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MegaChem Limited

Management Online Q&A With Investors

Dear Investors,

Thank you very much for your questions and the opportunities to respond to them.

We hope you have a better understanding of our business through this online exchange.

Your questions are reposted in blue followed by our replies in black.

Best Regards,
The Management Team
MegaChem Limited

1. Dear Lester Yeo, you wrote:

Can you elaborate further how the impairment of Venezuela trade receivables came about? Shouldn't there be a letter of credit for goods exported to serve as a guarantee for payments made?

Venezuela is one of the largest oil exporter in the world. Following the steep decline in oil prices, the country's foreign revenue from oil exports has declined drastically, leading to a shortage of foreign currency. Currently, there are foreign exchange controls in place where all foreign currency payments would require approval from the Venezuela's central authority, regardless of the form of payment be it letter of credit or others. As a result there has been much slower approval for foreign currency payments.

Our Venezuela customers provide us cash deposits as a form of guarantee but not for the full amount of the trade receivables, leaving us with some unsecured trade receivables. Following the impairment provision made in the first half of 2017, the unsecured net trade receivables from the Venezuela customers have been fully provided for impairment. We have also substantially reduced our business in Venezuela and hence do not foresee any significant exposure to Venezuela in the near future until its economic conditions improve.

2. Dear Chee Meng Kat, you wrote:

Have the majority shareholders considered to take MegaChem private since the share liquidity is so low and cost of listing is high?

Our listing status enhances our reputation and has been a key factor in developing relationships with our major customers and suppliers. Hence there is currently no plans to take the company private.

3. Dear Samuel Chee, you wrote:

Meghmani is going to delist the Singapore Depository Shares From SGX-ST. What are you going to do with your Meghmani shares?

Since its announcement in May 2017 of its intention to delist, we have not received further information from Meghmani Organics Ltd (“Meghmani”) on this matter. We are monitoring this matter and will take the necessary actions when there are further developments. In any case, our investment in Meghmani is small.

4. Dear Yang Shen, you wrote:

Why did you list your Thailand associated company and dilute your shareholdings? Have you considered bank loans instead to avoid dilution?

The listing of our Thailand associated company, Megachem (Thailand) Public Co Ltd (“Megachem Thailand”) provides us funds to further expand our business in Thailand and in other markets. These business expansions are long-term investments and we do not think it is appropriate to fund it with bank loans.

Following the listing, we are holding onto 36.19% of Megachem Thailand's issued share capital and therefore it still remains as our associated company.

Dear Investors,

Thank you for all your questions and your interest in MegaChem Limited. We have come to the end of this Q&A session.

We have enjoyed the session and have learnt much from your questions. We hope that through this Q&A, you have gained better insights to our Company and our operations.

Best Regards,
The Management Team
MegaChem Limited