and bushings, leading to a short circuit. We have since taken remedial action to insulate the cables to prevent future occurrences of similar problems. At that time, all our Malaysian plants other than PE1 Plant (and gas turbine 22), which were already shut down for maintenance at the time of the incident, were shut down as a result of the incident. This led to an aggregate emergency shutdown period of 38.3 days. All packaged boilers together with a few high voltage motors and all plants were shut down as a result from a combination of power failure, electrical load shedding or insufficient steam supply. This led to the release of black smoke from the flare stack. On 1 March 2015, we received a summon issued by DOE Johor for releasing black smoke of a severity beyond No.1 on the Ringlemann Chart when observed, under Regulation 12(1)(a) of the Environmental Quality (Clean Air) Regulations 2014. We were charged under Regulation 29 of the same regulation. 7. BUSINESS OF OUR GROUP (Cant’d) The relevant company, LCTM, pled guilty and was fined RM30,000. Fire incident at Tanjung Langsat site On 8 June 2015, at about 5.55 p.m., a fire incident occurred at the PE3 Plant in Tanjung Langsat site during routine maintenance works when the plant was shut down. The fire was caused by the unauthorised opening of a manhole by an external contractor while carrying out blinding works. This led to the release of hexane into the atmosphere, resulting in the ignition of a fire due to hot work activity at a nearby temporary fabrication yard around 10 meters away from the manhole. The fire was put out around 6.40 p.m. by our first line crew and fire safety team. 10 external contractors sustained injuries as a result of the fire, all of whom were sent to the nearest hospital for treatment. Two of the contractors passed away due to severe burn injuries. We promptly took key remedial actions to prevent the possibility of recurrence, including restructuring our “Permit to Work” system to include proper hazard communication to external contractors, ensuring the availability of on-site gas detectors during hot work activities, and revising our general risk assessment for blinding and de-blinding work to include chemical hazards. As a result of this fire incident, we were charged and fined RM15,000 under Section 15(1) of the Occupational Safety and Health Act 1994, and charged and fined RM5,000 under Regulation 5(3) of the Occupational Safety and Health (Notification of Accident, Dangerous Occurrence, Occupational Poisoning and Occupational Disease) Regulations 2004. Environment We are subject to extensive, evolving, and increasingly stringent national and local environmental laws and regulations, which address, among other things, the following: • emissions into the air;
• discharges onto land or into inland waters; • other releases into the environment;
• remediation of contaminated sites; and
• generation, handling, storage, transportation, treatment and disposal of scheduled waste materials.

The legislation governing environmental protection in Malaysia is the EQA. Our compliance with environmental regulations is overseen by the local environmental authority and the DOE, the agency responsible for implementing and monitoring Malaysia’s environmental regu lations and policies. I Company No.: 222357-P
7. BUSINESS OF OUR GROUP (Cont’d) Our Merak plant in Indonesia complies with the applicable environmental regulations of the Republic of Indonesia. In 2016, we received a Blue Award under the PROPER Programme initiated by the Ministry of Environment and Forestry of the Republic of Indonesia. The PROPER Programme is annual compliance measurement programme on environmental regulation related to environmental pollution and/or damage control and hazardous waste management organised by the Ministry of Environment and Forestry of the Republic of Indonesia. Under Ministry of Environment Regulation No. 3 of 2014 on compliance measurement program on environmental management, PROPER Programme is conducted on all organisations: (i) which products are for export purposes, (ii) registered in stock market, (iii) which is draWing concern from the public within regional or national scope, and/or (iv) has operations with significant impact to environment, which classifies each organisation into one of five categories: Gold and Green, when an organisation performs beyond compliance requirements and consistently demonstrate excellence performance in production process and/or services, implementing ethical business and being responsible to society, Blue, when there is full compliance with applicable environmental regUlations, Red, which indicates non­compliance with some environmental regulations, and Black, which indicates extensive non­compliance with environmental regulations and/or deliberately conducting acts or omissions which cause environmental pollution and/or damage. We place strong emphasis on the environmental aspects of the operation of our plants. We have environmental management policies covering air and water pollution, noise pollution, and disposal of gaseous, liquid and solid wastes, which include voluntary surveillance activities, on­going environmental monitoring programmes and online monitoring systems. We have achieved IS014001 :2004 certification since 2011. Air pollutant control We continuously monitor the combustion of gaseous emissions and other combustible gases. We have three flare stacks on the Pasir Gudang site, one flare stack on the Tanjung Langsat site and one flare stack at our C2/C3 terminal. We also maintain a 24-hour online stack monitoring using Continuous Emission Monitoring system for specific boiler stacks which are directly connected to the DOE. To minimise the effects on the environment arising from the production process, we use natural gas as fuel in almost all of our operations. In addition, we implemented a Leak Detection and Repair program on fugitive emissions to improve air quality and working environment in the NC1 Plant production areas. For odour management, we installed covers for waste water treatment plant’s oily pits. In Indonesia, we control the emission of combustible gasses from our Merak plant by carrying out periodical measurements on our stack of boiler and incinerator in accordance with Government RegUlation No. 41 of 1999 on Air Pollution Control and Minister of Environment Regulation No.7 of 2007 on Emission Standard for Boiler. Hazardous waste management In our Malaysian sites, we store scheduled wastes from the treatment facilities, such as solids and sludge, in drums and pallet tanks and subsequently transport them for treatment and disposal to the facilities of Kualiti Alam Sdn Bhd, the only Government-authorised unit for treatment and disposal of hazardous waste located at Bukit Nenas, Negeri Sembilan, Malaysia. We are charged a transportation and treatment fee by Kualiti Alam Sdn Bhd, on a consignment basis, for the disposal of such scheduled waste. 7. BUSINESS OF OUR GROUP (Cont’d) In recent years, with the increasing number of DOE approved recycling treatment facilities in Malaysia, we have begun disposing some of our recyclable scheduled wastes such as solvents and waste oils through such DOE-licensed companies for safe recovery and re-use. Apart from that, we also have waste minimisation programmes in place to reduce waste generation. We track the source of waste and cause of its generation, and also educate our employees about the efficient control and reduction of waste. As part of the current DOE regulation, we actively participate in the Electronic Scheduled Waste Information System to ensure our generated scheduled wastes are safely treated, recovered or disposed. We have built and maintain scheduled waste shelters to properly store scheduled waste and prevent the discharge of hazardous substances. We also record monthly scheduled waste inventories and submit these to the DOE for reporting purposes. We have further constructed protective spill control dykes around our storage facilities, and have designed impervious concrete slabs to ensure all toxic materials are safely contained in case of leak or spill. In addition, we also have provided spill control cabinets containing spill absorbent pads, booms, are placed at strategic locations in the plants. Our Merak plant in Indonesia stores all solid and liqUid hazardous waste in a dedicated shelter for a maximum of 365 days, depending on the type and amount of the hazardous waste, and then disposes the waste through a third party company with a permit for the transportation and treatment of hazardous waste in accordance with Government Regulation No. 101 of 2014 on Management of Toxic and Hazardous Waste Substances. Water pollutants control In Malaysia, as waste water from our cooling towers is generally not contaminated we discharge them without further treatment. Even so, we regularly monitor contamination levels of our waste water to prevent any unintended discharge of chemicals. Process water and storm water runoffs from our ethylene plants are treated in a waste water treatment plant prior to discharge. This water treatment consists of oil separation, coagulation, air flotation, aeration and slUdge separation, with the capacity to process about 75 cubic metres per hour. We perform waste water analysis daily, and provide the results to the DOE on a monthly basis for monitoring purposes. To ensure the systematic control of water pollutants, we also operate a biological waste water treatment plant in our site in Malaysia. We maintain, design and operate our waste water treatment plants to meet stringent DOE requirements for waste water treatment and have appointed a laboratory accredited by Skim Akreditasi Makmal Malaysia, Spectrum Laboratories (Johore) Sdn Bhd, to carry out our weekly sample analysis in line with DOE requirements. In addition, we implement waste water reduction initiatives and constantly look into ways to recycle waste water. In Indonesia, we have a waste water treatment facility to remove pollutants in waste water generated from plant process by aerobic treatment prior to their discharge into the sea. The daily monitoring of pollutant control on discharge water from our waste water treatment facility and periodical monitoring on sea water pollutant and biota is carried out in accordance with 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. I Company No.: 222357-P
7. BUSINESS OF OUR GROUP (Cant’d) 7.13 LICENCES Please refer to Annexure A for the details of our material licences as at the LPD. 7.14 REGULATION Our business is regulated by, and in some instances required to be licensed under, specific laws of Malaysia and Indonesia. The relevant laws and regulations governing our Group and which are material to our operations are summarised below. The following does not purport to be an exhaustive description of all relevant laws and regulations of which our business is subject to. Relevant laws and regulations in Malaysia Governing laws and regulations relating to the petrochemical industry (i) PDA and ICA Our operations are subject to MITl’s purview and primarily governed by PDA and ICA. The PDA and Petroleum Regulations 1974 govern downstream operations including the manufacture and the marketing or distribution of petrochemical products. Under the PDA and Petroleum Regulations 1974, the Prime Minister’s permission (via the Secretary General, MITI) is required for the manufacture of petrochemical products from petroleum and the Prime Minister’s permission (via the Secretary-General, MDTCC) is required for the sale and distribution of petrochemical products from petroleum. As we manufacture and market or distribute petrochemical products, we have valid licences to carry out such activities as required under the PDA and Petroleum Regulations. Failure to maintain valid licences or failure to comply with any term or condition of these licences shall make us liable to a fine not exceeding RM1.0 million and/or to imprisonment for a term not exceeding five years. In the case of a continuing offence, we shall be liable to a further fine not exceeding RM 100,000 for each day or part of a day during which the offence continues. All machinery, tools, plant, buildings and other property or things used or intended to be used in the commission of the offence and any petroleum or its products shall be liable to forfeiture. Under the guidelines issued under the ICA, a licence is required for any manufacturing activity with shareholders’ funds of RM2.5 million and above or employing 75 or more full-time paid employees. A licence will must be obtained for the manufacture of specified products at each separate manufacturing site. The licences are issued by MITI subject to conditions of the licence. Since we carry out manufacturing activities, we have valid manufacturing licences for all our sites. Failure to maintain valid manufacturing licences would make us liable to a fine not exceeding RM2,000 or to imprisonment not exceeding six months and a further fine not exceeding RI\II1 ,000 for every day during which such default continues. 7. BUSINESS OF OUR GROUP (Cant’d) Other relevant Malaysian legislation (i) OSHA We are required to comply with all requirements of legislations related to health and safety as provided under the OSHA, and the regulations and codes of practice which have been approved. The promulgation of OSHA is based on self regulation concept with the primary responsibility of ensuring health and safety at the workplace lying with those who create the risks and work with the risks. In line with the requirements of OSHA, we have employed five competent persons to act as the safety and health officers to ensure due observance and promotion of a safe conduct of work at the place of work. We are also required to establish a safety and health committee under the OSHA as we currently employ more than 40 employees. The general penalty under the OSHA provides that a person who by any act or omission contravenes any provision of the OSHA or any regulations made under the OSHA shall be guilty of an offence. Where no penalty is expressly provided, the person shall, on conviction, be liable to a fine not exceeding RM10,000 and/or to imprisonment for a term not exceeding one year. In the case of a continuing offence, the person shall be liable to a fine not exceeding RM1 ,000 for every day or part of a day during which the offence continues after conviction. (ii) FMA Other written law relating to occupational health and safety which is also applicable to us is contained in the FMA. Under the FMA, we have a duty to ensure that the health, safety and welfare in relation to our employees and workplace are maintained, including ensuring that the machinery used in our operations possess the relevant certificate of fitness, the necessary inspection of the machineries are carried out upon their installation and registered accordingly. The FMA provides for different penalties for the various offences and breaches committed under the FMA. Depending on the severity and type of offences and breaches committed, the penalties imposed under the FMA varies in the imposition of a fine of up to RM250,000 and/or imprisonment for a term not exceeding five years and may be subject to a further fine up to RM2,000 for each day or part of a day during which the offence continues after the first day in respect of which the conviction is recorded. (iii) Environmental Quality Act, 1974 The EQA restricts pollution of the atmosphere, noise pollution, pollution of the soil, pollution of inland waters without a licence, prohibits the discharge of oil into Malaysia waters, discharge of wastes into Malaysian waters without a licence and prohibits open burning. If we fail to adhere to provisions of the EQA or any regulations made under it, any person who at the time of the commission of an offence was a director, chief executive officer, manager or other similar officer of our Group would be deemed to be guilty of that offence. For example, where a person, unless licensed, deposits any environmentally hazardous substances, pollutants or wastes into any inland waters, that person will be guilty of an offence and liable to a fine not exceeding RM1 00 ,000 and/or to imprisonment for a period not exceeding five years and to a further fine not exceeding RIVl1 ,000 a day for every day that the offence continues after the Director General of Environmental Quality has served a notice on him requiring him to cease the act. 138
7. BUSINESS OF OUR GROUP (Cont’d) Relevant laws and regulations in Indonesia (i) Occupational safety health Law and Regulation The Government of Indonesia requires all organisations employing more than 100 workers or organisations having a high potential risk to implement its Occupational Safety and Health (“OSH”) Management System in accordance to Government Regulation No. 50 of 2012 on OSH Management System Implementation and Law No. 1 of 1970 on Work Safety. The implementation of OSH Management System is audited by a third party appointed by the Ministry of Manpower. There are three categories of OSH implementation, with the most advanced stage having 166 elements/regulation to be complied with by the company to obtain a fulfillment compliance. Failure to implement OSH Management may result in fines for the chief of the organisation of up to IDR100,000 (equivalent to RM32.4) and imprisonment for a maximum of three months. (ii) Environmental regulation law and Regulation Environmental regulations related to pollution control, Documents for Environmental Aspect Impact Analysis, Documents for Environmental Control, Importation and Utilisation of Hazardous Material and Waste, and Reporting System are strictly monitored by the Indonesian government under Law No. 32 of 2009 on Environment Protection and Management (“Environmental Law”). According to the Environmental Law, any party conducting any business and/or activity that may have a substantial impact on the environment is required to obtain an Environmental Impact Assessment (“AMDAL”). Examples of “substantial and important environmental impact” include: (i) where a change in topography occurs; (ii) where the exploitation of natural resources is involved (whether renewable or non­renewable); (iii) where there is a potential for pollution or environmental damage, as well the degradation of natural resources; (iv) where there is a potential impact on the natural environment, man-made environment or socio-cultural environment; (v) where resources and/or nature conservation areas are affected; (vi) where the introduction of a new species of flora, fauna or microorganism is involved; (vii) where the production and use of biological and non-biological materials occurs; (viii) where the application of technology has a potentially significant effect on the environment; and (ix) where the activities entail a high level risk and/or affect state security. Where an AMDAL is not required, a company must prepare an Environmental Management Plan and Environmental lVIonitoring Plan (Upaya Pengelolaan Lingkungan Hidup dan Upaya Pemantauan Lingkungan Hidup or “UKL-UPL”). If the business and/or activity does not require a UKL-UPL, the company is required to provide a Statement Letter of Environmental Management and Monitoring (Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan Hidup). Further, the Environmental Law and Government Regulation No. 27 of 2012 on Environmental Permits stipulate that all business sectors required to obtain an AMDAL and UKL-UPL shall obtain an Environmental Licence, by the State Minister of Environment Affairs, governor, or mayor/regent (in accordance with their respective areas of jurisdiction). 7. BUSINESS OF OUR GROUP (Cont’d) Remedial and preventative measures and sanctions (such as the obligation to rehabilitate tailings areas, the imposition of substantial criminal penalties and fines and the cancellation of approvals) may be imposed to remedy or prevent pollution caused by operations. The sanctions range from one to 15 years of imprisonment, applicable to the management of the relevant company, and/or fines ranging from IDR500.0 million (equivalent to RMO.16 million) to IDR15.0 billion (equivalent to RIVl4.9 million). A fine may be imposed in lieu of performance of an obligation to rehabilitate damaged areas. The Environmental Law also requires licencing of all waste disposal. Waste disposal may only be conducted in specified locations determined by the State Minister of Environmental Affairs. (iii) Labour law Law No. 13 of 2003 on Employment imposes an obligation on each organisation to, amongst others, provide proper wages and a benefit system, the freedom for employees to establish a or join a union, insurance for workers, training systems, permits for expatriates and a proper termination of employment process. Non­compliance with labour laws may lead to administrative sanctions and/or a fine ranging from IDR5 million (RM1 ,620.0) to IDR500 million (equivalent to RMO.16 million), and/or imprisonment of chief of the organisation for at least one year. (iv) Energy law and regulation In accordance with Law NO.3 of 2014 on Industry and Government Regulation No. 70 of 2009 on Energy Conservation, any organisation utilising an energy amount equal to or more than 6,000 tonnes of oil per year is required to maintain an energy manager and develop an energy conservation programme to reduce energy consumption, conduct periodic energy audits, implement any recommendations from such audits and report the implementation energy conservation programme to the Ministry of Energy and Mineral Resource of the Republic of Indonesia. Failure to do so will result in a written warning, fine, announcement in the media and/or reduction in the organisation’s energy supply from the government, including a reduction in electricity and natural gas supplies. 7.15 EMPLOYEES As at the LPD, we employ a total of 1,419 full-time employees in Malaysia and Indonesia. The following table sets out the number of our employees in Malaysia and Indonesia by job function as of the dates indicated: As at 31 December As at LPD Function 2014 2015 2016 Management and Professional 98 101 103 108 Technical and Supervisory 275 285 302 304 Executive (Support Function) 167 161 164 161 Skilled Technician 594 608 609 611 Semi-Skill and Clerical 258 240 232 235 1,392 1,395 1,410 1,419Total
7. BUSINESS OF OUR GROUP (Cont’d) Breakdown by geography The following table illustrates the breakdown of the number of our employees by geography as of the dates indicated: As at 31 December  As at LPD  Location  2014  2015  2016  Malaysia  1,054  1,048  1,066  1,075  Indonesia  338  347  344  344  Total  —–:—=–::­1,392===;…””.­ 1,395  1,410  1,419
Breakdown ofemployees in Malaysia by level of experience The following table illustrates the breakdown of the number of our employees in Malaysia by level of experience as at the LPD: Experience Level 15 years 5-<10 10-<15 and
Job Category < 5 years years years above Total Vice Presidents & Directors 0 0 10 14 24 Managers 0 8 20 26 54 Engineers & Executives 145 68 23 111 347 Skilled Technician 214 210 57 169 650 Total 359 286 110 320 1,075 33 27 10 30100Percentage (%)
Our Human Resource Department provides a structured approach for the training and development of our employees. We aim to link the capabilities required to implement our business strategies to individual training needs to ensure that the employees have the requisite skills and knowledge. We proVide a wide variety of training programmes utilising both external and internal resources to nurture professional talents. Training also comes in the form of coaching and mentoring, on-the-job training, job enhancement and job rotation. In addition, we provide development initiatives to nurture talent throL1gh apprenticeship programmes and tertiary or university scholarship programmes for students in relevant fields of stUdy, who will then join our company on graduation. Our employees attended the following training programmes in 2016: • Safety and Environmental System Training;
• Job Skill (Technical);
• Job Skill (Business Function);
• Leadership Development;
• Soft Skill and Personal Development;
• Competent Person Development Programme;
• Quality System Compliance; and
• New Hire Training.

For our training programmes and proposed training programmes in 2017, key focus areas include the following for different employee target groups: • Leadership and people management skills;
• Performance and disciple management;
• Job skill improvements;
• Safety and health training for compliance and improvement of awareness;
• Soft skills and competencies development; and
• Competent person development to meet regulation requirements.

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7. BUSINESS OF OUR GROUP (Cont’d) Labour relations We believe we have a good relationship with our employees. In 2016, we had a low attrition rate of 3.4% in Malaysia and 1.3% in Indonesia. We constantly seek to promote good employee relations by holding regular town hall meetings and dialogues. We have a social committee which organises healthcare talks and programmes, and sports and recreational activities on a regular basis. We also have in place organised initiatives to promote, develop and maintain communication and consultation among all level of employees, encourage the mutual exchange of information relating to employee relations and welfare, and facilitate the resolution of employee’s issues between employees and the company. As at the LPD, none of our employees in Malaysia was a member of any union. 90% of our employees in Indonesia are members of the union Serikat Pekerja TITAN. There has not, however, been any industrial dispute involving our employees in either Malaysia or Indonesia for the past three years. Joint Communication Consultation In Malaysia, we set up our Joint Communication Consultation (“JCC”) in 2003 to serve as a platform for employees to raise their concerns and requests. The key objectives of our JCC are to promote and maintain communication and consultation among all levels of employees, encourage and secure the mutual exchange of information on employer-employee relations and employee welfare, and facilitate the resolution of employees’ issues between the employees and the company. Our JCC committee is chaired by the Senior Vice President of Human Resources and comprises 25 elected and eight appointed members across different employment functions and levels. Our JCC conducts monthly meetings attended by an external advisor, an industrial relations lawyer, issues discussed include employee welfare such as compensation and benefits, sport and recreation, and health and safety. Remuneration policy Our remuneration policy is characterised by our company values, which aims to provide a link between performance and reward. The result is a comprehensive and competitive benefit package which seeks to commensurate our employees’ pay with the value of personal and family benefits. It also serves our talent retention strategy. Our compensation includes employees’ base salary, living support allowance, incentives and other benefits. In addition, we reward employees by providing cross-training and career development opportunities. We provide comprehensive health and hospitalisation insurance covers for all employees. 7. BUSINESS OF OUR GROUP (Cont’d) 7.16 INSURANCE Our significant insurance policies for on-going operations include an industrial all-risks property damage policy (including machinery breakdown and business interruption) for both our facilities in Malaysia and Indonesia. Our policy has a combined single loss limit in the amount of USD1.05 billion (equivalent to RM4.5 billion) and USD400.0 million (equivalent to RM1 ,724.2 million) per occurrence respectively, comprehensive general third party liability in the amount of USD50 million (equivalent to RM215.5 million) each for Malaysia and Indonesia, charterer’s legal liability in the amount of USD10.0 million (equivalent to RM43.1 million) for Malaysia, port operators’ legal liability in the amount of USD25.0 million for Malaysia (equivalent to RM1 07.8 million), and a further excess liability coverage of USD50.0 million (equivalent to RM215.5 million) for Malaysia, directors’ and officers’ liability in the amount of RM1 00.0 million effective 3 June 2017, marine open cover policy in the amount of RM250.0 million for lVIalaysia and Indonesia, as well as comprehensive motor policies. In addition, as a result of the terrorist attacks of 11 September 2001 and other events, our insurance carriers have created exclusions for losses resulting from terrorism from our “all risk” property insurance policies. While separate terrorism insurance coverage is available, premiums for this type of coverage are expensive, especially for chemical facilities, and the policies are subject to high deductibles. Available terrorism coverage typically excludes coverage for losses from acts of foreign governments as well as nuclear, biological and chemical attacks. We have determined that it is not economically prudent to obtain additional terrorism insurance, especially given the significant risks that are not covered by such insurance. Our insurance policies do not cover any penalties or fines or other payments made to the Government. Our insurance coverage is in line with industry standards. As at the LPD, we have one outstanding claim amounting to USD17.0 million (equivalent to RM73.3 million) (Property Damage amounting to USD8.9 million (equivalent to RM38.4 million) and Business Interruption amounting to USD8.1 million (equivalent to RM34.9 million)) under our industrial all-risks policy for the damage caused to gas turbine 21, which occurred on 4 May 2016. 7.17 PROPERTIES Our operational facilities include 14 plants over two sites in Malaysia (one site in Pasir Gudang and one site in Tanjung Langsat) and one site in Merak, Cilegon, Banten Province, Indonesia. The following table sets out the number of our plants and production facilities in terms of land and building as at 31 December 2016. Net Book Net Book Value Value as at Area as at 31 Dec 2016 31 Dec 2016 Tenure Lease Expiry Location Existing use (Acre) (USD million) (RM million) (Years) Date Pasir Gudang (4 Production plant 122 31 141 60 2 leases expiring leases) in 2051 2 leases expiring in 2050 Tanjung Langsat Production plant 100 22 99 60 2061 Pasir Gudang Tank farm 22 1 6 36 2052 Pasir Gudang Vacant land 65 6 26 30 2041 Pasir Gudang Vacant land lease back 22 1 4 30 2036 to Johor Port Authority Total (Malaysia) 331 61 276 Indonesia Production/housing 202 19 84 20-30 Land is owned by area/vacant land LCTN Total (Malaysia and Indonesia) 533 80 360 7. BUSINESS OF OUR GROUP (Cont’d) In addition, we expect to commence commercial operations of the TE3 Project and PP3 Project in the second half of 2017 and the second half of 2018, respectively. The US Shale Gas Project is expected to be operational in the second half of 2019. For more detailed information, please refer to Section 7.6.8 of this Prospectus. In addition to our operational facilities, we also have a corporate office in Kuala Lumpur and a corporate office in Jakarta, and four sales offices across each of Johor Bahru, Kuala Lumpur, Penang and Jakarta. The map below shows the location of our plants and offices:
<i) Corporate Office • Kuala Lumpur
• Jakarta

• Plant • Johor Bahru
• MeraK (PEl

A Sales office Domestic -Johor Bahru -Kuala Lumpur -Penang -JaKarta

 

 

 

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