LCY 2011 LCY CHEMICAL CORP.Corporate Social Responsibility Report

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Editing Principles

LCY CHEMICAL CORP. has long devoted itself to developing environmental health and safety systems, and has always applauded actions of Responsible Care being carried out within the chemical industry, and participated in social and cultural development and community actions. In order to communicate with the majority of stakeholders from a broader perspective regarding our long-term commitment to corporate social responsibility (CSR), as well as our practice and performance results, in 2012, LCY CHEMICAL CORP. for the first time, published its CSR Report publicly, in which business activities along with economic, social, and environmental projects were stated and communicated with the general public as well as the stakeholders of LCY CHEMICAL CORP.

In the 2011 “LCY CHEMICAL CORP. CSR Report”, our gradual improvements and achievements in sustainable development are presented. It is our hope that readers will find in our CSR Report the actions and events we have participated in and our efforts devoted to green tech innovation, system management, and the social responsibilities of a chemical corporation (including safety and disaster prevention, labor safety and health education, environmental conservation, and chemicals management).

In order for more stakeholders to learn about our CSR performance, and taking environmentally friendly actions into consideration, this report is also available in PDF format. You can download our 2011 “LCY CHEMICAL CORP. CSR Report” from the Internet at http://www.lcygroup.com/en/p4-she.asp

Reporting Period This Report covers activities of the 2011 fiscal year (from Jan 1st to Dec 31st, 2011). Some projects may be dated earlier from 2009 to 2010 in order to offer readers more complete information.

Scope of Information This Report covers all sites under LCY CHEMICAL CORP. in Taiwan (including Taipei Head Office, Kaohsiung Terminal Station, Kaohsiung Site, Siaogang Site, Linyuan Site, and Ta-she Site).

ReferencesSustainable development reporting guidelines (version G3.1) application level B+, Global ReportingInitiative (GRI)AA 1000 (2008) Type One, Moderate Level This Report has been certified by SGS-Taiwan as conclusive evidence and meets the above mentionedstandards.

Publishing DateFirst issue: August 2012Next issue (scheduled): August 2014

Contact InformationLCY CHEMICAL CORP.Address : (Chang-De Building) 4F, No.83, Sec. 4, Bade Rd., Taipei City 105, Taiwan (R.O.C.)Tel : +886-2-2763-1611 Email address : lcy@lcygroup.comOfficial Website : http://www.lcygroup.com

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Message from the Chairman

My greetings to all readers of the first publication of “LCY CHEMICAL CORP. Corporate Social Responsibility (CSR) Report”!

Having been established for almost half a century, LCY CHEMICAL CORP. has become a multi-national enterprise with consolidated revenue of nearly NTD 45 billion through operational strategies, including expansion of core businesses in energy and petrochemical, development of electronic chemical products and making headway into the solar energy sector. We constantly mull over and keep in mind the issue of how to help stimulate and promote local industries while benefiting the general public through industrial upgrade and development.

It is our goal to establish a world-class enterprise in Taiwan that offers green-tech, innovative and differentiated products to distinguish LCY CHEMICAL CORP. as a world renowned sustainable enterprise with “innovation DNA.” Over the years, LCY CHEMICAL CORP. has been paying close attention to global energy issues and discerning industrial trends and risks. We actively promote high-end petrochemical products and focus on seeking innovative ideas amongst ourselves and our chemical products. We employ advanced technologies to produce eco-friendly and high-quality products, and strive towards creating high value-added specialty chemicals.

Through the continuous upgrade of our core business in the chemical sector and extending into green energy business, we strive to gain better profits for the corporation while providing our society and our country with a paradigm of forward-looking development and creating more job opportunity for the industry. These are what LCY CHEMICAL CORP. see as our responsibilities to the society.

Besides developing relevant materials and ameliorating techniques, we also put our focus on low pollution and high added-value products. Innovation in research and development is highly encouraged to support the development of high-tech materials. I believe that through continuous innovation, an enterprise will never stop growing. With every breakthrough, the whole company, working as a team can surpass its limits. This is how an enterprise maintains its competitive edge while developing towards sustainable operations.

In 2011, we announced the establishment of a Corporate R&D Center at the Kaohsiung Site and plan to recruit over 500 R&D personnel in various specialties to join us in new technology R&D in the areas of solar energy, biomass, and other green energy. When the R&D Center starts operation in 2012, our R&D expenditure is expected to increase by NTD 400 to 500 million a year. We believe that our investment in R&D will bring opportunities for sustainable growth and business upgrades.

We understand that high-value business is one of the focuses in business development; we also recognize profoundly the importance of fostering R&D talents and believe that people are vital assets of the corporation. Thus, we recruit employees possessing the merits of integrity, innovation, teamwork, and leadership and see honesty as the first principle among them all. This is because we believe that when we work with our clients or suppliers, integrity and honesty are the keys to sustainable relationship development.

In order to take better care of our employees, we work assiduously to provide them with a healthy and safe working environment through introducing an international system for environmental safety and health standards. Furthermore, we require the same environmental-friendly, healthy and safe processes during operation. Through inspection and audit mechanisms, we work systematically with our suppliers to bring about environmentally friendly and low carbon products. Through training programs, we encourage our employees to work on all kinds of possibilities and

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learn from small failures and brainstorms. We understand that the development of an enterprise is like a relay race, thus it requires every single function in the corporation, from management to each individual, to learn efficiently and adapt fast in order to face challenges from sustainable development.

In terms of social contribution, we have long devoted ourselves to nurturing young talented people in creativity training through contests held by the Bowei Lee Education Foundation. The Foundation offers scholarships to winners who successfully integrate creativity and chemical expertise in their projects. Through full range of challenges, it is our hope that merits like integrity, innovation, team work, and leadership can be driven into the new generation.

Looking towards the future, I am confident that LCY CHEMICAL CORP. will become a world-class multi-national enterprise in the ensuing 20 years. When people speak of chemical corporations in Asia, they will conjure up the name LCY CHEMICAL CORP. This is the challenge we are willing to undertake, and goal LCY CHEMICAL CORP. is bound to achieve. It is my pleasure to lead LCY CHEMICAL CORP. towards realizing such a dream and win the trust of the general public by fulfilling our social responsibilities to all.

Chairman of LCY CHEMICAL CORP.Bowei Lee

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CONTENTS

Green Product Development

Environmental Management

Toxic Chemicals Management

Site Disaster Management

Environmental Footprint Overview

Environmental Protection Expenditures

- - - - - - - - - - - - - - - - - 44

- - - - - - - - - - - - - - - - - 45

- - - - - - - - - - - - - - - - 46

- - - - - - - - - - - - - - - - - - 50

- - - - - - - - - - - - -51

- - - - - - - - - -54

Occupational Safety and Health Management

Emergency Response Mechanism

Hazard Types Analysis and Control

Supplier Management

- - - - - -57

- - - - - - - - - - - - - -60

- - - - - - - - - - - - 61

- - - - - - - - - - - - - - - - - - - - - -62

SocialContribution

Friendly LaborManagement

Relations

OccupationalSafety

and Health

GreenChemical

"Heritage and Innovation" Scholarship Program

New Generation Cultivation

Social Contribution Amount

SGS Assurance Statement

GRI G3.1 Index

- - - - 76

- - - - - - - - - - - - - - - - - -77

- - - - - - - - - - - -78

- - - - - - - - - - - - - - - - - 79

- - - - - - - - - - - - - - - - - - -80

- - - - - - - - - - - - - - - - - - - - - - - - - -82

Scholarship Program Award CereZmonyfor Excellent Students Prize

Well-found Welfare Measures

LCY Welfare Committee

Fair Treatment of Contracted Human Resources

Talent Cultivation and Evaluation

Employee Health Enhancement Plan

- - - - - - - - - - - - - - - - 68

- - - - - - - - - - - - - - - - - - - -69

- - - -70

- - - - - - - - - - - - - -70

- - - - - - - - - - - - - - - - -71

- - - - - - - - - - - -72

Potential Talent Assessment andEvaluation Mechanism

Corporate Vision and Mission

Products and Services

Operational Bases

Financial Performance Overview

Participation of External Organizations

Awards in 2011

- - - - - - - - - - - - - - - - 06

- - - - - - - - - - - - - - - - - - - - - -08

- - - - - - - - - - - - - - - - - - - - - - - - 12

- - - - - - - - - - - - - - 14

- - - - - - - - - - 15

- - - - - - - - - - - - - - - - - - - - - - - - - - 18

Editorial Principles

Statement from the Chairman

- - - - - - - - - - - - - - - - - - - - - - - -01

- - - - - - - - - - - - - - - - -02

Integrity of Governance

Risk Management

Financial Risks

Management Risks

Risks at Sites

Research and Development

CSR Management

CSR Key Issues

Communication with Stakeholders

- - - - - - - - - - - - - - - - - - - - -20

- - - - - - - - - - - - - - - - - - - - - - - - -22

- - - - - - - - - - - - - - - - - - - - - - - - - - 23

- - - - - - - - - - - - - - - - - - - - - - - - 24

- - - - - - - - - - - - - - - - - - - - - - - - - - - -25

- - - - - - - - - - - - - - - - - - 27

- - - - - - - - - - - - - - - - - - - - - - - - 28

- - - - - - - - - - - - - - - - - - - - - - - - - -29

- - - - - - - - - - - - - 30

LCY CSRConcept

Energy andClimate Change

ResponsibleCare

- - - - - - - - - - - - - - -32

- - - - - - - - -33

- - - - - - - - - - - - - - - - - - 34

- - - - - - - - - - - - -35

- - - - - - - - - - - - - - - - - - - - - 36

GHG Emission Inventory Check

Products and Services Carbon Footprints

Climate Change Hazard Prevention

Energy Saving at Sites

Video Conference Encouragedfor Less Energy Usage

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Our vision is to become a world-class chemical corporation that offers exclusivity within the concept of eco-friendly and sustainable development. It is our mission to seek breakthroughs, adapt flexibly, and provide high-end quality products and services to suit the needs of our end user customers. With the passion we have for growth and development, we are confident in our ability to lead our clients into a win-win situation where our advanced operational model and complete manufacturing techniques will help create new values for all sectors of industry around the world.

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Established on November 6, 1965, LCY CHEMICAL CORP. produces petrochemical products that can be divided into 4 groups: Polypropylene (PP), Methanol, Solvent, and Thermoplastic Elastomers (TPE). Our products are used extensively in healthcare, industry, and home applications, and have created several benchmarks amongst peers within the chemical industry, including:

1. First solvent manufacturer in Taiwan 2. First polypropylene manufacturer in Taiwan 3. Largest thermoplastic elastomers (TPE) producer in the world, with over 400,000 tonnes of output per year 4. Second largest producer of pentaerythritol (PENTA) and paraformaldehyde (PARA) in the world 5. First polysilicon manufacturer in Taiwan, with its own dock and fleet equipped to assist production and operation

In the history of Taiwan’s economic development, chemical industry has been playing the role of driving industrial development by meeting the raw material demands of related industries. The emerging industries that the government has been promoting, including information, communication, consumer electronics, precision machinery, automation, advanced materials, specialty chemicals, pharmaceuticals, aerospace and pollution prevention, and control industries, are all closely related to the chemical industry. Therefore, LCY CHEMICAL CORP. has been playing an important role amongst them.

Currently, LCY CHEMICAL CORP. has 14 production sites, 42 production lines, 4 liaison offices, and 1 R&D Center, with over 1,300 employees around the world. LCY CHEMICAL CORP. has become one of the major players in the field of chemistry in Asia.

Beside the domestic market, our products have been exported around the world. We have long put effort into the research for innovative technologies and invested vast amounts of resources into research and development over the past 40 years. Other than enhancing the quality and service of the expertise we offer for our traditional products, we also keep in line with the industrial trends to develop products of high-added value.

We are proud of our corporate culture, where simplicity and modesty are encouraged. We listen to our clients and strive to meet their demands under the principles of sustainable development. We devote ourselves to maintaining a good corporate image along with careful risk management geared towards an enterprise of sustainability and prosperity.

Corporate Vision and MissionOur vision is to become a world-class chemical corporation that offers differentiated products within the concept of eco-friendly and sustainable development. It is our mission to seek breakthroughs, adapt flexibly, and provide high-end quality products and services to suit the needs of our end user customers. With the passion we have for growth and development, we are confidant in our ability to lead our clients into a win-win situation where our advanced operational model and comprehensive manufacturing knowhows will help create new values for all sectors of industry around the world.

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Event

The second TPE site at Kaohsiung Siaogang Site began production

Kaohsiung Linyuan Site obtained ISO 14001

Reinvestment Zhenjiang LCY General Chemical Co., Ltd. began production of Methanol

downstream series and completed the first phase investment plan for chemical storage

Acquired Polimeri Europa S.P.A's TPE Site in Baytown , Texas , U.S.A.

Named the best 200 Enterprises in Asia for turnover under US$1 billion by Forbes Magazine

Established Huizhou LCY Rubber Corp.

Named to the Top 50 among 1,000 Enterprises in Taiwan in 2005 as one of the best corporation

worth investing by CommonWealth Magazine

Acquired 42.33% equity in Taiwan Polypropylene and became its largest shareholder

Named the Top 50 among 1,000 Enterprises in Taiwan in 2006 as one of the best corporation worth

investing in by CommonWealth Magazine

Merged into REMARKABLE TRADING LIMITED for reorganization and held 36.02% equity in

Taiwan Polypropylene.

Established Taiwan Polysilicon Corp. and started investing in solar energy

Started investing in Huizhou LCY Rubber Corp. TPE site with production over 100,000 tonnes per

year began production

Merged with Taiwan Polypropylene, in which LCY CHEMICAL CORP. was the surviving

company while Taiwan Polypropylene ceased to exist.

Huizhou LCY Rubber Corp. completed expansion on the second production line for TPE with over

100,000 tonnes of production per year

TPSi Corp. started producing polysilicon

Declared to have signed a cooperation letter of intent with New Zealand's clean energy technology

leader LanzaTech, fully committing to the development of biomass energy and chemicals

Completed trials of independent research and developed hydrogenated thermoplastic elastomer

(SEBS) products at hydrogenated thermoplastic elastomer (SEBS) at Kaohsiung Siaogang Site

with designed annual capacity of 45,000 tonnes.

Important Events of LCY CHEMICAL CORP.Year

2001

2002

2003

2005

2006

2007

2008

2009

2010

2011

2011

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Products and Services Our products can be divided into four groups Polypropylene (PP), Solvent and Thermoplastic Elastomers (TPE), and Methanol.

Polypropylene is a thermoplastic resin available in a wide range of formulations and can be used for various purposes by changing the formulations or adding additives.

The wide range of physical properties and relative ease of processing make polypropylene an extremely attractive material capable of competing with more expensive resins in a number of demanding applications.

PP Products of LCY CHEMICAL CORP.Homo-PP (Homopolymer):It consists solely of propylene sequences in the polymer chain.

Heterophasic (impact) copolymers:It is a product of a semi-crystalline matrix (homopolymer) with ethylene propylene (EPDM) dispersed within it, thus ameliorating its impact performances.

Random copolymers:It is a product with ethylene molecules added to the polymer chain at random locations. Random copolymers exhibit better optical properties and impact resistance, lower stiffness and melting point than homopolymer.

High heat resistance and high stiffness:With various filler types for different content, it offers a wide range of products, serving applications like A/C housings, dish dryers, fan casings, battery cases...etc.

Flame-retardant:This product exhibits flammability of UL94 V2 or V0. With different combinations of stiffness, impact, and flammability, it can be adopted for many applications such as the motor casing of air blowers, appliances, auto chargers...etc.

Impact modified product:It offers different levels of impact strength. It is widely used in ATVs, power tools, skates, and many other sports and leisure applications.

Glass-fiber reinforced compound:It features high stiffness and appropriate impact strength. It is widely used for motorcycles, baby strollers, and other structural parts.

Thermal forming:Disposable thermal bonded nonwovens for diaper and sanitary coverstock, medical and surgical uses, wipes, and filters.

Needle punching:Nonwoven floor and wall coverings, tufted carpets

Polypropylene (PP)

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It is our goal to reduce production cost and increase capacity of utilization to gain better competitiveness in the market. We aim to integrate the production line by developing downstream products and application, for example the manufacturing process of using acetone to produce MIBK. We have also established production bases in Zhenjiang with a production capacity of 50,000 tonnes per year to become the largest producer in the Asia. LCY CHEMICAL CORP. also works closely with strategic partners in this field to optimize capacity. We hold the key to sources of raw material and established the Ethanol AA process to reduce the cost of production of ethyl acetate (EAC), gaining LCY CHEMICAL CORP. its place in the competitive market. We are also flexible in modes of transport including barrels, Isotank or bulk. With Taiwan located close to Southeast Asia and Mainland China, the transportation risks can be well managed by shortening the delivery time. The isopropyl alcohol and ethyl acetate produced by LCY CHEMICAL CORP. have gained a reputation for high quality and are favored by Japanese and Indian pharmaceutical companies.

Thermoplastic elastomers (TPE) is mainly used in shoe soles, asphalt modifiers, roof leakage sealant, industrial supplies, electronic components, toys, medical equipment, and appliances. During the manufacturing process, after styrene/ butadiene/ catalyst/ coupling agent/cyclohexane have gone through the reactor and flash, expansion oil is added and SBS/ SIS is produced after dehydration. SBS/SIS is a special rubber containing the advantages of both plastic and rubber, allowing the manufacturing process to be simplified and downstream manufacturing cost to be reduced by injection molding. It can be used in shoe soles, asphalt modifiers, roof leakage sealants, industrial supplies, electronic components, toys, etc. With its special flowing characteristics, SBS/SIS is also used for adhesion including hot melt adhesive and hot melt pressure sensitive adhesive. The newly-developed SEBS contains plasticity and high elasticity. Furthermore, it can be manufactured without vulcanization. Its scraps can be re-used, allowing SEBS to be applied in producing a top-grade elastomer, such as in automobile parts, plastics modification, adhesives, lubricants tackifiers, filler wire and cable, sheath materials, etc. In 2010, the global market share of TPE produced in Taiwan was 15%, making the Island the NO.3 producer of synthetic rubber and LCY CHEMICAL CORP. the largest manufacturer. Due to the global trend of conservation, the recyclable characteristic of TPE has drawn attention from all over the world. Besides reducing the production cost by improving our manufacturing process, it is also our goal to enhance our level of technology to strengthen our competitiveness as the leading manufacturer, and put effort into developing unique products with higher added-value.

Methanol is widely used in the productions of pesticides, dyes, paints, synthetic fibers, etc. It can also be used in solvents, as well as industrial and domestic fuel.

In recent years, methanol has developed applications in advanced coatings, resins and other products of high added value. A portion of our Methanol series products are sold directly, while another portion are manufactured before being sold to local or foreign downstream industries. LCY CHEMICAL CORP. is the leading manufacturer of Methanol related products as we are the mid-level supplier within the chain of the petrochemical industry.

Solvent related products(including propylene series and

ethylene series)

Thermoplastic Elastomers (TPE)

Methanol related products

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Proportion of Product SalesPolypropylene related products

Solvent related products

TPE products

Methanol related products

Trading products and others

2009 2010 2011

51.48%

15.54%

19.56%

7.53%

5.89%

55.82%

18.77%

1.30%

7.64%

16.47%

2.92%

7.49%

12.87%

18.27%58.45%

QUALITY ASSURANCE

SAFETY FIRST

CUSTOMER CONFIDENCE

Quality Policy

We are committed to maintaining safety in all manufacturing, storage and transportation processes by meeting or exceeding legal standards. With strict scientific methods of management, it is our first priority to secure a safe working environment where our advanced production technology provides a best quality guarantee, enabling our products and services to win the trust of out clients.

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Sales Region and Market Share

Main Product Main Domains Sales Region Market Share

Formaldehyde Plywood and urea plastic industry, textile resins, melamine resin industry

Taiwan, Southeast Asia, Mainland China

28.0%

Paraformaldehyde Amino resins industry, textile and resin industryTaiwan, Southeast Asia, Mainland China

51.0%

Iso-propyl alcohol Nitrocellulose, synthetic resin, electronics cleaning, pesticide industry

Taiwan, Southeast Asia, India, Pakistan, Europe, USA, Japan, South Korea, Mainland China

60.0%

AcetoneAcrylic resin raw material industry, acetylene absorbent CCL Industry

Taiwan, Southeast Asia, Mainland China

4.5%

MIBK Ink, paint industry, antioxidants manufacturing Taiwan, Southeast Asia, Mainland China, Japan, USA, Europe

97.0%

Acetaldehyde Downstream of petrochemical industry Taiwan %0.001

Ethyl acetate Tape, paint and coatings industry, the synthetic leather industry

Taiwan, Southeast Asia, Mainland China, Japan

53.0%

Pentaerythritol Paint, industrial tetranitrate, absorbent, industrial, fire protection materials, PVC stabilizers

All over the world, Taiwan

Sodium acetate Leather auxiliaries Taiwan, Southeast Asia, Mainland China

70.0%

Thermoplastic Elastomers (TPE)

Soles, asphalt modifier, leak-proof roof, industrial supplies, electronic components, toys, medical devices, appliances

All over the world, Taiwan

Polypropylene (PP)

Food containers, pipes, packaging materials, medical equipment, household goods, ribbon, fabric, carpet, appliances, vehicle parts, baby stroller parts

Taiwan, Southeast Asia, Mainland China, Middle-East

30.0%

Liquefied petroleum gas

Gas stations, domestic fuel, industrial fuel Taiwan %5.6

Sales Proportion of All ProductsMain product 2009 2010 2011

%54.85 %28.55%84.15 stcudorp detaler enelyporpyloP

%72.81 %77.81%45.51 stcudorp detaler tnevloS

%78.21 %74.61%65.91 stcudorp EPT

%94.7 %46.7%35.7 stcudorp detaler lonahteM

%29.2 %03.1%98.5 srehto dna stcudorp gnidarT

%00.001 %00.001%00.001 latoT

70.0%

50.0%

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Operational Bases

Operational Bases in Taiwan Kaohsiung Site is located in the Kaohsiung Linhai Industrial Zone and produces formaldehyde, poly formaldehyde,

hexamine, all types of synthetic resin, pentaerythritol, and sodium acetate.

Ta-she Site is in Kaohsiung Ta-she Industrial Park and produces polypropylene, polypropylene composites, and

polypropylene fiber.

Linyuan Site was founded in 1979 and is located in Kaohsiung Linyuan petrochemical industrial zone with 9.4

hectares of total site area. Its main functions are to 1. Produce chemicals for industrial use including Isopropyl

alcohol, acetone, methyl isobutyl ketone, acetaldehyde, and ethyl acetate. 2. Produce Isopropyl alcohol and acetone

for electronic use. 3. LPG repackaging.

Siaogang Site is located in Koahsiung Siaogang District, producing thermoplastic elastomers (TPE).

Kaohsiung Terminal Station. Established in 1979, is located in Cianjhen District with total area of 28,262M . Its main

functions are to 1. Provide a port for the import and export of chemical raw materials and products. 2. Execute rental

operations for the warehouses and tanks. Kaohsiung Terminal Station has 57 stainless steel and carbon steel tanks

including special tanks offering bonded storage, insulation, nitrogen seal, condensation, and watering features. There

are also bulk and bottled equipment available for oil filling truck and drum shipping. The station is located near Pier

No. 57 and 58 of Kaohsiung Harbor, where chemical ships over 10,000 tonnes can dock. Special pipelines are

implemented in the piers, making it convenient for the import or export of all types of specialized chemical materials

or products.

Ta-she, Koahisung Polypropylene

Kaohsiung Copper foil

Linyuan, Koahsiung Solvent

Linyuan, Koahsiung ElectronicChemicals

Kaohsiung Menthol and derivatives

Siaogang, Koahsiung TPE

Kaohsiung Terminal Station, Storage &Transfer Station

Zhenjiang, ChinaFormaldehyde, Paraformaldehyde, MIBK

Huizhou, China TPE

Pingtung Barrel

Pingtung Polysilicon

Shanghai, China Branch Office

Taipei Head Office

Hong Kong, China Branch Office

Head Office and Branch Offices

Manufaturing Site and HarborStorage & Tranfer Station

R & D Center

Tokyo, Japan Branch Office

Nanzhi, Koahsiung R&D Center

Baytown, US TPEQatar Menthol, MTBE

Zhenjiang, China Harbor Storage &Tranfer Station

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Board of Shareholders

Board of Directors

Chairperson

Supervisors

General Manager

Remuneration Committee

Auditing

General Manager’s Office

Polypropylene Dept.

Methanol &

Solvents Dept.

Rubber D

ept.

Environmental R

isk M

anagement D

ept.

Procurement D

ept.

Treasury

Hum

an Resource D

ept.

Warehouse D

ept. Management & Planning Dept

Energy Dept.

Secretariat

R&

D D

ept.

Organization Chart

Department Duties

Secretariat Responsible for organizing meetings of the Board of Directors, as well as administration work related to the meetings.

Remuneration Committee Regularly review the annual and long-term performance goals of the directors, supervisors, and managers. Review wage remuneration policies, systems, standards, and structures.

Auditing In charge of internal auditing of all business departments in the corporation.

Management & Planning Dept.

Plan and review domestic and international business development and investment plans

Treasury Responsible for accounting, tax, capital allocation, cashier operations, information systems management, and maintenance operations

Human Resources Dept.

Responsible for building a human resources management system and a system for overall manpower planning and development. In charge of establishing and maintaining staff training and communication systems. Responsible for payroll, employee benefits and welfare, retirement, severance payment, etc.

Environmental Risk Management Dept.

Establish the risk management policy of the corporation to minimize risks and maximize interests. Ensure safety of the working environment for the best interest of the employer.

R&D Dept. Provide long-term technology development strategy and planning; research and development of new products, new processes, and process improvement of existing products.

Procurement & Logistics Dept. In charge of procurement and logistics.

Methanol, Solvents, Rubber, Polypropylene, Energy and Warehousing Dept.

Product market analysis survey, business goals implementation, customer relationship maintenance and development of new markets, customer credit investigation, product sales, overdue accounts management, and petrochemical storage tank rental business

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Affiliates

99%

Taiwan 1704

USA TAIWAN 100% TAIWAN 100% TAIWAN 63.78% BVI 100% BVI 100%

Subsidiary

TAIWAN 62.63%

USA 1%

17040010LCY ELASTOMER

MANAGEMENT LLC

17040009LCY ELASTOMERS LP

17040002LCY INVESTMEN

CORP

17040001LCY CHEMICAL

CORP.

17040008LCY ELECTRONICS

CO., LTD

17040004LCY WAREHOUSING& STORAGE CORP

17040023LCY LANZA

TECH CO., LTD(2008/09)

17040011LCY ELSATOMERS

CORP(2005/09)

17040012HUEIZHOU LCY

RUBBER CO., LTD(2006/01)

17040013LCY MIDDLE EAST

CORP(2006/02)

17040018LCY POLYMERS

CORP(2007/05)

17040003LEE CHANG YUNG

INVESTMENTINCORPORATED

17040021LEE CHANG YUNG

DEPARTMENT

17040005ZHENJIANG LCY

PETROCHEMICALCO., LTD

17040006ZHENJUANG

PETROCHEMICALSTORAGE CO., LTD

17040007LCYT

HOLDINGS CORP

17040022HUEILI INVESTMENT

CO., LTD(2008/04)

17040020TAIWAN

POLYSILICONCORP(2007/09)

1704LCY CHEMICAL CORP.

42.13%BVI 100% BVI 100% BVI 100% BVI

China 100%

Hong Kong 100%China 100%

China 100%

China 100%

BVI 100%

Sub-subsidiary

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Financial Performance at a Glance The LCY CHEMICAL CORP. management and financial policies aim to increase its long-term investment value for investors.

Our revenue in 2011 amounted to NTD 30,281,810,000 as compared to NTD 28,649,137,000 in 2010. Our net income in 2011 was NTD 2,484,799,000, which was less than the NTD 3,147,211,000 of the previous year; our earnings per share in 2011 was NTD 3.37.

In recent years, we have devoted our rich experience in chemical technology, engineering capability, and large-scale manufacturing to the new energy industry in the hope of creating long-term investment value for our shareholders in a win-win situation of sustainable development. These investments inevitably caused relative changes in our profit profile as return on equity dropped to 12.38% in 2011. However, it is our hope that return on equity will maintain double-digit performance in the long term to maintain a considerable level of dividend and dividend rate.

Dividend Distribution Amount Unit: NTD 2009 2010 2011

73.325.472.4 erahs rep sgninraE06.253.300.3 sdnedivid hsaC

%83.21%74.81%08.81 ytiuqe no nruteR

Operating Performance Unit: NTD 1,000 2009 2010 2011

018,182,03 731,946,82046,181,52 emocni gnitarepOOperating costs and expenses 22,869,628 26,762,867 29,166,541

962,511,1 072,688,1210,213,2 tiforp gnitarepO757,642,2 759,257,1297,335,1 emocni gnitarepo-noN

Non-operating expenses and losses 313,111 77,849 135,047

979,622,3 873,165,3396,235,3 xat erofeb emocnI081,247 761,414936,785 esnepxe xat emocnI997,484,2 112,741,3450,549,2 emocni teN440,581,1 249,890,1894,969 lloryaP418 857596 )snosrep( seeyolpme fo rebmuN995,9 216,5896,71 tnemtsevni ytinummoC

15

Participation of External Organizations LCY CHEMICAL CORP. collaborates with influential non-governmental organizations, industrial associations and organizations and maintains good partnerships with them to promote R&D as well as information sharing within the industry. It is our hope to elevate the industry so the competitiveness and sustainable development of the chemical industry as a whole can be secured and enhanced.

Name of Organizations Held Positions Major Actions or Promoted Policies

Taiwan Responsible Care Association (TRCA)

Founding member Third, Fourth and Six Chair of the Council Second to sixth Chairman of the Executive Committee

Led Taiwan chemical industry to promote flagship program of international chemical industry in 1997, joined International Council of Chemical Associations (ICCA) as member of Responsible Care Leadership Group (RCLG)

Chemical Awareness and Emergency Response Association, Taiwan (CAER)

Founding member First and Second Chair of the Council

Formed national toxic chemical substance transport defense organization, covering 70% of Taiwan's toxic chemical substances. Held emergency personnel training under the auspice of the organization and provided quota for free training to encourage participation Coordinated the construction of disaster and ignition training ground with authorities.

Taiwan Association of Petrochemical Industry

Executive Director Sustainable Development Panel Convener Chief of Responsibility and Care Committee

Encouraged members to join the Committee. Promoted the flagship program for international chemical industry

Taiwan Chemical Technology Industry Association

Member of Council Encouraged members to join the Committee. Promoted the flagship program for international chemical industry

Other ogranization members includes:Association of Bio-based Material Industry (R&D Dept)、R&D Center for Membrane Technology,CYCU (R&D Dept) 、Taiwan Flat Panel Display Materials & Devices Association (Management & Planning Dept)、Grand-China IMA(Wu Ren-zhi)、Sino-Arabian Cultural & Economic Association (General Manager's Office)、Taipei City Young CEO's Organization (General Manager's Office)、Global Growth Companies (General Manager's Office)、Mont Jade Science & Technology Association of Taiwan (General Manager's Office)、IMPCA (General Manager's Office)、Association of Industry for Environmental Protection R.O.C. (General Manager's Office)、R.O.C.-U.S.A. Business Council (General Manager's Office)、Chinese International Economic Cooperation Association. (General Manager's Office)、The Third Wednesday Club (General Manager's Office)、Industrial Safety and Health Association (ISHA) of the R.O.C. (Taiwan) (Ta-she Site Construction Safety Dept)、Kaohsiung County Industrail Association (All Sites) 、Taiwan Synthetic Resins Manufacturers Association (Polypropylene Dept)、Taiwan Resource Recycling Industries Association (Methanol Solvent Dept)、Republic of China Publicly Issued Company Association (General Accounting Dept)、Taiwan Institute of Chemical Engineers (General Manager's Office)、Chinese Petroleum Society (General Manager's Office)、The Kaohsiung LinHai Industrail Park Association for Advancement (P/K Sites)、Kaohsiung Commerce & Trade Development Association (W Site) 、Kaohsiung Chamber of Industry (P/K Site ；LCY CHEMICAL CORP.)、Taiwan Accreditation Foundation(LPG Dept)

2011 External Organization Participation Total Investment NTD2,748,920

16

As a founding member of Taiwan Responsible Care Association (TRCA) and having served as its chairman and member

of its Executive Committee, we have led and promoted many important actions and policies for TRCA in the past 15 years

as follows:

In 1997, led Taiwan chemical industry to promote flagship program of international chemical industry, joined

International Council of Chemical Associations (ICCA) as member of Responsible Care Leadership Group (RCLG).

In 2004, represented TRCA in signing safety and health partnership with the Council of Labor Affairs to enhance

health and safety performance.

In 2005, formed Chemical Awareness and Emergency Response Association, Taiwan for emergency measures when

accidents occur during inland transportation of toxic chemicals.

In 2006, represented the chemical industry in Taiwan in signing the Global Charter of ICCA.

In 2010, became an observer of ICCA.

In 2011, promoted Global Product Strategy with ICCA Capacity Building Task Force in order to meet the goals of

Strategic Approach to International Chemicals Management, (SAICM) under the UN.

In 2012, in order to enhance the image of the petrochemical industry, collaborated with TamKang University on

“Countryside Project” by bringing chemical lab experiment to children in rural areas to enhance their knowledge.

Moreover, we are keen on organizing and promoting a network of prevention for transporting toxic chemicals across the

country. This network covers 70% of Taiwan’s toxic chemicals. We help train personnel under the organization and

provide a quota for free training to encourage participation. We also coordinate the construction of a disaster and fire

safety training site with the authorities.

17

Awards in 2011Site Project Name Award

1 All sites Healthy low-carbon LOHAS contest LOHAS Award from the Premier

2 Ta-she Site Kaohsiung enterprise energy performance assessment activities

Energy Saving Award

3 Ta-she Site Zero Accidents Award from Council of Labor Affairs Record of 400,000 working hours with zero accidents

4 Ta-she Site Ta-she Industrial Park safety and environmental monitoring

Certificate of Merit

5 Ta-she Site 2011 healthy workplace self-certification Certificate of Merit

6 Siaogang Site Kaohsiung enterprise energy performance assessment activities

Energy Saving Award

7 Siaogang Site 2011 healthy workplace self-certification Certificate of Merit

8 Siaogang Site Zero Accidents Award from Council of Labor Affairs Record of 400,000 working hours with zero accidents

9 Siaogang Site Performance recognition of occupational safety and health management system and institutions

Certificate of Merit

10 Kaohsiung Site Kaohsiung enterprise energy performance assessment activities

Energy Saving Award

11 Kaohsiung Site Ministry of Economic Affairs Bureau of Energy, energy-saving merit selection

Excellence Innovation Award for energy-saving elite

12 Kaohsiung Site 2011 healthy workplace self-certification Certificate of Merit

13 Copper Foil Site 2011 Enterprise industrial safety investment merit award

Certificate of Merit

14 Copper Foil Site 2011 healthy workplace self-certification Certificate of Merit

15 Linyuan Site Zero Accidents Award from Council of Labor Affairs Record of 400,000 working hours with zero accidents

16 Linyuan Site 2011 healthy workplace self-certification Awarded with Merit for tobacco and harmful substances control

17 Linyuan Site Kaohsiung citizens and enterprise power-saving water-saving contest

Second place for enterprise water saving

18 Kaohsiung Terminal StationKaohsiung Terminal Station

Kaohsiung Terminal Station

Kaohsiung Terminal Station

Kaohsiung enterprise energy performance assessment activities

Certificate of Merit

19 Carbon reduction actions logo Certificate of Merit for Enterprise in South region

20 2011 healthy workplace self-certification Awarded with Merit for tobacco and harmful substances control

21 Merit for fire management Certificate of Merit

22 Kaohsiung Site Ministry of Economic Affairs Industrial Development Bureau, merit of voluntary reduction of greenhouse effect

Corporate Award

18

LCY Chemical is committed to use resources more efficiently, to deliver value for our customers and stakeholders, to provide solutions to customers’ needs and to enhance the life quality of human beings through research and development of green chemical products and investment in renewable energy technologies to inject new energy to sustainable development.

LCY CSR Concept

19

Shareholders’ Meeting

SecretariatRemuneration Committee

Internal AuditingManagement Team

Board of Directors

LCY CSRConcept

The Structure of Board of Directors

LCY CHEMICAL CORP. Board of Directors Title Name Chairman of the Board Bowei Lee Director Representative from Fuju: Li Kun-Chih Director Representative from Fuju: Yang Sai-Fen Director Representative from Fuju: Li Ming-Kung Director Representative from Fuju: Wu Hsien-Chin Director Representative from Fuju: Wei Cheng-Cheng Director Representative from Fuju: Shih Tsung-Hsien Supervisor Representative from Lee Cheng Enterprise Co., Ltd: Chuang Hsun-Chia Supervisor Representative from Lee Cheng Enterprise Co., Ltd: Wang Kun-Tsan

Remarks: The LCY Board of Directors’ background information, educational backgrounds, positions in other companies, and attendance of Board meetings are released in our annual report. Please go to http://www.lcygroup.com for the annual report.

Governance Integrity LCY CHEMICAL CORP. understands the importance of operational transparency and corporate governance. Thus, the organization structure of the corporation is set and executed according to the Company Act, Securities and Exchange Act, and other relevant laws and regulations. Under this structure, we continue to enhance our management performance, secure the rights of investors and other stakeholders.

Board of Directors The Board of Directors is responsible for the supervision, appointment, and guidance of management; it is also responsible for the overall corporate operation. Furthermore, the Board of Directors ensures a well-rounded supervision and strengthens managerial capacity in an effort to maximize shareholder equity.

We have 7 seats on the Board of Directors, each voted on by shareholders. Among the Member of the Board, 6 are representatives of corporate directors from Fuju Corporation, of which, one is female. In addition, there are two supervisors on the board. Mr. Bowei Lee, the chairperson of the Board of Directors, is also the CEO of LCY CHEMICAL CORP. In 2011, there were 12 Board of Director meetings held.

Remunerations to board members are paid according to Article 27 of the LCY Charter, where board members and supervisors are awarded 1.5% of the annual pre-tax net income, signifying that remuneration benefits of the Board are in positive correlation with annual surplus. According to Article 30 of the LCY Charter, remuneration to directors and supervisors shall not exceed 0.5% of the surplus, so that most of the earnings can be distributed to shareholders.

20

LCY CSRConcept

Remuneration Committee To enhance the governance of LCY CHEMICAL CORP. and to keep in line with international standards, we established the remuneration committee in 2011. The committee regularly reviews annual and long-term performance goals and the remuneration policy, system, standards, and structure of the Directors, Supervisors, and Management Team. The reviews serve as an important basis to attract, encourage, and maintain talented employees, in hopes of maximizing benefits for our shareholders.

The main responsibilities of the remuneration committee are: 1. Establish and regularly review Director, Supervisor, and Management Team performance evaluation and

remuneration policy, system, standards, and structure. 2. Regularly evaluate and formulate salary compensation of Directors, Supervisors, and Management Team, and

submit recommendations to the Board of Directors for discussion. The management team under supervision is based on the applicable range of managers according to the Securities and Exchange Act benchmark. 3 members are appointed to the remuneration committee. To ensure the independence of the remuneration committee, member tenures are based on Article 6 of the Salary Remuneration Committees and the Exercise of Powers Regulation for Companies Listed in Stock Market or Office of the Business of Securities Dealers.

Financial Information Disclosure and Investor Communication The financial information of LCY CHEMICAL CORP. is published on the company website (http://www.lcygroup.com)to provide complete, up-to-date, and fair disclosure of financial information and corporate governance to the public. Stakeholders can download the shareholder’s annual reports, financial reports, all financial information, company governance charters, and information regarding stock prices and dividends. All information regarding our operation status and financial figures are complete, up-to-date, and transparent.

Shareholders can also contact us by telephone or email. In addition to answering questions in detail, we also respond to all suggestions made at the shareholder’s meetings. Besides providing the announcements for Taiwan Stock Exchange on time, LCY CHEMICAL CORP. was accredited Class A in information disclosure by the Securities & Futures Institute in 2010.

Other than financial information, in recent years, strategies for corporate sustainable development and corporate management potential risks and opportunities have become the focus of major investing parties around the world. LCY CHEMICAL CORP. has always been cognizant of communicating with our investors; therefore we used the Dow Jones Sustainability Index to evaluate LCY CHEMICAL CORP. While identifying our shortcomings, we poured efforts into improving these shortcomings and sought sustainable development to safeguard the value of our shareholders' long-term investment.

We provide convenient channels of communication for our shareholders and stakeholders. We have also established the spokesperson system and created a web forum for investors to provide feedbacks, so that communication and advice could be offered. The mechanisms for shareholders or employees to give advice or strategic planning are (1) shareholders can give their proposals through the shareholder’s meetings or through the company website or spokesperson; and (2) employees can propose their ideas.

21

LCY CSRConcept

Corporate Code of Conduct “Integrity” is the core value of LCY and all employee behaviors must meet the standards of this ethical principle.

In order to emphasize our strict anti-corruption regulations and requirements, we have developed an “Employee Conflict of Interest Regulation”. This Regulation is to be followed by all employees irrespective of position. Employees who violate the regulation will be penalized accordingly. Serious misconducts may result in dismissal.

We believe that the trust and respect of the public is earned through honesty in management and operation. Therefore, we have also developed a “Business Code of Conduct” that requires all employee activities to meet the highest standards. All employees are required to follow the code, view the code as a duty, and perform their job on behalf of the corporation accordingly.

Risk Management Responsible actions in strengthening corporate operation are to identify risks and implement risk management policies, in an effort to attain sustainable development by reducing possible risks.

Risk Management Organization Duties and Responsibilities

Board of Directors (including Auditing) 1. Establish risk management policy, structure and, culture. 2. Ensure the effectiveness of risk management and allocate

resources.

High-level management (CEO)

1. Execute risk management strategies set by the Board of Directors.

2. Coordinate inter-departmental risk management efforts and communication.

All management offices of the Head Office (Environmental Management and Risk

Department)

1. Compile results of risk management activities. 2. Assist and supervise risk management activities of affiliates. 3. Change risk categories depending on changes in the

environment and recommend risk taking methods. 4. Conduct performance evaluation and coordination following

risk adjustment.

Related Affiliates 1. Execute risk management activities. 2. Conduct self-evaluation of risk management activities.

22

LCY CSRConcept

Our risk management structure is divided into aspects of finance, auditing, legal, information, and investment with the following strategies of execution level:

Financial Risks1. Safe management of funds

Funds play an important role in the operation of a company. All operation schemes are related to funds. Ample liquidity or shortages may influence the operation of huge stakes, signifying the importance of efficient management of funds. The management of funds includes the monitoring and review of the following to achieve optimal benefit and safety control.

(1) Daily review of current funds and demands for funds for further capital allocation to avoid shortages of working capital which may lead to operational crisis.

(2) Monthly prediction of accounts receivable and accounts payable for better capital allocation. (3) Strengthen payment security by using SAP system direct transfer through electronic banking operations where

all levels of authorization are needed to access payment. (4) Plan appropriate bank line of credit to increase the depth and width of capital allocation, securing the safety of

capital allocation. (5) Establish internal control mechanisms with regular cash inventories and reconciliation of bank deposits. Audit

payment authorization level to enhance the security of fund management.

2. Foreign exchange risk management (1) Review foreign funds and demands for foreign funds for foreign exchange management and control. (2) Gather foreign exchange information as risk control basis to lower the risk of foreign exchange. (3) Establish management system to consolidate all fund bodies, accounts receivable and accounts payable related

to foreign exchange to avoid risk of foreign exchange. (4) In order to avoid risks due to foreign exchange rate differences, estimate the amount of foreign currency and

payment terms to offset foreign currency assets and foreign currency liabilities, achieving close-to-zero for all foreign currency bodies.

3. Property and assets management Asset management specialists and professional insurance brokers should work together to plan insurance of property and assets before choosing a suitable insurance company.

(1) Professional insurance brokers are to conduct site visits and produce “survey reports” which evaluate the operational risks of the sites and provide points of improvement for occupational safety. This report also serves as a reference when evaluating a suitable insurance company.

(2) Plan for staff to participate in occupational safety and environmental protection workshops and courses held by authorities.

(3) Review the expiration date of insured items to avoid gaps in insurance coverage.

23

LCY CSRConcept

Management Risks

1. AuditingPerform annual auditing according to self-assessed risk evaluation of the internal control system. Review the effectiveness of internal control system and execution, while assist the Board of Directors and the management level to understand the control operations for corporate risk management. Includes functions below:

Avoid conflict of interests Assist the Board of Directors and all departmental heads in understanding the effectiveness of the internal control system, including the design and execution of internal control.

2. Legal counseling In charge of legal risk evaluation and legal advice, which include contract audit procedures to assess the risks of contracts; based on internal system, proposals and execution regulations, provide legal advice and recommendations for litigation, mergers and acquisitions, intellectual property rights applications and management, and other matters. Share legal knowledge and information based on external seminars and news related to legal affairs. Write drafts and amendments to official corporate letters in order to lower the risk of legal affairs.

3. Information safety The information safety team works with the professional risk counseling team to plan and review information risk management covering the possible impact or all possible risks of IT operations, including natural disasters or government policy changes, internal procedure that may impact the product or service quality, IT organization and efficiency of the information center, improper authorization, intellectual property loss, supervision or legal control, etc. Reviewing and monitoring at all times is required to achieve optimal performance and safety.

(1) Safety risks: risks of malicious attacks from unauthorized persons to access, manipulate, or use information. (2) Availability risk: risks of limited access to information, application or system process failure due to human

error, mechanical breakdown, or natural disasters. (3) Effectiveness risk: risks of reduced business productivity or value due to systems, applications, personnel, or

organizational ineffectiveness. (4) Legal compliance risk: risks of information processing not meeting the requirements of regulations, IT or

business policies.

4. Investment risk (1) Asset allocation, management, and control according to the evaluation and review of asset distribution and

funding needs. (2) Utilize macro- and micro- economic information for investment or asset allocation, to lower the risks of

investment. (3) Calculate achieving time, payback, and acceptable risks based on investment goals, and screen for optimal

assets.(4) Establish a dynamic analysis adjustment system and regularly review assets in the investment portfolio.

Analyze and decide according to future overall economies and financial market trends if adjustment of the portfolio is to be made.

24

LCY CSRConcept

Risks at Sites LCY plays an important role in the petrochemical industry. all our production facilities operate under high temperature and pressure, and even minor negligence may lead to accidents involving leakage of combustible; furthermore, many manufacturing process require 24-hour non-stop operation. Therefore, internal risks at sites should not be underestimated. If a fire led to explosions, it will be difficult to extinguish such fire by aiming the fire extinguisher directly at the dangerous petrochemical substances. If such incident occurs, nearby residents might file complaints against the corporation or even organize protests, making such events even more difficult to resolve.

Furthermore, deriving problems may arise if harmful chemical substances are leaked. Such hazards may threaten the lives and properties of nearby factories and residents directly. Therefore, LCY has put great effort into the fire control system at each site and established a holistic fire management plan. In the case of fire, the plan can minimize damage, thus reducing any impact on corporate reputation.

In addition to enhancing fire control equipments at all sites to surpass the requirements set by government regulations, all sites are required to conduct emergency drills of single or complex scenarios. This is to strengthen the management system for basic safety of all manufacturing processes and facilities, and enhance high risk operation control and management over contract suppliers. The organization chart of the Environmental Risk Management Department is shown below.

Furthermore, we established an “Environmental Risk Management Department” registered under the Taipei CityGovernment Labor Inspection Department of Labor Bureau. The Environmental Risk Management Department is incharge of the Occupational Safety Department and Damage Department, each responsible for environmental risk man-agement and relevant technical engineering. They are in charge of overseeing the occupational safety andhealth offices at each site, which are responsible for the planning, supervision, and promotion of employee safety andhealth.

25

OccupationalSafety and

HealthDepartment

(Associate) Manager

SupervisorEngineerAssociate Engineer

Environmental RiskManagementDepartment

Loss ControlDepartment

Vice President, Director

(Associate) Manager

SupervisorEngineerAssociate Engineer

OccupationalSafety and

Health Office ofall Sites

SupervisorEngineerAssociate EngineerAssistant EngineerTechnician (Level 3-6)

Environmental Risk Management Structure

Performance appraisal

Resp

ect　

Understanding　Acceptance　Appreciation

Customer relationship management

Communication

Risk control

Management system mainte

nanc

e

Hazardidentification Industrial

safetyRisk

assessment

Losscontrol

Engineeringimprovement

Assetmanagement

Insurance

Business continuity planning

Emergency response planHealth care

Security

Environmentalprotection

Occupationalhealth

Riskmanagement

LCY CSRConcept

26

LCY CSRConcept

Research and Development To secure stable long-term growth, LCY CHEMICAL CORP. has set short- and long- term research and development strategies to achieve technology innovation and product diversity by recruiting talented people with expertise and increasing investment in research and development. Hopefully, the added-value of our products and services can be boosted to create market opportunities while increasing industry and human resource competitiveness.

Short-term Research and Development Long-term Research and Development

1. Enhance the reliability of facilities by implementingadvanced production technology. Continue manufacturing process modifications to increase performance and production efficiency in hopes of reducing product cost.

2. Incorporate and satisfy the core demands of clients. Implement internal and external customer service to effectively expand the market and win sales opportunities.

3. Provide complete product specifications and technology services to expand further into the global market of thermoplastic rubber.

4. Continue to develop relevant electronic chemical products to increase the proportion of customized services.

1. Planned training for employees; enhance internal management; and simplify operations to increase management efficiency.

2. Develop specialized chemical products to elevate manufacturing level and added-value of products.

3. Promote main products to the world and strive to become one of top three chemical engineering corporations in Asia, and gain unrivaled reputation in the chemical industry.

4. Develop advanced electronic chemical materials to synchronize with the developmental trends of the electronics industry. Create key materials of new technology and high added-value.

The research and development tasks we are carrying forward currently include DCPD purification manufacturing process development, SEBS manufacturing process modification and product development, continuous SEBS process development, SEB / PP composites product development, special high-priced chemicals process introduction and development, TPE production technology improvement and product development, PP production technology improvement and product development, SBS, SIS development of new products, PARA production technology improvement and development, Pentaerythritol production technology improvement and development. Our research and development results are as follows,

1. SEBS process and product development: Development of 2 specifications of SEBS9550／9551 Development of high hydrogenation process and catalyst removal process

2. Composite materials (aiming to develop the market for green material for wire and cable coating) Development of formulation and manufacturing process for flame retardants and composites (1) The Technology is owned by LCY CHEMICAL CORP. and can be adjusted according to customer

demands. (2) The technology is designed for our own materials, providing advantages in exclusivity. (3) Competitive in cost compared to products of the same-level in the market. (4) Potential for patent application due to technology novelty (5) Potential for massive production (6) Market potential is huge for eco-friendly wire and cable coatings

27

Economy

Operation risks Financial risks Purchase risks

Innovative R&D CorporateProspects

CSR Committee

Environment

Water resource Waste

Toxic substances Air pollutants Environmental

footprint

Community

LaborHuman right Community

Product responsibility

LCY CSRConcept

SEBS halogen-free flame retardant composites with two formulations verified by client’s combustion test (UL1581VW-1). Excellent physical properties that pass the heat and aging duration test (136℃，168hr) for cables and wires (The highest level at the temperature of 105 ℃). The formulation and manufacturing process is developed solely by LCY CHEMICAL CORP. with over 50% own material usage, bringing forth competitiveness in the market and potentials for massive production.

Investment in Research and Development Unit: NTD 1 million

2009 2010 2011 202 951911 D&R ni tnemtsevni rof eulaV282,03 946,82281,52 eunever latoT76.0 55.074.0 )%( oitaR

CSR Management We view discussion and management of CSR issues as the key in showing our commitment to corporate social responsibilities, including following corporate ethics, complying with regulations and guidelines, risk management, EHS, hazard prevention, employee health enhancement, and product responsibility. We seek an effective management system that can drive stable growth in CSR issues.

To establish and execute a management system that can be applied to all level of employees, LCY CHEMICAL CORP. set up a “CSR Management Committee”. Annual meetings for committee members are held to promote and fulfill our corporate social responsibilities. During the meeting, CSR challenges faced by LCY CHEMICAL CORP. are reviewed and discussed, to determine concepts worth promoting and focus on CSR efforts accordingly.

The chairperson of LCY CHEMICAL CORP. CSR Committee is our Chairman; other department heads act as committee members. The Committee is in charge of setting the course, strategy, and action plan of CSR, and passing the plan to each department for execution and feedback.

28

High

Low

Influ

ence

to c

orpo

rate

m

anag

emen

t

High Low Level of concern to parties of interest

IntegrityTalent cultivation

and social contribution

Green chemical industry

Energy and climate change

Toxic chemicals management

Transparent disclosure

EHS Community

meetings

Supply chainmanagement

LCY CSRConcept

Key CSR Issues Because our business comes into contact with many different stakeholders, including clients, suppliers, employees, investors and representatives from all fields, the media, and non-governmental organizations, LCY CHEMICAL CORP. believes in actively communicating with these stakeholders, to understand and communicate each party’s needs, demands, and issues.

During the publication of our first CSR Report, we identified LCY CHEMICAL CORP. CSR Issues of Concern through the following steps. With experts in related fields and support from all departments, we drafted a list with issues of concern from our stakeholders.

Step one: identifying issues Gather and collate relevant issues through interaction with stakeholders and discuss the responses from stakeholders during the operation process.

Step two: prioritizing concerns

Score each issue by “Effect on corporate management” and “Level of concern to stakeholders”. “Effect on corporate management” refers to the extent of effect on the management of LCY CHEMICAL CORP. and “Level of concern to stakeholders” refers to the effect on corporate image and business scope.

Step three: analyzing results The upper right corner of the Matrix for CSR Issues consists of priority issues we should respond to and are designated as major topics in our annual report.

Step four: continued modification Obtain better understanding of stakeholder satisfaction through information disclosure, in order to develop, execute, and review various action plans for improvement.

LCY CHEMICAL CORP. Matrix for Key CSR Issues

29

LCY CSRConcept

Communication with Stakeholders It is our hope to understand the needs of LCY’s stakeholders. Therefore, we have established different channels of communication for investors, clients, employees, and the community. The channels are explained as follows. In the future, we will continue to strengthen these channels of communication to meet the demands of our stakeholders.

Channels of Communication for Stakeholders Stakeholders Frequency of

communication Issues of concern Our efforts

Investors Annual shareholder’s meeting

Corporate earnings Risk management

Regular shareholder meetings are held on a regular basis. A special forum for investors to express their opinions and provide feedback is setup on our official website for better, quicker communication.

Clients Customer service hotline Customer satisfaction

Customer service maintains close contact with clients and provides product information updates and services of high quality. Perform all system management to meet the demands of our customers.

Suppliers

Standards for procurement

Random auditing

Quality control (ISO9001) Environment management (ISO14001) Social responsibilities (SER) Employee’s rights (SA8000) Electronic Industry Code of Conduct (EICC) Green Product RoHS, WEEE, EuP, REACH

Department in charge of purchasing, green product proposals, supplier chain management, and EHS maintain close contact with suppliers. Characteristics of materials and quality control are requested to help establish all management systems and suit the future demand of LCY CHEMICAL CORP.

Employees Regular meetings Salary and compensations Welfare Working environment

Staff members are resources of the company. It has been our goal to provide a comfortable working environment for our employees. We also provide all types of training resources to enhance employee morale. Meetings are conducted to encourage feedback from our staff.

Communities Community activities Charitable work

Impact to environment Social contribution

Environmental monitoring and evaluation are ongoing to minimize the impact to the environment of nearby communities. Engage in community services.

Government bureaus

Regular checks Fire drills Regular inspections Equipment checkups Safety inspection

Regulations with impact to societyImpact to environment

Participate in inspections and audits according to government regulations.

30

The chemical industry that LCY CHEMICAL CORP. locates in is right at the central position to change the world. We have competent professionals and technical personnel dedicated to solve global challenges towards sustainable development through innovation.

Our industry contribute to product innovation and reducing the energy dependence of material and products. We strive to reduce the CO2 emissions of materials in the entire product life cycle, and play a positive role in creating green future and moving towards green economy.

Energy and Climate Change

31

Energy andClimate Change

GHG Emission Inventory Check Climate change is currently the biggest challenge for achieving sustainable development around the world. As an export-oriented newly industrialized country and non-State party to the Framework Convention of the United Nations Climate Change, Taiwan is at a turning point in economic development. In order to maintain our competitiveness in the global market, we have to act fast in developing carbon reduction policies and adapting plans to meet the challenges of such impact. It is also important to strengthen international collaboration and encourage exchanges of carbon reduce policies, technologies, and experience. By doing so, the carbon market can be aligned with global market trends, ensuring sustainable development of the environment, economy, and society.

LCY CHEMICAL CORP. believes in holding a proactive attitude towards carbon reduction plans. The first step in carbon reduction is to track the carbon footprint of our products. This understanding will allow us to estimate carbon emission in the product life cycle, and achieve energy conservation through assisting the supplier chain. It is our hope that our products can meet the target of carbon neutrality with no greenhouse gas emissions.

With this in mind, LCY CHEMICAL CORP. has been promoting the GHG Emission Inventory project since 2004, and logs our greenhouse gas emission annually, as instructed by the Bureau of Industry. In 2009, Ta-she Site first implemented the greenhouse gas inventory management system and obtained ISO14064-1 verification. By 2011, LCY CHEMICAL CORP. has implemented this system to all sites and obtained ISO14064-1verification for greenhouse gas emission. Step by step, LCY CHEMICAL CORP. has built a carbon gas emission list for the group in preparation for eventual carbon trading. LCY CHEMICAL CORP. is moving towards the ultimate goal of carbon neutrality and promotes the concept of green conservation and green industry to all of its sites.

Moreover, in order to show our commitment to promoting greenhouse gas reduction, in 2011, LCY CHEMICAL CORP. signed the Industrial Greenhouse Gas Voluntary Reduction Agreement with the Ministry of Economic Affairs, along with delegates from 11 other industries, including iron and steel, petrochemicals, cement, paper, rayon, cotton printing and dyeing, silk printing and dyeing, composite materials, industries of certain sorts (including food, electronics and plastic, etc.), semiconductor, and liquid crystal display (LCD).

In 2011, there were 10 award-winning corporations for voluntary greenhouse gas reduction including China Steel, Formosa Chemicals & Fiber Synthetic Phenol Site CAPCO Taichung Site, LCY CHEMICAL CORP. Kaohsiung Site, Asia Cement Hualien Site, Chung Hwa Pulp, Far Eastern Chemical Fiber Site the ASE K11 Site UMC Fab8D Site and AUO Taichung Plant.

32

Energy andClimate Change

Carbon Footprints in Our Products and Services After the GHG emission inventory system had been implemented, in 2011, all LCY sites conducted inventories of carbon emissions during the life cycle of products produced in 2010. This included carbon emission generated during raw material acquisition, manufacturing process, and transportation. A product carbon footprint report was completed and verified by British Standards Institution PAS 2050.

Beside the inspection of GHG emissions, this report can also be the basis for future planning of carbon reduction. It can also provide our clients with an understanding of greenhouse gas emissions produced by selected products and services.

LCY CHEMICAL CORP. 2011 Inventory of Target Product Carbon Footprint Number Site Name of Target Product Carbon Footprint

1 Ta-she Site 25 kg polypropylene particles (product number 6331, woven bag) 42.1 kgCO2e

2Kaohsiung TerminalStation

Per tonne of chemicals, storage and transportation services 0.037 kgCO2e

3 Linyuan Site

Standard one gallon electronic isopropyl alcohol S Level (Product number EIPA2-S-001GSL) 1kg in bulk of acetaldehyde (not include the phase of translate to client )

6.956 kgCO2e

1.86 kgCO2e

4 Kaohsiung Site

1kg bulk bags of pentaerythritol 25 kg paper bags of pentaerythritol 24% per kilogram of bulk formaldehyde 37% per kilogram of bulk formaldehyde 37% per kilogram barrels of formaldehyde 44% per kilogram of bulk formaldehyde 44% per kilogram barrels of formaldehyde

5.91 kg CO2e149.812 kg CO2e

0.48 kg CO2e0.7kg CO2e

0.99 kg CO2e0.89 kg CO2e1.13 kg CO2e

5 Siaogang Site 600 kg flexible freight bags (TPE1487) 20 kg paper bag TPE1487

2,335.49 kg CO2e75.81 kg CO2e

Among the sites of LCY CHEMICAL CROP., Kaohsiung Terminal Station provides customized services for chemical assets storage under the client’s name. Other sites are manufacturers of products where all target products are sold to downstream suppliers for manufacturing or use. Therefore, these sites are considered to provide B2B service and the system boundaries include raw material acquisition, manufacturing process, and various stages of transportation.

33

Energy andClimate Change

Video Conference Encouraged to Lessen Energy Use The Head Office of LCY CHEMICAL CORP. is located in Taipei, whereas all other sites are spread out in southern Taiwan. In order to reduce carbon emission resulting from employee business travels and to put carbon reduction policies into practice, the R&D department in the Head Office conducts video conferences with on-site staff on a weekly basis. This reduces waste of human resources and energy, and transportation use for business trips. Types of greenhouse gas emissions reduced because of reduction in transportation use in 2011 are as follows:

Travel Item Greenhouse Gas Reduced Description

Taxi / Car to THSR Station 19,846 kg

The average distance from THSR to the Head Office is 35 km; 51 weeks*12 persons*2 (round trip)*0. 2 kg (carbon emission per person per km)*35 km

THSR 11,274 kg51weeks*12 persons*2 (round trip)*0.0267 kg (carbon emission per person per km)*345 km

Driving to the Head Office 4.01 tonnes CO

Regular meetings held in Taipei for 2 persons per month/ single trip; gasoline consumption of 70.5 L; round trip 141L; annual consumption 1.692 kiloliter

Carbon reduction through video conferences

2010 2011

Number of persons in Taipei/ Kaohsiung 6 / 2 7 / 12

Weeks of Meeting/ year 51 51

THSR carbon emission (per km per person) 0.0267kg 0.0267kg

Round trip distance to Taipei on THSR 345km*2 345km*2

Taxi carbon emission (per km per person) 0.2kg 0.2kg

Average distance in Taxi to THSR and to Head Office 35km*2 35km*2

Carbon emission 3,307 kg 19,846 kg

2e

34

Hazard Prevention Due to Climate Change In order to reduce damages caused by power failure, water shortage or water supply disruption caused by climate change or extreme climate, LCY CHEMICAL CORP. has developed “Emergency Measures for Operation” and “Water Supply Disruption Operation Plan” to respond to fire and water shortage, respectively. These plans ensure the continued production when such incidents occur.

Factor Response Measures Kaohsiung Site Siaogang Site

Fire

Fire system maintenance

Installed two emergency generators (providing 1,250KW electricity) that can ensure the normal operation of the site fire fighting and telephone systems.

Installed a fire pump emergency generator (500HP) to maintain normal operation of site fire system.

Production operation response

Maintain minimum function of facilities via power provided through generator and avoid shutdown Respond in accordance to contingency plans of each site Instrument and Electronics team repairs equipment and troubleshooting

Install generators to provide electricity for lighting 2 production lines and DCS control room. Maintain minimum function of facilities via the power provided by generators and avoid shutdown Respond in accordance to contingency plans of TPE site Instrument and Electronics team repairs equipment and troubleshooting

Disruption of Water Supply

Water for fire extinguishing system

1,500 m3 cistern installed, allowing normal operation of the site fire system

2,500 m3 cistern installed, allowing normal operation of the site fire system

Production line water

Reduce site capacity and fill factory spare barrel Contact transportation companies to bring water from Fensang Reservoir and the Cheng Ching Lake water supply field When no water could be obtained externally, use site cistern to maintain minimum factory production operation

Energy andClimate Change

35

Energy andClimate Change

Energy Saving at Sites To reduce energy consumption at our sites to achieve our energy conservation goals, LCY CHEMICAL CORP. has implemented various plans at our sites, including heat recycling, reduction of steam consumption, improve air-conditioners, and etc. With successful execution of these plans, LCY CHEMICAL CORP. reduced 2,354.7 tonnes of CO2 emissions in 2011.

Energy Saving Action Unit 2009 2010 2011 Energy Saving Benefit t-CO2e

Install air compressor heating the molecular sieve (air dehumidifier)

KWh 690,478 0 0 430

Implement MVR water system Tonnes of steam 0 18,374 0 2,912

Replaced aluminum alloy fan in three cooling towers with second generation HUDSON FRP blades to increase cooling effect and reducing power consumption

KWh 0 345,933 0 212

Replace second floor office air-conditioning system with frequency variable energy saving air-conditioners, reducing the power consumption of air conditioning systems

KWh 0 2,864 0 2

Install additional steam boiler to recycle wasted heat by burning waste

Tonnes of steam 0 9,967 0 2,282

Sale of waste KL heavy oil 0 0.30 0 2.654

Replace air compressor cooling water device KWh 0 222,500 0 138.67

Steel low pressure steam piping directed to the T1302 for integration, reducing the use of the DIPE low pressure steam

Tonnes of steam 0 0 4,752 1,088.2

Kaohsiung Site Energy Saving Achievements

36

Energy andClimate Change

Siaogang Site Energy Saving Achievements

Linyuan Site Energy Saving Achievements

Energy Saving Action Unit 2009 2010 2011 Energy Saving Benefit

t-CO2e

Replace cooling fan for Cooling Tower PF-1101D

KWh 182,280 0 0 112

Reduce blade size of PC-208C KWh 137,016 0 0 84

Replace 400W Mercury vapor lamps to 100W discharge lamps

KWh 0 49,275 0 34

Replace 3-1 and 2-1 refrigeration compressor with high-efficiency models (RC2)

KWh 0 201,382 0 145

Replace heat exchangers, enhance condensate efficiency, reduce non-condensing VOCs emissions to Flare E-2208, E-205, E-303

t-CO e20 0 1,245.68 1,246

Change Steam Trap to reduce extra steam use

Tonnes 0 0 775 176

Energy Saving Action Unit 2009 2010 2011 Energy Saving Benefit

Equipment / pipeline insulation and steam trap replacement

Tonnes 562.4 453.77 162 325

Variable frequency cooling fan installation

MWh 0 406.58 37.48 272

Installed new filter to press mud off equipment and installed air conditioning pump for IPA filling

MWh 0 0 70.53 43

t-CO2e

37

Energy andClimate Change

Ta-she Site Energy Saving Achievements

Energy Saving Action Unit 2009 2010 2011 Energy Saving Benefit

Change P-922C to stainless steel impeller, high efficiency and low horsepower motor

KWh 224,000 0 0 137,984

Raw water pump P-811A/B renewedwith stainless steel impeller, high efficiency, low horsepower motor

KWh 256,648 0 0 158,095

New 8” air pipeline added to supply AQU-3571 from the outlet of new dryer (C4582A/B/C 3 dryer usage reduced to 2)

KWh 85,904 0 0 52,917

Boiler RO water system and dosing system newly installed Kiloliter 363 0 0 1,129,293

C-2877 air compressor changed to energy saving mode KWh 0 393,520 0 240,834

Fiber Site 2 production line stopped using hot water circulation system of the DR-1 DR-2 & wrinkle machine. Operation and product quality remained the same while saving steam.

KWh 0 133,629 0 81,781

Fiber Site 2 production line stopped using the hot water circulation system of the DR-1 DR-2 & wrinkle machine. Operation and product quality remained the same while saving steam.

kiloliter 0 31.7 0 98,619

Installed a new variable frequency air compressor C-4582D NT$ 0 0 581,818 356,073

Reduced steam use of TPP3 Steamer kiloliter 0 0 29 90,219

Remarks: Ta-she Site has also started recycling its waste water to a waste water collection pool for reuse after going through TK-901. This

helps to reduce 500 tonnes of water per day (this is an estimated value only, as the flowmeter was not installed during 2009 to 2011)

t-CO2e

38

Energy andClimate Change

Storage and Transfer Station Energy Saving Achievements

Energy Saving Action Unit 2009 2010 2011 Energy Saving Benefit

Reduce freezer use from 10 hours to 9 hours according to actual time of use KWh 9,141 0 0 5.69

Change IPM discharge mode from pump to N2 pressure discharge KWh 105 0 0 0.07

Modify lightening system of sites from whole area switch to separate area switch

KWh 0 21,096 0 2.06

Change old lightening lamps to energy-efficient lamps KWh 0 0 3,308.4 13.14

Under various energy saving measures, greenhouse gas emission was reduced gradually. LCY CHEMICAL CORP. will continue to put effort into reducing greenhouse gas emission, lower carbon footprints in our products, and develop green products in the hope of reducing overall greenhouse gas emissions of the entire society.

GHG EmissionScope Source Unit 2009 2010 2011

Direct Greenhouse gas Emission (Scope 1)

Company VehicleBoiler

t-CO2e 87,633 94,721 82,701

Indirect Greenhouse gas Emission (Scope 2)

ElectricitySteam t-CO2e 308,409 306,758 314,636

Total 396,042 401,479 397,337

Total Revenue (million) 25,182 28,649 30,282

Eco-efficiency Ratio (million) (Revenue created by the unit of greenhouse gases) 0.06 0.07 0.08

Other GHG Emission Type of Greenhouse Gas Unit 2009 2010 2011

CH4 emission ／year 48 49 53

N2O emission ／year 88 95 96

t-CO2e

t-CO2e

t-CO2e

39

As an important member of the global chemical industry, LCY CHEMICAL CORP. has been long devoted itself to improving the environmental protection, safety, and health of employees.

LCY CHEMICAL CORP. became a founding member of the Taiwan Responsibility Care Association (TRCA) in 1998. With demands from chemical supplier chains in mind, we have helped elevated the performance of working environment safety and health, and environmental protection among the chemical industry.

Responsible Care

40

ResponsibleCare

Following the 1984 Bhopal incident in India that caused 3,000 casualties, the chemical industry realized the high risk of site shutdown if site safety, health, and environmental friendliness are not improved. Through voluntary efforts and self-discipline, chemical industries developed responsible care systems to prevent incidents like the Three Mile Island nuclear disaster, which devastated the nuclear industry.

As an important member of the global chemical industry, LCY CHEMICAL CORP. has long been devoted to improving environmental protection, safety and health of employees. To strengthen risk evaluation and safety management in environment, safety and transportation for the domestic chemical industry, LCY CHEMICAL CORP. became a founding member of the Taiwan Responsible Care Association (TRCA) in 1998. With demands from chemical supplier chains in mind, we put efforts in elevating the performance of workplace safety, health, and environmental protection among the chemical industry.

Responsible Care is a concrete commitment of chemical industries around the world, to voluntarily continue performance improvements in environment, health, and safety (EHS). To achieve this, chemical industries must meet or exceed regulatory requirements, collaborate with governments or other stakeholders, and participate in voluntary services. The Responsible Care System has been implemented in 53 countries.

LCY CHEMICAL CORP. has participated in and given full support to various TRCA activities. The TRCA mission statement “recognizes that Taiwan chemical industry carries social responsibilities and continuing improvements in environmental, health, and safety performance”, which has become our goal in promoting EHS activities.

The promotion of Responsible Care in Taiwan reached second place among Asian countries, only behind Japan. TRCA is one of the few associations that had continued regular updates of our environmental safety reports. Furthermore, LCY also works with external professional organizations to maintain and enhance chemical industry environmental safety performances, through participation in Level II and III Emergency Response Information Center (ERIC) of the Industrial Technology & Research Institute (ITRI) and the Taiwan Chemical Awareness and Emergency Response Association (CAER).

Products and services created by LCY CHEMICAL CORP. enhance the quality of life for all mankind, both now and in

the future. Therefore, we are committed to strive toward an accident-free, injury-free workplace that causes no harm to

the environment. We will keep our achievements in the development of sustainability and environmental safety public.

LCY CHEMICAL CORP. will follow the principles of Responsible Care and seek long-term development and

prosperity of the chemical industry.

41

Green Chemical

LCY CHEMICAL CORP. is based on the concept of “Green Energy Technology Enterprises with DNA-Full-of-Creativity” and implements the environmental protection concepts in the green chemistry to develop green products. We continue to invest resources to reduce the environmental impact of product lifecycle, including reducing chemicals emissions, controlling and reducing the waste environmental impact, and actively contribute to environmental sustainability.

42

RESPECT FORHUMAN LIFE

PREVENTION OFPOLLUTION

CONTINUOUSIMPROVEMENT

OBSERVEREGULATIONS

SUSTAINABLEOPERATIONS

By meeting or surpassing legal standards, maintain safety on all manufacturing, storage, and transportation processes, ensure the safety of employees, factory facilities, and the life and property of the general public, in an effort to achieve a zero accident status. Through sticking to “Excellence in Technology”, “Proactivity in Spirit”, and “Continuous Improvement”, LCY ensures that quality of products and services earn the greatest trust from customers.

Environmental protection is the primary objective of EMS (Environmental Management System). Implementing environmental protection measures is the established management objective of the company. Well-executed environmental protection must achieve our highest respect and safety for people, the ecological system, and facilities.

Carrying out environmental protection activities, promoting the Responsible Care System, and continuously improving on the spirit of compliance with requirements and standards. Make sure all internal activities are in total compliance with applicable laws and regulations, and do so with vigilance to effect the sustainable operation of every activity.

GreenChemical

From the procurement of raw materials to production, and all the way to waste disposal, LCY CHEMICAL CORP. follows the guideline of related laws and puts effort into ameliorating the utilization of energy and resources including chemicals, water, and waste, from a perspective of environmental friendliness and energy conservation.

LCY CHEMICAL CORP. Environmental Protection Policy

43

GreenChemical

Green Product Development Innovation is deeply rooted in LCY CHEMICAL CORP. We devote great effort to innovative research and development of our products and technologies to meet challenges in the local and global market, as well as the industrial trend of low-carbon energy saving and environmental protection. We strive to be part of the green industry and hope to present ourselves as the best practitioner in this field. In 2011, under the government’s high-value chemical industry policy, we established our Corporate R&D Center in Nanzi Park II, to enhance technology and consolidate the current R&D resources at each site. In this R&D Center, the main focus is on the development of solar energy, wind power, LED, eco-friendly tires, and new technologies of biomass energy.

Thermoplastic Elastomers (TPE) is a special rubber has the advantages of both plastic and rubber, allowing the manufacturing process to be simplified and downstream manufacturing cost to be reduced through injection molding. It can be used for shoe soles, as an asphalt modifier, roof leak proofing, hot-melt adhesives, pressure sensitive adhesives, industrial supplies, electronic components, toys, etc. At the current stage, TPE manufacturers are working towards reducing production cost, while developing specialized products with higher added-value.

LCY CHEMICAL CORP. is the world’s largest manufacturer of TPE. Because of the global trend of conservation, the recyclable characteristic of TPE has drawn attention from all over the world. Besides reducing production cost by improving our manufacturing process, it is also our goal to enhance our level of technology to strengthen our competitiveness as the leading manufacturer in the global market. We continue to put effort into research and development of composite materials and strive to expand the market of eco-friendly coating materials for wires and cables. LCY CHEMICAL CORP. has also developed its own flame retardant composite formulations and process technologies. Currently, we have successfully developed “SEBS halogen-free flame retardant composites” where two formulations have passed client’s combustion tests (UL1581VW-1). The composite contains excellent chemical properties which meet the highest standard of cable and wire heat aging resistance at 105°C (136°C, 168hr).

International Collaborations Committed to the development of biomass energy and chemicals, LCY CHEMICAL CORP. signed a Letter of Intent for Collaboration with LanzaTech, New Zealand's top clean energy technology enterprise, to develop biomass energy and chemicals. First, the two partnership aims to develop renewable low-carbon raw materials that can eventually replace our dependence on crude oil during the manufacturing of current products. Then, the partnership is expected to extend our expertise to the development of green products, including biomass plastics and energy. The special gas fermentation technology developed by LanzaTech has been successfully implemented in the manufacturing process of collecting steelmaking exhaust to produce ethanol and is expected to be applied to other types of industrial gas emissions. At the same time, transformational product researchers have currently explored the possibilities of butanediol and other widely used carbon-hydrogen and oxygen compounds. It is expected that various forms of biomass energy or high added-value chemicals for special use can be produced.

Developing a strategic advanced technology platform has long been set as our direction. At the 2009 National Energy Conference held by the Ministry of Economic Affairs’ Bureau of Energy, biomass energy became the center of attraction. Our international collaboration project of biomass and chemical development will not only help improve sales but also serve as a token of our contribution to green technology development. The project represents our commitment to the sustainability of our Earth and a critical step towards a future beyond boundaries.

44

GreenChemical

LanzaTech CEO Jennifer Holmgren has pointed out that although the market share of biomass chemicals is only 1% currently, but it is predicted to have an annual growth of 9% for the next 10 years. Furthermore, the global market of biomass chemicals and plastics is predicted to reach US$ 15 billion in 2020. Therefore, we deeply believe that this collaboration will be beneficial to both chemical raw material supplier chains and users. LanzaTech will continue to speedily provide integrated industrial commercialization process.

Environmental Management As a founding member of the Taiwan Responsible Care Association (TRCA), LCY has always emphasized the importance of community integration. LCY CHEMICAL CORP. is keen on maintaining good relationships with businesses and positive interactions with communities. We shoulder our social responsibilities and proactively organized an environmental management team to avoid the occurrence environmental risks. Through the establishment of a collaborative network and the nurturing and training of colleagues, LCY CHEMICAL CORP. cultivated a proactive management style for environmental care, providing high quality petrochemical raw materials and products.

Through the hard work of each factory, LCY CHEMICAL CORP. has implemented and developed an efficient environmental management system. By the end of 2011, all sites have implemented ISO 14001 for Environmental Management System (EMS). All sites met ISO 14001 standards for daily environmental management operations to ensure that all sites meet the minimum environmental requirements.

45

GreenChemical

Toxic Chemicals Management LCY CHEMICAL CORP. is committed to strict chemical substance management. It is our responsibility to continuously increase the safety of our products from R&D, production, transportation, marketing, to sales.

Through standardization and strict control and management mechanisms, all manufacturing processes follow guidelines set by the Toxic Chemical Substance Management Act to ensure safe storage, utilization, and recycling or disposal of these substances. Current toxic chemical substance management at LCY CHEMICAL CORP. sites are as follows.

Ta-she Site No toxic chemical substances, except minor operations in the laboratory.

Kaohsiung Site

Regulated toxic chemical is formaldehyde. There are 11 substances used for quality control analysis, including methylene chloride and pyridine.

1. License application and personnel designation: Permit applied for formaldehyde or for the laboratory to use small amounts of chemicals in accordance with regulations. Designate specific personnel in charge of toxic chemicals.

2. Product packaging/sales: Formaldehyde products are labeled “toxic” in accordance with regulations. Client’s permit is confirmed before sales. Permit is applied for product transportation, and use vehicles equipped with GPS trackers as required by law.

3. Record and Report: The amount of all toxic chemical substances used is recorded daily. The log is submitted monthly and annually as required.

4. Contingency measures: In site Transport hazard prevention and response plans are open to the general public for review, while hazard exercises are carried out regularly.

Siaogang Site

Regulated toxic chemical includes 1,3 butadiene and cyclohexane, as well as small amounts of chemicals used for quality control and laboratory analysis including 8 chemicals: benzene, benzyl chloride, potassium dichromate, potassium chromate, acetonitrile, methyl-tert-butyl ether, dichloromethane, and dicyclopentadiene. All are managed and controlled under 457-EMS-06 Toxic Chemical Substances Management Guideline.

46

Toxic chemicalsubstances operation Document management Record report

Contingency measuresWarning signsMonitoring system

GreenChemical

Kaohsiung

Terminal Station

1. Toxic substance operation: All toxic substance storage is inspected by environmental audits and has to apply for storage permits before such action is put into practice.

2. Document management: All toxic chemical substances uses are recorded daily and the records kept for audits.

3. Record report: Records of all toxic chemical substance used and released are reported on a regular basis.

4. Monitoring system: A monitoring system is established on site for monitoring and warning. All toxic chemical substances are monitored and alarm will sound when incidents occur.

5. Warning signs: All toxic substances and their operations facilities are labeled with GHS warning signs so that staff may be aware of the toxic storage zones and their risks.

6. Contingency measures: In the event of a toxic substance leakage, contingency plans are carried out according to the types of chemical substances to minimize harm caused by toxic chemical substances.

Linyuan Site

Regulated toxic chemicals manufactured on this site are acetaldehyde and MIBK, with small amounts of toxic chemicals used for quality control and laboratory analysis, including potassium dichromate, potassium chromate, potassium cyanide, dimethyl formamide, dicyclopentadiene, hydrazine, cyclohexan, and etc. All substances are recorded daily and reported online monthly in accordance with regulations. All substances are managed and controlled by the 757EMS0104 Toxic Chemical Substances Management Guideline.

Toxic chemical substance protocol is established to control toxic chemical substances.Furthermore, Kaohsiung Terminal Station is also a member in Team 4 of the Kaohsiung City Toxic Disaster Joint Prevention Group. In the event of a serious incident, off-site assistance can be requested to minimize damage. The toxic substance control measures are as follows:

47

GreenChemical

Strategic Planning and Measures We have 10 strategic plans for the management of toxic chemical substances.

1. Establish hazardous item and toxic chemical substance database for consolidating incident response resources. All sites are required to build a database on their own hazardous items and toxic chemical substances. Individual site incident response plans are developed according to site characteristics and manufacturing process features, in an effort to ensure that the most accurate information will be provided to disaster response units.

2. Strengthen the facilities and storage containing hazardous items and toxic chemical substances so as to prevent seismic or flood damage. Review the facilities and storage of hazardous items and toxic chemical substances according to each site’s construction plan, piping components, and machinery settings to prevent accidents and the secondary disasters following earthquakes or floods.

3. Supervise the safety inspection of each site and enhance self-management and response to accidents. Form sites’ own firefighting teams and establish evaluation mechanisms for firefighting, reporting, and escape plans. Strengthen self-management and inspection of fire equipments on site and review incident response procedure.

4. Raise awareness of incident prevention and strengthen the joint prevention network with related authorities. Regular site safety meetings are conducted to further enhance the participation of joint prevention network so that all rescue resources are consolidated to reduce incident reporting time at each site.

5. Implement manufacturing process safety management and occupational safety supervision plan. Conduct safety inspections for managing, producing, and using hazardous or toxic chemical substances. Consolidate the inspections of toxic chemical substance sites and enhance the management quality of contracted safety inspection partners.

6. Regularly update site safety profile database and geographical environment potential analysis. A. Verify basic information of sites (e.g. site manager, firefighting manager, security supervisor, emergency

contact person’s address and telephone number, location and type of stored toxic chemical substances) and follow up regularly for updates of site layout and availability of basic rescue equipments.

B. Potential analysis is conducted according to the geographical environment of the site, e.g. sewage distribution, waste water flow, wind, burning tower exhaust gas dispersion, potential risk areas, and population distribution.

7. Establish safety and hygiene management guidelines to enhance the efficiency of safety and hygiene management. Inspect the potential risk factors of the chemical industry, analyze accident cases, manage risks, improve the prevention of incidents, establish emergency operational procedures, while enhancing performance evaluations and auditing management as well as management plans from our contract partners.

8. Establish incident analysis and review system on-site, encourage staff to participate in petrochemical hazard prevention workshops held by authorities. Discuss and analyze each incident and review its cause, effect, and improvement plan.

9. Enhance manufacturing process safety guidance for operational staff. Establish risk evaluation mechanism to understand the risk factors and management system of petrochemical sites to qualify current facilities and manufacturing criteria.

10. Implement operational plan on a continuous basis to reinforce safe practices of staff. Create a safe working environment and enhance incident response capacity.

48

GreenChemical

LCY CHEMICAL CORP. Mid to Long Term Targets for Toxic Chemical Substances Management

Short term target Mid-term target Long term target

1. Plan for hazard prevention software and its settings to achieve hazard prevention.

2. Ensure hazard prevention hardware installation and maintenance.

3. Enhance firefighting management and develop fire control inspection form and quantify the inspection results.

4. Identify high risk areas to strengthen the control and prevention of hazards.

5. Enhance hazard prevention, exercises, and training to raise hazard prevention awareness of the management team and staff.

6. Increase emergency response capabilities to achieve the goal of self-rescue and self- protection.

7. Enhance fire alarm firefighting capacity.

1. 24-hour monitoring system installed to inspect firefighting and safety condition on site. Set video motion detection features for early warning and alarm.

2. Locate suitable places for the installation of auto-fire extinguishers.

3. Set fixed shot water cannons to strengthen fire safety protection on site. Install tools to support the fire control of neighboring factories.

4. Evaluation of fire control pipeline settings to enhance seismic tolerance.

1. Continued promotion of fire control plans and create self inspection form for fire control.

2. Safety evaluation and promotion of fire fighting improvement plans.

3. Evaluation and improvement of fire-proof items.

4. Evaluation and improvement of fire control facilities.

5. Enhance fire control divisions and fire escape facilities.

6. Evaluate fire control management promotion, emergency response plan, self-protection fire fighting team training and execution.

7. Evaluation and improvement of building safety.

8. Strengthen fire control management with continued joint auditing for improvement and prevent errors.

9. Develop fire control statistics for the evaluation of fire control management and goal setting.

10. Promote fire control area, distinguish and upgrade fire fillings.

11. Introduce new engineering methods for fire control construction, e.g. sprinkler water piping mechanical joint construction method, electrical room, early fire alarm equipment installation on high value facilities such as the clean room.

12. Implement safety inspection and risk evaluation of construction and environment.

49

GreenChemical

Site Disaster Management It has always been the goal of LCY CHEMICAL CORP. to build a safe working environment. In the past, disaster management meant emergency response and rescue in the event of a fire; the goal was to minimize damages. These days, disaster management means the prevention of fires. In a chemical site fire can be very dangerous because of the explosive nature of chemicals (so-called hazardous materials). Fires caused by these chemicals are difficult to extinguish and the duration of fires are usually longer. Categorized by the chemical properties of each substance, these chemicals can be further divided into flammable gas, ignition liquid, flammable substances, spontaneous combustion substances, dangerous when wet substances, oxidizing substances, and etc. Careful attention should be paid in manufacturing, storing, and handling of these substances.

Results of fire prevention can only be achieved with deep rooted work over long period of time. Past experiences have shown that the reason for the spread of fires include improper handling of the fire source, late discovery of fire, delayed reporting of fire, failure in early fire extinguishing, and misguidance of escape routes. All these were caused by human errors. Therefore, from the fire prevention management’s perspective, human factor is far more critical than upgrading of preventative facilities.

Observing the concept of “taking care of one’s own properties,” world-renowned fire prevention countries such as the US and Japan have developed an autonomous “fire management system”. Each department is to secure the properties of its own department. In the event of fire, this system can help minimize damage. LCY CHEMICAL CORP. is keen on achieving this target.

Fire Safety Equipment on Site At the initial stage of a fire, with speedy response, fires can be extinguished irrespective of its temperature or coverage area. Without proper response, fires can expand, quickly increasing the evaporation rate, exposing the site to high temperature radiation effects, leading to serious consequences including serial explosions. Therefore, the main goal of fire prevention on site is to extinguish fires at preliminary stages, thus minimizing damage. Moreover, because of the importance of extinguishing fires at initial stages, fire extinguishing capacity will depend on fire equipments.

Fire Management Achievements In 2011, Loss Control Department conducted fire inspections on all the sites with the Joint Auditing Project and listed points of improvement in all aspects from management to human errors. We also participated in off-site occupational safety workshops. During inspections, because sites have different locations and features, GPS was used to learn more about the sites and their surroundings. The stored volume of chemical substances in operation was calculated before escape exercises were conducted. On-site inspection helped us to better understand the risks, thus a risk evaluation report was prepared as the basis for future fire or hazard damage control.

Fire equipments and fire prevention mechanism are two sides of the same coin; both are needed. Fire equipments at all sites are inspected regularly in accordance to relevant guidelines. As for the fire management of buildings, we have fire management system review meetings to look for improvement and correct errors. We discuss methods of improvement to reduce the risks of fires and ensure the safety of our employees and properties.

50

INPUT

Liquefied Petroleum Gas (kg)

2009 2010 2011

40,000

30,000

20,000

10,000

23,768

34,164

22,312

1,059.48 838.581,357.20

280,000

270,000

260,000

250,000

240,000

Power Usage (MWh)

2009 2010 2011

251,366254,094

271,314

100.18112.75 111.61

9

8

7

6

5

4

3

2

1

0

Gasoline Usage (Liter)

2009 2010 2011

6,780

4,720

8,610

3,014.11

6,069.73

3,517.05

Diesel Usage (Liter)

2009 2010 2011

120

100

80

60

40

20

105,790

74,310 73,680

238.04

385.54411

Heavy Oil Usage (Liter)

2009 2010 2011

15,000

14,000

13,000

12,000

13,041,000

14,541,000

14,008,000

1.93 1.97

2.16

2009 2010 2011

Steam Usage (Tonnes)790,000

780,000

770,000

789,705

777,830 777,868

31.89 36.83 38.93

GreenChemical

Overview of Environmental Footprint The environmental footprint covers all sites of LCY CHEMICAL CORP. in Taiwan (including Taipei Head Office, Kaohsiung Terminal Station, Kaohsiung Site, Siaogang Site, Linyuan Site and Ta-she Site).

51

2009 2010 2011

Tap Water Usage (kl)

2,000,000

0

1,759,1771,660,298

1,419,082

14.31 17.26 21.34

Total Amount of Recycled and Reused Water (kl)

2009 2010 2011

200,000

160,000

120,000

80,000

40,000

166,650 166,650 166,650

151.10 171.91 181.71

2009 2010 2011

Green House Emissions (t-CO2e)410,000

400,000

390,000

396,042

401,479

397,337

Total Waste (kg)

2009 2010 2011

18,000,000

15,000,000

12,000,000

9,000,000

6,000,000

3,000,0002,315,624

17,136,569 16,332,523

OUTPUT

GreenChemical

Waste TreatmentQuantitative indicators Unit 2009 2010 2011

Waste incinerated kg 729,075 15,288,790 14,896,040

Waste sent to landfill kg 426,150 503,550 323,810

Waste recycled kg 116,279 115,975 208,357

Waste treated for reuse kg 255,305 326,605 497,655

52

80,000

60,000

40,000

2009 2010 2011

52,17155,105

62,276

Nitrogen Oxides (NOx) Emissions

2009 2010 2011

51,181

52,916

53,93654,000

53,500

53,000

52,500

52,000

51,500

51,000

50,500

50,000

49,500

Sulfur Oxides (SOx) Emissions

Volatile Organic Compounds (VOCs)

80,000

60,000

40,000

20,000

02009 2010 2011

Suspended Particles

2009 2010 2011

20,000

16,000

12,000

8,000

4,000

Air Pollutant Emission

GreenChemical

Water Resource Management

Water Usage Indicator Unit 2009 2010 2011

Tap water usage 1,000 Liter (1 degree) 1,759,177 1,660,298 1,419,082

Total water recycled 1,000 Liter 166,650 166,650 166,650

Tap water is the main source of water usage at LCY sites and the wastewater of each site after treatment facilities treat

wastewater to meet the Linhai Industrial Park Sewage Treatment Standards, together with the wastewater from

Siaogang Site, are drained into the discharge pool at Kaohsiung Site. The wastewater is then drained to Linhai Industrial

Park Wastewater Treatment Site for treatment in order to meet EPA effluent standards before being discharged to the sea.

It is our hope that by doing so, we can help reduce the burden put on water resources. Under such strict control processes,

no severe leakage occurred in 2011.

53

GreenChemical

Year Item 2009 2010 2011

Wastewater (m3) 320,191 235,283 320,067

COD average concentration (ppm) 55 169 211

SS average concentration (ppm) 16 87 83

Remarks: average concentrations of COD and SS are that of Kaohsiung and Siaogang Sites mixed.

LCY Site Effluent Discharge

Year Site 2009 2010 2011

Kaohsiung, Siaogang Site 320,191 235,283 320,067Ta-she Site 344,186 396,454 306,870

Linyuan Site 417,409 366,131 367,111Total 1,081,786 997,868 994,048

Environmental Protection Expenditures Unit: NTD 10,000/year

Item Description 2009 2010 2011

Environmental penalty Ta-she Site: VOCs leakage over 10,000 ppm in 2009 20 10 0

Waste disposal charge 421 510 834

Gas emissions treatment fee 41 50 118Environmental management

expenditures Marine discharge maintenance fees and wastewater treatment costs 356 378 304

Total (penalty excluded) 818 938 1,256

54

To substantiate the concept of occupational health and safety, we have formulated the health and safety policy, hoping to ensure the health and safety of every employees of LCY CHEMICAL CORP. and the residents in the local communities through the full participation, education, monitoring, and systematic management mechanisms.

Occupational Safety and Health

55

LCY CHEMCIAL CORP. Health and Safety Policy

Train employees to conduct self-protection through safety and health awareness education: By raising employee awareness to workplace hazards and through safety and health education, help employees develop safety and health consciousness for self-protection and elevate their capacity to manage their own safety and health, thereby improving the safety and health performance overall.

Strengthen safety and emergency response training: Train employees to be observant of hazards, proactively conduct inspections, practice standard operating procedures, which all together enhances employee emergency response capacity. Make sure all employees understand their responsibilities regarding safety and health, enhance the protection of employee safety and health, and promote workplace harmony.

Train employees to practice safety and health behaviors: Employees should proactively assess the level of risk in mechanical equipment, operations, and the workplace.

Create a safe, healthy and comfortable working environment: Respect the opinions of business owners and stakeholders. Establish sound communication channels internally and externally so that all stakeholders and all people working under the company understand the safety and health management policies of the company, related requirements, and objectives. Collaborate in the improvement of safety issues, to create a safe, healthy, and comfortable working environment, and to prevent the occurrence of injuries or illnesses.

Continue to pursuit zero-accident and zero-hazard status: Observe safety and health laws and regulations and other commitments. Establish hazard assessment and risk management. Implement health examination and management to strengthen contract management and communication. Practice strict safety and health operations. Continue to elevate the management and performance of safety and health towards zero-disaster, zero-accident, and zero-disease.

OccupationalSafety

and Health

What We Care About

Self-awareness upon safety and health conscience

Safety and health training upon prevention

Spontaneity upon safety and health behaviors

Harmlessness upon safety and health environment

Zero-hazard upon safety and health

56

OccupationalSafety

and Health

Kaohsiung Terminal Station Occupational EHS Management System and Inspection

Kaohsiung Site Occupational EHS Management System and Inspection

Ta-she Site Occupational EHS Management System and Inspection

Officially joined CDI-T (Chemical Distribution Institute–Terminals)

Received TOSHMS Certification

Received BSI ISO 14064-1:2006 Greenhouse Gas Emission Verification

Certified Zero Hazard through 506,395 hours by the Bureau of Labor Affairs

DescriptionYear

2008

2008

2009

2010

DescriptionYear

2000

2004

2007

2008

2009

2011

DescriptionYear

2004

2008

2012

Received Self-Protection System Certification

Received ISO14001:1996 Certification

Received OHSAS18001:2007 Certification

Received TOSHMS:2008 Certification

Passed Business Unit Occupational Safety and Health System Performance Verification

Received Healthy Workforce Certification Label

Received OHSAS 18001 Certification

Received TOSHMS Certification

Certified Zero Hazard through 993,163 hours by the Bureau of Labor Affairs

Management of Occupational Health and Safety

The commitment we have made to safety, environmental care, and health is one of the fundamental requirements of

occupational safety and health management. Furthermore, we also pay close attention to the daily management of safety

and health issues at all sites. Through frequent communication for mutual understanding, we promote projects that are

aligned with government policy, international trends, and the spirit of environmental safety and health. Through these

activities, plans have been implemented at all sites to reap maximum benefits.

In order to efficiently implement occupational safety and health management plans, we have established an

“Occupational Safety and Health Committee ” at all sites where staff from different teams can help review and discuss

relevant policies of EHS (Environmental Health and Safety), as well as introducing the OHSAS 18001 occupational

safety and health management system.

57

56.25% 50%

38.89% 37.5%

Employee RepresentativesEmployer Representatives

Ta-sheSite

SiaogangSite

KaohsiungSite

LinyuanSite

OccupationalSafety

and Health

2011 Health and Safety Committee of All Sites

Remarks: Kaohsiung Terminal Station, with insufficient number of employees, is exempt from Health and Safety Committee.

Siaogang Site Occupational EHS Management System and Inspection

DescriptionYear

1996

1999

2000

2002

2005

2005

2007

2008

2010

2011

Received ISO 9001 Certification

Passed Self Protection Evaluation

Awarded Third Place among Self Protection Units

Received ISO 14001 certification

Received ISO 9001:2000 certification

Received ISO 14001:2004 certification

Received OHSAS 18001:2007 Certification

Received TOSHMS Certification

Received BSI (ISO 14604-1) Certification

Received BSI (PAS 2050) Certification

Description

Received OHSAS18001 Certification

Received TOSHMS Certification

Certified Zero Hazard through 418,339 hours by the Bureau of Labor Affairs

Received Tobacco Control Healthy Workforce Certification Label

Year

2006

2009

2011

2011

Linyuan Site Occupational EHS Management System and Inspection

58

Assign to differentdepartments

Supervisor assigns different training accordingto the features of the job description Receive training

Receive operationalqualification certificate

Register in LCYcertification system Notify for recertification

1

2

3

OccupationalSafety

and Health

Response Mechanism for Emergencies Receive relevant operation qualification certificate as statutorily required 1. According to the Labor Safety and Health Training Guidelines, operational staff must receive operational

qualification certificates from training units authorized by the Council of Labor Affairs

2. Recertification needed for all certified staff accordance to Section 17 of the Labor Safety and Health Training

Guidelines.

3. Training at each site are as follows.

Continuing education for staffArrange regular environmental safety and health professional training and promotions for employees according to

occupational risks.

Emergency response training1. Develop procedures and plans in accordance to Fire Services Act Section 13, Toxic Chemical Substances

Management Act Section 10, and Labor Safety and Health Act Section 10, and conduct fire and toxic

chemical substance response exercises.

2. Exercises were carried out to train the emergency response team of each shift. Self training was conducted

during each half of the year in 2011 to implement and strengthen the response capability of our staff.

3. Prepare different rescue and protective equipments according to product characteristics at each site, and

produce training materials to train the emergency response team members.

Furthermore, in order to enhance understanding of occupational safety and health, LCY CHEMICAL CORP. continues

to promote training of our employees. Employees are trained to raise the awareness of workplace safety, respond and

adapt to changes at work, prevent accidents, and ensure employee safety and health. All these can help cultivate a

culture of safety at LCY CHEMICAL CORP.

Therefore, we have worked hard to create a 3-year e-learning system project. The system was integrated into our staff

training programs to enhance staff’s awareness of related issues. We plan to introduce more online courses on

occupational safety and health to allow more flexible class schedules.

59

OccupationalSafety

and Health

Kaohsiung Site Emergency Response PlanTo rapidly respond to accidents, employees must be able to quickly organize into teams and take appropriate actions to effectively control the accident and minimize loss. An emergency response plan was established for the Kaohsiung Site. The plan not only serves as a guideline for response during critical moments, it also presents accident scenarios. With this, staff can practice and equip themselves with general knowledge and better judgment when accidents occur.To have expected results, employees were given complete training and relevant staff gained knowledge and techniques necessary for survival. Through regular training sessions, our staff became familiar with all operation procedures and the processes of each task, and reviewed errors for improvements. The response plan includes,

Stage 1 (Hazard Classification: 1) substance leakage on site that does not cause fire or the fire does not affect other substances or areas. Toxic chemical substance leakage but does not affect nearby area or eco-systems.Stage 2 (Hazard Classification: 2) fire on site and affects other substances or areas. Toxic chemical substance leakage that might affect but has not yet affected the nearby eco-system.Stage 3 (Hazard Classification: 3) fire on site and affects other substances or areas. Toxic gas leakage is severe and may affect the whole site as well as nearby factories and houses.

1.

2.

3.

LCY CHEMCIAL CORP. Occupational Safety and Health Training Materials for New Employees

Course name

Basic fire safety, fire equipment operation, and emergency response Confined space

timrep toH tnemeganaM htlaeH robaL

Chemical hazard prevention and emergency response Forklift and crane operation safety

diuG tnemevorpmi euqinhcet kroW elines for Safety and Health

Introduction to EHS management system EHS professional training on confined space

Personal protective equipment use and maintenance First aid training

Self examination before, during, and after operation Safety and health management and execution

Safety regulations for working from heights General knowledge of hazards

For future EHS activities, besides continuing current daily management and follow-up, more manpower and resources

will be allocated to the maintenance of facilities, occupational management, and environmental conservation. It is our

hope that, step by step, EHS performance of LCY CHEMICAL CORP. sites will be published for the public and

stakeholders, to reinforce our commitment to social responsibility.

60

LCY

OccupationalSafety

and Health

Hazard Types Analysis and Control

In order to understand different hazards at different sites for effective protection and occupational safety, we completed

the survey of potential hazards for all sites in 2010. This survey collected information on toxic chemicals in all

operation areas, the concentration of these chemical substances, and the duration of exposure, providing LCY

CHEMICAL CORP. the basis for selecting appropriate personal protection plans.

Moreover, we have proactively promoted protection plan training for both managerial and operational staff. Employees

are trained to select appropriate personal protective equipment, evaluate the suitability of their chosen equipment,

understand the possible changes in their gears, and troubleshoot. In 2011, we consolidated emergency equipments

available from all sites, with the hope that this horizontal integrating will prevent accidents.

Site Hazard Type

Ta-she Site Specific chemical substances, noise, high temperature, organic solvents, dust, radiation

Siaogang Site Organic solvents, specific chemicals, noise, high temperature, dust

, ,

Kaohsiung Site Organic solvents, specific chemicals, noise, high temperature, dust

Linyuan Site Organic solvents, specific chemicals

Kaohsiung Terminal Station Organic solvents, specific chemicals, noise,

61

2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011

1.18 0 0 0.01 0.01 3.23 1.8 0 0.68 0.87 0 0 0 3.59 0

1.25 0 0 0.01 0.01 3.42 1.98 0 0.74 0.87 0 0 0 4.16 0

29.76 0 0 5.55 44.27 57.91 47.96 0 158.86 0 0 0 0 57.34 0

31.62 0 0 5.95 46.83 61.25 52.71 0 174.57 0 0 0 0 66.9 0

1.17 0 0 0.93 0.78 3.09 0.94 0 0.71 0.08 0 0.23 0 3.82 0

1.24 0 0 0.99 0.82 3.27 0.94 0 0.71 0.08 0 0.23 0 4.46 0

2 0 0 1 1 4 1 0 1 1 0 0 0 1 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Ta-she Site Kaohsiung Site Siaogang Site Linyuan Site Storage &Transfer Station

Injury rate of site staff

Injury rate of maleemployees

Factory employeeworkday lost rate

workday lost rate formale employees

Lost time ratio ofsite staff

Lost time ratio ofmale employees

Workplace injuriesof factory employees

Independent contractorworkplace injuries

Occupational Hazard Statistics (%)

OccupationalSafety

and Health

62

Item Description

Unit: MT

Unit: MT

Raw materials: propylene, ethylene

Materials: catalysts, singleadditives and pre-blends

Mostly bought from CPC under long-term contract (1) Catalyst: Mostly purchased from abroad(2) Single Additives: 66% foreign 34% domestic (including antioxidants, transparent agents, light stabilizers, lubricants, flame retardants, etc.)(3) Pre-blend: Mostly from domestic manufacturers

Raw material

Propylene

Ethylene

Material

ZN111-4

DSTDP

TEAL

D-Donor

MT

MT

MT

MT

MT

MT

2009 usage 2010 usage 2011 usage

2009 usage 2010 usage 2011 usage

327,092

12,779

333,584

14,279

341,531

13,624

10

237

70

6

11

244

70

6

10

215

70

6

OccupationalSafety

and Health

2009-2011 Important Materials Usage

Purchase of Materials

Supplier Management As a founding member of the Taiwan Responsible Care Association (TRCA), LCY CHEMICAL CORP. continues to emphasize the importance of community integration. We put effort into maintaining interactions between corporations, clients, and the community. With social responsibility in mind, we have established a network for assistance and collaboration with others with a proactive attitude. We provide employment opportunities that cultivate and train talented people to work with us. In this good workplace, employees help build the corporate system of LCY CHEMICAL CORP. where a proactive, enthusiastic, and innovative atmosphere is cultivated to provide excellent petrochemical products. Our contributions to domestic and foreign industries have brought satisfied clients and excellent prospects.

We have adopted purchase reduction and green procurement policies. The policies are shown results. Our stack boards

are recycled and reused through the assistance of storage management staff. When purchasing, products labeled eco-friendly are prioritized for purchase to meet the requirements of green procurement.

LCY CHEMICAL CORP. has established short, middle, and long-term purchasing strategies to enhance responsible

procurement. When evaluating a new material or new supplier, environmental issues are introduced to our partners.

Environmental concerns are included into the quality requirement. In the future, we hope to include more issues

regarding eco-friendly management (e.g., local purchase, labor conditions) into our criteria of evaluation in annual

supplier reviews.

63

OccupationalSafety

and Health

Future short, middle and long-term purchases and plans will be divided into three aspects, including “quality report of

supplier management,” “principle of local purchase,” and “labor conditions.”

1. Quality report of supplier management Ta-she Site requires suppliers to provide a COA documents, data sheet, and MSDS of raw materials. All material

should meet the REACH specifications set by the EU. Important materials are expected to meet the Sony GP

standards.

2. Principle of local purchase Local suppliers are preferentially considered compared to foreign suppliers in order to eliminate carbon emissions

of transportation.

3. Labor condition During the process of negotiation or material procurement, labor conditions of all potential partners are to be

reviewed via telephone. It is planned that from 2012, all new suppliers must provide a process capability index.

Working conditions and quality documentation will be required as evaluation criteria.

64

LCY CHEMICAL CORP. believes that good organization and corporate culture will contribute to the basic construction of mutual trust between employees and enterprises, and thus triggering employees’ potential to innovate and perform their duties in the workplace; this is the key to achieve corporate vision of sustainable development.

We are long-committed to creating a friendly working environment, establishing adaptive employee development and training programs, constructing a work atmosphere with fairness and freedom, and enabling employees to achieve work-life balance.

Friendly Labor-Management Relations

65

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

Male

Female

Domestic employees

Foreign employees

Direct staff

Indirect staff

Free-term contract staff

Fixed-term contract staff

589

105

1

0

335

11

252

88

587

99

3

6

85%

15%

0%

0%

48%

2%

36%

13%

84%

14%

0%

1%

643

114

1

0

379

4

260

98

639

102

5

12

85%

15%

0%

0%

50%

1%

34%

13%

84%

13%

1%

2%

695

117

1

1

403

9

289

103

692

112

4

6

86%

14%

0%

0%

50%

1%

36%

13%

85%

14%

0%

1%

2009

596

2010

758

2011

418

Year

Total number of employees

Employment Status

Friendly LaborManagement

Relations

To help optimize our employees’ potential at the most suitable position, we consider their workload based on the

capabilities of each individual. The employment principle of LCY CHEMICAL CORP. strictly prohibits child labor. In

addition, gender, religion, nationality, and ethnic differences do not affect placement of employees, payroll,

performance appraisal, promotion, education and training, or their personal welfare.

Because of the global economic depression in recent years, many companies used unpaid leave as a solution to the

market recession. However, considering that the income of our employees would be affected by accepting unpaid leave,

LCY CHEMICAL CORP. avoided instituting unpaid leaves by rescheduling employee shifts.

Remarks: terms are defined as follows,

1. Direct staff: first line operators

2. Indirect staff: administrators, logistics, aid staff

3. Fixed-term contract staff: temporary, short-term, seasonal, and specified workers

4. Free-term contract staff: workers who continued working without any specified terms

Because LCY CHEMICAL CORP. is in the chemical raw material manufacturing industry, intense labor workload and

physical fitness are required for our 24-hour non-stop operation. Therefore, we currently have more male employees

than female; however, LCY CHEMICAL CORP. recognizes potentials and contributions offered by our female staff. We

promote the outstanding female staff based on the same principles.

66

Employment of Employees with Disabilities

Male and female ratio for supervisory positions 2009 2010 2011

2009 2010 2011 Employee turnover rate

Assistant Manager/ Manager

Associate Manager

Vice President and up

Male

Female

Male

Female

Male

Female

Total

31

2

1

1

2

0

94%

6%

50%

50%

100%

0%

37

30

2

2

1

2

0

94%

6%

67%

33%

100%

0%

37

31

3

4

0

2

1

91%

9%

100%

0%

67%

33%

41

Male employee turnover rate

Female employee turnover rate

New employee turnover rate

1.294%

0.863%

0.863%

3.034%

0.659%

1.187%

4.176%

0.859%

2.579%

Year 2009 2010 2011

Total 11 10 9

Friendly LaborManagement

Relations

LCY CHEMICAL CORP. employs people with disabilities in accordance with government regulations. In 2011, LCY

CHEMICAL CORP. hired 9 employees with disabilities (total number of employees in 2011 was 814 persons, 1%

should be persons with disabilities in accordance with government regulation). In addition, whenever there are job

vacancies suitable for people with disabilities, LCY CHEMICAL CORP. will contact the disadvantaged groups and

interview the candidates they provide. We are committed to caring for the disadvantaged.

To show our appreciation of the hard work of our staff provide and to help provide job opportunities to the

disadvantaged, LCY collaborates with social welfare associations to arrange for blind masseuses to provide their

services on site. This not only helps our staff to relax and enjoy massage after a hard day’s work, but also provide job

opportunities for the blind. This service received great support from our staff.

67

Application rate of parental leaveand reinstatement rate

Number of reinstated

Number of employees eligible to apply forparental leave without pay

Number of employees who applied forparental leave without pay

Number of staff who continuedto work one year after reinstatement

Reinstatement rate

47

0

0

80%

0%

0%

20%

100%

75%

0%

75%

12

4

3

0

59

4

3

0

Male % Female % Total

2011

Friendly LaborManagement

Relations

Remarks: denominator for number of employee eligible for parental leave without pay is calculated from staff who took maternity or

paternity leave within the last 3 years.

Complete Employee Benefits No enterprise can prosper without hiring the right employees with the right skills. Therefore, LCY CHEMICAL CORP. has long been devoted to providing complete and high quality employee benefits so that all staff can achieve their potential in their position. Besides providing benefits guaranteed by the Labor Law, LCY CHEMICAL CORP. establishes our benefits system from the employee’s perspective.

We provide group insurance to all employees (including fixed-term life insurance, accident insurance, transportation accidental death insurance, accident medical insurance, and hospital insurance). The insurance premium is covered 100% by LCY CHEMICAL CORP. Additionally, we cover the hospital insurance for employee spouses and children, allowing our employees to perceive our care and concern for employees and their families.

Besides full-time employees, we also care for dispatched workers. We request labor agencies to provide the same insurance that we provide to our full-time employees, so that all staff at LCY CHEMICAL CORP. can have the same benefits.

Our Head Office and the Manufacturing units are located in Taipei and Kaohsiung, respectively. When a staff is required to relocate for work, we will explain to the staff and his/her supervisor in person so that the employee understands the purpose of the transfer, and possible career pathways.

We will also ask his/her supervisor to see if there are any suggestions for the transfer. After reaching the consensus with the staff member and his/her supervisor, the process will then be conducted to ensure all assistance needed be provided.

We also provide dormitory around the Head Office and at Sites for non-resident employees so that they don’t need to worry about accommodations when working away from home.

68

Friendly LaborManagement

Relations

Employee Welfare Committee In most companies, the function played by Employee Welfare Committee is pretty much the same. However, the leaders at LCY CHEMICAL CORP. emphasize that the committee should be human oriented, and provide deep meaning to employee care.

In addition to providing bonuses, retirement fund, various insurances, staff education grants, and employee children’s educational grants for full-time employees, LCY’s Employee Welfare Committee is also the best and warmest organization within the group. All activities and projects stem from “love” and all our projects surround this core value, from employee benefits to the support we give to Taiwan and the disadvantaged. We not only give out bonuses and organize staff trips, we also convey the corporation’s thanks to employees, so that every staff member may know their worth and that their value has been seen. Employees are recognized, cared for, cherished, and taken care of. From this, employees recognize themselves and their value, and may seek further improvement. This, in turn, benefits the corporation.

Employee Welfare Committee Affairs and Duties

Item Applicants/ Criteria Benefit amount (NT)

Hospitalization Daily (maximum 15 days) 1,000

Disabled Employees (levels 1 to 10) 90,000

Births Each time 3,000

Birthdays Each person 2,000

Weddings Each person 3,000

Funerals

Employee 110,000

Parents, spouse, children 10,000

Parents in-law 5,000

Education grants

Employee 5,000

Employee’s children for graduate school 4,000

Employee’s children for college or university 3,000

Employee’s children for high school 2,000

Employee’s children for junior high school 1,500

Employee’s children for elementary school or kindergarten 1,000

Festival bonus

Chinese New Year/ person 15,000

Dragon Boat Festival/ person 6,000

Mid-Autumn Festival/ person 6,000

Group trip grants Per Person 23,000

Club and association grants Per person 1,000

Language class grants Per person 6,000

69

Friendly LaborManagement

Relations

Fair Treatment of Contracted Human Resources LCY CHEMICAL CORP. gives fair treatment to all employees including contract staff. When selecting human resource agency partners, we require them to meet all government regulations.

Usually human resource agencies only provide insurance according to the regulations, but as requested by LCY CHEMICAL CORP., all our contract staffs share the same insurance.... Although doing so increases cost, this is still put into practice to guarantee benefits for every individual that works for LCY CHEMICAL CORP., and to emphasize the fact that LCY CHEMICAL CORP. cares for both full-time and contract employees.

Talent Cultivation and Evaluation LCY CHEMICAL CORP. believes that assisting our staff in self-improvement and staying passionate to confront the challenges at work is the key to human resource cultivation, through which corporate value and creativity is derived.

To meet this goal, and also to meet the challenges of the upcoming demand of recent expansions in operation, LCY CHEMICAL CORP. continues the planning of training projects for our employees. We have established a diversified training system to assist our staff to construct their mid- and long- term occupational and life plans. It is our hope that every employee in LCY CHEMICAL CORP. can find positions to realize their potential.

We respect self-improvement, and especially focus on personality cultivation and development. We strive to improve the overall quality of our staff and strengthen management skills of our managers. We also arrange trainings of younger generations so that we can build human resource base with lecturers and skilled professional. We stimulate the potential of each employee and bring passion to our teams.

We not only encourage our staff to develop professional expertise in their current position, but also to learn other skills. We applaud those who proactively attend classes after work to increase their value (e.g: staff are encouraged to take classes at government certified language schools or any other schools. Subsidies for tuition are granted when staff files his/her application.) The training we offer at LCY CHEMICAL CORP. includes:

Professional Training Courses New Staff Training Management Skill Training

Training courses for professional skills are provided by internal departments or external organizations to encourage learning, self-improvement, and enhance interaction with other professionals. Position rotation is also conducted to provide staff with different experiences and challenges at work, enhancing the width and depth of knowledge.

Through the arrangement by the human resources department and relevant department supervisors, new staff can understand corporate organization and culture, working environment and respective responsibilities; enhance new employee’s understanding and rapid integration into the company.

Gradual training program to build a high quality management team. Through complete and gradual skill training for different management levels, develop various management capabilities. Build mutual management language and team spirit that help enhance the organization performance.

70

Friendly LaborManagement

Relations

Average Number of Hours of Staff Training (By Gender) Gender Year 2009 2010 2011

Female

502,1 025,1631 sruoh gniniart latoT

481 453311 ffats fo rebmuN

Average training hours 1.20 4.29 6.54

Male

Total training hours 1,117 11,077 9,718

427,1 269,4704,2 ffats fo rebmuN

Average training hours 0.46 2.23 5.63

27.5 63.294.0 sruoh .egarevA latoT

2011 Staff Training Funding and Number of Hours

2009 2010 2011

418 857596 ffats fo rebmun latoT

020,790,2 732,054,2103,385,1 )$TN( gnidnuf latoT

675,2 332,3 872,2 )$TN( atipac rep gnidnuf gniniarT

329,01 795,21352,1 )sruoh( sruoh gniniart latoT

27.5 63.294.0 )sruoh( atipac rep sruoh gniniarT

Talent Assessment and Evaluation Mechanism A performance evaluation is conducted every 6 months in LCY CHEMICAL CORP. Through interviews and discussions, staff will have a better understanding about the expectations for his/her work performance; the supervisor will know if there is anything he/she can improve on. Based on this mutual communication, employees can adjust his or her goal or career planning accordingly.

LCY CHEMICAL CORP. carries out special training projects for potential employees to further enhance talented expertise for the corporation. Through this project, it is our hope that employees can benefit from training and gain capabilities to face issues independently.

Furthermore, LCY CHEMICAL CORP. selects our employees through various evaluation mechanisms. For example, engineers of different ages are put together to solve problems including chemical engineering tasks, practical applications, business issues, and various themes for discussion. From this we hope to find talented employees suitable for further cultivation. If there is a need for position switching or adjustment, thorough communication is guaranteed and agreement obtained before making adjustment.

71

Friendly LaborManagement

Relations

Employee Health Enhancement Plan LCY CHEMICAL CORP. believes that a healthy workplace is the result of integrating healthy, occupational safety, sustainable development, and human resource management. Therefore, we built a management system in line with our sustainable development concept to promote and establish a healthy workplace. We believe that employees are able to perform their best in such an environment. When the employee is healthy and active, they will keep their spirits up and generate more creativity, increasing corporate competitiveness.

To encourage employees to be more aware of their health and to elevate their physical fitness, we introduced Health Promotion Project in 2011 and assist employees to enhance their own health status through self-health management, group activity participation, diet control, and health check-ups. Other health promotion activities were also promoted.

We have adhered proactively to the “Healthy low-carbon LOHAS activity” promoted by the Business Council for Sustainable Development. By changing our lifestyles and purchasing habits, we strive towards a healthy low-carbon world.

The Activities Conducted by LCY CHEMICAL CORP. are as Follows:

Promote the concept of “National Health Day” on the first day of each month, and encourage staff to eat more

fruits and vegetables and less red meat.

The cafeteria provides more fruit and vegetables, and does not provide red meat on the 1st of each month.

The cafeteria does not provide disposable chopsticks or plate.

Staffs are encouraged to bring their own cups. No paper or plastic cups are provided. Water fountains are provided

to discourage packaged water.

Encourage electricity conservation. Encourage employees to use public transportation and bikes.

“Two floors up and three floors down” activity promoted in encouraging employees use the stairs and avoid using

the elevator.

Qigong groups are invited to sites to encourage employees to exercise more.

Voluntarily take care of the environment around sites. Plants were planted along the pedestrian walking for a

green and eco-friendly environment.

72

Friendly LaborManagement

Relations

In 2011, our health enhancement plan was entitled “Prevent Metabolic Syndromes; Reduce rate and figures of the three

highs (high blood pressure, high cholesterol, and high blood sugar)”. Regular exercise can help people lose weight and

body fat. It can also help metabolize accumulated cholesterol, LDL cholesterol, maintain normal blood glucose level,

and avert the treat of metabolic syndrome. To increase staff participation in such activities, the EHS department of each

site was assigned to carry out its own projects for employees.

Activities at Ta-she Site

Health Enhancement Plan Prevention of Metabolic Syndromes

Activity Duration Time/ period Description

Qigong 2010/07/05~present 0.5h/D

Monday to Friday

Internal webpage promotion 2011/01/01~present Once/month Newsletter sent via email for promotion through images or text.

Weight loss 100 2011/06/01~2011/11/30 0.5h/2 weeks Weight measured every two weeks.

Workshop on cardiovascular disease prevention

2011/05/18 2h/D

Workshop on the harm of smoking 2011/05/18 1h/D

Activities at Storage and Transfer Station

Health Enhancement Plan Weight Loss and Management

Activity Duration Time/ period Description

Weight loss class at Kaohsiung hospital

2011/03/22~ 2011/04/19

Once/ week 4 weeks in total

Exercise plan 2011/05/11 0.5h/D

9 weeks in total

Exercise starting 10 minute before end of work that continues for half an hour; employees are requested to exercise and can continue voluntarily.

Self-recording of exercise 2011/05/30~present ongoing Using weekly exercise log to remind employees of the benefits of exercise.

Weekly records of physical fitness 2011/01/24~present ongoing The record can help remind employees to control weight, blood pressure, etc.

Outdoor activities 2011/01/01~present ongoing Staff outdoor activities are held to encourage exercise and participation in sports.

E-newsletter promotion 2011/01/01~present ongoing Newsletter sent via email for promotion through images or text.

Prevention of metabolic syndromes / weight loss result presentation

2011/12/12 1 day

73

Friendly LaborManagement

Relations

Activities at Siaogang Site

Health Enhancement Plan Weight Loss and Management

Activity Duration Activity Duration

Morning Qigong 2011/01/01~present Monday to Friday

0.5h/D

Weight loss and control class2011/05/04~ 2011/07/13

1h/ week, 12 weeks in total

Weight loss performance Presentation

2011/07/20 1day Number of participants: 42 Total weight loss: 80.4 kg

Activities at Linyuan Site

Health Enhancement Plan Weight Loss and Management

Activity Duration Activity Duration

Qigong 2011/09/01~ present

Monday to Friday0.5h/D

Weight loss 100 2011/07/11 ~ 2011/10/07

Measured every season

Number of participants: 98. Total number ofstaff: 134. Total weight loss: 68.6 kg

Environmental Medical promotion

2011/10~ present

ongoing

1. Annual employee health checkups are conducted to follow-up and screen high risk staff.

2. Investigation and evaluation on exposure.3. Establish occupational sickness

prevention.

Activities at Kaohsiung Site

Health Enhancement Plan Healthy diet

Activity Duration Activity Duration

Morning Qigong 2011/01/01~ present

Monday to Friday0.5h/D

Weight loss class 2011/04/01~ 2011/07/12

2h/ time 4 times

Healthy diet Plan 2010/07/01~ present

1D/month ongoing

Began in September 2010; no red meat for lunch on the 1st of every month; only vegetables or white meat served.

Stress release exercise before middle shift

2011/01/01~ present

ongoing

Outdoor activities for staff 2011/01/01~ present

ongoing Staff outdoor activities are held to encourage exercise and participation in sports.

E-newsletter promotion 2011/01/01~ present

ongoing Newsletter sent via email for promotion through images or text.

74

Since the founding of the corporation, LCY CHEMICAL CORP. has always kept our commitment of improving quality of life as our goal. We aim to establish a working environment where innovation is encouraged to integrate with traditional industry. Internally, it is our hope to build a young and proactive corporate culture that leaps toward the cultivation and nurturing of employees with qualities of integrity, innovation, teamwork, and leadership. Externally, it is our responsibility to contribute to society. We hope to stimulate our growth by attracting young experts to join the chemical industry. These elites are the fundamentals of upgrade and transformation in the future chemical world.

Social Contribution

75

SocialContribution

As the ninth largest chemical producing country in the world, Taiwan, an Island with no natural resources, has built its chemical kingdom which was once one of the three-trillion-miracles. However, due to depletion of global petroleum resources and heightened awareness of environmental protection, the chemical industry has been stereotyped as a “polluting and sunset industry”.

Since the founding of the corporation in 1965, LCY CHEMICAL CORP. has always aimed to improve the quality of life. By innovating within a traditional industry, we sculpted a young and forward-looking corporate culture. Internally, we cultivate and nurture employees with integrity, innovation, teamwork, and leadership qualities. Externally, it is our responsibility to contribute back to the community. We hope to attract young professionals into the chemical industry, who can advance and transform in the future of the industry.

"Heritage and Innovation" Scholarship Program for Distinguished Professors and Outstanding Students To change the stereotype of the chemical industry being a polluting and sunset industry, to increase industry value, to encourage innovation, and to inspire young talents, LCY CHEMICAL CORP. and the Bowei Lee Education Foundation together hold an annual competition, providing scholarships for distinguished professors and outstanding students in chemistry or chemical engineering department in universities.

LCY CHEMICAL CORP. believes that students in Taiwan have creativity, pragmatic spirit, and international perspective, making them the source of competitiveness for Taiwanese industries. Therefore, the scholarship offered to outstanding professors and students is an important part of LCY CHEMICAL CORP.’s social responsibility; it encourages creativity and develops talent.

To motivate collaboration between academia and industry, we award professors devoted to the teaching, research, development, and application of traditional chemical technologies in colleges and universities. Hopefully, through the award, chemical technology level can be further enhanced, bringing prosperity to our community and Taiwan’s traditional industries.

Through the scholarship program, we encourage outstanding students and the young professionals to join this field. This helps to enhance petrochemical expertise and bring forth the energy of innovation. This positive trend of creativity and team spirit will hopefully prosper LCY CHEMICAL CORP. stimulate corporate internationalization, and establish a successful model for the industry. In the future, we hope to expand the scholarship program in related fields so that more young people can benefit from our contribution to society.

76

Distinguished Professor Award

Outstanding Student Award

SocialContribution

Scholarship Program for Distinguished Professors and Outstanding Students

Applicants have to be professors (including professors, associate professors, and assistant professors) at a public or private college or university in Taiwan, teaching in the chemical engineering or other related departments (including biotechnology and material science), with outstanding research in development or promotion of traditional chemical engineering technology, including publication of significant manuscripts or applications. Applicants are to be recom-mended by the school of posting. To maximize opportunities for all, applications are not open to persons who have previ-ously been awarded.

Undergraduate student: junior and senior students studying chemical engineering or other related departments (including biotechnology and material science) of a public or private college or university in Taiwan.Graduate student: graduate students studying at chemical engineering or other related graduate schools (including biotechnology and material science) of a public or private college or university in Taiwan.

Cultivation of a New Generation In 2010, we established the first scholarship program to encourage outstanding undergraduate and graduate school students in hopes to increase students’ knowledge and skills, so that Taiwan’s chemical industry can abandon traditional mindsets, and instead embrace and integrate new elements, maintain the competitive edge across the globe, and eventually benefit our community.

Furthermore, program activities incorporate LCY core values of “creation of value, innovation and improvement, leadership, team excellence.” It is our hope that through participation in the scholarship program, students will not only have a better understanding of LCY CHEMICAL CORP., but also have gained the right values upon entering the workforce.

77

SocialContribution

Program FeaturesUnique evaluation mechanism The vetting process for this program differs from other scholarship programs. During the second stage, all staffs are required to participate in the program by setting up creative and interesting tasks which students must integrate innovation and chemical engineering knowledge to get through including exercises of engineering methods, chemical engineering expertise Q&A, games, and inventive cooking contests. All these activities challenged the integrity, innovation, teamwork and leadership qualities of students.

Encourage participation and teamworkAlthough the chemical industry is a traditional industry, it still needs diversified and talented people from all fields. We select our talents based on integrity, innovation, teamwork, and leadership qualities, which are also our corporate core values . We stimulate the potential and team spirit of students, allowing the community to see a livelier and innovative chemical industry. By doing this, we hope students who participated in these activities will use their experience in the learning of chemical technologies and application.

Prompt LCY employees to interact with studentsStaff in all departments used after work hours to help in the preparation of the competition and the award ceremony. Employees held many inter-departmental brainstorming sessions, thinking outside the box, working together as a team to come up with great ideas for the program. From the activities to the award ceremony, employees from different departments were mobilized. Our chairman, Mr. Lee, and the R&D Director, Dr. Shih, both took parts in the activities and award ceremony. Their participation throughout the whole program is a demonstration of our corporate culture and image.

Award Ceremony for the Outstanding Student Scholarship In 2011, using the theme of “Developing New Legends in Chemical Engineering, Cultivating New Citizens for the Future,” LCY CHEMICAL CORP. held the Award Ceremony for the Outstanding Student Scholarship at Kaohsiung Grand-Hilai Arena .

During the ceremony, students once again experienced teamwork interactions and the chemical engineering industry through putting together puzzles of famous chemists in history, and presenting a new citizen declaration. Moreover, all award winners underwent two days of competition, where they had to put innovation and chemical engineering knowledge into contest activities, including exercises of engineering methods, chemical engineering expertise Q&A, games, and inventive cooking contests. All these activities challenged the integrity, innovation, teamwork and leadership qualities of students.

Students who received the awards were invited to state innovative declarations of the expectations to themselves, to the industry, and to the future, demonstrating the new generation’s idealistic dreams to change the community and the world.

78

SocialContribution

Funding and Resources for the 2011 Scholarship Program Item Content

Financial investment Approximately NT$ 3.1 million

Number of participants 30 employees

Beneficiaries 28 students, 5 professors, a total of 33 persons.

Benefits

Stimulate young professionals and deliver corporate values

Establish corporate culture Build foundation

for collaboration between academia and industry

By promoting innovative thinking and encouraging interaction between industry and academia, students who participated in the program experienced teamwork and learned to put knowledge into practice. They are challenged with tasks that help them seek breakthroughs in their professions and look at the chemical industry with a new perspective. The culture and corporate values of LCY CHEMICAL CORP. is also well highlighted.

With the spirit of bringing innovation to traditional industry, the scholarship program not only helps to cultivate a young and forward-looking corporate culture in LCY CHEMICAL CORP., but also helps to seek and nurture employees with integrity, innovation, teamwork, and leadership qualities.

The scholarship program not only refreshes the corporate image, but also helps to build the foundation for collaboration between industry and academia.

Feedbacks from ParticipantsKu Shan-Chieh from National Taiwan University of Science and Technology, Department of Chemical Engineering said, “it is a veryunique and creative scholarship program. I am honored to have participated in it.”

Wu You-Lin, the winner of the first Scholarship Program who is now an employee of LCY CHEMICAL CORP. said, “when I chose my major, it was when the so-called “Two-Trillion Industries” of semi-conductors and monitors were the most popular choices. I doubted the prospect of chemical industry. However, the scholarship program I participated in last year blew the stereotype of traditional industries out of my mind. Looking at these passionate students receiving their awards this year, I hope more and morepeople can also join the chemical industry to be part of a great workforce with high added-value and prosperity.”

Social Contribution Besides the "Heritage and Innovation" Scholarship Program for Distinguished Professors and Outstanding Students, in 2011, we made donations to National Taiwan University Hospital and its affiliate foundations to help enhance healthcare quality and the well being of the disadvantaged. We also donated to the Lung Yingtai Cultural Foundation for the cultivation of “New Youth” with qualities of being world citizens.

2009~2011 Total Donation Unit: NT$ 1,000

2009 2010 2011

Li Mou-Wei Foundation 3,000 3,000 4,390

Other Cash Donations 14,698 2,612 5,209

Total 17,698 5,612 9,599

79

GP5008 Issue 4 DRAFT

SGS TAIWAN’S REPORT ON SUSTAINABILITY ACTIVITIES IN THE LCYCHEMICAL CORP.’S CORPORATE SOCIAL RESPONSIBILITY REPORT FOR2011

NATURE AND SCOPE OF THE ASSURANCE/VERIFICATIONSGS Taiwan was commissioned by LCY CHEMICAL CORP. (hereinafter referred to as LCY CHEMICAL) toconduct an independent assurance of the Corporate Social Responsibility Report of 2011. The scope of theassurance, based on the SGS Sustainability Report Assurance methodology, included the text, and data inaccompanying tables, contained in LCY CHEMICAL’s operational sites in Taiwan of this report.

The information in the LCY CHEMICAL’s Corporate Social Responsibility Report of 2011 and its presentationare the responsibility of the superintendents, CSR committee and the management of LCY CHEMICAL. SGSTaiwan has not been involved in the preparation of any of the material included in the LCY CHEMICAL’sCorporate Social Responsibility Report of 2011.

Our responsibility is to express an opinion on the text, data, graphs and statements within the scope ofverification set out below with the intention to inform all LCY CHEMICAL’s stakeholders.

The SGS Group has developed a set of protocols for the Assurance of Sustainability Reports based on currentbest practice guidance provided in the Global Reporting Initiative Sustainability Reporting Guidelines and theAA1000 Assurance Standard (2008). These protocols follow differing options for Assurance depending thereporting history and capabilities of the Reporting Organisation.

This report has been assured at a moderate level of scrutiny using our protocols for:evaluation of content veracity;evaluation of the report content and supporting management systems against the AA1000Accountability Principles (2008);evaluation of the report against the Global Reporting Initiative Sustainability Reporting Guidelines.

The assurance comprised a combination of pre-assurance research; interviews with relevant employees atheadquarter of LCY CHEMICAL in Taiwan; documentation and record review and validation with externalbodies and/or stakeholders where relevant.

Financial data drawn directly from independently audited financial accounts has not been checked back tosource as part of this assurance process.

STATEMENT OF INDEPENDENCE AND COMPETENCEThe SGS Group of companies is the world leader in inspection, testing and verification, operating in more than140 countries and providing services including management systems and service certification; quality,environmental, social and ethical auditing and training; environmental, social and sustainability report assurance.SGS Taiwan affirms our independence from LCY CHEMICAL, being free from bias and conflicts of interest withthe organisation, its subsidiaries and stakeholders.

The assurance team was assembled based on their knowledge, experience and qualifications for thisassignment, and comprised auditors registered with QMS, EMS, SMS, EnMS, GPMS, SA 8000, GHGVerification Lead Auditors and experience on the SRA Assurance service provisions.

ASSURANCE STATEMENT

8080

GP5008 Issue 4

VERIFICATION/ ASSURANCE OPINIONOn the basis of the methodology described and the verification work performed, we are satisfied that theinformation and data contained within LCY CHEMICAL’s Corporate Social Responsibility Report of 2011verified is accurate, reliable and provides a fair and balanced representation of LCY CHEMICAL sustainabilityactivities in 01/01/2011 to 12/31/2011. Some statements and data within the scope were not assured due tolack of accessible records during the timescale allowed for assurance, and these are clearly marked throughoutthe text.

The assurance team is of the opinion that the report can be used by the Reporting Organisation’s Stakeholders.We believe that the organisation has chosen an appropriate level of assurance for this stage in their reporting.The report is the first to be assured by an independent assurance team and LCY CHEMICAL has taken a boldstep by offering the report to evaluation against both Global Reporting Initiative’s G3.1 guidelines and theAA1000 Assurance standard. This shows a deserved confidence in their reporting process.

In our opinion, the contents of the report meet the requirements of Global Reporting Initiative G3.1 ApplicationLevel B+ and AA1000 Assurance Standard (2008) type 1, moderate level.

AA1000 ACCOUNTABILITY PRINCIPLES (2008) CONCULSIONS, FINDINGS AND RECOMMENDATIONSInclusivityLCY CHEMICAL has demonstrated a strong commitment to stakeholder inclusivity and stakeholderengagement. A variety of engagement efforts such as survey and communication to employees, consumers,investors, local communities, suppliers, media, NGOs and other stakeholders are implemented to underpin theorganization's understanding of stakeholder concerns. It is recommended to have direct involvement ofstakeholders during future engagement.MaterialityLCY CHEMICAL has implemented appropriate process for determining issues that are material to theorganization. We believe the report has addressed the great majority of LCY CHEMICAL’s material issues at anappropriate level to reflect their importance and priority to the stakeholders. It is recommended that the processand criteria applied to assess materiality to be formalized and documented to ensure better consistent result infuture reporting.ResponsivenessLCY CHEMICAL is committed to being responsive to stakeholders and their concerns. Future reporting mayrefocus on how the contribution is making to sustainable development outcomes. The amount of information onsocial aspect may be increased in next report.GLOBAL REPORTING INITIATIVE REPORTING GUIDELINES (2006) CONCULSIONS, FINDINGS ANDRECOMMENDATIONSPrinciples, Standard Disclosures and IndicatorsThe report, LCY CHEMICAL’s Corporate Sustainability Report 2011, is adequately in line with the GlobalReporting Initiative G3.1 application level B+. Contents of Disclosure on Management Approach may have moreclearly defined policies and goals for each aspect. It is also recommended to have more disclosure on theperformance of supplier chain management, sustainability strategy and material impacts.

Signed:For and on behalf of SGS Taiwan

Dennis Yang, Chief Operating OfficerTaipei, Taiwan26 June, 2012WWW.SGS.COM

81

GRI G3.1 Index

Disclosure Items Page

Strategy and Analysis

1.1 Statement from the most senior decision maker of the organization about the relevance of sustainability to the organization and its strategy.

2

1.2 Description of key impacts, risks, and opportunities. 2

Organizational Profile

2.1 Name of the organization. 12.2 Primary brands, products, and/or services. 6-8

2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures. 13

1 .sretrauqdaeh s’noitazinagro fo noitacoL 4.2

2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

12

2.6 Nature of ownership and legal form. 14 2.7 Markets served. 11 2.8 Scale of the reporting organization. 15

2.9 Significant changes during the reporting period regarding size, structure, or ownership.

No significant changes

2.10 Awards received in the reporting period. 18

Report Parameters

3.1 Reporting period for information provided. 1

3.2 Date of most recent previous report Firstpublication

3.3 Reporting cycle. Every two years

3.4 Contact point for questions regarding the report or its contents. 1

3.5 Process for defining report content. 28

3.6 Boundary of the report. 1

3.7 State any specific limitations on the scope or boundary of the report. 1

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.

No relevant issues

3.9

Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report.

Refer to each chapter

3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement.

Firstpublication

3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.

Firstpublication

3.12 Table identifying the location of the Standard Disclosures in the report. 82

3.13 Policy and current practice with regard to seeking external assurance for the report. 1

Governance, Commitments,

and Engagement

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.

20

4.2 Indicate whether the Chair of the highest governance body is also an executive officer. 20

82

4.3 For organizations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members.

20

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. 30

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives, and the organization’s performance.

20

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided. 24

4.7

Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organization’s strategy on economic, environmental, and social topics.

28

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

6,22

4.9

Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

28

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

28

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization. 22

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

16,41

4.13 Memberships in associations and/or national/international advocacy organizations. 16

4.14 List of stakeholder groups engaged by the organization. 30

4.15 Basis for identification and selection of stakeholders with whom to engage. 29

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group. 30

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.

30

Economic Disclosure on Management Approach 15

ECONOMIC PERFORMAN

CE

EC1

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

15

EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change. 25

EC3 Coverage of the organization’s defined benefit plan obligations. 69

EC4 Significant financial assistance received from government. -MARKET

PRESENCE EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation. -

83

EC6Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. 63

EC7 Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation. 68

INDIRECTECONOMIC

IMPACTS

EC8Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

76-79

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. 63

Environmental Disclosure on Management Approach 45

MATERIALS EN1 Materials used by weight or volume. 63 EN2 Percentage of materials used that are recycled input materials. -

ENERGY

EN3 Direct energy consumption by primary energy source. 51 EN4 Indirect energy consumption by primary source. 51 EN5 Energy saved due to conservation and efficiency improvements. 36-39

EN6Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.

36-39

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. 34

WATER 35 .ecruos yb lawardhtiw retaw latoT 8NE

EN9 Water sources significantly affected by withdrawal of water. 53 EN10 Percentage and total volume of water recycled and reused. 51,53

BIODIVERSITY

EN11Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

LCY is located in the

industrial area

EN12Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

LCY is located in the

industrial area

EN13 Habitats protected or restored. LCY is located

in the industrial area

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity.

LCY is located in the

industrial area

EN15Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

LCY is located in the

industrial area

EMISSIONS, EFFLUENTS, AND WASTE

EN16 Total direct and indirect greenhouse gas emissions by weight. 39 EN17 Other relevant indirect greenhouse gas emissions by weight. 39

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. 36-39

EN19 Emissions of ozone-depleting substances by weight. No emissions EN20 NO, SO, and other significant air emissions by type and weight. 52 EN21 Total water discharge by quality and destination. 53 EN22 Total weight of waste by type and disposal method. 52 EN23 Total number and volume of significant spills. 53

EN24

Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

Not applicable

84

EN25Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff.

None

Products and Services

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. 44

EN27 Percentage of products sold and their packaging materials that are reclaimed by category. -

COMPLIANCE EN28 Monetary value of significant fines and total number of non-monetary sanctions for noncompliance with environmental laws and regulations.

54

TRANSPORT EN29

Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce.

34

OVERALL EN30 Total environmental protection expenditures and investments by type. 54

Labor Practices and Decent Work Disclosure on Management Approach 65

EMPLOYMENT

LA1 Total workforce by employment type, employment contract, and region.

66

LA2 Total number and rate of employee turnover by age group, gender, and region.

67

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

69

LABOR/MANAGEMENT

RELATIONS

LA4 Percentage of employees covered by collective bargaining agreements.

No labor union

LA5 Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements. 68

OCCUPATIONAL HEALTH

AND SAFETY

LA6Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs.

58

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work related fatalities by region.

62

LA8Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.

72

LA9 Health and safety topics covered in formal agreements with trade unions.

No labor union

TRAINING AND

EDUCATION

LA10 Average hours of training per year per employee by employee category.

71

LA11Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

70,71

LA12 Percentage of employees receiving regular performance and career development reviews.

-

DIVERSITY AND EQUAL OPPORTUNIT

Y

LA13Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity.

67

LA14 Ratio of basic salary of men to women by employee category. 66 LA15 Return to work and retention rates after parental leave, by gender. 68

85

Human Rights Disclosure on Management Approach 65

INVESTMENT AND

PROCUREMENT

PRACTICES

HR1 Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

-

HR2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken. -

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

-

NON -DISCRIMINA

TION HR4 Total number of incidents of discrimination and actions taken. No relevant

issues

FREEDOM OF ASSOCIATION

AND COLLECTIVE BARGAINING

HR5

Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights. -

CHILD LABOR HR6 Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor.

66

FORCED AND COMPULSOR

Y LABOR HR7

Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor.

63

SECURITYPRACTICES HR8

Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.

-

INDIGENOUS RIGHTS HR9 Total number of incidents of violations involving rights of

indigenous people and actions taken. No relevant

issues

Assessment HR10 Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments. -

Remediation HR11 Number of grievances related to human rights filed, addressed, and resolved through formal grievance mechanisms.

No relevant issues

Society Disclosure on Management Approach 75

Localcommunities SO1

Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.

LCY is located in the

industrial area

CORRUPTION

SO2 Percentage and total number of business units analyzed for risks related to corruption. -

SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures. -

SO4 Actions taken in response to incidents of corruption. No relevant issues

PUBLIC POLICY

SO5 Public policy positions and participation in public policy development and lobbying. 17,18

SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. None

ANTI-COMPETITIVE

BEHAVIOR SO7 Total number of legal actions for anticompetitive behavior, anti-trust,

and monopoly practices and their outcomes. None

COMPLIANCE SO8 Monetary value of significant fines and total number of non-monetary sanctions for noncompliance with laws and regulations.

No relevant issues

86

LocalCommunities

SO9 Operations with significant potential or actual negative impacts on local communities.

LCY is located in the

industrial area

SO10 Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities.

LCY is located in the

industrial area, no relevant mitigation measures

Product Responsibility Disclosure on Management Approach 44

CUSTOMERHEALTH AND

SAFETY

PR1Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

45

PR2Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

No relevant issues

PRODUCT AND SERVICE

LABELING

PR3Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

33

PR4Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.

No relevant issues

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. -

MARKETING COMMUNICA

TIONS

PR6Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.

-

PR7Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

No relevant issues

CUSTOMERPRIVACY PR8

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. No relevant

issues

COMPLIANCE PR9 Monetary value of significant fines for noncompliance with laws and regulations concerning the provision and use of products and services.

None

87

LCY+

2011 LCY CHEMICAL CORP. Corporate Social Responsibility Report

2011