Bottled carbonated soft drinks, mineral water and other beverages account for a significant majority of global PET resin demand. As awareness of environmental conservation grows globally, alternatives to PET resin may be introduced or demand thereof may increase. For example, a plant- based biodegradable plastic material, polylactic acid ("PLA"), is increasingly attracting attention as a substitute for petroleum-based plastic materials. Such substitution could become more prevalent if the technology and feedstock limitations, as well as the higher production costs, for such products decrease in the future. 1.12 Exchange rate and/or interest rate fluctuations may have a significant adverse impact on our business, financial condition, results of operations and prospects. As a result of the global nature of our business, changes in foreign currency rates could have an adverse impact on our business, financial condition, results of operations and prospects. Currency fluctuations affect us because of mismatches between the currencies in which operating costs are incurred and those in which revenues are received. We sell products that are typically priced by reference to prices in U.S. dollars or Euros, while a portion of operating costs are incurred in local currencies, including the Baht, Sterling pound and Lithuanian litas. Our reported earnings may also be affected by fluctuations between the Baht, which is our reporting currency, and the non-Baht currencies in which some of our subsidiaries report their results of operations. As a result, we may be adversely affected by foreign exchange translational losses due to fluctuations in the value of the Baht against the U.S. dollar, Euro and other currencies in which we conduct our business. For the year ended December 31, 2008, we incurred a net foreign exchange loss of Baht 523.8 million, and for the nine months ended September 30, 2009, we incurred a foreign exchange gain of Baht 421.1 million. In addition, our operating subsidiaries usually borrow in the principal currency in which they do their business to minimize currency risks. This exposes us to interest rate risks associated with these currencies, the principal ones being the Baht, the U.S. dollar and the Euro, and therefore a change in interest rates could have a material adverse impact on our business, financial condition, results of operations and prospects. 2 Risks Relating to our Group Structure 2.1 Our business depends, in part, on our informal relationships with other Indorama group entities in Indonesia and India. We are a part of an informal Indorama Group, which consists of three independently managed associate groups, namely ourselves, the S.P. Lohia Group Indonesia and the O.P. Lohia Group India. The Indorama Group was founded by Mr. M.L. Lohia in 1976 in Indonesia, and each of the groups is currently managed by one of Mr. M.L. Lohia's sons. The Indorama name does not belong to us, and we have a non-exclusive license for its use pursuant to a License Agreement with Lohia Global Holdings Limited, a company controlled by Mr. M.L. Lohia. The S.P. Lohia Group and the O.P. Lohia Group also use the Indorama name. We do not control how the S.P. Lohia Group and the O.P. Lohia Group use the Indorama name and cannot assure you that their actions will not adversely impact the reputation associated with the Indorama name. In order to obtain the best prices for the MEG that we purchase, we source for, and negotiate the prices of, MEG together with the S.P. Lohia Group and the O.P. Lohia Group. Because this is an informal arrangement, we cannot assure you that the S.P. Lohia Group or the O.P. Lohia Group will continue to source for, and negotiate the prices of, MEG with us. If we were to source for, and negotiate the prices of, MEG without the other groups, this could adversely affect the price that we pay for our MEG. In addition, upon the completion of the public offering and Tender Offer (assuming that all IRP Minority Shareholders tender all of their shares in the Tender Offer and there is no adjustment to the exchange ratio), our controlling shareholder (of which Mr. Sri Prakash Lohia and his immediate family owns a 51.0% interest and has voting control over 24.0%) will own 71.5% (70.1% if the over-allotment option is exercised in full) of our outstanding shares. Mr. Sri Prakash Lohia and his immediate family controls the S.P. Lohia Group, and their interests may differ from the interests of our other shareholders. 2.2 The Company is a holding company and is dependent on the receipt of dividends to make dividend payments on our shares. As a holding company, the Company is dependent on the receipt of dividends from its subsidiaries and associated companies, the payment of which will depend on their future financial performance, which in turn depends on successfully implementing their strategies and on financial, competitive, regulatory, technical and other factors, general economic conditions, demand and selling prices for their products and other factors specific to their respective industries or specific projects, many of which are beyond our control. The ability of our direct and indirect subsidiaries to pay dividends to their shareholders, including the Company, is subject to applicable law. For example, under the PLCA, if a Thai company's retained earnings are not positive, the Company is not permitted to pay dividends even if it records a net profit for that year. In addition, a significant number of our subsidiaries, including Indorama Petrochem, Orion Global, Indorama Holdings Europe, IRH Rotterdam, TPT Petrochemicals, Indorama Polyester Industries and AlphaPet, are subject to restrictions on their ability to make dividend payments unless they meet the relevant conditions specified in their debt agreements. As part of the conditions for our acquisition of the 3.94% interest in Indorama Polymers from Deutsche Investitions- und Entwicklungsgsellschaft ("DEG") in 2008, we were also required to pledge such shares, together with any dividends arising from such shares, to DEG until we pay the final instalment of the purchase price. 2.3 Our ability to pay dividends may be restricted. Although we intend to pay dividends with respect to the shares, our ability to pay dividends in the future will depend upon a decision of the Board of Directors and/or the approval of the shareholders at a general meeting, our results of operations, cashflows, financial condition, contractual restrictions and restrictions imposed by applicable law and other factors the Board of Directors deems relevant. In addition, under the PLCA, if the Company's retained earnings are not positive, the Company will be unable to pay dividends, even if we record positive net profit for that year. If we are unable to generate sufficient profits, the Company will not be able to pay more than a nominal amount of dividends in the future. In addition, under Thai law, dividend payments may be paid based on the net profit of the Company derived from its standalone financial statements and not from its consolidated financial statements. Therefore, we are not able to pay any dividend with respect to our net profit derived from our consolidated financial statements that is attributable to the net profit of Indorama Holdings which we purchased in 2006 or the negative goodwill that we recorded in 2008 as a result of our 2008 acquisitions. 3 Risks Relating to our Shares and the Tender Offer 3.1 Future sales of our shares, and the availability of large amounts of our shares for sale, could depress price of the securities. Upon completion of the public offering and Tender Offer (assuming that all IRP Minority Shareholders tender all of their shares in the Tender Offer and there is no adjustment to the price or exchange ratio), our controlling shareholder will continue to own 71.5% (or 70.1% assuming the over- allotment option is exercised in full) of our outstanding shares. Our controlling shareholder may agree with the initial purchasers, the co-lead manager and the Thai lead underwriter with respect to our public offering that for 180 days after the closing date of the public offering, our controlling shareholder will not, without the respective written consent of the initial purchasers, the co-lead manager and the Thai lead underwriter, offer, sell or otherwise dispose of any securities of the same class as the ordinary shares offered in the public offering or any securities convertible into or exchangeable for our securities of the same class as the ordinary shares offered in the public offering. Subject to the lock-up provisions, our controlling shareholder will be free to sell the shares it controls any time after July 31, 2010. Significant sales of our shares by our controlling shareholder, or the perception that significant sales may occur, could adversely affect the trading price of the securities. We cannot predict the effect, if any, that future sales, or the availability of shares for future sale, will have on the market price of the securities prevailing from time to time. Sales of substantial amounts of shares in the public market following the public offering, or the perception that such sales may occur, could adversely affect the market price of the securities on the SET. These sales may also make it more difficult for us to raise capital through the issue of equity securities at a time and at a price we deem appropriate. Lawsuit As of 30 September 2008, there is not any outstanding litigation which we and our subsidiaries in Thailand are a party to which may have an effect on our assets to the extent greater than 5 percent of shareholder's equity. In addition, there is no lawsuit which could have a significant effect on our business. However, our subsidiaries abroad are a party in lawsuit as the following details: 1 Lawsuit of our subsidiaries Eastman Lawsuit Eastman filed a complaint in the Delaware District Court against AlphaPet, IRP Rotterdam, IRP Workington, IRH Rotterdam and Indorama Polymers on December 18, 2009 in connection with commercial production at the AlphaPet PET facility. The AlphaPet PET facility accounts for 28.8% of our PET installed capacity. IRP Rotterdam, IRP Workington, and IRH Rotterdam (combined called "the European Defendants") entered into a Technology License Agreement with Eastman in connection with our acquisition of Eastman's north-west European PET and PTA businesses in March 2008. Pursuant to the acquisition agreement, certain Eastman employees became employees of the European Defendants. In addition, pursuant to the Technology License Agreement, the European Defendants received a license to use licensed technology to make certain commercial products at the IRP Workington PET facility, the IRP Rotterdam PET facility and the IRH Rotterdam PTA facility. The Technology License Agreement precludes the European Defendants from using or accessing Eastman's IntegRexTM PET technology, and prevents the European Defendants from accessing the knowledge of former Eastman employees regarding such technology. In the complaint, Eastman alleges that: AlphaPet infringes certain patents owned by Eastman by making, using, selling and offering - for sale polyester monomer and polyester polymer melt phase products within the United States, and supplying polyester polymer products to others that make and sell plastic containers within the United States; the European Defendants breached the Technology License Agreement because former - Eastman employees who were in possession of Eastman confidential, proprietary and trade secret information had improperly used and disclosed such information during the design, start-up and/or operation of AlphaPet's melt-to-resin PET manufacturing process; and the defendants misappropriated Eastman's confidential and proprietary trade secret - information under Delaware statutes. Eastman requested the court to, among other things, award compensatory, punitive and/or exemplary damages in favor of Eastman, including reasonable royalties, enjoin AlphaPet from further infringement of various patents, enjoin the defendants from unauthorized use of Eastman's confidential, proprietary and trade secret information, including injunctive relief, and award interest, costs and attorney's fees. The complaint filed on December 18, 2009 does not request for pre-trial temporary injunctive relief. The AlphaPet PET facility uses technology called melt-to-resin that was licensed from Uhde Inventa Fischer AG. AlphaPet contracted with Uhde Inventa Fischer AG to oversee construction of the AlphaPet PET facility and provide design services and equipment. We believe that these claims are without merit and intend to vigorously defend ourselves against these claims. However, we cannot predict when these legal proceedings will be completed and we cannot assure you that the Delaware District Court will dismiss the claims or rule in our favor. The Delaware District Court could grant temporary or permanent injunctive relief against us (which could result in the cessation of operations at the AlphaPet PET facility), deliver a ruling in favor of Eastman and/or award substantial monetary damages against us and/or impose royalties. In addition, if the court were to find that the European Defendants had materially breached the Technology License Agreement, Eastman may be able to terminate the agreement and all licenses granted thereunder. We may also incur significant costs and expenses as a result of these legal proceedings. We are parties to litigation that, if decided against us, could have a material adverse effect on our business, financial condition, results of operations and prospects" for a further discussion. If the Technology License Agreement were to be terminated by Eastman, we believe that the facilities of the European Defendants are able to use alternative conventional technologies for relatively low cost and can be implemented with minimal or no disruption to our operations. Industrial Piping Proceedings AlphaPet had engaged Industrial Piping, Inc. ("Industrial Piping") to install certain piping in the AlphaPet PET facility in Decatur, Alabama. Industrial Piping agreed to perform such work for US$2,990,000. Through a number of mutually agreed change orders, this amount was increased to US$3,220,000. On September 23, 2008, AlphaPet issued a Letter of Intent pursuant to which AlphaPet and Industrial Piping attempted to reach agreement on final terms and conditions. However, no such agreement was reached, although Industrial Piping began work. On November 19, 2009, Industrial Piping filed a Request for Mediation and a Demand for Arbitration with the American Arbitration Association. In the Demand for Arbitration, Industrial Piping made a claim for an unspecified amount of substantial damages for breach of contract, negligence and negligent misrepresentation, and an amount in excess of US$1.9 million for breach of the Letter of Intent, reasonable compensation for services provided (quantum meruit) and payment for work and labor performed. On November 23, 2009, Industrial Piping filed a lien against AlphaPet's property with the Office of the Probate Judge of Morgan County in Alabama, seeking, among other things, a declaration that it was entitled to have AlphaPet's leasehold rights sold and to have the proceeds of such sale applied to Industrial Piping's claims, together with interest and costs. AlphaPet denies all of Industrial Piping's material allegations and intends to vigorously defend the lawsuit. AlphaPet has filed a counterclaim for, among other things, an order correcting the public record regarding the lien, a declaration that both parties are not required to arbitrate any disputes, an order enjoining Industrial Piping from pursuing the pending arbitration, and actual and punitive damages for slander of title and fraud. On the same day, Industrial Piping filed a complaint to perfect and enforce the lien in the Circuit Court of Morgan County, Alabama. We cannot predict what the outcome of the litigation will be. 2 Lawsuit associated with the Company but we are not direct party in lawsuit Lawsuit that we are not a party but may have a material adverse effect on our business. Lawsuit regarding improvement of project to increase production efficiency and improve the air pollution treatment system of Indorama Petrochem PTA Facility, which was filed a lawsuit in the Thai Central Administrative Court On June 19, 2009, the Stop Global Warming Association and a number of other people living in Map Ta Phut, Ban Chang and Muang District, Rayong Province (the "Claimants") filed a lawsuit in the Thai Central Administrative Court (the "CAC") against various Thai governmental entities and Ministers, including the Minister of Industry (the "Respondents"). This lawsuit requests the CAC to render a judgment ordering the Respondents to revoke the environmental impact assessment reports (the "EIA Report") and to revoke their approvals of projects or activities required to prepare the EIA Report that are located in Map Ta Phut, Ban Chang and the surrounding area in Rayong Province, Thailand. The lawsuit alleges that 76 projects in such areas may cause serious impact on the community with regard to the quality of environment, natural resources and health. The Claimants also requested that the CAC suspend any current activities of such projects, activities or operations of applicants or owners because they may have breached relevant procedures specified under the Thai constitutional and other relevant laws, including the commissioning of a health impact assessment report (a "HIA Report"), the holding of a public hearing and the hearing of opinions from independent environmental organizations, prior to operating such projects or activities. One of the projects named in the lawsuit is the Indorama Petrochem PTA facility, which was approved by the Minister of Industry. On the same day, the Claimants also requested the CAC to render an injunction ordering the temporary suspension of projects, activities or any operations under construction in such area, and prohibition of the Respondents from granting approval or permission of reports of any new projects that may cause serious impact on the community. On September 29, 2009, the CAC issued a temporary injunction ordering the Respondents to procure the temporary suspension of such operations or activities until final judgment. This injunction excludes the projects or activities that were granted approval or permission prior to the effective date of the Thai Constitution B.E. 2550 (2007), and projects or activities not prescribed as the type of projects or activities required to prepare the EIA Report in accordance with applicable guidelines and regulations. In October 2009, the Respondents by The Thai Attorney General, a number of industrial operators, as well as Indorama Petrochem, filed an appeal against such injunction to the Supreme Administrative Court, requesting the Supreme Administrative Court to overrule the CAC's injunction and to suspend the enforcement of the CAC's injunction. On December 2, 2009, the Supreme Administrative Court stated that its preliminary consideration of the type or nature of the projects or activities that were subject to the injunction led them to the view that certain projects or activities were unlikely to have a material impact on the local community because they focused on the control or treatment of, or the installment of additional equipment to control or treat, pollution. Therefore, the Supreme Administrative Court ruled that the Indorama Petrochem PTA facility was one of the 11 projects that would no longer be subject to the injunction. In light of the ruling by the Supreme Administrative Court relating to the injunction, Indorama Petrochem has made an application to the IEAT for approval to begin commercial operations at the Indorama Petrochem PTA facility. However, we cannot assure you that the IEAT will provide the approval letter for the project until the matters surrounding the litigation are resolved or at all. With respect to the lawsuit, the Respondents are required to submit their response to the CAC by January 12, 2010. We cannot assure you that the Thai Administrative Courts will not ultimately pass a verdict in the lawsuit that would lead to the revocation of the licenses and permits that were granted to construct and operate, or to the suspension of operations of, the Indorama Petrochem PTA facility. 3,475 persons, as of 30 September, 2009 (Include all subsidiaries) Number of Employees Company Background Indorama Venture Public Company Limited, formerly known as Beacon Global Limited was established on 21 February 2003. Then, we registered to change the name to Indorama Venture Public Company Limited on 19 March 2009. n. We are a holding company with investments in companies operating in an integrated petrochemical value chain both domestic and international. These companies are manufacturers and distributors of polyethylene terephthalate ("PET"), polyester fiber and yarn, purified terephthalic acid ("PTA"), and wool. We commenced business operations in 1994 with the incorporation of Indorama Holdings, which was the first worsted wool yarn producer in Thailand. In 1995, we entered the petrochemical industry (more)