ivl : annual report 2009

2 Indorama Ventures PCL

Vision To be one of the leading global producers with key focus on people and processes thus making INDORAMA one of the most admired companies in the world.

MissionContinuously upgrade quality of products and services through people involvement and world class processes to attain customer delight thus becoming a preferred supplier and institutionalise people learning as a key factor for business growth.

Values

People FirstWe believe that people are our core strength, be it our employees, suppliers, customers, shareholders and stakeholders. Their involvement and satisfaction are the key drivers for our success and growth.

Customer DelightWe believe we exist because of our customers. We focus our activities to achieve customer delight and loyalty for a long lasting relationship.

Social ResponsibilityWe believe in being responsible and caring for society; maintaining as well as enhancing the environment around us.

Corporate GovernanceWe believe i n transparency, accountability and e thics. We aim to achieve the h ighest degree o f governance in accordance with best practice.

Performance Highlights

Chairman’s Message

Group Chief Executive Officer’s Message

Company and Subsidiaries Information

Organization Structure

Board of Directors

Major Shareholders

Dividend PolicyCore Business

Business Operations

Risk Factors and Risk Management

Related Party Transactions

Management Discussion and Analysis

Corporate Governance Report

Human Resources &

Corporate Social Responsibilities

Report of Audit Committee

The Board of Directors’ Report

Financial Statements

4

6

8

12

18

19

24

25

26

27

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45

49

57

67

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75

76

Contents

Performance Highlights

(Baht Million)

CONSOLIDATED INCOME STATEMENTNet salesCost of salesGross profitSelling and adminsitration and others expensesOperating profitOther (income) expenseProfit before tax and minorityIncome taxProfit before minorityMinority interestNet profit after tax and minority interestEBITDA

CONSOLIDATED BALANCE SHEETTotal Current AssetsProperty, plant and equipmentOther AssetsTotal AssetsTotal Current LiabilitiesLong term loans - net of current portionOther liabilitiesTotal LiabilitiesIssued and paid-up capitalShare premiumRetained earnings and reservesMinority interestTotal shareholders equity

FINANCIAL RATIOS

Gross marginEBITDA marginNet margin before minorityEarnings per ShareReturn on equityReturn on capital employedNet gearingNet debt - equity

2009

79,99467,66612,3284,8527,476

9036,573

5546,0191,1954,824

10,636

23,56649,5051,189

74,26025,78525,331

67851,7943,3524,4439,3845,287

22,466

15.4%13.3%7.5% 1.44

30.0%13.8%62.6%

1.7

2008

53,33248,1785,1542,8832,271(905)3,176

533,123

4672,6563,838

18,83549,6421,291

69,76823,77927,981

30152,0613,3524,4435,0004,912

17,707

9.7%7.2%5.9% 0.79

26.0%6.7%

69.7% 2.3

Growth

50%40%

139%68%

229%n.a.

107%945%93%

156%82%

177%

25%0%

-8%6%8%

-9%125%

-1%0%0%

88%8%

27%


80,000

60,000

40,000

20,000

0

7,000

5,250

3,500

1,750

0

1.50

1.25

0.75

0.37

0

30

25

20

15

10

16.0

12.0

8.0

2.0

0

11,000

8,250

5,500

2,750

0

2008 2009 2008 2009

2008 20092008 2009

2008 20092008 2009

Growth Continues

SALES (Baht Million)

Profit before Minority (Baht Million)

Earnings per Share (Baht)

EBITDA (Baht Million)

Gross Margin (% )

Return on Equity (%)

Annual Report 2009 5 Annual Report 2009 5

Chairman’s Message

Every time a prospect comes up in the IVL domain, we frame the right questions and contemplate a smart business move

The firmest strides of growth and progress have often stemmed from a readiness to adapt and evolve. Such firm strides have been the cornerstone of Indorama Ventures Limited (IVL Pcl) since it came into being. Demonstrating its readiness, is the company’s most prolific step of restructuring IVL, and subse-quently making it public in 2009. This move is both astute and timely.

Organizational momentum usually encourages the continua-tion of thriving practices and habits, particularly in successful organizations. Our principles at IVL have guided us through triumphs in every conceivable market condition. Today, as we work to enact well conceived, balanced business reforms for our business, these principles are as important as ever.

Through every business cycle, IVL has always been about responsiveness to our customers and providing the highest level of business to satisfy needs. The IVL way is synonymous with stability, which we believe gives us our competitive advantage. We continue to experience strong global demand across our product groups. This demand reflects the underlying indispensability of our products, which has proved robust across the economic cycle. The PET plant in Lithuania, UAB Orion Global PET received a gold medal with an embedded plaque conferring our product ‘Ramapet N1’ as “Lithuanian Product of the Year”, signed by the President of the Confederation of Lithuanian Industrialists. Such awards are symbolic of the rigorous operational excellence and that enhances the performance of our business.

IVL is working on an incredible range of activities in business articulation with mutually reinforcing performance goals organized around our focus areas: our people, our business model, and our Governance. Speaking of Corporate Governance, the IVL Board continues its responsibility with the goal of sustainably increasing the company’s intrinsic value and achieving defined corporate objectives. We are in an era where we need to be more and more aware of our Board Governance and we at IVL are very glad to see more interest in setting high standards of transparency. Indorama Polymers Pcl (IRP), a subsidiary of the Company that was listed in the SET up until February 2010, received a Corporate Governance Scoring of ‘Excellent’ last year, a step up from “Very Good” the previous year. This early effort to promote and develop good corporate governance practiceswill be continued by IVL.

On the organizational side, there has been a major enrichment with the infusion of quality manpower. Despite this year’s revolving-economic door, we saw no layoffs of our employees but actually employed an additional 370 people (approx.). We have witnessed huge recruitments and had fruitful training sessions for our employees. I believe this stability speaks well for our company and only makes us feel more empowered. At IVL we have been working with leadership teams and employees that transition from strength to strength.

Our industry focus is the predicate to everything we know. We have broadened our horizon and are keeping in sight the indica-tors poignant for our core businesses and industry. The world of petrochemicals is not instantaneous. The challenge is to make successful headway into new domains and extract the best out of the traditional domains. Our strategy remains to focus on large, low cost methods capable of delivering superior returns across all economic cycles. We are fortunate to have a geographi-cal portfolio weighted towards large, mature as well as growing economies. Neverthless, our quest does not end at the current portfolio. We want to be in alignment with our ethos- Grow Profitably! With this sponsoring thought, we are towards ambitious ventures. This year will have IVL expanding into hitherto unexplored plants.


Annual Report 2009 7

The set of ambitious and important endeavors that the management is planning should more than keep me busy as IVL’s chair-man for the foreseeable future. In fact, this is the path I wish to walk to much advantage. This is the opening Annual Report for IVL and the Chairman’s message should traditionally convey all the reasons why one should invest in the company. But I feel the company’s rich history, a dynamic present, and a promising future speaks for itself. Today we are a bigger family and just as strong.

We have had a great year, and we owe thanks to many people for their dedication, confidence, trust and conviction. It is the un-flagging support and belief of our shareholders, customers and equally important, the loyalty of our employees that has ensured a successful and gratifying year for us. I thank my colleagues and Board members for their able advice and direction. We extend our deepest gratitude to all of you. This year the Directors and I, hope to build on the momentum we have worked to establish. Our ability and your conviction will together create value that gradually rises to a crescendo.

S.P.LohiaChairman of the Board


Group Chief Executive Officer’s Message

One question for all of you – What do you think of mega changes in business structuring, brought about with good strategy and thought?

The World isn’t changing, it is exchanging. That’s what is said by some and that’s what I believe. Our intention to go public with Indorama Ventures reiterates this belief. Indorama is a metaphorical story that’s evolving all the time. At IVL we all want to believe that we are a piece of something bigger. Companies that manifest that sensibility in their employees and shareholders invoke immense passion. But passion alone is not good if there is no sense of direction and flexibility. We at Indorama know that passion needs to dovetail with a clear grasp of operational needs.I am writing this message today at a significant turning point in the history of Indorama Ventures, Public Company Limited (IVL), with a foreshadowing of such operational needs and singularity of purpose.

2009, leading into 2010 has been a pivotal year for the company against the then poor economic backdrop. It was quite eventful and contributive in making growth more synchronous with our vision, mission and goals. Our entrepreneurial momentum is going strong and we see greater vibrancy in our business environment today. The stage is set for us to be the Google of polyester value chain sector. Indorama Ventures Limited is constantly in a forward motion mapping a world of PET, Polyester and PTA produc-tion and has a unique name for itself in these industries. And I deem nothing triggers a more receptive attitude among potential stakeholders than visibly strong growth.

One team, one brand, one strategy

IVL is now a ubiquitous brand. Today our business is a lot different from what people knew of us. The difference comes from the business strides we have taken over the years. A significant stride was bringing each of our businesses under the flagship of Indorama Ventures as a single operating structure. Effectively integrating all the individual operations is now better differentiat-ing us in the marketplace and also enabling us to deliver returns, under one brand, defined by a common strategy. The integra-tion improves our economies of scale, combines the talent and creates various common platforms that can be used to improve overall efficiency and costs such as IT, logistics, and raw material. Convergence has been the buzzword and IVL is now strongly positioned to leverage this convergence.

Given the size of Indorama Ventures, it is more challenging to be entrepreneurial and also be a Public Limited Company. What we try to do is balance a corporate thought process with a strategic approach but embed it with an entrepreneurial spirit. One of the most critical components is the innate understanding of the industry we bring on. Our operational excellence has been able to balance the corporate view with the entrepreneurial spirit and ensure it doesn’t get diluted.

Buoyed by a searing growth, IVL pedaled its way into a plan of being the biggest company to be listed in the Stock Exchange of Thailand in the last three years. We see this move as one that can help propel IVL’s profile to a level yet unseen. From talking the talk, 2009 saw us being on the fast track to operationalize.

In Today’s marketplace there are many opportunities but you have to be bold. Our challenge is to make the most of this oppor-tunity by doing what we do, but doing it better by capitalizing on our traditional strengths. The establishment of a comprehensive business restructuring plan by consolidation of Indorama Polymers into IVL through a share swap offer and a tender offer to delist Indorama Polyester Industries Plc. is an interesting and important step that we have taken. IVL became pcl on 25th Sep-tember 2009 and got listed on 5th February 2010.What distinguishes this restructuring is not only its scale and acuteness, but the size and speed of the business and people response. While it was a challenging decision, the opportunity we see is breathing room to further refine our core business strategy across a triple bottom line of economic, environmental and people performance.


From the period since IVL became a public listed company we have been able to further broaden our strategic and commercial relationship and we look forward to developing this going forward. Development is only meaningful if it is inclusive and sustain-able. Going public with IVL, maintains and reaffirms our focus and commitment to the future of the Polyester segment.

Strong performance in 2008 bode well for 2009

The ecosystem of any company, any strategy and thought needs to shift from perpetuating the status quo to being a catalyst of change. To me, the greatest sign of hope is that this is beginning to happen for IVL.

We have seen significant investments each year through expansions that help us stay more relevant to the marketplace. By tapping into challenging moves in our business stream and leveraging the thought leadership coming out of our internal think tanks—we bring to our stakeholders the most beneficial and boldest business returns from across our global organization.

This year marked the fortification of our business in the main business segments of PTA, Pet Resins and Polyester after a num-ber of acquisitions in Thailand and Europe in year 2008. We entered into the PTA business in 2008 for integration and it has been a major successful move with record production, sales, profits and cash flow in 2009. It has provided us an excellent platform to enable more growth and provide superior value. The acquisitions we had done in 2008 demonstrate the full gambit of how we communicate the big picture in a global context. As a company we have always had a proven track record of successfully implementing intensive projects as well as selecting attractive acquisition opportunities and successfully improving the opera-tions and profitability of acquired businesses. The successes of 2009 are evident of this. All the major capex and investment projects undertaken in year 2008-9 completed successfully. AlphaPet, our state-of-the-art plant with latest technology in USA, successfully commenced Line 1 operations in 2009 and is all set to begin Line 2 in the first half of 2010.

During the past year, the organization’s dialogue on moving forward intensified, driven by strategies for expansion and change. We added a new paradigm when IVL made an initial public offering of its new shares; made a tender offer for all shares of In-dorama Polymers (IRP Pcl) held by other shareholders by swapping them with its new shares and subsequently delisted IRP. At the heart of the delisting is the recognition that it’s not enough to continue to do the same thing. Businesses become more productive by standing apart and serving the market place and investors with a truly unique offering. That’s exactly what IRP depicts through its delisting and continues to remain one of the most exciting members of the IVL family.

IVL’s endeavor towards the IPO, shows the kind of force, resilience, and drive that stretches and pushes a business to all pos-sible limits even after seemingly having seen and done most of it all. The idea of IVL going public was a strategic decision with a double aim: to allow the shares to be freely exchanged on the organized market and to give flexibility to the Group to enable it to manage its own funds and to access capital markets with a view to future growth. The quest for value accretive expansion has always been part of the IVL ethos.

The industry rationalization has accelerated in the current environment as the high cost; non-focused players have begun to exit the market. This is expected to continue over the coming years creating additional growth potential for focused players such as IVL that continue to invest in the industry. Because our products are resilient to recession and IVL has a global distribution plat-form, increase in volumes and utilization rate was experienced. We achieved higher returns on a larger equity and capital base in year 2009 and saw margin improvement from upward integration with PTA.

Certitude that our Business Warrants

We have remained true to our growth strategy and maintained a steadfast focus on our sector. Value is the very essence of our “Monozukuri” – combination of technology and operations to include development and production. Our seven strategic impera-tives, in place, continue to guide our actions.

• Raw Material Security & Captive Consumption- Security of PTA supply for our PET and Polyester operations• Common Buying Platform for MEG- Our PET and Polyester divisions leverage their buying bargaining power for MEG procurement• Partnering, acquiring and investing to accelerate the implementation of our strategy and focus our resources on core business• Focusing relentlessly on growth markets


• Cost Savings Through Synergistic Asset Positioning & Integration - Cost savings through co-locations due to reduction of logistics costs and the sharing of common services• Going to market as one team, under a common brand, executing a single strategy• Investing in internal capabilities to build a high-performance culture and efficient operation, best practices and benchmarking

Our focus in this industry is not only for passion for this sector but also because of better understanding of the key success factors for individual businesses. We also thrive on more efficient allocation of capital and human talent, ability to make quick management and commercial decisions. Reduction in overheads needed to manage a diverse set of operations and addition of more value due to the similarity of the businesses is yet another factor.

The pursuit of reinforcing brand presence in the market place, is, keeping in mind, its overarching relevance to the industry. This year we designed our new Indorama logo which unequivocally defines the strong foundation on which the company is built upon. It depicts our dependability, dynamism, sustainability and encapsulates all activities by the company. The rationale behind the design and choice of colors is that we want our shareholders, new and old, to associate with.

Financials The notable financial performance of IVL, in the face of fluctuating economic environment reflects the full strength of our signifi-cant consolidation of business units.

Financial highlights (Baht million):

Net salesEBITDAEBITDA marginProfit before tax and minorityNet profit after tax and minorityIssued and paid-up capital*Earnings per Share

Year 200979,99410,63613.3%6,5734,8243,3521.44

Year 200853,3323,8387.2%3,1762,6563,3520.79

Growth50%

117%

107%82%

*Based on issued and paid-up capital at end of year and par value Baht 1 per share

People and Practices Augur Well for us

I attribute the company’s momentum to the dexterity with which our people have worked. Even in unsettled global marketplaces, trust, not uncertainty dominated our conversations at IVL. I have always believed that the role of a leader is often not to force the outcome, but to command execution. Managing that command falls largely to seasoned management that we have. 2009 was an intense but very productive year. Yet again our people have demonstrated their solidarity and dedication to the company. Our employees continue to devote their energies to confirming whether our business really is going the way it should. Their persever-ance animates my being and instructs our energies. Indorama’s development, in my humble opinion, is the sine-qua-non of our people. Not many executives have a better vantage point on the industry we operate in like ours.

After winning national accolades, IVL’s Quality Circles (QC) initiatives soared international in 2009. One of our QC Groups was awarded “Best QC Group” by the QC head quarter of Thailand. Furthermore the group also was selected for International Con-vention on Quality Control Circle for the International Exposition for Team Excellence (IETEX) 2009 at Singapore. Another group was selected for the International competition in China.

In 2009 we also received the Environment Good Governance Reward named “Green Star on White Flag”. One of our PTA plants received this excellent reward on environment good governance from the Industrial Estate Authority of Thailand Governor.


Businesses are an instrument of society and governance. IVL’s demonstration of transparent, fair and equitable corporate gover-nance practices depicts its responsibility towards the same. IRP, a subsidiary of IVL receiving an “Excellent” CG Scoring from the Institute of Directors, “IOD” survey for listed companies is an empirical proof of our good practices.

As we take steps today, we know, these are steps towards tomorrow

IVL is uniquely positioned to take advantage of the industry, thanks to its strong portfolio, larger market cap and liquidity, high growth industry, secured PTA feedstock through integration, favorable raw material (PX and MEG) supply scenario, human capital and conversion costs. We are prepared to enter next phase of growth through acquisitions and Brownfield /Greenfield expansions.

With this in mind, our way forward has always been very clear. Our ability to retain effective margins is our measure for our success. Also, whatever measures we take in the short –term, we never sacrifice our ability in the long term. Excess is not my scene. I like the play of clear vision. And that’s what I think IVL and its subsidiaries are going to be all about. Today we see ourselves at the front line of the World Polyester Producers. We want to grow faster than the market. We want to be, as in the world, recognized as the leader in the polyester value chain industry. I’m excited today about the opportunities that exist out there for IVL.

Thank you for your belief in Indorama and my sincerest gratitude to all our suppliers, customers, employees and stakeholders.

Coming back to my question of Mega changes in business – I believe these Mega changes will bring us Giga returns.

Mr. Aloke LohiaGroup CEO


Company Information

Listed Company Information

Subsidiary Companies Information

1. Indorama Polymers Public Company Limited (Direct Subsidiary)PET Business

Name Type of businessHead Office

Company’s Registration NumberTel.Fax.Web siteRegistered Share Capital

Issued and paid-up Capital

Type of businessHead Office

Tel.Fax.Plant

Tel.Fax.Web siteRegistered Share Capital

Issued and paid-up Capital

Percentage of Investment


Tel.Fax.Plant

Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment

: Indorama Ventures Public Company Limited (IVL): Holding Company: 75/102 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 0107552000201: +66-2-661-6661: +66-2-661-6649, 02-661-6664 www.indoramaventures.com Baht 5,082,000,000 divided into 5,082,000,000 ordinary shares each of Baht 1 par value Baht 4,334,271,047 divided into 4,334,271,047 ordinary shares each of Baht 1 par value

: PET Polymers Production : 75/102,103 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 72 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand : 036-489164-5: 036-489115 www.indoramapolymers.com Baht 1,450,000,000 divided into 1,450,000,000 ordinary shares each of Baht 1 par value Baht 1,382,197,870 divided into 1,382,197,870 ordinary shares each of Baht 1 par value: 99.08%

: Preforms, Bottles and Caps Production : 85 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: 85 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: Baht 75 Million : Baht 75 Million : 60.00% (Indirect)

2. Petform (Thailand) Limited (Indirect Subsidiary)


3. Asia Pet (Thailand) Limited (Indirect Subsidiary)

4. StarPet Inc. (Indirect Subsidiary)

5. AlphaPet Inc.(Indirect Subsidiary)

6. Indorama Polymers (USA) Inc. (Indirect Subsidiary)


Tel.Fax.Plant

Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment


Plant



Plant




: Amorphous Chips Production : 75/102, Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Klongtoey Nuer Sub-District, Wattana District, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 61/1 Moo 11, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: Baht 450 Million : Baht 450 Million : 99.99% (Indirect)

: PET Polymers Production : 801 Pineview Road, Asheboro, North Carolina 27203, USA: 801 Pineview Road, Asheboro, North Carolina 27203, USA: +1-336-6720101: +1-336-6721904: USD 25 Million: USD 12 Million: 100.00% (Indirect)

: PET Polymers Production : 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: +1-256-3081180: +1-256-3405722: USD 50 Million: USD 44 Million: 100.00% (Indirect)

: Holding Company for AlphaPet Inc.: 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: +1-256-3081180: +1-256-3405722: USD 50 Million: USD 44 Million: 100.00% (Indirect)


7. UAB Orion Global Pet (Indirect Subsidiary)

8. Indorama Polymers Rotterdam B.V. (Indirect Subsidiary)

9. Indorama Polymers Workington Limited (Indirect Subsidiary)

10. UAB Indorama Polymers Europe (Indirect Subsidiary)

Type of businessHead OfficePlant Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment


Plant



Plant


Type of business

Head OfficeTel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment

: PET Polymers Production : Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 77,688,000 : Litas 77,688,000 : 100.00% (Indirect)

: PET Polymers Production : Markweg 201, 3198 NB Europoort, Harbour Number 6347, Rotterdam, the Netherlands: Markweg 201, 3198 NB Europoort, Harbour Number 6347, Rotterdam, the Netherlands: +311-81-285438: +311-81-285596: EUR 90,000: EUR 18,000: 100.00% (Indirect)

: PET Polymers Production : Siddick, Workington, Cumbria, CA14 1LG, United Kingdom: Siddick, Workington, Cumbria, CA14 1LG, United Kingdom: +44-1900-609300: +44-1900-609341: GBP 100: GBP 1: 100.00% (Indirect)

: Holding Company for Indorama Polymers Rotterdam B.V. and Indorama Polymers Workington Limited: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 72,508,800: Litas 72,508,800: 100.00% (Indirect)


1. Indorama Petrochem Limited (Direct Subsidiary)

2. TPT Petrochemicals Public Company Limited (Direct Subsidiary)

3. Indorama Holdings Rotterdam B.V. (Indirect Subsidiary)

4. UAB Indorama Holdings Europe (Indirect Subsidiary)

PTA Business


Tel.Fax.Plant



Tel.Fax.Plant



Plant


Type of businessHead OfficeTel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment

: PTA Production : 75/93 Ocean Tower, 35th Floor, Soi Sukhumvit 19, Sukhumvit Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand : 02-661-6661: 02-661-6649, 02-661-6664: 4 Moo 2, Asia Industrial Estate, Tambon Banchang, Amphur Banchang, Rayong, 21130 Thailand : 038-689081-5: 038-689090: Baht 4,727,820,420 : Baht 4,727,820,420: 100.00% (Direct)

: PTA Production : 54 BB Building, 20th Floor, Sukhumvit 21 Road (Soi Asoke), Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-203-6900: 02-260-8018: 3, I-7 Road, Map Ta Phut Industrial Estate, Amphur Meuang, Rayong 21150 Thailand: 038-683288: 038-683300: Baht 6,903,000,000 : Baht 4,925,000,000: 54.60% (Direct)

: PTA Production : Markweg 201, 3198NB Europoort, Rotterdam, the Netherlands: Markweg 201, 3198NB Europoort, Rotterdam, the Netherlands: +31-181-285-455: +31-181-285-405: Euro 90,000 : Euro 18,000: 100.00% (Indirect)

: Holding Company for Indorama Holdings Rotterdam B.V.: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 117,395,200: Litas 117,395,200: 100.00% (Indirect)


1. Indorama Polyester Industries Public Company Limited. (Rayong) (Direct & Indirect Subsidiary)

2. Indorama Polyester Industries Public Company Limited. (Nakhon Pathom), formerly Indo Poly (Thailand) Limited* (Direct & Indirect Subsidiary)

3. Indorama Holdings Limited (Direct Subsidiary)

Polyester Fibers, Yarns & Wool Business


Tel.Fax.Plant



Tel.Fax.Plant



Tel.Fax.Plant


: Polyester Fiber, Yarn and PET Chips Production : 75/92 Ocean Tower 2, 35th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 6, I-2 Road, Map Ta Phut Industrial Estate Tambon Map Ta Phut Amphur Meuang Rayong, Rayong 21150, Thailand: 038-683870: 038-683884: Baht 2,226,220,000 : Baht 2,202,850,000: 64.94% (Direct) and 34.61% (Indirect)

: Polyester Fiber and Yarn Production: 35/8 Moo 4, Khun Kaew Sub-district, Nakhon Chaisri District, Nakhon Pathom 73100, Thailand: 034-222191: 034-324169-70: 35/8 Moo 4, Khun Kaew Sub-district, Nakhon Chaisri District, Nakhon Pathom 73100, Thailand: 034-222191: 034-324169-70: Baht 700,000,000 : Baht 700,000,000: 98.85% (Direct & Indirect)

: Holding Company and Production of Wool Yarn : 75/64,65 Ocean Tower 2, 28th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 63 Moo 11 Bangngha-Thaklong Road, T. Kaosamorkorn A. Thawung Lopburi -15180 : +663 6489116-7: +663 6489115: Baht 774,468,000 : Baht 774,468,000: 97.93% (Direct)

* Indo Poly (Thailand) Limited was dissolved on August 3, 2009 and is being liquidated, which we expect to be completed by mid 2010


4. Indorama Textiles (Thailand) Limited. (Indirect Subsidiary)

Other Information


Tel.Fax.Plant


Listing on Stock Exchange

Shares Registrar

Auditors

Legal Counsel

Company Contact

: Wool Tops Production: 75/64,65 Ocean Tower 2, 28th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 61 Moo 11 Bangngha-Thaklong Road, T. Khaosamorkorn A. Thawung Lopburi-15180 : 036-489116-7: 036-489115: Baht 51,000,000 : Baht 51,000,000: 95.10% (Indirect)

The Stock Exchange of ThailandThe Stock Exchange of Thailand Building, 62 Rachadapisek Road, Klongtoey, Bangkok, 10110, ThailandTel. +662-229-2000Fax. +662-359-1009-11www.set.or.th

Thailand Securities Depository Company LimitedThe Stock Exchange of Thailand Building, 62 Rachadapisek Road, Klongtoey, Bangkok, 10110, ThailandTel. +662-596-9302-12Fax. +662-359-1259www.tsd.co.th

KPMG Phoomchai Audit Limited50th - 51st Floors, Empire Tower195 South Sathon Road, Yannawa, SathonBangkok 10120, ThailandTel. +662-677-2000Fax. +662-677-2222

Weerawong, Chinnavat & Peangpanor Ltd.22nd Floor, Mercury Tower540 Ploenchit Road, LumpiniPathumwan, Bangkok 10330, THAILANDTel. +662-264-8000Fax. +662-657-2222

Company Secretary & Legal: 1) Mr. Souvik Roy Chowdhury2) Ms. Thamonwan Woraphongjirakarne-mail: [email protected] [email protected]

Investor Relations:1) Mr. Richard Jones 2) Mr. Ashok Jaine-mail: [email protected] [email protected] Company Address:75/102,103 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand Tel. 02-661-6661Fax. 02-661-6664

* Indo Poly (Thailand) Limited was dissolved on August 3, 2009 and is being liquidated, which we expect to be completed by mid 2010


Organization Structure

Board of Directors

Group Chief Executive Officer

Audit Committee

Polyester Fiber and Yarn & Wool BusinessPET BusinessPTA Business

Internal Audit Department

PresidentChief Executive OfficerPresident

Head of Accounting

Chief Operating OfficerChief Operating OfficerChief Operating Officer

Board of DirectorsOrganization Structure

Name/Surname: Mr. Sri Prakash Lohia Position: Chairman of the Board Age: 57 Education: Bachelor of Commerce Delhi University, IndiaWork Experience (5 years past and present) :2009 - present Chairman Indorama Ventures PCL2009 - present Director Indorama Group Holdings Limited2009 - present Director Indorama Corporation Pte. Ltd.2009 - present President Director PT Surya Sakti Investment2006 - present President Director Indorama International Limited, Dubai2006 - present Chairman Eleme Petrochemicals Co., Ltd.2006 - present Director Indorama Petro Limited2006 - present Director Indorama Shebin Textiles Co SAE2005 - present Director Indorama Petrochemicals (Nigeria) Limited2004 - present President Commissioner PT Indo-Rama Synthetics Tbk2003 - present Director Indorama Petrochem Limited1998 - present Director Indorama Iplik Sanayi ve Ticaret AS1997 - present President Director PT Indorama Industries1991 - present Director Isin International Pte Limited1991 - present Director Indorama Lanka Pvt Limited

Name/Surname: Mr. Aloke Lohia Position: Vice Chairman and Group Chief Executive Officer (The director who is authorized to sign on behalf of the Company)Age: 51 Education: Bachelor of Commerce Delhi University, India Director Certification Program (DAP) Class 65/2007, Thai Institute of Directors (IOD) Work Experience (5 years past and present) :2009 - present Vice chairman Indorama Ventures PCLPresent Director TPT Utilities Company Limited2009 - present Chairman Indorama Resources LimitedPresent Director Aviante International Ltd.2009 - present Director Indorama Petrochem Limited2008 - present Chairman TPT Petrochemicals PCL.2008 - present Director Indorama Polyester Industries PCL.2008 - present Director Indorama Ventures Limited, Jersey2008 - present Chairman Beacon Chemicals Ltd.2008 - present Director Indorama Ventures S.A. Luxembourg2007 - present Chairman Cryoviva (Thailand) Ltd.2007 - present Chairman UAB Indorama Holdings Europe2007 - present Chairman Indorama Polymers Rotterdam B.V.2007 - present Chairman Indorama Holdings Rotterdam B.V.2007 - present Chairman Indorama Polymers Workington Ltd.2007 - present Chairman UAB Indorama Polymers Europe.2007 - present Chairman Indorama Polymers (USA) Inc.2007 - present Chairman AlphaPet, Inc.2004 - present Chairman UAB Orion Global PET2004 - present Chairman StarPet Inc.2004 - present Chairman Asia Pet (Thailand) Limited2004 - present Director Canopus International Limited2003 - present Director Florrie Ltd.1997 - present Director V.O.X. Investment Limited1996 - present Director Petform (Thailand) Limited1995 - present Vice chairman Indorama Polymers PCL1994 - present Chairman Indo-Rama Textiles (Thailand) Ltd. 1994 - present Chairman Indorama Holdings Ltd.1991 - present Chairman Habitat Estate Development Co., Ltd.1987 - present Chairman Aurus Speciality Co., Ltd.1986 - present Chairman Winforce Trading (HK) Ltd.1985 - present Chairman Autumn Investment (HK) Ltd.



Name/Surname: Mrs. Suchitra Lohia Position: Director (The director who is authorized to sign on behalf of the Company)Age: 45 Education: Bachelor of Commerce Delhi University, IndiaWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCL2009 - present Director Indorama Resources LimitedPresent Director TPT Utilities Company Limited2009 - present Director Indorama Petrochem Limited2008 - present Director TPT Petrochemicals PCL.2008 - present Director Indorama Ventures Limited, Jersey2008 - present Director Indorama Polyester Industries PCL.2008 - present Director Beacon Chemicals Ltd.2007 - present Director UAB Indorama Holdings Europe2007 - present Director Indorama Polymers Rotterdam B.V.2007 - present Director Indorama Holdings Rotterdam B.V.2007 - present Director Indorama Polymers Workington Limited2007 - present Director UAB Indorama Polymers Europe.2007 - present Director Indorama Polymers (USA) Inc.2007 - present Director Alpha Pet Inc.2004 - present Director UAB Orion Global PET2004 - present Director StarPet Inc.2004 - present Director Asia Pet (Thailand) Limited2004 - present Director Canopus International Limited2004 - present Director Aviante International Ltd.2003 - present Director Florrie Ltd.1997 - present Director V.O.X. Investment Limited1996 - present Director Petform (Thailand) Limited1995 - present Director Indorama Polymers PCL1994 - present Director Indo-Rama Textiles (Thailand) Ltd. 1994 - present Director Indorama Holdings Ltd.1987 - present Director Aurus Speciality Co., Ltd.1986 - present Director Winforce Trading (HK) Ltd.

Name/Surname: Mr. Sashi Prakash KhaitanPosition: Director and President Polyester fibers and Yarn & Wool Business (The director who is authorized to sign on behalf of the Company)Age: 61 Education: Bachelor of Science St. Xavier College, Kolkata, IndiaWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Director Indorama Ventures Limited, JerseyPresent Director Indorama Ventures S.A.,Luxembourg2008 - present Director Indorama Polyester Industries PCL.2004 - present Director Indorama Holdings Ltd.2004 - present Director Indo-Rama Textiles (Thailand) Ltd.


Name/Surname: Mr. Amit LohiaPosition: Director Age: 35 Education: Bachelor of Economics and Finance Wharton School of Business, USAWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Director Indorama Polyester Industries PCL.Present Director TPT Petrochemicals PCL.2009 - present President Director PT Indo-Rama Synthetics TBK2009 - present Director Indorama Corporation Pte. Ltd.2009 - present Director Indorama Petrochemicals (Nigeria) Limited2008 - present Director Indorama Group Holdings Ltd.2006 - present Vice Chairman Indorama Shebin Textiles Co SAE2006 - present Director Eleme Petrochemicals Company Limited2006 - present Director Indorama Petro Limited2006 - present Director Indorama Investments Limited2006 - present Director Indorama International Limited, Dubai2004 - present Director Isin International Pte Limited2004 - present Director Indorama Lanka Pvt Ltd2004 - present Director Indorama Energy Pte Ltd., Singapore2003 - present Director Indorama Petrochem Limited1999 - present Director Indorama International Finance PLC.1998 - present Director Indorama Iplik Sanayi ve Ticaret AS

Name/Surname: Mr. Rathian Srimongkol Position: Independent Director and Chairman of the Audit CommitteeAge: 50 Education: Bachelor of Medical Science, Mahidol University Medical Degree (Siriraj Hospital), Mahidol University Master of Business Administration, Thammasat University Certificate in Politics and Governance in Democratics Systems for Executives Course (Class 9), King Prajadhipok’s Institute Diploma, National Defense College, The Joint State - Private Sectors Course Class 21 Director Certification Program (DCP) class 8/2001 and Role of the Chairman Program(RCP) class 19/2008, (IOD)Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCL2008 - present Senior Executive Vice President Siam City Bank Pcl.2008 - present Director State Enterprise Director Nomination Committee , Ministry of Finance2008 - present Director TOT PCL.2004 - present Performance Agreement Subcommittee, Organization Management (Internal Audit and Internal Control) State Enterprise Policy Office, Ministry of Finance2001 - present Performance Agreement Subcommittee (Energy sector) State Enterprise Policy Office,Ministry of Finance2007 - 2009 Adviser Siam City Securities Ltd.2004 – 2008 First Executive Vice President-Siam City Bank PCL2004 – 2008 Chairman The Zoological Park Organization2008 - 2008 Chairman Industrial Estate Authority of Thailand 2003 - 2007 Chairman and Chairman of Executive Directors Siam City Securities Ltd. 1999 - 2003 Chairman of Audit Committee and Director Matichon Pcl.2004 - 2005 Director Thailand Privilege Card Co., Ltd.2005 - 2005 Independent Director TOT PCL.2001 – 2004 Executive Vice President Siam City Bank PCL


Name/Surname: Mr. William Ellwood HeineckePosition: Independent Director and Director of Audit CommitteeAge: 60 Education: Honorary Doctoral Degree of Business Administration in Management, Yonok University, Lampang International School of Bangkok Director Certification Program (DCP) class 64/2005 (IOD)

Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Chairman and Chief Executive Officer, Minor International PCLPresent Chairman and Chief Executive Officer, Minor Corporation PCLPresent Chairman Minor Food Group PCLPresent Director Rajadamri Hotel PCLPresent Director S&P Syndicate PCLPresent Director Everest Worldwide Ltd.Present Director Serm Suk PCLPresent Chairman Minor Hotel Group Co.,Ltd.Present Chairman Royal Garden Plaza Ltd.Present Chairman Royal Garden Entertianment Ltd.Present Chairman MSpa International Ltd.Present Chairman MSpa Venture Ltd.Present Chairman MSpa Enterprise Management (Shanghai) Ltd.Present Chairman Hua Hin Resort Ltd.Present Chairman Hua Hin Village Ltd.Present Chairman Royal Garden Development Ltd.Present Chairman RNS Holding Ltd.Present Chairman RGE (HK) Ltd.Present Director Chao Phaya Resort Ltd.Present Chairman Samui Village Ltd.Present Chairman Samui Resor & Spa Ltd.Present Chairman Samui Beach Residence Ltd.Present Chairman Baan Boran Chieng Rai Co., Ltd. Present Chairman Maerim Terrace Resort Ltd.Present Chairman Rajadamri Residence Ltd.Present Chairman MI squared Ltd.Present Chairman Coco Plam Hotel & Resort Ltd.Present Chairman Phuket Beach Residence Ltd.Present Chairman Minor Information Technology Ltd.Present Chairman Coco creation Ltd.Present Chairman Coco Residence Ltd.Present Director Swensen (Thai) LimitedPresent Director Minor Cheese LimitedPresent Director Minor Dairy LimitedPresent Director Minor DQ LimitedPresent Director RGR Food Service LimitedPresent Director Catering Associate LimitedPresent Director Berger (Thailand) LimitedPresent Director The Pizza Restaurant LimitedPresent Director SLRT Ltd.Present Director BEIJING LEJAZZ FOOD & BEVERAGE CO.,LTDPresent Director THAI EXPRESS CONCEPTS PTE. LPresent Chairman Chao Phaya Resort & Residence Ltd.Present Chairman Maifad Beach Resort LimitedPresent Chairman The Coffee Club (Thailand) Ltd

Name/Surname: Mr. Chakramon Phasukavanich

Position: Independent Director and Director of Audit Committee

Age: 61

Education: Bachelor’s Degree in Economics, Chulalongkorn

University M.A. (Economics), California

State University, Northridge, U.S.A.Certificate,

Senior Executive Development Program

class 12 The National Defense College

of Thailand (Class 39)

DAP 20/2004, FND 13/2004, ACP 14/2006,

DCP 71/2006, RCP 20/2008, R-CIS 1/2008,

R-Forum 1/2009 , (IOD)

Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Independent Director and Chairman of Nomination PTT PCL.Present Committee Member, Monetary Policy Committee Bank of ThailandPresent Member Council of statePresent Member Council of Burapha UniversityPresent Member Economic Policy Advisory Committee of The Office of The Prime MinisterPresent Chairman Civil Service Commission Sub-committee on job Qualification and Post Classification for Senior Executives of Ministry of Public Health, Ministry of Science and Technology, and Nation Intelligence Agency2007 - 2008 Chairman Electrical and Electronic Institute2007 - 2008 Director Civil Service Commission2006 - 2008 Member National Legislative Assembly, Thailand2005 – 2009 Director Thai Oil PCL.2005 – 2008 Chairman Small and Medium Enterprise Development Bank of Thailand2004 – 2008 Permanent Secretary Ministry of Industry2004 – 2008 Chairman Thailand Productivity Institute2004 – 2008 Chairman Thailand Automotive Institute2004 – 2008 Chairman Thailand Textile Institute2004 – 2006 Chairman AVIVA (Thailand)2002 – 2008 Director Thai Asset Management Corporation

Annual Report 2009 23 Annual Report 2009 23

MAJOR SHAREHOLDERS as at 31 December 2009*

MAJOR SHAREHOLDERS as at 2 March 2010

No.1.2.3.4.5.6.7.

No.1.2.3.4.5.6.7.8.9.10.11.

NameIndorama Resources Ltd.Bangkok Bank PCL.DEG-Deutsche Investitions-Und Entwicklungsgesellschaft MBH.Bangkok Insurance PCL.Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V.Mr. Aloke LohiaMr. Anuj Lohia

NameIndorama Resources Ltd.Bangkok Bank PCL.Indorama Synthetics (India) Ltd.Citibank Nominees Singapore Pte Ltd. - Thai Focused Equity Fund Ltd.Thai NVDR Ltd.Mr. Kamlesh Chandumal DaswaniMorgan Stanley & Co. International Pcl.The Bank of New York (Nominees) Ltd.DEG-Deutsche Investitions-Und Entwicklungsgesellschaft MBH.Goldman Sachs & CoK Equity 70:30 LTF

No. of shares3,112,562,720

167,509,15029,536,24025,300,00016,635,780

1010

No. of shares3,073,262,520

206,082,850128,029,20068,743,24747,183,21043,157,50038,536,73933,919,50029,536,24023,769,54622,918,000

% Holding92.84.990.880.750.490.000.00

% Holding70.914.752.951.591.091.000.890.780.680.550.53

Remarks: * Before IVL listed in the SET

SOURCE: Thailand Securities Depository Co., Ltd.


Dividend Policy

The Company has a policy to pay a total dividend of not less than 30% of our net profit after tax and after the appropriation of the reserve. However, our Board of Directors may amend the dividend policy at any time to take into account the availability of funds to be used as a reserve for debt repayment, capital investment for production expansion, to react to changing market conditions or as required to manage the company’s future cash flows. The policy of Indorama Polymers PCL, a core company, is to pay a total dividend of not less than 30% of its net profit after tax and after the appropriation of the reserve. However, the Board of directors of Indorama Polymers PCL may amend the dividend policy at any time to maximize shareholder’s wealth such as a reserve for debt repayment, capital investment for production expansion, reaction to changing market conditions or as required to manage its future cash flows.

In 2009, other subsidiaries, excluding Indorama Polymers PCL, do not have a dividend policy. Dividend distributions of our subsidiaries are subject to the approval of our Board of Directors and/or our subsidiaries’ shareholders, at an annual general meeting. Each subsidiary company is reviewing and setting out its future dividend policy.


Core Business

PET – Thinking Global

The core business of IVL is PET resins which is held through its subsidiary Indorama Polymers Public Company Limited “IRP”. IRP owns and oper-ates plants in Asia, Europe and North America to produce PET resins. The presence in three continents provides it the ability to service global customers in each continent. The presence in three key global regions offers the advantage of fast and efficient delivery with a constant effort to lower logistical costs and to enhance the global distribution network. All plants use a range of shipping options to provide the best and lowest-cost delivery: road, rail, and sea. The assets are top end assets in terms of size, scale, economics and global positioning.

PET resins capacity by region:

IRP has established lasting customer relationships that involve close cooperation in formulations and applications development. IRP has diversified its product offering of different grades to meet the needs of customers in Asia, Europe, NAFTA and others. IRP and its subsidiaries have a marketing team in Thailand, USA and Europe which is focused on sales in respective regions. Further, it is supplemented by agent network in export markets. With different distribution bases, transportation costs are lower and the threat of trade barriers is less, thus, increasing the stability of the system, a major strength IRP offers.

The general market segmentation of plants in IRP:

ThailandUSAEuropeTotal

CompanyIndorama Polymers StarPet and AlphaPet

UAB Orion Global Pet Indorama Polymers Rotterdam

Indorama Polymers Workington

2007180,000225,000198,000603,000

Location Thailand, Asia

USA, North America

Lithuania, EuropeNetherlands, Europe

UK, Europe

MarketDomestic market, Asia-Pacific, Middle

East and AfricaUSA, Canada, Mexico and South

AmericaGreater Europe, EU and Non-EU, UK,

Russia and CIS

2008180,000225,000553,000958,000

2009180,000

657,000*553,000

1,390,000

*Includes 432,000 tons per annum of capacity in AlphaPet Inc. USA

Mr. Dilip Kumar AgarwalCEO, PET resins Business


BusinessOperations

Business Operations

Description of Indorama Ventures’ Business

Indorama Ventures Public Company Limited (IVL) is one of the world’s leading producers in the polyester chain industry, in terms of capacity and level of integration.

Crude oil Naphtha Paraxylene PTA PETMelt

fiber

/filam

ents

bottle-grade resinFigure 1 : The Polyester Chain

Figure 2: The Polyester Chain is Driven by the Fast Moving Consumer Goods Industry

Indorama Ventures part of the chain

Upstream raw materials

About 99% of our revenues come from the sale of products in the polyester value chain. IVL produces two major polyester poly-mer types, PET resin and polyester fibers and yarns, and some specialist polyester types such as film grade chips. In March 2008 we began to produce PTA, a feedstock essential to the production of polyester polymers.

The major products are all intermediates between the oil and petroleum industry and fast moving consumer goods producers. This lends itself to less volatility than those producers further up-stream and consistent demand from those customers down-stream from us. Contracts with customers are for long term volumes, however the pricing is adjusted each month to take into account the rise and fall of raw material supplies. This means that we are able to pass through price movements to customers. Crude oil prices have very little effect on global producers of carbonated soft drinks. For instance, the actual crude oil cost in a two liter PET bottle is around 2-3%, so IVL can pass on fluctuations in price with little or no effect to customers for whom volume sales are more important.


Description of business segments

Why Polyester?

The IVL Group is solely focused on the global polyester market. Polyester products act as an intermediary between large petrochemical companies, which provide the feedstock used in the manufacture of polyester, and Fast Moving Consumer Goods (FMCG) / Apparel Companies, which drive the demand for polyester products. Because of this central position between commodity petrochemical products and consumer end markets, polyester products do not exhibit the same kind of volatility as the olefins and aromatics sectors.

Polyester demand and pricing show resilience that olefins and aromatics products do not as it is the material of choice for both packaging and fiber applications, with a strong substitution effect on competing materials in the consumer packaging space.

Polyester products have some compelling attributes, such as versatility, convenience, affordability, high performance, comfort, and eco-friendliness that make it increasingly indispensible for use in a broad range of everyday applications.

We currently operate 13 manufacturing facilities in five countries located in Asia, North America and Europe.

Our operations have increased significantly since 2003, principally through acquisitions. This geographic reach means that IVL is the only producer with operations in Asia, North America, and Europe and this allows us not only to be close to our end customers but to be able respond quickly to their needs. From a cost perspective, this geographic reach allows us to compete as local players, avoiding high logistical costs and government-imposed import restrictions. It also allows us to switch from a market that has trade barriers to another, more efficient market if necessary.

Competitive Strengths

In summary, IVL’s strengths are its industry focus and leading market positions; its global sales and manufacturing footprint; its integrated business model; its strong cost position; and expe-rienced management team with a proven track record of growing and managing the business.

Supply/Demand Dynamics for Polyester

The global demand for PET resin, polyester fiber as well as PTA has been consistently growing .

Figure 3: Indorama Venture’s Global Reach


Raw Materials

The two main feed stocks for PET and polyester fiber are PTA and MEG, with paraxylene, or PX, an important raw material for the production of PTA (see figure 1 above). The overall capacity increases for PX and MEG will provide sufficient raw materials for PET and polyester fiber requirements.

Since 2008 for instance, the global PX industry has shifted from a situation of balanced capacity to overcapacity with about 1.1 million tons of PX capacity added in 2008 and about 8.7 million tons of capacity currently under development and estimated to come on-stream by 2012.

Similarly, since 2008, the global MEG industry has shifted from a situation of balanced capacity to significant overcapacity with about 1.4 million tons of MEG capacity added in 2008 and about 7.4 million tons of capacity currently under development and estimated to come on-stream by 2012.

Polyester Industry Rationalization

The past two years have been marked by the acceleration of industry rationalization with 0.4 million tons and 0.2 million tons capacity estimated closed in 2008 and 2009 respectively and 0.6 million tons capacity shutdown in the USA and Canada in 2008 and 4.0 million tons capacity closed in Asia, especially China, which is 9.0% of the regional capacity, in 2009.

This industry rationalization has occurred as high cost, non-focused players have begun to exit the market. New capacity additions are now lagging behind plant closures and thereby provide an opportunity for stronger companies to further boost capacity uti-lization.

PET The PET (polyethylene terephthalate) business segment primarily comprises the manufacture and sale of PET, a plastic poly-mer resin primarily used for beverage containers and food, pharmaceutical and household product packaging and in industrial packaging applications. PET resin is produced from polyester polymer which is a mixture of Purified Terephthalic Acid (PTA) and Monoethylene Glycol (MEG). PET is one of the most widely-used packaging materials worldwide. From 2000 to 2009, global PET resin production grew at a CAGR of 8.25%, from 7.5 million tonnes in 1997 to 15.3 million tonnes in 2009. This growth has been driven by increasing consumer spending, population growth and the substitution by PET resin of traditional packaging materials and the increased use of PET resin in other products.

Description

PET can be semi-rigid to rigid, depending on its thickness, and very lightweight. PET bottle recycling is more practical than many other plastic applications. Plastic carbonated soft drink bottles and water bottles are almost exclusively PET, which makes them easier to identify for recycling. PET has a resin identification code of 1.

Installed Capacity

Our aggregate PET installed capacity is 1,282,000 tonnes per year as of December 31, 2009 (excluding the 216,000 tonnes capacity for the second line being installed at our PET plant in Alabama, USA). We have two PET plants in Thailand, three PET plants in Europe (the Netherlands, the United Kingdom and Lithuania) and two PET plants in the United States (North Carolina and Alabama).

PET Segment Financial Performance

Our PET business segment accounted for Baht 44,456 million, or 55%, of our total revenue from the sale of goods in 2009. The 98%, increase in PET operating EBITDA at the end of 2009 from the end of 2008, was primarily due to an increase in our PET gross margin through increased sales volumes, integration into PTA and decreased our per unit production costs resulting from lower energy prices.


Importance of Spreads to PET Producers

A determinant of the financial performance of a PET resin producer is the price spread that is earned on product sales relative to the cost of the main raw materials PTA and MEG. IVL was able to achieve slightly better than the market average due to its business strategies and intrinsic strengths, which are explained in more detail below.

Demand for PET for packaging

Demand for PET resin is predominantly driven by the growth in demand for end use products, for which PET resin is used as the primary packaging material, such as water and carbonated drinks. This growth is predominantly influenced by population growth, disposable income and consumer trends. PET is currently a substitute for traditional packaging materials such as alumi-num, glass, tetra pack and other polymers made from PET resin due to its ability to retain carbonation and freshness, chemical inertness, recyclability and cost. Moreover, demand has been created by the development and enhancement of PET resin pack-aging, which provides a high oxygen barrier, prevents oxygen seepage and increases product shelf-life. The end-use products which are susceptible to spoilage by oxygen leakage include beer and fruit juices.

Geographic demand drivers for PET

Demand for PET resin is still expected to post positive growth across all regions from 2009 to 2012F although at a slower rate than previously. This phenomenon is in some cases due to the maturity of markets like North American and Europe, the more common use of less PET resin per bottle or “light weighting” and post-consumer recycling, or PCR.

Supply to reflect demand

As demand is largely coming from developing regions and nations, the increase in global capacity for PET resin is expected to be mainly in Asia, primarily driven by China whose capacity additions are expected to service the growing domestic demand. In con-trast, North America and the European Union are expected to see a lack of capacity additions and some capacity rationalization.

Substitution

There is currently no commercially attractive or practical alternative to PET resin in packaging. While there could be other poly-mers which may be substitutes for PET resin in packaging materials, these other polymers are currently expensive to manufac-ture, require raw materials necessary for polymerization that are limited and therefore expensive, are unsafe for food products, difficult to mass produce or have limited production capacity.

Polyester Fiber and Yarn and Wool

Indorama Ventures polyester fiber and yarn and wool businesses constitute one business line of the company. The business embraces the manufacture and sale of a variety of polyester fibers, yarns and worsted wool.

Figure 4: Demand drivers for PET resin

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20.5Mt

1. Real GDP, US$-based, Constant 1998 Prices. Source : IMF

2. SBA-CCI (February 2010)

15.3Mt

North America

Asia

European Union

Central Europe

South America

Middle East & Africa

2009 2013F

North America

Asia

European Union

Central Europe

South America


P E T R es in Demand(2)

R eal

G lobal G DP (1)

C AG R ’09E -’13F = +3.4%

C AG R ’09E -’13F = +7.6%

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Product Description

Polyester is one of the most widely used synthetic fibers in the world and is a versatile material with wide-ranging textile and industrial applications. Fabrics woven from polyester thread or yarn are used extensively in apparel and home furnishings, from shirts and trousers to jackets and hats, bed sheets, blankets and upholstered furniture. Industrial polyester fibers, yarns and ropes are used in tire reinforcements, fabrics for conveyor belts, safety belts, coated fabrics and plastic reinforcements with high-energy absorption. Polyester fiber is used as cushioning and insulating material in pillows, comforters and upholstery padding.

Polyester fiber is classified as either a commodity or non-commodity polyester fiber, based on the end use application. Com-modity polyester fibers are sold in bulk with little differentiation between suppliers and generally at lower margins than non-commodity polyester fibers. Non-commodity polyester fibers are produced in smaller volumes. They are generally custom made, have a higher unit value and a customer base that has low price sensitivity. The production of commodity polyester fibers tends to be dominated by large producers with economies of scale, whereas the production of non-commodity fibers tends to be dominated by producers with fit-for-purpose assets and cost efficient and flexible operations.

Installed Capacity

IVL has two polyester plants in Thailand with a total capacity of 244,800 tonnes per year (excluding the 108,000 tonnes per annum converted to PET production at our polyester plant in Rayong) and one wool plant in Thailand with a capacity of 5,900 tonnes per year.

Gaining an Advantage in the Industry

A competitive advantage in the commodity polyester fiber segment of the business is gained through market share, economies of scale and low raw material and logistics costs. In the non-commodity polyester fiber segment, the competitive advantage is achieved through product differentiation, customized service, industry experience and operational excellence. Customers are looking for reliability, cost and flexibility.

Production Methods

Polyester fiber is produced from a mixture of PTA and MEG to produce polyester polymer. There are two polyester polymer production processes which may be used to produce polyester fibers: the batch process and the continuous process. In the batch process, polymerization yields polyester chips which are further processed into polyester fiber. In the continuous pro-cess, however, polyester fiber can be extruded directly from polymerization to direct spinning. For the production of commodity polyester fiber, the continuous process is favored because it is more economical for it creates less waste and has lower energy and labor costs than the batch process technology. For the production of non-commodity polyester fiber, batch processing is preferred because the producer has more flexibility to produce different types of polyester fibers with minimal losses of inter-mediate products.

Demand for polyester fiberThere is growth in demand for conventional end-use products, such as clothing, upholstery, home furnishing and floor covering, in which polyester fiber is used as the primary material. This is further influenced by population growth, disposable income and consumer trends. Polyester is causing the substitution of existing fibers such as cotton, nylon and acrylic due to its versatility and favorable cost-performance characteristics. Another demand driver is the development and enhancement of applications in which polyester adds value, such as those in the non-woven industry, including geotextiles where permeable fabrics are typi-cally used in civil engineering to separate, filter, reinforce, protect, or drain roads and embankments etc. Another industry that uses polyester is the automotive industry, which uses it in airbags, seatbelts and tires.


The Polyester Fiber Industry

The polyester fiber industry is typically viewed as comprising two main product segments: polyester staple fibers and polyester filament yarns. Polyester staple fibers are bundles of strands cut into short lengths, which are primarily used in apparel and home textiles and are often blended with cotton or other natural and synthetic fibers. Another form of polyester staple fibers, fiberfill, is used as stuffing for toys and pillows and as insulation and padding for bedding and furniture. Polyester filament yarns are con-tinuous strands of fiber, which are used in apparel, home textiles, and industrial end use markets. In 2009, 60.7% of total global polyester fiber was used in the production of polyester filament yarns and the remaining 39.3% was used in the production of polyester staple fibers.

There is steady demand growth for polyester fiber in markets such as North America and the European Union, growing at ap-proximately 4.3% and 2.1%, respectively. Asian demand is rising on average by 7.0% a year, mostly driven by China and India (+8.3% and +8.2% respectively) due to low per capita consumption, disposable income growth and population growth.

The developed regions of North America and the European Union have a per capita consumption of 10.3 kg and 10.1 kg, respec-tively. In comparison, the developing regions of Central Europe, Asia, South America, and the Middle East & Africa, have lower per capita consumption of 6.4 kg, 4.6 kg, 4.1 kg, and 1.2 kg, respectively. Therefore, given the large gap of per capita consump-tion between the developed and the developing regions, there is ample scope for growth, most notably in Asia.

Asia is both the largest producer and consumer of polyester fiber and is a net exporter of polyester fiber. China is by far the largest regional producer and consumer of polyester fiber, accounting for 72.9% of the regional capacity and 64.0% of the re-gional consumption. China is also the largest net exporter of polyester fiber, which can be considered as a potential competitive threat to producers in Asia, in particular, and the rest of the world. Apart from China, the other major producing countries in the region are India, Indonesia, Taiwan, Korea and Thailand, collectively representing 22% of the regional capacity, while the major consuming countries in the region are India, Japan, South Korea and Thailand, collectively representing 22% of the regional consumption. The major net exporters in the region are Taiwan, South Korea, Indonesia and Thailand and the major net import-ers in the region are Japan, the Philippines, Bangladesh and Australia.

Substitution of Competing Fibers

Over the past decade, polyester fiber has been increasingly replacing other fibers such as cotton, nylon, acrylic, and other fi-bers. Polyester fibers are more economical to produce than other man-made fibers including nylon and acrylic. In addition, the substitution of nylon as well as acrylic fibers with polyester fibers has gathered significant momentum over the last two decades. As a result significant investment in polyester fiber production capacity and the lack of correspondingly sizeable investments in acrylic and nylon fibers have changed the economies of scale in the synthetic fiber industry. It is unlikely that such dynamics will be reversed.

Figure 5: Demand drivers for Polyester Fiber��

44.2Mt

1. Real GDP, US$-based, Constant 1998 Prices. Source : IMF

2. SBA-CCI (February 2010)

31.9Mt

North America

Asia

European Union

Central Europe

South America


2009

P olyes terF iber G lobal Demand(2)

R eal

G lobal G DP (1)North

America

Asia

European Union

Central Europe

South America


2013F

C AG R ’09E -’13F = +3.4%

C AG R ’09E -’13F = +8.5%

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Polyester vs. Cotton

In the past decade, polyester fiber has gained market share against cotton. In 2003, polyester fiber surpassed cotton as the most widely used fiber in the world. Unlike cotton, man-made polyester fiber production is not impacted by the elements and there is no “crop” to harvest. Polyester fiber is less expensive to produce than cotton (therefore energy costs are lower and its carbon footprint smaller) and can be used in a wide range of end use products ranging from apparel to industrial products.

Competitive FactorsIn the polyester fiber industry, companies compete on a variety of factors such as price, product quality, performance or specifi-cations, continuity of supply, customer service and breadth of product line. The competition among existing players is varied and is predominantly dependent on which sector the producer is focused on: commodity polyester fiber or non-commodity polyester fiber. For a commodity polyester fiber producer, the main pricing drivers are the raw material cost and supply/demand balances, wherein prices are public and based on cost-related formulas. For a non-commodity polyester fiber producer, however, price is a reflection of the value added to the customer and that value is decoupled from the raw material cost cycle.

In general, there is a high level of competition for the commodity polyester fiber products and moderate to low level of competi-tion for the non-commodity polyester fiber products.

Wool IVL’s wool business segment comprises the processing of wool into worsted wool yarn. We have a worsted wool spinning mill in Thailand with an installed capacity of 5,900 tonnes per year. Raw wool is imported from Australia, processed in to worsted yarns.

Polyester Fiber, Yarns and Wool Operational Performance

A determinant of the financial performance of a polyester fiber producer is the price spreads that are earned relative to the cost of raw materials. The spread is the difference between the product selling price and the cost of raw materials used in the production of polyester fiber, namely PTA and MEG.

Total revenues from polyester fibers and yarns and wool grew 87% from 2008 to 2009 as the impact of IVL’s acquisition of Tuntex (Thailand) Public Company Limited in 2008, and later renamed Indorama Polyester Industries Public Company Limited (IPI) commenced with a phased start up of operations in Q1/09 culminating in full operations in Q4/09. Accordingly, the operating EBITDA of the business line improved 128%. Integration into PTA and a switch to natural gas based utilities at IPI in the fourth quarter of 2009 also helped to lower production costs. In 2010, IVL will see the first full year of full utilization of this plant and should benefit accordingly.

PTA Our PTA business segment comprises the manufacture and sale of PTA, an organic acid in the form of fine, white powder prin-cipally used as a precursor or raw material in the production of polyester products.

Manufacturers of PTA can be classified between merchant producers and integrated PTA producers. Merchant producers manufacture and supply PTA to third parties, whereas integrated PTA producers manufacture PTA for their own captive con-sumption.

Competitive EnvironmentAs PTA is a commodity product, competition is based mainly on price and, to a lesser extent, on product quality and lead times to product delivery. As IVL has recently moved to integrate PTA into its business, it will continue to take advantage of economies of scale and provide low cost manufacturing due to lower logistics costs together with security of its raw material supply.


Importance of UtilizationAn important influencing factor on the profitability of a PTA plant is capacity utilization. Down-stream integrated PTA producers can maintain higher capacity utilization due to captive PTA consumption as compared to merchant PTA producers. It has never been IVL’s intention to become a merchant producer – the company is seeking vertical integration to secure its feedstock.

Our PTA business segment supports our PET and polyester business segments and forms part of our strategy of vertically inte-grating our operations. Our aggregate PTA installed capacity is 1,590,000 tonnes per year as of December 31, 2009. We have two PTA plants in Thailand and a PTA plant in the Netherlands. Between 2008 and 2009, utilization of these factories rose from 93% to 100%.

PTA Demand and SupplyDemand for PTA is primarily driven by the growth in demand of polyester fiber, PET resin and film and specialties. Global PTA demand has been growing consistently and is expected to continue to grow at steady rates. The increase in global PTA demand is expected to be driven primarily in Asia and mainly in China. However, such has been the competition by major PTA suppliers to enter China that margins there have suffered.

Diversifying PTA MarketsThere had been talk of China protecting its domestic PTA industry in 2009 and it was no surprise that in early 2010, China im-posed anti-dumping duty on imports of PTA from South Korea and Thailand at a rate of 18 5% - 18 9%. By that time, IVL had already started to diversify its customer base to other markets in Asia and less than 10% of sales are now to China, all to the re-processing areas for re-exports which are not affected by the new duties.

PTA requirements in North America and the European Union are expected to decline or remain stable as a result of the slowdown in new capacity additions and the industry rationalization in the PET resin and/or polyester fiber industry discussed above.

The reduction reflected in demand for PTA in Europe is primarily attributed to the lack of new capacity additions and continued industry rationalizations in the PET resin and polyester fiber industries.

PTA Operational PerformanceOur PTA business segment in the first full year of operations in 2009, post acquisition in 2008, saw a 907%, increase in PTA EBITDA at the end of 2009 from the end of 2008, primarily due to an increase in production volumes of 197% and in our PTA gross margin. This was because we increased our sales volumes but decreased our per unit production costs resulting from lower energy prices. Investors should be aware that we are an integrated producer of PTA and we allo-cate earnings from this business to our PET and polyester businesses on a pro rata basis.

Financial Performance of product segmentsContributions of each segment in 200955% of revenue and 53% of EBITDA comes from PET15% of revenue and 13% of EBITDA from polyester and wool30% of revenue and 34% of EBITDA from PTA

Why IVL has performed wellManagement has a clear business strategy to become a leader in the polyester chain industry, and to lead its future consolidation.

Strategy SummaryAs one of the only vertically integrated producers of polyester products, with its own captive PTA production, IVL is able to take advantage of lower logistics costs as the feedstock is delivered via pipe or barge and thus gain a larger part of the polyester chain spread. IVL then also becomes protected from volatility in the PTA market. The company, while maintaining its identity as a low


cost producer, has invested in the best technology to increase efficiency and lower conversion costs where possible. In many parts of the world, we now compete against manufacturers with considerably older and less efficient technology. And finally, we can exploit these advantages in an industry that is growing at a multiple of approximately twice GDP growth.

Over time we have sought and exploited opportunities to acquire and develop assets so as to capture market growth while at the same time differentiating ourselves to stay ahead of the competition. Business ObjectivesIVL’s objectives are to be the market leader in the polyester value chain in terms of scale and integration, profitability and re-turn on investment, supported by a focus on delivering superior customer satisfaction and on corporate responsibility, thereby enhancing shareholders’ value. Our ongoing and future strategy has therefore been designed to help us continue achieving our objectives.

How to get thereTo achieve these focused objectives, the company has to sustain and increase its market posi-tions through selective focused growth and investment. To create wider margins and lower volatility, IVL will also have to continue enhancing its vertical integra-tion, and we will explain more about this below. The past has taught us that a business cannot rely too much on one market or one product, so IVL will continue diversifying the product and customer mix, developing our recycling capabilities and increasing use of recycled materials to ensure global acceptability of our products continues to grow.

Net income growth will also come through additional margin expansions and cost savings initiatives in raw materials procure-ment, energy integration, more efficient logistical operations and continued financial discipline.

We will strive to maintain an efficient capital structure as we grow to provide us sufficient flexibility in our operations and sufficient liquidity in our cash flow position.

Management Track RecordAny new shareholders of IVL would do well to look at management performance of its previ-ously-listed subsidiary Indorama Polymers Plc (www.indoramapolymers.com) as it will become clear that management has a track record of success in generat-ing high returns for shareholders.

Financial Discipline and PrudenceIVL is committed to maintaining a continued emphasis on financial discipline and prudent investment decisions, evaluating each potential investment on the basis of stand-alone profitability and efficiency, in addition to potential synergistic contribution within the overall organization. IVL intends to continue to finance projects on a stand-alone basis, maintaining debt levels where cash flows from individual operations are sufficient to cover debt service requirements even during industrial downturns.

Indorama Ventures is committed to maintaining a continued emphasis on financial discipline and prudent investment decisions, evaluating each potential investment on the basis of stand-alone profitability and efficiency, in addition to potential synergistic contribution within the overall organization. We strive to maintain an efficient capital structure as we grow to provide us sufficient flexibility in our operations and sufficient liquidity in our cash flow position.

Integrated Business ModelWe expect vertical integration, either through asset ownership, co-location with third party assets or virtual integration through co-location with key raw material suppliers, to enhance our operational and logistical efficiency, cost competitiveness and raw material security. Integration through owned assets also enhances our ability to insulate ourselves from sector cyclicality and improve the quality and predictability of earnings. Moving forward, our strategy will focus on growing our PTA capacities in line with our downstream PET and polyester capacities, especially in markets that we identify to be important.


During 2008, we entered the PTA segment of the polyester chain through the acquisition of three PTA production facilities, which provide raw material support for our downstream PET and polyester facilities. We intend to gradually consume an increasing quantity of PTA internally through our PET and polyester facilities, reducing quantities available for merchant sales. A significant proportion, 48% of our PTA production is used internally.

What we integrateThe key raw material for PET/Polyester production is PTA and MEG, with Paraxylene (PX) used to produce PTA. IVL is among the world’s largest buyers of PX and MEG. We are vertically integrated into PTA, either through our own co-located PTA produc-tion facilities, or through virtual integration with PTA piped in from adjacently located feedstock suppliers.

There are opportunities for further real or virtual integration into PX and MEG, as well as energy integration by acquiring the util-ity assets of, or partner with, suppliers. By increasing supply chain efficiency the logistics cost for raw materials will come down.

The key benefits of vertical integrationAs mentioned above, it is the security of PTA supply for our PET and polyester operations during periods of market fluctuations, specifically in periods of high PTA demand, that will allow us to make better cost planning and lower volatility. Integration means captive consumption for our PTA operations, resulting in the ability to maintain higher capacity utilization as compared to mer-chant PTA suppliers, even in periods of reduced PTA demand. Through PTA and PET and polyester site co-locations costs can be reduced due to the reduction of logistics costs and the sharing of common services. Also, there are cost savings due to the reduction of fixed costs associated with raw materials procurement, sales and marketing and administrative functions.

Integration enhances operating efficiency, competitiveness and responsiveness to customers and market developments, as well as allowing stability in volumes and profits. IVL can secure a PTA supply for internal PET and Polyester operations during periods of market fluctuation, especially in periods of high PTA demand.

In the current market environment, IVL also benefits from oversupply of our key raw materials, namely PX and MEG. This over-supply is driven by unprecedented recent capacity additions globally that will push supply to outstrip demand growth for both PX and MEG for the short and medium term. This will lead to downward pressure on PX and MEG prices, which in turn will benefit the polyester chain.

Industry Focus as a strategyIndorama Ventures Plc is one of the few petrochemical companies that focuses on the polyester value chain, compared with other important players who are organized in large divisions that, in turn, consist of many different businesses. We believe that the key advantages of being a focused player are a better understanding of the key success factors for individual businesses; a more efficient allocation of capital and human talent; an ability to make quick management and commercial decisions; and the reduction of overheads needed to manage a diverse set of operations.

We are solely focused on the polyester chain, with 99% of revenues coming from polyester products, whilst the majority of other important players are organized in large divisions, with polyester chain products being non-core businesses. This lack of focus often leads larger conglomerates to rationalize and divest if they are using older technology or are unable to maintain high uti-lization rates.

It is because of this keen focus and commitment to the industry that since 2003 we have grown through expansions and acquisi-tions and by expanding our business portfolio and geographical presence. In future, we will look closer at Brazil, Russia, India and China as well as the Middle East and Europe, to invest in or acquire large scale, latest generation assets, including PET pro-duction facilities with an economic size, that will contribute to a sustainable and competitive position on the cost curve. We will continue to expand and debottleneck capacity at existing facilities.

Global Sales and Manufacturing Footprint Leads to SuccessIndorama Ventures is a global company with 13 manufacturing facilities located in five countries, Thailand, the United States, Lithuania, the Netherlands and the United Kingdom, across three continents, namely Asia, North America and Europe, supplying products to customers worldwide. Indorama Ventures is the only PET resin producer with operations in Asia, North America and Europe, the three major PET resin regions. Our polyester business is located in Thailand and has a globally diversified customer


base. Our PTA is manufactured in Thailand and Europe to provide the support to our downstream operations as well as to market to external customers worldwide.

This global footprint enables us to capture volume growth and widen our customer base. By being closer to both customers and suppliers, we can increase our cost competitiveness and lower our logistical costs. As protectionism leads to trade barriers, globalisation means we benefit by avoiding existing trade barriers and reduce exposure and dependence on any single market. Moreover, we are able to operate our facilities at higher utilisation rates than the average in each region

Economies of ScaleIVL has large, efficient, production facilities in the PET resin and PTA industries. Our newest PET facility, the AlphaPet PET facility, is one of the largest in North America and employs the latest generation PET technology from Germany’s Uhde Inventa Fischer. These large-scale, modern and efficient facilities enable us to achieve a competitive cost position in the industries where economies of scale are critical. In the polyester business, where we focus on the production of niche products, we have invested in fit-for-purpose, flexible assets which are ideally suited for the production of niche and value added products.

Manufacturing EfficiencyThis is achieved through running our facilities at high capacity utilization rates with optimal levels of manpower, low overhead costs, as well as energy and utilities cost savings. Cost competitiveness improved by building efficient utility plants using coal or gas as feedstock at most of our facilities and, where possible by selling excess electricity and steam to third parties to reduce our own cost of electricity and steam. We benchmark all of our facilities against each other in order to optimize performance.

Diversifying the Product and Customer MixDiversifying our customer mix, both geographically and through end-use applications (for some business segments), is an im-portant aspect for our continued success in the polyester value chain. We plan to continue to enhance our marketing efforts to geographically diversify our customer base for our PET and PTA product lines. For our PET and polyester business segments, in addition to continued expansion of geographic reach, we also look to diversify our customers based on the end-use applica-tion mix. We believe this strategy will help insulate us from dependence on individual customers and/or an individual application base, providing us with protection against potential customer distress or industrial downturns in individual application sectors.

In the polyester business, in addition to maintaining cost and price competitiveness, we seek to differentiate ourselves through value added products. This necessitates that we maintain a wide product range to be a “one-stop shop” for a customer’s require-ments and maintain flexibility in our manufacturing processes to satisfy customer requirements on short notice.

Focusing on Recycling to Protect the FuturePET resin is a recyclable and energy efficient packaging material, easily recovered and reused by simple washing processes to regenerate clean washed polymer flakes or by chemical treat-ment to break down the PET resin into raw materials or intermedi-ates which are converted into new PET resins. Recycled PET resin can be used to make many new products, including polyes-ter fiber for carpet, apparel, luggage, upholstery, fiberfill for sleeping bags and winter coats, industrial strapping, sheet and film, automotive parts, such as luggage racks, headliners, fuse boxes, bumpers, grilles and door panels.

IVL will focus on the development of our research and development capabilities to better serve our polyester polymer customers by developing products tailored to serve their requirements. Use of recycled materials within our standard processes will allow us to cater to changing customer objectives and proactively address environmental issues so that more people become aware of the environmental advantages of polyester and PET.

Acquisitions at a Reasonable CostAchieving a low capital cost structure has meant constructing large scale plants and acquiring assets at a discount to their re-placement cost. Our Orion Global and AlphaPet PET production facilities benefit from a low capital cost per tonne because of their large scale. We have acquired our Thai PTA and polyester assets as non-performing assets at a discount to their replace-ment cost. Our European PET and PTA assets were purchased at lower than the replacement cost and turned around in one year through a high utilization rate, increasing sales volume, the integration of PTA into our PET production in Europe and lower conversion costs to create excellent profita-bility.


Risk Factors and Risk Management

The following describes some of the significant risks that could affect us and the value of our shares. All of these could affect our business, revenue, profit, assets and liquidity, or the Company’s source of fund.

Risks Relating to Our Businesses and Operations

We operate in highly competitive industries and the actions of our competitors could impact our profitability and market share. High levels of price and other competition characterize the industries in which we operate. In addition, many of our products are commodity products, and it may be difficult to have product differentiation and pass on increased cost to customers. Other com-petitive factors include product quality, specifications or product performance, continuity and reliability of supplies to customers and sustaining long-term customer relationships.

We principally compete with several large multinational companies in each of our business segments. We also compete with numerous regional and/or specialized producers in the markets for our polyester fiber products. Some of these competitors may have greater market presence and/or financial and other resources than us. In addition, margin pressure could arise from, among other factors, limited demand growth and overcapacity in a relevant market. For example, China, whose domestic de-mand for PET resin may fall short of the forecasted capacity increase), price reductions by competitors, new industry players, industry consolidation, the ability of competitors to capitalize on their economies of scale and create excess product supply and the access of competitors to new technology that we do not possess.

The cyclical nature of the PTA, the PET resin, and polyester fiber industries could result in overcapacity.Our operating results reflect the historical cyclical pattern of the PTA, PET resin, and polyester fiber industries, with periodic overcapacity and resulting pressure on pricing. This cyclicality arises, in part, from investments made at the top of the cycle (when margins are high and funds are available), thereby shifting the balance of supply and demand by new capacity coming on stream in large quantities. Consequently, the industry has from time to time experienced periods of overcapacity, such as when new plants are built and become operational, and there can be no assurance that this will not recur. In the absence of sufficient economic growth to generate increased demand or the closure of facilities to mitigate the effect, new capacity can cause a period of regional or global overcapacity that may lead to downward margin pressure.

Our inability to pass on raw materials price increases to customers could adversely affect our operating results.Any increase in raw materials costs without a corresponding increase in selling price would reduce our operating results. Our ability to pass on raw materials price increases is dependent upon market conditions and our relative cost position compared to competitors. There may be periods of time in which we may not be able to recover increases in the cost of raw materials fully due to contractual arrangements or to weaknesses in demand for, or oversupply of, our products. Our operations are dependent on the availability and cost of raw materials.Our operations are substantially dependent on the availability and cost of our primary raw materials: PTA (limited to merchant purchases primarily in USA) and MEG for our PET and polyester fiber and yarn businesses, and PX for our PTA business. PX, PTA and MEG are oil and natural gas derivatives, and are usually manufactured by large petrochemical companies. Thus, the costs of production of PTA, PET and polyester are affected by the international and domestic prices of crude oil, natural gas and refined petroleum products. Our financial condition and results of operations are thereby influenced by market prices for crude oil, natural gas and refined petroleum products, which are subject to the forces of international, regional and domestic supply and demand, as well as other factors beyond our control.

The markets and prices for petroleum products may be influenced by aggregate demand for such products (which can fluctuate with changes in economic conditions and cycles, seasons and weather patterns), the level of domestic and regional production, the prices and availability of imports, the prices and availability of substitute fuels and the extent and nature of governmental regulation and taxation. Worldwide supply conditions and the price levels of crude oil may also be significantly influenced by


international groupings, which control the production of a significant portion of the worldwide supply of crude oil, and by political developments, especially in the Middle East. In addition, factors such as domestic and foreign government regulations, weather conditions, and competition from other energy sources also have an impact on crude oil and petroleum product prices.

Increases in our costs could adversely affect our operating results.As we are unable to influence commodity prices directly, our competitiveness and long-term profitability are, to a significant de-gree, dependent upon our ability to reduce costs and maintain low-cost and efficient operations. Our inability to maintain our cost structure and efficiently operate our manufacturing facilities may increase our costs and adversely affect our operating results. Certain non-controllable costs may increase due to external factors beyond our control, which may also reduce our operating results. Examples of non-controllable costs are energy costs, insurance costs, tax costs and pension costs.

Over the past few years, we have experienced significant cost increases for energy sources. While we attempt to match energy price increases with corresponding product price increases. Ultimately, our ability to pass on increases in our costs to customers is dependent upon market conditions.

In addition, production in our polyester fiber and yarn business is labor intensive. Consequently, inflationary pressures, changes in applicable laws and regulations or other factors resulting in increased labor costs.

Shortages or disruptions of supplies to our customers due to unplanned production capacity decreases or shutdowns of production plants may reduce sales.Production at our manufacturing facilities or delivery of supplies to our customers could be adversely affected by technical failures, strikes, natural disasters, regulatory rulings and other factors. Unexpected events, such as manufacturing problems, unplanned shutdowns or loss of supplies, could lead to reduced sales.

If the capacity of one or more material facilities is reduced or the manufacturing of material products is shut down for a prolonged period and we are unable to shift sufficient production to other plants or draw on inventories, or if we are unable to run our pro-duction facilities at our typical utilization rates because of a disruption to our raw material supplies, we may not be able to fulfill our product delivery obligations and we could be exposed to claims for damages and suffer reputational harm.

The costs and difficulties of integrating future acquired businesses and technologies could impede our future growth and adversely affect our competitiveness.As part of our strategy, we may seek further growth through acquisitions of other PET, polyester or PTA companies in order to maintain a competitive position within the industries in which we operate and to enhance our position in our core areas of operations. This strategy entails risks including:• unidentified or unanticipated liabilities or risks in the operations of the companies which we may acquire;• potential failure to achieve the economies of scale, synergies or other benefits sought;• greater than expected costs and management time and effort involved in completing and integrating the acquisitions;• inability to successfully integrate the services, products and personnel of the acquisitions into our operations or to realize any expected cost savings or other synergy benefits from the acquisitions;• inability to retain employees, customers and supplier relationships;• Lack of return on our investment. We may not be able to identify attractive acquisition opportunities or make acquisitions on attractive terms, or obtain financing necessary to complete and support such acquisitions. Regulation of merger and acquisition activity by the European Union, the United States, Thailand or other national regulators may also limit our ability to make future acquisitions or mergers.


Significant capital investments including future development of new facilities have been, and may in the future con-tinue to be, necessary to achieve our growth plans, which carry project and other risks.Our growth plans have required, and may continue to require, significant capital investments to expand, renovate, convert or up-grade existing facilities, develop new facilities or make major acquisitions or investment. Projects that require significant capital expenditure carry risks including:• failure to complete a project within the prescribed project timetable and/or within budget; and• failure of the project to perform according to prescribed operating specifications following its completion.• In addition, any significant increases in costs unforeseen in the project plan and any inability to sell the products pro-duced at volumes and/or price levels envisaged in the project plan could affect the success of our projects. Due to the significant amount of capital required and the long lead time between planning and completion of such projects, project delays could have an effect on our business and prospects.

Our production facilities are subject to operating risks that may adversely affect our operations.We are dependent on the continued operation of our production facilities. These production facilities are subject to hazards associated with the manufacturing, handling, storage and transportation of chemical materials and products, including pipeline leaks and ruptures, explosions, fires, inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, remediation complications, chemical spills, discharges or releases of toxic or hazardous substances or gases, storage tank leaks and other environmental risks. These hazards can cause personal injury and loss of life, severe damage to, or destruction of, property and equipment, environmental damage, fines and liabilities.

On January 8, 2010, Indorama Petrochem received a letter from the Industrial Estate Authority of Thailand (“IEAT”) informing it that, following an inspection of the Indorama Petrochem PTA facility, Indorama Petrochem is disposing of production waste by burning such waste using a thermal oxidizer without the requisite approval from the Department of Industrial Works (“DIW”). In addition, there were signs of chemical leakage at the thermal oxidizer, the nitrogen oxide and carbon monoxide emissions from the stack of the thermal oxidizer and the vent scrubber, respectively, exceeded applicable maximum permissible limits and a chemical odor originated from the facility. As a result, the IEAT ordered Indorama Petrochem to cease the treatment of waste using the thermal oxidizer immediately and make improvements to its air pollution treatment system by February 15, 2010. Indorama Petrochem has taken various steps to address the issues raised in the IEAT’s letter. IRPTA has undertaken and completed all the necessary requirements from IEAT and informed to them during their visit to the plant on February 15, 2010. In addition, some of our production facilities, such as our AlphaPet PET facility, our IRP Rotterdam PET and IRH Rotterdam PTA facilities, our Indorama Polyester Industries’ Map Ta Phut polyester facility and our TPT Petrochemicals PTA facility, are co-located at sites where our neighbors face the same operational risks and, in some cases, they provide critical supplies and/or services, and any disruption in those supplies and/or services could affect our operations.

Exchange rate and/or interest rate fluctuations may have a significant adverse impact on our business, financial condi-tion, 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 busi-ness, 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, for the year ended December 31, 2008, we incurred a net foreign exchange loss of Baht 523.8 million, and for the year ended December 31, 2009, we incurred a foreign exchange gain of Baht 567.7 million.

In addition, our operating subsidiaries usually borrow in the principal currency in which they do their business to minimize cur-rency 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.


Litigations 1. Eastman Chemical Company (“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. IRP Rotterdam, IRP Workington and IRH Rotterdam (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 which the European Defendants received a license to use licensed technology secrets to make certain commercial products as part of the acquired business. In the complaint, Eastman alleges that:

• AlphaPet infringes certain patents owned by Eastman;• the European Defendants breached the Technology License Agreement; and• the defendants misappropriated Eastman’s confidential and proprietary trade secret information under Delaware statutes.

We intend to defend ourselves vigorously against these claims. We have appointed our legal counsel Kirkland and Ellis LLP. The legal counsel is making initial investigations and preparing a response to be submitted in the courts. AlphaPet has pur-chased the plant and technology for its PET resins plant from Inventa Fischer, a plant and technology supplier. The audited fi-nancial statements have disclosed the lawsuit as a contingent liability and at this time not possible to quantify impact. However, litigation of this nature can take a long time to resolve and we cannot predict when these legal proceedings will be completed.

Eastman’s complaint includes an allegation that the European Defendants breached the Technology License Agreement, as described above. 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. In that event, the European Defendants would be required to either renegotiate the terms of the license with Eastman or implement suitable substitutes to continue operation of the plants, which could result in the suspension of operations until new terms were negotiated with East-man or a suitable substitute technology was implemented. We believe that alternative technologies are readily available in the market for a relatively low cost; however, we cannot assure you how long it would take to implement any new technologies at these plants.

2. On June 19, 2009, two Thai NGOs and a number of people living in Map Ta Phut, Ban Chang and Meuang District, Rayong Province filed a lawsuit in the Thai Central Administrative Court against various Thai Ministers and governmental entities. The claimants alleged that the respondents breached Thai constitutional and other laws by approving the construction or operation of 76 projects without complying with the relevant procedures specified under such laws. One of the projects named in the lawsuit is the Indorama Petrochem PTA facility, located in Ban Chang, Rayong.

On September 29, 2009, the Thai Central Administrative Court issued an injunction ordering the respondents to procure the temporary suspension of operations of the 76 projects until final judgment. The Thai Attorney General and a number of indus-trial operators, including Indorama Petrochem, filed an appeal against such injunction to the Supreme Administrative Court. On December 2, 2009, the Supreme Administrative Court stated that its preliminary consideration of the type or nature of the proj-ects 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.

Changes in laws and regulations relating to beverage containers and packaging could reduce demand for such end use productsLegal requirements have been enacted in various jurisdictions in the United States and elsewhere requiring that deposits or certain eco-taxes or fees be charged for the sale, marketing and use of certain non-refillable beverage containers. Other pro-posals relating to additional beverage container deposits, recycling, eco-tax and/or product stewardship have been or may be introduced in various jurisdictions in the United States and elsewhere. Consumers’ increased concerns and changing attitudes about solid waste streams and environmental responsibility and related publicity could result in the adoption of such legisla-


tion or regulations. This has encouraged some of our PET customers to reduce the amount of PET resin they use in their bottle production process. This process, known as light weighting, has reduced the amount of PET resin used in each bottle and has affected the demand for PX, PTA and PET resin.

Environmental regulations may cause us to incur costs and liabilities.Our operations are subject to environmental laws and regulations by central and local authorities in the countries in which we operate. These include laws and regulations pertaining to pollution, the protection of human health and the environment, air emissions, wastewater discharges, occupational safety and health, and the generation, handling, treatment, remediation, use, storage, release and exposure to hazardous substances and wastes. These requirements are complex, subject to frequent change and have tended to become more stringent over time. We have incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations and in obtaining and maintaining all necessary permits.

We have procedures in place to allow us to comply with environmental laws and regulations; however, there can be no assur-ance that we will at all times be in compliance with all of our obligations in the future or that we will be able to obtain or renew all licenses, consents or other permits necessary to allow us to continue to operate our businesses. Any failure by us to comply with such laws and regulations could subject us to fines, penalties and other liabilities.

We have activities in certain countries that are subject to sanctions in the United States and elsewhere and such activi-ties could trigger these sanctions under relevant legislation.The U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers certain laws and regulations that impose penalties upon U.S. persons and, in some instances, foreign entities, for conducting activities or transacting business with certain countries, governments, entities or individuals subject to U.S. economic sanctions, or U.S. Economic Sanctions Laws.

As a globally operating organization, we conduct business with customers (either directly or indirectly through traders and agents) in various countries including Iran, Syria, Myanmar and the Ivory Coast. Our activities with customers in these states, which are predominantly sales of PET resin, polyester fiber and yarn and wool, are insignificant when compared to our entire business. We seek to comply fully with international sanctions to the extent they are applicable to us and will continue to do so.

Our international presence exposes us to macro economic, political, legal and regulatory risks in the markets in which we operate and to other challenges.International operations present challenges related to operating under different business cultures and languages. We may ex-perience increased difficulty in the collection of accounts receivable, including longer collection periods; we may have to comply with inconsistent, or unexpected changes in, foreign laws and regulatory requirements which could negatively impact our op-erations and ability to manage our global financial resources; export controls or other regulatory restrictions could prevent us from shipping our products into and from some markets; quota requirements, including quotas regulating the composition of our employee base or promoting local sourcing of raw materials, could have an adverse effect on our production costs; changes in currency control, tax regulation and international tax treaties could impact the financial performance of our international opera-tions and their contributions to our overall financial performance. Similarly, events beyond our control, such as political instability or social unrest, could affect consumer demand in general and increase volatility in price of raw materials and other costs.

We could be affected by the application of antitrust laws and anti-dumping and anti-subsidy duties.In recent years, antitrust investigations and actions have been launched in a number of jurisdictions against companies in indus-tries in which we are active, indicating that the sector in which we operate may face continuing regulatory scrutiny. Therefore, we face the risk that our business could be adversely affected by the application of U.S., European Union or other national competition laws to any agreements or practices in which we have been engaged or is a party to. In addition, anti-dumping and anti-subsidy duties have been imposed by the European Union on Asian imports of PET resin. These anti-dumping and import duties make it more difficult for imported PET resin to compete with locally produced PET resin. These anti-dumping and import duties give PET resin producers in Europe a competitive advantage over Asian importers of PET resin. However, there is no


guarantee that the European Union will continue to maintain such anti-dumping and import duties on imported PET resins. In February 2010, China imposed anti-dumping duties on imports of PTA from Thailand and South Korea.

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 our-selves, 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 affect the reputation associated with the Indorama name.

The Company is a holding company and is dependent on the receipt of dividends to make dividend payments on our sharesAs a holding company, the Company is dependent on the receipt of dividends from its subsidiaries and associated companies. Payment of these dividends will depend on their future financial performance, which in turn depends on successfully implement-ing 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. Although we intend to pay dividends our ability to pay in the future will depend upon the decision of the Board of Directors and/or the approval of the shareholders at a general meeting, our results of operations, cash flows, financial condi-tion, contractual restrictions and restrictions imposed by applicable law and other factors the Board of Directors deems relevant.

[For details: Please refer to Section on Risk Factors in Form 56-1]


Related Party Transactions

The related party transactions of IVL occur in the normal course of business and the pricing is akin to market prices that would normally be charged to/ by any other customer/ supplier with comparable and reasonable terms and conditions. The following is a summary of such transactions as at 31 December 2009 with the rationale for each:

I. Normal Business Transactions

Type of Transaction

Sale of Preforms, Closures and Bottles

1) Petform (Thailand) Ltd. sales to Sermsuk PCL.

Sale of Purified Terephthalic acid

1) Indorama Petrochem Ltd. sale to Indorama Syn thetics India Ltd.

Sale of Polyester Fibers and Yarns

1) Indorama Polyester Industries PCL. sales to P.T. Indorama Synthetics Tbk Ltd, Indonesia

Purchase of Additive & Chemicals

1) Indorama Polyester Industries PCL. (“IPI “) purchase from P.T. Indorama Synthetics Tbk Ltd, Indonesia

Type of Transaction

Dormitory Rental at Rayong

1) Indorama Polyester Indus-tries PCL. Payment to Pacific Resources Ltd.

Rationale

Sermsuk PCL is Petform’s major customer, buying preforms, closures and bottles for blowing/filling Pepsico products.

Indorama Synthetics India Ltd. is a Polyester manufacture and uses PTA as a raw material.

Since IPI started operations after closure of the plant for more than 3 years, sales transactions were undertaken in order to test and establish quality of the product.

Some of these chemicals and ad-ditives were required on an urgent basis for the start up operation of the plant

Rationale

Pacific Resources owns dormitory near the factory site of IPI measuring 7,577 Sqm which IPI required to rent for their factory staff.

Pricing Method

Rent and service charge based on fair market value of property with a return of 7% – 8%.

Pricing Method

Pricing is negotiated with Serm-suk PCL periodically reflecting prevailing market prices.

Negotiated per market rate as ap-plicable to other customers.

On applicable market rate basis

On market rate basis

OutstandingAmount (MB)

702.50

926.99

52.66

0.82

Amount (MB)

2.70

II. Rental/Lease (not exceed 3 years) without any indication of General Trading Condition


Office Space Rental at Ocean Tower 2, Bangkok

1) Indorama Polyester In-dustries PCL. Formerly Indo Poly (Thailand) Limited. Pay-ment to Pacific Resources Ltd.

2) Indorama Holdings Limited. Payment to Pacific Resources Ltd.

Office Space Rental at Nakhon Pathom

1) Indorama Polyester Indus-tries PCL. formerly Indo Poly (Thailand) Limited. Received payment from Cryoviva (Thailand) Ltd.

Pacific Resources, owner of 28th floor at Ocean Tower 2, Bangkok, has rented out office space of 1,457.88 Sqm to Indorama Polyester Industries Pcl for their use.

Pacific Resources owner of 28th floor at Ocean Tower 2, Bangkok has rented out office space of 857.73 Sqm to Indorama Holdings for their use.

Indorama Polyester Industries for-merly named Indo Poly (Thailand) Ltd. owner of the factory office building at Nakhon Pathom has rented out office space of 630 Sqm to Cryoviva (Thai-land) Ltd. for their use.

As per prevailing rent in Ocean Tower building

As per prevailing rent in Ocean Tower building

The rental charge is based on comparable market rates in that area

3.45

1.80

0.94

Type of Transaction Rationale Pricing Method Amount (MB)

III. Financial Assistance

Type of Transaction Long Term Loan

1) Canopus International Ltd. provides to Indorama Ventures Limited

Rationale

Canopus lent USD 10 Million loan to IVL as financial support for the restructuring of IRPTA

Pricing Method

Interest free

Amount (MB)

24.47

Relationship with Related Parties Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. The relationships for the above transactions are as follows:

Name of entities

Petform (Thailand) Ltd.

Serm Suk PCL

Indorama Petrochem Ltd.

Country of incorporation

Thailand

Thailand

Thailand

Nature of relationships

Indirect Subsidiary, joint venture company between Indorama Polymers PCL. Serm Suk PCL.

Major Shareholder of Petform (Thailand) Ltd., holding 40%, one common director

Direct Subsidiary, 100% shareholding


Name of entities

Indorama Synthetics India Ltd.

Indorama Polyester Industries PCL.

P.T. Indorama Synthetics Tbk Ltd.

Pacific Resources Ltd.

Indorama Holdings Limited

Cryoviva (Thailand) Ltd.

Canopus International Ltd.

Country of incorporation

India

Thailand

Indonesia

Thailand

Thailand

Thailand

Mauritius

Nature of relationships

Mr. O.P. Lohia, major shareholder of Indorama Synthet-ics India Ltd. is a blood brother of Mr. Aloke Lohia

Direct Subsidiary, 99.55% shareholding

One common director

Mr. Anuj Lohia, son of Mr. Aloke Lohia is the major shareholder of Pacific Resources Ltd.

Direct Subsidiary, 97.93% shareholding

One common director

Ultimate shareholders

License Agreement and Royalty Fee Agreement, dated 16 November, 2009The Board of Directors of IVL approved the above two agreements at its Board meeting no 2/2009 dated November 16, 2009 for the payment of Royalty fee to Lohia Global Holdings Limited, the owner of the name “INDORAMA” for the perpetual use of the said name by IVL or its subsidiaries as stated in the License Agreement and Royalty Fee Agreement.

Relationship:

Mr. M.L. Lohia is a major shareholder and a director of Lohia Global Holdings Limited and is a father of Mr. Sri Prakash Lohia and Mr. Aloke Lohia who are directors of the Company.

Terms and Fees:

IVL has to pay royalty fees at the rate of US$0.5 per tonne produced by IVL and its subsidiaries (excluding waste) .The payment of fees will be made quarterly effective from March 1, 2010.

On the occurrence of the actual transaction, the same will be disclosed in the Financial Statements and reported to the Audit Committee and Board every quarter in the prescribed statement. IVL may in the larger interest/ benefit of the Company and the Group suitably amend the License agreement and Royalty fee agreement

The Audit Committee Opinion on the Related Party Transaction

The abovementioned related party transactions have been considered by the Company’s Audit Committee, which opined that said transactions are reasonable and necessary to the Company’s operations. Entering into those transactions, the Company has considered the best interest of the Company as a priority and there was no transfer of benefit between the Company and the persons who have a conflict of interest.

Policy and Procedure to Approve Related Party Transactions

In such event that the Company carries out any business with a related party who may have a conflict of interest with the Company, the Audit Committee will express its opinion regarding the necessity of such transactions. The Audit Committee will ensure that the terms and conditions of these transactions are consistent with market practice and that the prices charged are


evaluated and comparable with market prices. In the event that the market price is not available, the Audit Committee must ensure that the price is reasonable and the transaction carried out in the best interest of the Company and its shareholders. If the Audit Committee is unable to evaluate a related party transaction due to lack of expertise in certain areas, the Company will arrange an independent expert to evaluate and give an opinion on such transaction. The Board of Directors or Audit Committee or the Company shareholders, as the case may be, will use this opinion from the independent expert as a supplement to form their own conclusion. Those directors who may have a conflict of interest with the Company are prohibited from voting on issues regarding related parties transactions. All Related Party transactions will be reported by the statutory auditors in their quarterly and audited financial statements and in Form 56-1 and Annual Report as per the SEC/SET guidelines.

Policy on Entering into New Related Party Transactions

For any new related transaction, Indorama Ventures PCL will ensure that such transactions are carried out in compliance with the SEC Act, rules, notifications and regulations of the Capital Market Supervisory Board, the SEC and the SET. In addition, the Company must also comply with the Thai GAAP on disclosure rules related to related party transactions and other requirements as specified by the Institute of Certified Accountants of Thailand and the policy of Indorama Ventures PCL

As above, when proposing to conduct business with a related party, Indorama Ventures PCL will seek its Audit Committee’s opinion on the reasonableness of such transaction. In the event that the Audit Committee is unable to evaluate a related party transaction due to lack of expertise, the Committee may arrange an independent expert, such as independent appraiser, to evaluate and give an opinion on the transaction. The opinion of the Audit Committee or the independent expert will be used by the Company’s Board of Directors or shareholders to make a decision to ensure that these related party transactions are carried out without any conflict of interest and in the best interest of all shareholders.

However, the Company and its subsidiaries may have related party transactions with their directors, executives or potentially connected persons. The Board of Directors meeting has approved in principle that the management is empowered to approve such transactions under reasonable, transparent and non-corrupt conditions, provided that such transaction is categorized as a transaction with the same commercial terms as those an ordinary person would agree with any unrelated counterparty under similar circumstances, on the basis of commercial negotiation (general trading conditions) and without any dependent interest resulting from the status of director, executive or related person as the case maybe.


Management Discussion and Analysis

Indorama Ventures Consolidated 2009 Highlights

• Record consolidated sales and earnings in year 2009:- Net sales for year 2009 of Baht 79,994 million, a growth of 50%- EBITDA for year 2009 of Baht 10,636 million, a growth of 177%- Profit before tax of Baht 6,573 million, a growth of 107%- *Net profit after tax and minority of Baht 5,346 million (including minority interest for IRP considering on completion of tender offer IVL shareholding has increased from 69.29% to 99.08% on February 3, 2010), a growth of 68%

• Benefit from integration with PTA which is a key raw material for PET resins and Polyester fibers and yarns:- Gross margin improved to 15.4% from 9.7%- EBITDA margin improved to 13.3% from 7.2%- Net profit before minority margin improved to 7.5% from 5.9%

• Earnings per share of Baht 1.44 per share and return on equity of 30% • Increase in free cash flow before capex and investments of Baht 7,404 million and free cash flow after capex of Baht 3,454 million• Net debt reduced by Baht 3,152 million, resulting in net gearing ratio of 63% (before including IPO proceeds which have been received in Q1, 2010) lower than 70% at the end of 2008• Completed major capital expenditure:- Greenfield PET resin plant of 432,000 tons per annum located in Decatur, Alabama, USA. AlphaPet first line with capacity of 216,000 tpa started-up initial operations in October 2009- Phased restart of commercial operations in year 2009 at Indorama Polyester Industries (Rayong facility, Thailand) with a total capacity of 252,000 tons per annum of which Polyester fibers and yarns 144,000 tpa and PET resins 108,000 (converted a line to PET resins which started in Q4, 2009) Year 2009 reflects the full year results of operations of major acquisitions completed in year 2008 within our product lines of PTA, PET resins and Polyester fibers and yarns. Despite the recessionary conditions in year 2009, our products saw positive growth in global demand reflecting of there consumer staple nature. PET resins and Polyester fibers and yarns are primarily used in daily necessity like food and beverage and clothing. The management emphasized on lowering of costs through integration, increase utilization rates to full capacity and take benefit of lower energy prices.

*Net profit after tax and minority as per audited financial statements for year 2009 is Baht 4,824 million Indorama Ventures Consolidated Performance

OPERATIONS

This section presents a summary of the key events observed in 2009 at each of IVL’s business groups.

PET business reported sales of Baht 44,456 million a growth of 9% over the corresponding period. The increase in sales is from growth in sales volume by 32% to 1.02 million tons. Lower raw material prices led to lower selling prices. The sales volume in-crease came from full year sales from European assets acquired on March 31, 2008 and higher utilization rate of 101%. The PET business represented 55.6% of consolidated sales and 53.5% of consolidated EBITDA.

Polyester fibers and yarns & Wool yarns business reported sales of Baht 11,668 million, a growth of 87% over the corre-sponding period. The increase in sales is primarily from 199% increase in sales volume in polyester fibers and yarns business contributed from the restart of Indorama Polyester Rayong facility which was restarted in phases for commercial operations in Q1, 2009 after acquisition on September 30, 2008. The Polyester fibers and Wool yarns business represented 14.6% of consolidated sales and 12.7% of consolidated EBITDA.


PTA business reported merchant sales (excludes captive sales) for PTA of Baht 23,870 million, a growth of 318% over the corresponding period. The increase in sales is from full year operations of all 3 PTA plants acquired in year 2008 and higher utilization rate of 100%. 48% of PTA sales was for captive use to PET resins and polyester fibers and yarns business within the group. The PTA business represented 29.8% of consolidated sales and 33.8% of consolidated EBITDA.

CONSOLIDATED FINANCIAL RESULTSIVL’s consolidated sales were Baht 79,994 million in 2009, increasing 50% from the previous year. These were driven by in-creases in sales volume of PET resins, Polyester fibers and yarns and PTA. The sales increase was mainly driven by full year operation of acquired business in year 2008 in Thailand and Europe in PET resins, Polyester fibers and yarns and PTA. The acquired plants were operating at full capacity by Q4, 2009.

EBITDA, as a result of higher sales and cost improvements, jumped to Baht 10,636 million in 2009 which was 177% higher than 2008. EBITDA margin also improved significantly from 7.2% in 2008 to 13.3% in 2009. High EBITDA generation in 2009 resulted in free cash flow after capex of Baht 3,454 million which was used in reduction of debt. The net debt in the year 2009 decrease by Baht 3,315 million after draw down of additional debt for completion of AlphaPet project and for expansions and improvements in Indorama Polyester Rayong Facility.

IVL posted profit before tax of Baht 6,573 million in 2009, increasing 107% from the previous year, on the back of the strong sales and operating income in the year. Tax expense was higher at Baht 554 million in the year 2009 compared to Baht 53 million in the previous year. The tax expense was 8.4% of profit before tax and was primarily on the earnings of subsidiaries in USA and Europe.

IVL posted net profit after minority interest of Baht 4,824 million, increasing 82% from the previous year. In 2008, IVL recorded net profit after minority interest of Baht 2,656 million. Minority interest increased from Baht 467 million to Baht 1,195 million in year 2009 and the major components are minority shareholders in Indorama Polymers Public Company Limited “IRP” and TPT Petrochemicals Public Company Limited.For comparison to future results, considering IVL has increased shareholding in IRP from 69.29% to 99.08% on completion of share swap on February 3, 2010, the IVL net profit after minority interest (except IRP) was Baht 5,346 million, an increase of 68% over 2008.

CAPITAL EXPENDITURES AND NET DEBTTotal capital expenditure of IVL in year 2009 of Baht 3,785 million which was primarily in greenfield project for PET resins in AlphaPet for Baht 2,479 million and expansion and improvement projects in Indorama Polyester Rayong facility for Baht 665 million. The total capital expenditures in 2009, Baht 3,478 million was for investment/ expansion and Baht 307 million was for maintenance. The total capital expenditure in year 2008 was Baht 4,856 million which Baht 3,466 million was in the greenfield project for PET resins in AlphaPet Inc., USA. The total assets at the end of December 31, 2009 were Baht 74,260 million of which net fixed assets are Baht 49,505 million, equivalent to 67% of total assets.

At the end of the year, IVL’s total net debt stood at Baht 37,540 million, an 8% decrease from the previous year. The company repaid debt from its high EBITDA generation and free cash flow after capex. Net gearing ratio went down from 70% in 2008 to 63% at the end of the year. The net debt consists of:

Bank overdrafts and short term loans Baht 10,004 millionCurrent portion of long term loans Baht 4,692 million Long term loans net of current portion Baht 25,404 million TOTAL Baht 40,100 millionLess: Cash and cash equivalents Baht 2,560 millionNet debt Baht 37,540 million

[ NOTE: Please refer to Form 56-1 under Section Management Discussion and Analysis for additional details ]


IVL CONSOLIDATED

IVL : REVENUES

Total revenuesBaht in millionsUSD in millionsProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World

FY09

79,994 2,331

15%24%16%38%8%

FY08

53,332 1,600

11%11%24%48%7%

FY09 vs. FY08

50%46%

IVL : KEY FINANCIAL PERFORMANCE

EBITDABaht in millionsUSD in millionsMargin (%)Profit (loss) before taxBaht in millionsUSD in millionsMargin (%)Net profit (loss) after tax and minority Baht in millionsUSD in millionsMargin (%)

FY09

10,636 310

13.3%

6,573 192

8.2%

*5,346 156

6.0%

FY08

3,838 115

7.2%

3,176 95

6.0%

*3,182 95

5.0%

FY09 vs. FY08

177%169%

107%101%

68%64%

*including minority interest for IRP considering on completion of tender offer IVL shareholding has increased from 69.29% to 99.08% on February 3, 2010


IVL : FINANCIAL RATIOS

Current ratio (times)Net gearing ratio (%)Net operating gearing ratioInterest coverage ratio (times)ROE (%)ROCE (%)

FY09

0.963%60%

6.730.0%13.8%

FY08

0.870%67%

2.726.0%6.7%

BUSINESS SEGMENTS PET

PET : CAPACITY AND UTILISATION (%)

Production capacity (in Tonnes)Production volumes (in Tonnes)Utilisation rate (%)

FY08 869,250 804,190

93%

FY091,012,0001,026,582

101%

FY09 vs. FY08 16%28%

IVL : CASH FLOWBaht in millions

EBITDANet working capital and othersNet financial expensesIncome taxFree cash flow before CapexCapital expendituresNet (acquisitions) disposals of subsidiariesMargin (%)Free cash flow after CapexDividendsProceeds from issues of sharesChanges in net debt

FY09

10,636 (1,084)(1,884)

(264)7,404

(3,785)(165)3,454 (182)

0 (3,272)

FY08

3,838 (1,290)(1,302)

(28)1,218

(4,856)(14,194)(17,832)

(136)4,025

13,943

FY09 vs. FY08

177%-16%45%

843%508%-22%-99%

n/a34%

-100%n/a

Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions rea-son which the total of each segment may not tally with consolidated financials.


PET : REVENUES

Total revenuesBaht in millionsUSD in millionsGrowth in Baht revenues from: Volume movementPrice movementProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World

PET : OPERATING EBITDA AND MARGIN

Operating EBITDABaht in millionsUSD in millionsMargin (%)

POLYESTER & WOOL : CAPACITY AND UTILISATION (%)

POLYESTER FIBERS AND YARNS Production capacity (in Tonnes)* Production volumes (in Tonnes)Utilisation rate (%)WOOL YARNSProduction capacity (in Tonnes)* Production volumes (in Tonnes)Utilisation rate (%)

FY08

40,969 1,229

6%3%

30%54%8%

FY08

2,873 86

7.0%

FY08

100,000 109,651

110%

5,900 4,136 70%

FY09

44,456 1,295

6%3%

27%58%6%

FY09

5,687 166

12.8%

FY09

333,080 318,582

96%

5,900 3,062 52%

FY09 vs. FY08

9%5%

32%

-18%

FY09 vs. FY08

98%92%

FY09 vs. FY08

233%191%

0%-26%

POLYESTER & WOOL

* volumes based on equivalent production


POLYESTER & WOOL : REVENUES

Total revenuesBaht in millionsUSD in millionsGrowth in Baht revenues from:Volume movementPrice movementProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World

PTA : CAPACITY AND UTILISATION (%) Production capacity (in Tonnes)Production volumes (in Tonnes)Utilisation rate (%)

Total revenues Baht in millionsUSD in millionsGrowth in Baht revenues from:Volume movementPrice movementSales to PET businessBaht in millionsUSD in millionsSales to Polyester businessBaht in millionsUSD in millionsTotal revenues after eliminationsBaht in millionsUSD in millionsPTA integration ratio (%)Proportion of revenues (after eliminations) by geographicThailandAsia (excluding Thailand)North AmericaEuropeRest of the World

POLYESTER & WOOL : OPERATING EBITDA AND MARGIN

Operating EBITDABaht in millionsUSD in millionsMargin (%)

FY08

6,243 187

37%32%3%

25%3%

FY08572,500 534,260

93%

FY08

593 18

9.5%

FY09

11,668 340

22%45%5%

14%14%

FY091,590,000 1,584,683

100%

FY09

45,981 1,340

15,418 449

6,693

195

23,870 696

48%

28%52%0%

13%8%

FY08

14,732 442

8,645 259

377 11

5,710 171

61%

20%47%5%

24%4%

FY09 vs. FY08

212%203%

197%

5%

78%73%

1675%1624%

318%306%

FY09

1,353 39

11.6%

FY09 vs. FY08

87%82%

193%-37%

FY09 vs. FY08178%197%

FY09 vs. FY08

128%121%

PTA

PTA : REVENUES


*Operating EBITDABaht in millionsUSD in millionsMargin (%)

Baht in millions

Net salesCost of salesGross profitSelling and administrative expensesRealised foreign exchange gain (loss)Other income (expense), netEBITDADepreciation and amortisationOperating incomeUnrealised foreign exchange gain (loss)Extraordinary itemsInterest incomeInterest expenseProfit (loss) before taxIncome tax expenseProfit (loss) for the periodMinority interestNet profit after minority interestOutstanding no. of shares (in Million)Annualized earnings per share (in Baht)

Baht in millions

AssetsCash and current investmentsTrade accounts receivableInventoriesOther current assetsTotal current assetsProperty, plant and equipmentIntangible assetsOther assetsTotal assets

Dec-09

2,560 9,963 9,674 1,369

23,566 49,505

879 310

74,260

Dec-08

1,435 8,525 7,419 1,456

18,835 49,642

968 323

69,768

Dec-09 vs. Dec-08

78%17%30%-6%25%

0%-9%-4%6%

FY09

79,994 67,666 12,328 5,045

98 95

10,636 3,160 7,476

470 210 18

1,601 6,573

554 6,019 1,195 4,824 3,352 1.44

FY08

53,332 48,178 5,154 2,973

(32)122

3,838 1,567 2,271 (492)2,837

27 1,467 3,176

53 3,123

467 2,656 3,352 0.79

FY09 vs. FY08

50%40%

139%70%

n/a-22%177%102%229%

n/a-93%-33%

9%107%945%

93%156%

82%0%

82%

FY09

3,551 103

14.9%

FY08

353 11

6.2%

FY08

907%878%

PTA : OPERATING EBITDA AND MARGIN

IVL CONSOLIDATED STATEMENT OF INCOME

IVL CONSOLIDATED BALANCE SHEET

*Based on pro-rata allocation of earnings of PTA business calculated on intra-group sales to PET and Polyester fibers

Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions reason which the total of each segment may not tally with consolidated financials.


LiabilitiesBank OD and short-term loans from financial institutionsTrade accounts payableCurrent portion of long-term loansCurrent portion of finance lease liabilitiesOther current liabilitiesTotal current liabilitiesLong-term loans from financial institutionsLong-term loans from related partiesFinance lease liabilitiesOther liabilitiesTotal liabilities

Shareholder’s equityShare capitalShare premiumRetained earningsReservesTotal equity attributable to shareholdersMinority interestTotal shareholder’s equity

Total liabilities and shareholder’s equity

10,004 9,004 4,667

25 2,085

25,785 25,331

0 73

605 51,794

3,352 4,443

10,093 (709)

17,179 5,287

22,466

74,260

11,205 6,863 3,265

73 2,373

23,779 27,507

474 77

224 52,061

3,352 4,443 5,463 (463)

12,795 4,912

17,707

69,768

-11%31%43%

-66%-12%

8%-8%

-100%-5%

170%-1%

0%0%

85%53%34%

8%27%

6%

Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions reason which the total of each segment may not tally with consolidated financials.

Baht in millions Dec-09 Dec-08 Dec-09 vs. Dec-08


Corporate Governance


Corporate Governance Report

Indorama Ventures PCL (IVL) believes in striking a balance between economic and social goals by executing high standards of Corporate Governance and always strives to implement the Corporate Governance principles set by the Stock Exchange of Thailand.

The Company firmly believes in transparency, accountability and ethical conduct in pursuit of its mission and acts in accordance with our framework for sound corporate governance to enhance Company’s competitiveness and best serve the interests of our many stakeholders – and our business.

IVL has in place a written Corporate Governance Policy and the Policy follows the guidelines set out by SET. The Board and management are strongly committed to the implementation and practice of the Corporate Governance principles and this reflects our allegiance to doing what is fair, right and legal.

Indorama Polymers Pcl (IRP), a subsidiary of the Company which was listed in the SET up until February 2010, received a Cor-porate Governance Scoring for the years 2007 and 2008 of ‘Very Good’ and ‘Excellent’ respectively. This early effort to promote and develop good corporate governance practices will be continued by IVL.

It is the policy of IVL to uphold the core and relevant principles of corporate governance as hereunder:

Rights of Shareholders and Equitable Treatment of ShareholdersIt is the Company’s top most priority to protect Shareholders’ rights, irrespective of their shareholding, and encourage them to exercise those rights as spelt out in relevant laws.

The Company recognizes the basic legitimate right of Shareholders to participate in Shareholders’ meetings; the right to appoint a proxy to participate and vote at the said meeting; the right to vote for the appointment or removal of individual directors; the right to vote on the annual appointment of statutory auditors and fix their remuneration and the right to vote on various other busi-nesses of the Company. IVL will implement these rights of the shareholders at their first Annual General Meeting of Shareholders to be held in April, 2010.

Shareholders rights also include eligibility to receive dividend payments, the right to give opinions and enquire into business matters of the Company during the Shareholders’ meeting.

Apart from the above, IVL also recognizes the equal rights of all Shareholders to obtain accurate, adequate and timely informa-tion from the Company, for their decision-making and will always strive to provide the same.

General Rights and EqualityIVL will provide the opportunity to minority shareholders to propose agenda items and to nominate qualified individuals to be elected as directors of the Company before the AGM, effective from the year 2010.

IVL will continue to provide opportunities to the minority shareholders to participate in fundamental corporate decisions.In order to ensure that the shareholders receive the annual audited financial statements and the quarterly reviewed financial re-sults on time, IVL shall continue and maintain the practice of disclosing the results the very next day of its approval by the Board of Directors through the website of the Stock Exchange of Thailand and also through its website - www.indoramaventures.com, both in English and Thai.

IVL will also make regular disclosures through its website and also through SET about all relevant information like the Annual Report, Form 56-1, Shareholders’ meeting resolutions, important Board resolutions, analyst reports and press releases about the Company and its subsidiaries in an effort to keep the Shareholders informed.


IVL will encourage shareholders to attend the AGM in person or by proxy. In case of proxy, Shareholders can either appoint their authorized person or any one of the two independent Directors nominated by the Company in this regard. The profiles of the Independent Director(s) will be attached to the notification of the meeting. To enable Shareholders to make decisions, IVL will provide adequate information in the Notice to the meeting on the agenda items.

Re-appointment of Directors and appointment of new DirectorsProfiles of the directors retiring and offering themselves for re-appointment will be provided, including name, age, type of director, educational background, working experience, positions held in other organizations, number of years as director of the Company and the opinion of the Board, in order to facilitate the voting of the Shareholders.

Approving Directors remunerationThe total remuneration for the Independent Directors as proposed by the Board will be given in the Notice together with the amount approved and paid during the year. The Board will review the annual remuneration of the Directors with comparable listed companies.

Appointing the external auditor and approving the audit feeThe name of the audit firm and the auditor’s names, independence of the proposed auditor, number of years as the company’s auditor, remuneration proposed for the year together with the opinion of the Board in order to facilitate the voting of the Share-holders will be given. For the year 2009, IVL and its subsidiaries paid an audit fee of Baht 30 million.

Payment of dividendThe dividend policy of the Company, the amount paid in comparison with the policy and the amount paid in the previous year, if any and the opinion of the Board shall be given.

Shareholders MeetingIt is IVL’s policy to conduct Shareholders meetings properly in accordance with the Articles of Association of the Company and related laws to allow Shareholders to exercise their rights fully and in an informed manner.The annual general meeting of the Company will be organized within four months from the closure of the financial year. For the financial year 2008, the AGM was held on April 30, 2009.

Internal Information and related party transactionsThe Company has in place a written policy on the use of confidential and/or internal information so as to prevent any illegal use. The statement is prominently displayed at the head office and at the offices and the working places of all its subsidiaries, for the knowledge of all employees.

The code of conduct prohibits employees from buying, selling, transferring or accepting the transfer of Company securities by using confidential and/or internal information in any manner that may take advantage of outsiders by using inside information. All directors, senior management, auditors and employees having access to financial statements of the Company are required to make a declaration of their movement in shareholding including their spouse and minor children, to the Company Secretary who in turn presents a summary report to the Board.

Also the directors shall file with the company a report, in the form as approved by the Board, on their interest or a related person’s interest in the company or its subsidiaries.

Reporting of and trading in IVL SecuritiesThe Company has in place a written policy on reporting of and trading in IVL Securities. As per this policy no director or executive shall directly or indirectly trade in IVL Securities during the period of 15 working days prior to and 2 working days subsequent to the date of filing with the SET of the quarterly and annual financial statements of the Company. Further if any director or executive trades, they must report to SET and the Company. They should also deliver a quarterly declaration to the Company Secretary listing all Trading in IVL Securities.


Related party transactionsThe Company has in place a detailed policy on related party transactions. It very clearly defines who is a related party and what constitutes a connected party transaction and what procedures to follow when there is a related party transaction. The policy is circulated at the beginning of each year in order to remind all concerned about the compliance requirement on related party transactions. The Compliance Officer of the Company is responsible to ensure that all related party transactions follow the rules and regulations as prescribed by SEC/SET and the internal policy guidelines. Any new connected transaction is first brought to the notice of the Audit Committee. The Committee after reviewing the same recommends to the Board for their approval. With-out the Board’s approval no new related party transaction is allowed to take effect.

However, the Company and its subsidiaries may have related transactions with their directors, executives or potential connected persons. As a result, the Board of Directors Meeting approves, in principle, that the management is empowered to approve such transactions under reasonable, transparent and non-corrupt conditions, provided that such transaction is categorized as a transaction with the same commercial terms as those an ordinary person would agree with any unrelated counterparty under similar circumstances, on the basis of commercial negotiation (general trading conditions) and without any dependant interest resulted from the status of director, executive or related person, as the case may be.

The internal audit department, every quarter carries out a check of the continuing transactions in order to ensure that they are following the approved principles. The internal audit department will give their report to the Secretary to the Audit Committee who in turn will report to the Audit Committee. The Audit Committee meeting considers and upon their satisfaction on the basis, reasonability of the transactions, recommends to the Board for their approval.

Any Director who is directly or indirectly interested in any transaction abstains from discussions and voting.

The Company also has in place a written Board and Audit Committee Charters, Code of Conduct for directors & employees, an Internal Audit Manual and Internal Audit Charter.

Role of StakeholdersIVL gives equal importance to all of its stakeholders both internal and external such as shareholders, personnel, business part-ners, customers, competitors, creditors, community, environment and society. The Company is fully aware that support from each stakeholder will sustain and reinforce its competitive advantage and profitability.

It is the policy of IVL to safeguard their rights by strictly complying with applicable laws and regulations and to take into consid-eration their interests.

Shareholders: IVL and its subsidiaries strive to conduct its business in a transparent and efficient manner with a view to enhancing shareholder value and returns.

Customers: IVL and its subsidiaries will strive to maintain and strengthen its long-term and loyal relationships with its customers and is de-termined to ensure customer delight by providing high quality products and services that best fit customer needs at competitive prices, supported by a high standard of service and accurate information regarding our operations and products.

The Company believes in and will strive to keep communication channels open for constant customer feedback. Personnel: All personnel of IVL and its subsidiaries are considered to be valuable assets, critical to the growth and profitability of the com-pany and its subsidiaries, and strive to provide a conducive and quality oriented work environment with utmost emphasis on safety along with fair and equitable compensation compatible with similar businesses.


The Company gives importance to developing skills, knowledge and potential of its employees, and strives to build a work envi-ronment that is rich in diversity and will attract and retain high performance employees.

Business Partners: IVL and its subsidiaries fosters symbiotic, long-standing and growing relationships with all its business partners, based on mutual benefit and guided by good business ethics.

Creditors: IVL and its subsidiaries attempts to provide its creditors with all full and accurate information about the progress of the company, as required for smooth business dealings and to comply with all its obligations.

Community, environment, & society: IVL and its subsidiaries cares about safety of its society, environment, and quality of life of people associated with all its opera-tions and strives to comply with applicable laws and regulations.

IVL and its subsidiaries try to actively participate in all activities that support and care for environment and society and promote the cultures in which the companies operate.

IVL and its subsidiaries treat and dispose of waste in a manner that will have least impact on Society, environment and people.

Competitors: IVL and its subsidiaries will act within the rules with respect to its competitors and employ best practices in dealing with them, as well as working towards market development and growth for the benefit of the industry as a whole.

Disclosure and Transparency

It is IVL’s policy to deliver all-important information relevant to the Company, both financial and non-financial that may have an impact on the interests of the Shareholders or any decision to invest in or on the price of its shares. All such information will be disclosed sufficiently, accurately, on a timely basis and transparently through easy-to-access channels that are fair and trustwor-thy and all such information to comply with the relevant rules of SEC/SET.

The communication channels used are the Annual Reports, Form 56-1, SET website, Shareholders meeting and Company’s own website.

The designated executives that can disclose information about IVL is the Group Chief Executive Officer (Group CEO), and the Secretarial and Investor Relations Department. They provide information to interested parties on various occasions such as one-on-one meetings with Shareholders, creditors, analysts, quarterly meetings with analysts to discuss the recent financial performance, road shows and others.

The Company gives utmost importance to its website, which is in English at present, and regularly reviews it to ensure all in-formation provided is current and up-to date. The Company has taken effective steps to develop the website in Thai, which is expected to be completed in the first half of this financial year.

The information of the following provided on the Company website is regularly updated: Vision, Mission, Value statements, financial statements, analyst reports, press releases, Annual report, IVL Board and manage-ment structure, shareholding structure and major shareholders.

The company has a designated department / person for Investor relations for disclosing essential information to investors and financial reporting. An annual investor relations plan is established and the executive in charge is involved in various investor relations activities including but not limited to periodical plant visits for the benefit of shareholders, investors and analysts etc. Also regular investor meetings are organized.


To contact the Company’s investor relations department, the general public may call (+66) 2 661 6661 or email [email protected] or [email protected]. The details are provided on the Company website.

A statement on the Board’s responsibility concerning the Company’s financial report is disclosed in the Annual Report which mentions among other things that the Company complies with generally accepted accounting principles and that accounting standards and practices used are appropriate and consistent to the nature of the business. It also states that all information presented in the financial reports are accurate, complete and adequate. The Chairman of the Board and the Group CEO sign the statement.

NameMr. Sri Prakash LohiaMr. Aloke Lohia Mrs. Suchitra Lohia Mr. Sashi Prakash KhaitanMr. Amit LohiaMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichMr. Dilip Kumar AgarwalMr. Prem Chandra GuptaMr. Gopal Lal ModiMr. Satyanarayan MohtaMr. Ramesh Kumar NarsinghpuraMr. Vikash JalanMr. Anuj LohiaMr. Harsha V ReddyMr. Richard Jones

Opening-

1*---------------

Purchased--------------

1*--

Sold-----------------

Balance-

10*------------

10*--

Responsibility of the BoardBoard StructureThe IVL Board during the year increased the number of Directors from 4 to 8 consisting of 3 Executive Directors, 2 Non-Exec-utive Directors and 3 Independent Directors representing more than one-third of the total Board size.

The Board structure is appropriate in relation to the size of the Company, number of executive, non-executive and independent directors and qualification in terms of knowledge and expertise and provides a fair balance of power and effective management monitoring.

In the Directors’ profile, IVL discloses its director’s names, profiles, qualifications, experience, and shareholding in the Company to demonstrate the Board’s knowledge, competence, qualification and experience via the Annual Report and its website. It also mentions which Director is independent, executive and non executive and representative of a major shareholder.The profile mentions the Board membership of other Companies held by the Directors.

In order to achieve a balance of power, the position of the Chairman of the Board and that of the Group CEO are different. The Chairman of the Board of Directors is a Non Executive Director.

One third of the Directors retire by rotation at every Annual General Meeting as specified in the Articles of Association of the Company. The directors to retire during the first and second years following the registration of the Company shall be drawn by

The individual shareholdings of Directors, Senior Management, auditors and employees having access to financial information including their spouse and minor children for the period January 1, 2009 to December 31, 2009 is as follows:

* The par value of the shares has been changed from Baht 10 (Ten) to Baht 1 as approved by the Shareholders in the Extraordinary General Meeting held on September 28, 2009.None of the Auditors were holding any shares for the period January 1, 2009 to December 31, 2009.


The Audit Committee Charter was approved by the Board in their Meeting held on September 18, 2009. The Charter is in line with the new SEC regulations. It is available for reference on the Company’s website.The main duties and responsibilities of the Audit Committee include:1. review of company’s financial reporting process to ensure that it is accurate and adequate;2. review of the company’s internal control system and internal audit system to ensure that they are suitable and efficient, to determine an internal audit unit’s independence, as well as to approve the appointment, transfer and dismissal of the chief of an internal audit unit or any other unit in charge of an internal audit;3. review of the company’s compliance with the law on securities and exchange, the regulations of the Stock Exchange of Thailand, and the laws relating to the company’s business;4. to consider, select and nominate an independent person to be the company’s auditor, and to propose such person’s remuneration, as well as to attend a non-management meeting with an auditor at least once a year;5. review of the connected transactions, or the transactions that may lead to conflicts of interest, to ensure that they are in compliance with the laws and the regulations of the Stock Exchange of Thailand, and are reasonable and for the highest benefit of the Company;6. to prepare, and to disclose in the company’s annual report, an Audit Committee’s report which must be signed by the Chairman of the Audit Committee and consist of at least the following information: (1) an opinion on the accuracy, completeness and credibility of the company’s financial report; (2) an opinion on the adequacy of the company’s internal control system;(3) an opinion on the compliance with the law on securities and exchange, the regulations of the Stock Exchange of Thailand, or the laws relating to the company’s business;(4) an opinion on the suitability of an auditor;(5) an opinion on the transactions that may lead to conflicts of interests;(6) the number of the Audit Committee meetings, and the attendance at such meetings by each committee member;(7) an opinion or overview of comments received by the Audit Committee from its performance of duties in accordance with the charter; and(8) other transactions which, according to the Audit Committee’s opinion, should be known to the shareholders and general investors.7. to perform any other act as assigned by the company’s board of directors, with the approval of the Audit Committee. The Audit Committee is responsible to the Board of Directors according to the duties assigned by the Board of Directors, while the responsibilities for all activities of the company towards third persons are still vested in the entire Board of Directors.

lots. In subsequent years, the director who has been in office for the longest term shall retire. A retiring director is eligible for re-election. Voting for appointment/ re-appointment of Directors is done individually.

The Board has appointed the Company Secretary in order to meet the requirements of the SEC regulations. The Company secretary is responsible for matters connected with meetings of the Board and Shareholders and to advise the Board on law and regulations that the Board must know to effectively perform its duties and to administer the Board’s activities and ensure Board resolutions are complied with.

Audit CommitteeThe Audit Committee of IVL was constituted by the Board at its meeting on September 18, 2009 for a period of two years. The Committee comprises of Mr. Rathian Srimongkol as Chairman, Mr. William Ellwood Heinecke, and Mr. Chakramon Phasuka-vanich as members. All members are independent Directors and have the requisite experience and knowledge to review finan-cial statements. The attendance of the Committee members for the year 2009 is given below:

NameMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon Phasukavanich

Attendance3/32/33/3


The Chairman reports on the Audit Committee’s activities to the Board, immediately following the Audit Committee meetings. Between the meetings, the Committee reviews emerging issues with the management team, Secretary of Audit Committee and Chief of Internal Audit.

Nomination, Compensation and Corporate Governance Committee (NC&CG)At present the Company has no Nomination, Compensation and Corporate Governance Committee. However, in order to pro-mote Good Corporate Governance, the Company is taking effective steps to constitute the Nomination, Compensation and Corporate Governance Committee in the year 2010.

Responsibility and duties of the Board of DirectorsThe Board of Directors of IVL has the vision, mission, value statement, plans, strategies, key policies and budgets of the Com-pany with a view to effectively and efficiently manage the business for maximum Shareholder value. Detailed budgets and plans are formulated for the Company and its subsidiaries. The Board closely monitors the management and implementation of busi-ness plans to achieve targets. The Board also sets internal controls and audit procedures, including risk management.

The Board through the Audit Committee, internal auditor, and compliance department reviews potential conflicts of interest. The internal guidelines of the company on related party transactions and the relevant rules and regulations of SET/ SEC provide a basis for avoiding conflicts of interest. Details of all related party transactions are updated in Form 56-1 and reported in the An-nual Report. Those Board members who have an interest in a matter that might involve a conflict of interest must abstain from voting and other involvement, as prescribed by the Board. Company policy prohibits personnel at all levels from using inside information for personal benefit with all business decisions based on achieving the maximum benefit for the company and its subsidiaries.

The company has a code of conduct for Directors, executives and employees, approved by the Board and communicated to everyone. The Company through this Code of Conduct strives to achieve observance of ethical practices, honesty, and account-ability, as well as a responsibility to all stakeholders and external agencies.

Internal AuditThe company has its own Internal Audit Department, Internal Audit Manual and Internal Audit Charter. The Internal Audit Depart-ment is entrusted to carry out internal audit activities of the company and its subsidiaries under the supervision of the Chief of Internal Audit. The Internal Audit Department reports functionally to the Audit Committee. A detailed plan for the year is formu-lated for the units and approved by the Audit Committee which then reviews the work of the internal audit department against the plan periodically and makes recommendations to management. For the year 2009, the audit was carried out for Thailand units and some overseas units. The Secretary of Audit Committee follows up on the implementation of recommendations and reports the progress to the Audit Committee and also undertakes periodic checks to ensure compliance with statutory and regulatory requirements.

A report by the Audit Committee to the Shareholders on its activities for the year 2009 is separately disclosed in the Annual Report.

The regulations on the use of internal information of the Company The regulations on the use of internal information of the Company are as follows: 1) All directors, executives, staff and employees of the Company shall keep the confidential and/or internal, all information of the Company except for the purpose of the operation of the Company’s businesses;2) All directors, executives, staff and employees of the Company shall not disclose confidential and/or internal information of the Company with the aim to seek benefit for oneself or for other persons either directly or indirectly regardless of whether or not such benefit is to be received; and 3) All directors, executives, staff and employees of the Company shall not sell, purchase, transfer or take the assignment of securities of the Company by using confidential and/ or internal information of the Company and/ or enter into any transactions by using confidential and/or internal information of the Company in a manner that could possibly cause


damage to the Company either directly or indirectly. This provision shall also apply to spouses and minor children of the directors, executives, staff and employees of the Company. Violators of the regulations shall be deemed as committing a serious offence.

After the shares of the Company have been listed on the Stock Exchange of Thailand (“SET”), directors, executives, managers, person responsible for the operation, auditor, staff or employees of the Company purchase or sell, offer to purchase or sell or invite any other person to purchase, sell or offer to purchase or sell the shares of the Company in such a way as to take advan-tage of other persons by using internal information material to changes in the prices of the shares of the Company which has not yet been disclosed to the public and to which information he has access by virtue of his office or position, and whether or not such act is done for his own or another person’s benefit, or to disclose such information so that he will receive consideration from the person who engages in the aforesaid acts, such person shall be liable under the applicable laws with respect to insider trading as a result of such contravention.

In case, directors, executives, managers, person responsible for the operation, auditor of the Company acquire or dispose of shares or other securities (if any) of the Company, such person have to report on such acquire or dispose to the SEC within the time described by SEC Act B.E. 2535. The said acquire or dispose of such person shall include the holding of shares and other securities (if any) by his spouse and minor children of securities in the Company.

These regulations have been informed to all employees.

Board of Directors’ performanceThe Board of Directors has met 4 times since its decision to convert the Company to a Public Limited Company in August, 2009. The Company generally proposes to schedule a minimum of 4 meetings a year. Typically, a meeting is convened every 3 months with extra meetings convened as and when deemed necessary to review operations, financial matters, plans, or other matters. At the end of each year a schedule of meetings for the next year is circulated to the members so as to fix the meeting dates well in advance and also to ensure maximum participation.

The Chairman, Group CEO and Company Secretary set Board meeting agendas and the Company Secretary sends invitation letters together with the Agenda and relevant documents to the Directors at least 7 days prior to the meeting to allow adequate time for the directors to study the information.

At each Board Meeting, the Chairman allows each Board member to express his or her views and management to answer all queries in full. If desired, Directors can request for additional information from a designated person.

Detailed minutes are prepared for each meeting which includes the meeting date, beginning and ending times, name of Direc-tors who attended and were absent from the meeting, summarized information proposed to the Board on each issue, summa-rized discussion and Director’s observations and the person authorizing the Minutes.

The following are the details of attendance of the Board of Directors’ meeting in 2009* Name

1. Mr. Sri Prakash Lohia 2. Mr. Aloke Lohia3. Mrs. Suchitra Lohia4. Mr. Sashi Prakash Khaitan 5. Mr. Amit Lohia 6. Mr. Rathian Srimongkol 7. Mr. William Ellwood Heinecke 8. Mr. Chakramon Phasukavanich

No. of attendance / total meeting

-/33/33/33/3-/33/33/33/3

Remarks: * The company became a public limited company on 25 September 2009


The Executive Directors on the IVL Board are not paid any director’s fee. Remuneration paid to the Management team for the year was Baht 45,731,335.

Professional Development of Directors & Management

The Directors who joined the Company during the year are given a Directors Orientation folder with complete information about the Company and its subsidiaries to assist them in getting well acquainted with the business, practices and procedures of the company and their rights, duties and obligations as Directors.

In addition to the above, the new directors were arranged orientation meetings with the management team members.The Board encourages the Board members, Audit Committee members, management team members, Company Secretary and Internal Auditor to attend seminars, training and courses which would assist in further improving their contribution/performance in the Company.

We encourage the member of the Board to undergo applicable training programs.

Our company’s policies, integrity, ethics and disclosures always seek to emulate the best practices in Corporate Governance.

RemunerationThe current remuneration of Independent Directors is established based on assignments, responsibilities. Such remuneration proposed by the Board requires the approval of the Shareholders’ meeting.For the year 2009 the total annual remuneration to the Independent Directors approved at the Extraordinary General Meeting No.1/2009 held on September 19, 2009 was for an amount not exceeding Baht 1,300,000.

The actual remuneration paid in 2009 is Baht 1,300,000 as against the approved amount of Baht 1,300,000. The details of the remuneration paid are as hereunder:

As Directors of the Company

No.123

Independent DirectorsMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichTotal

Amount approved (Baht)50,000 per month50,000 per month50,000 per month

Actual Paid (Baht)200,000200,000200,000600,000

Note: The remuneration to Independent Directors is paid effective from September, 2009

As Audit Committee members

No.

123

Members

Mr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichTotal

Amount approved(Baht)

75,000 per month50,000 per month50,000 per month

Actual Paid(Baht)

300,000200,000200,000700,000

Note: The remuneration to the Audit Committee Members is paid effective from September, 2009


People & CSR

Our People - Drivers of Performance at IVL

The EEE (3E) Concept- – Environment, Engagement and Excitement, which is a way of life at IVL, has been instrumental in creating employee participation and involvement thereby bringing improvement in all spheres of the IVL business.

During the last year, IVL has moved from the margins of employee involvement agenda towards constantly engaging employees through various forums and events to build excitement, passion and competency of the people. Our 3E facet is all the more critical in a global and multicultural environment, such as at IVL.

Environment

Through our periodic measures we have been ensuring that a sense of control over one’s environment, a sense of shared des-tiny, and opportunities for development and advancement is maintained at our company. Some of the measures being:

Indorama Song – This song has been emblematic of the ways in which it ignites a sense of passion, pride and belongingness within every employee for their company. Emotions run high each time the song is played or sung and it has gone onto become an anthem that every one at IVL identifies with.

Communication of Vision Mission and Values (VMV) - VMV have been the beacon which signal intent and direction and feel-ing of oneness in employees that is crucial in creating a thriving organization that people feel committed to. Regular sessions on communication of VMV are enabling employees to acquire the necessary knowledge, skills and attitude so that they can contribute their best to the achievement of our vision. Our vision, mission and values

Environment, Health and Safety (EHS) - The week from 1st to 5th June 2009 included several eco-awareness activities, including plantations aimed at increasing green areas belts. Many activities stressed the importance of maintaining a clean en-vironment. Also, the celebration of World Environment Day on 5th June catalyzed the endeavors. The Management team and employees planted trees on this day as an act of collective responsibility. The health programs highlighted the importance of educating the community on various protection measures against impending diseases.

A Complete Medical Health Check up for all employees was held at head office. Indorama is focused on building a sustainable healthy fraternity for the good of the whole community

As part of SHE fortnight, following activities were carried out –

- Health care workshop for employees organized by local hospital.- Fire fighting training organized by local fire station staff.- Traffic safety seminar given by local Police chief.- Tree plantation done at site- Training on Action for good health in order to protect from diseases.Training on Aids & Tuberculosis (TB) prevention and management in

Employee Opinion survey (EOS) – EOS activities are carried out at IVL where in employees provide their feedback about the organization, peers, superiors and culture / environment. These opinions are of paramount importance in the building of a smooth organizational culture and development.

Communication Month - March 2009 was declared as the Communication Month wherein Vision, Mission, Values were rein-forced and communication workshops were conducted across all facilities of Indorama Thailand which culminated in interesting competitions towards the end of the month.


To a large extent it was successful in improving the participants’ understanding and practical experience of the skills required for communicating in a professionally assertive manner. Simulation activities and a single day workshop were conducted by Hans Andersson and Inn Narula, who have been working in the field of education and management training for more than 20 years.

Quality Circles concept (QCC) - Quality Circles drive continues to spread its wings by encouraging an environment for participation and involvement at grass root levels. These groups identify their own problems, which turns into a “Problem Bank”. Out of this problem bank, easy ones are picked to be worked on for solu-tions. These groups meet every month, discuss problems and go for solutions using our 7 Quality Tools. They present their case studies to the management and take pride in sharing their success stories.

The dynamic and ongoing mid-year QCC continued with its efforts to improve the performance of the organization by enriching the work of employees

The annual event – Quality Day was conducted on 12th December 2009. The convention was held at CTE, with the Quality Day Flag being hoisted, the Quality circle committee was formed and t-shirts with the ‘Q’ logo were introduced. The program was concluded with the Royal Anthem and Indorama song.

Quality week was conducted from 7th-12th December 2009 wherein the concept of quality was further reinforced and its mean-ingful contribution to the organization was brought to the forefront.

After winning national accolades, IVL’s Quality Circles (QC) initiatives have soared international.

It is really a matter of great pride for us at Indorama that our teams have progressed to achieve the international accolades. Three Quality Circle Concept (QCC) Teams (Two from Indorama Polyester Industries and One from Wool) recently participated in the national event of QCC HQ. The presentations made by the teams at the competition were excellent. The next step from QCC HQ was the site visit to the two locations at Indopoly and Wool, which was also appreciated by the judges as they could see the movement on the shop floor showcasing what the teams had talked about in the presentation at the competition.

The QC Group “Two for One” was awarded “Best QC Group” from The 23rd Quality Control Circles (QCC) Presentation held by The QC Head Quarter of Thailand on 28th April, 2009. Furthermore the group also was selected for International Convention on Quality Control Circle for the International Exposition for Team Excellence (IETEX) 2009 at SINGAPORE during 9-12 June 2009.

The Sen Dai Kao Klai Team from Indorama Polyester Industries was been selected for the International competition in China on 3rd Nov 2009

Engagement

Engagement remains the ultimate prize given to the employees. Having a critical mass of employees who are engaged in activities that lead to their self develop-ment and learning is of tremendous value for IVL.

Employee engagement is a process that never ends. And it rests on the foundation of a meaningful and task-driven enriching work experience. What is on the engage-ment list are the things that take time and commitment — such as strong leader-ship, interaction amidst employees, training etc. In the end, it only reminds us that there are no substitutes for these fundamentals. Some of the measures being:


Promoting Mutual Learning (PML) – Knowledge is power and it multiplies with every sharing process. PML continues to be our step towards building “Knowledge Bank” for the company by motivating people to participate in the knowledge sharing process by learning from their superiors as well as their subordinates thus promoting the culture of two-way learning process. During this year two PML sessions were conducted by the Production department.

Total Quality Assurance (TQA)- Inspired by the Malcolm Bald ridge Model for Total Quality Assurance IVL gave birth to an evolutionary model Indorama Business Excellence Model “ IRBEM” .We are already working on this model where in improve-ments under the concept of Approach, Deployment, Integration and Learning. The following committees are already working on this concept:

This model will aid in improving organizational performance practices, capabilities and results and also facilitate communication and sharing of opportunities for learning. It will serve as a working tool for understanding and managing business performance and also lead to improvement in overall organizational effectiveness

The categories of the IRBEM model at IVL are:Leadership StrategyEmpowermentCapability BuildingContinuous ImprovementBenchmarkingCommitmentInvolvementSelf Development

Quality of life (QOL) - Working towards its target of Total Quality Management, IVL moved on with its periodical QOL activities. Employees got together on a weekend program on self development. This stimulated good performance, boosted performance and eased work pressures after a weekend getaway.

Training and Development (T&D) - Being good at a job bolsters confidence and ensures both the organization and the em-ployees achieve individual and collective goals. Training and development programs, mentor/coach relationships and regular feedback from managers not only engender competence, but help a company build the skills and behaviors that meet specific business objectives.

Regular training and developments programs are conducted at various levels of the manpower. Employees are trained on vari-ous areas of improvement like attitude for excellence, team work, interpersonal skills, motivation, success as well as technical training related to their job. On an average employees are given 16 hours training per year. For employees who are involved in the QCC concept they undergo additional eight to ten days training per year.

The Visit of Mr. Lulla was facilitated in January 2009, wherein he endeavored to enhance training effectiveness by ensuring all committees related to the IRBEM model start working on the preparation of action plans called RACI (Responsibility, Account-ability, Consult and Inform) and submit it for review to him. He very vividly made clear the “Approach for Making Action Plan” on the base elements of TQA i.e. Leadership, Strategic Planning and Customer and Market Focus, taking inputs from Customer and Market Focus and Leadership (Vision, Mission and Values), and drilled down to Strategic Planning. ADLI Model (Approach, Deployment, Learning, and Integration) is creating excitement all around.

Indorama also conducted the Thai Labor for stability occupation training. The Opening ceremony of this training of Indorama Polyester Industries’ employees took place on 27 March 2009 and was done by Nakhonpathom Deputy Governor Mr.Uthan Chawamethee


PERFORMANCE MANAGEMENT SYSTEM (PMS) - PMS deals with identifying, evaluating and facilitating the work perfor-mance of employees in the organization which facilitates in achieving the organizational goals and objectives in a more effective way through the employees and also provides rewards to employees through recognition for their work.Activities were designed that will facilitate overall development of the employees.- Career Growth opportunities for talented people.- Succession planning for effective business. - Job Rotation/ Multi-Skilling opportunities to enable effective use of in-house talents for better results. - Recognition and Rewards to motivate people

ExcitementIVL indulges its employees in various activities and events allowing employees the freedom to breakaway from their erratic schedules which is an essential part of enthusiastic execution. These events provide a platform to highlight those aspects of our employee’s personalities that have the most positive impact on behavior and performance and also make them a part of the happenings around the world. This way our multi-cultural team gets to be a part of every Global event. Events held during year 2009 are:

Picnic getawaysFamily Day CelebrationsFather’s Day CelebrationsDiwali and New Year Party CelebrationsSongkran

Successful employee involvement and participations strategies help create a community at the workplace and not just a work-force. When employees are effectively and positively engaged with their organization it leads to competitive advantage. At IVL we thrive on an open and transparent culture to empower people and develop better managers. The 3E concept which is mov-ing on successfully is gradually evolving into a fourth E-“Excellence” in all arenas of IVL operations and people. It is an endeavor towards enhancing the existing culture of Education so IVL becomes– a learning organization.

“We care for our communities”IVL’s main objective of social activities is sustainable growth of the society and a better environment. These objectives are achieved by working directly or with government or non-government organizations works to support communities. IVL continues to be involved in social contribution activities in Thailand, Lithuania and USA. IVL learns from the community how best to serve and participates in annual public events to cultivate positive human and social relationships. Many line employees are members of these communities. IVL social activities and respect for communities reflect its commitment to be a good corporate citizen.The main activities include:• Scholarships for primary education of children • Sponsor sports team • Support for the public health center• Green program for planting trees• Support and organize cultural activities and events• Participating in various local festivals, such as National Children’s Day, Song-kran, Loy Krathong and Makhabucha Day.

IVL focus is also to reduce and reuse natural resources. Energy and water conservation is of paramount importance and re-quires greater efficiency in use of natural resources. IVL has implemented EHS, environment - health - safety, practice at all


plants and a set of guidelines were prepared, EHS Manual, and distributed to all plants for its implementation.

To ensure operations meet all government and industry standards, IVL hires professionals to assess, recommend, and monitor environmental and workplace programs. IVL has staff dedicated to implementing all environment-related systems to ensure they are functioning properly and that staff are observing prudent safety practices. Outside professionals test regularly as an added measure.During 2009, our endeavor towards Corporate Social Responsibility at various IVL locations unfolded in the form of following activities:At OGPET Lithuania the following activities were conducted

- Meeting with Klaipeda Enviroment organization Žvejonė like Green peace organization - Annual presentation of Environmental Monitoring for society (villagers, city administration, Environment Department). - Also conducted was the Fire prevention training with Klaipėda Fire and Rescue Department- Annual Football Charity Cup at FEZ

A Boat Race was conducted on Oct 5th, 2009 at Bangkham River, Koksalod Village located at the backside of Indorama Poly-mers PCL, Lopburi. This is a Traditional Function for conservation of water source at Bangkham River. IRP has supported it and got involved in it by sending IRP’s team to participate in this event. The team also emerged victorious for the year 2009.

Activity training on HIV AIDS by Thailand Business Coalition was conducted at Lopburi (IRP) on Sept 28th,2009.

Indorama Polyester Indutries PCL-Nakhonpathom’s employees co-operated to donate blood with Department of Transfusion Medicine, the Faculty of Medicine Siriraj Hospital, Mahidol University on September 21st, 2009.

Environment Good Governance Reward “Green Star on White Flag - On June 5th, 2009, TPT Petrochemicals Plc. and TPT Utilities Company have received the Excel-lent Reward on Environment Good Governance from the Industrial Estate Authority of Thailand Governor. Before the award, ‘Green Star on White Flag’, was received, IEAT assessment team along with representatives from communities had audited TPT four times in year 2008. They focused on our environment management, i.e. water consump-tion and waste water treatment, wastes management, air emission and noise control, VOCs monitoring, Green Area/Buffer Zone, support student trainees program to train at plant site and hire local people to work at TPT.

Indorama presented a gift of Baht 20,000 to H.H Princess Somsawalee during her visit to Thaklong on 25th April 2009 for ‘Sapakachat Thai’ towards project of preparing rice grain as improvement for the people affected by the last flooding.

At Alphapet, USA, the following activities took place:

- Relay For Life American Cancer Society- Charity Golf Tournament The Pilot Club of Decatur- Annual Membership Industrial Emergency Association- Scholarship Funding Decatur General Foundation- Hindu Cultural Center of North Alabama- Avon Breast Cancer Foundation- Student Leadership Scholarship DECATUR - MORGAN COUNTY CHAMBER OF COMMERCE


In 2009 the following external projects were executed at Indorama Polymers/Holdings Rotterdam B.V:

• Donated redundant computers to a charity organization in the Netherlands

• Participated in the program “feel the chemistry”. This program is initiated by the VNCI (Association of Chemical Industry). The objective is to let children, from primary school, visit chemical plants and see what chemistry is all about. Approximately 35 school kids visited our site in June. Presentation about Indorama and their products was given. The children were invited to execute chemical proofs by making hair gel and shampoo.

• Indorama participates in the Process College Mainport Rotterdam. Promoting the schools for process operator and mainte nance technician is one of the major tasks. The need for more students following a technical education is a priority. By inviting students from secondary schools to our site, giving presentations, explaining about the job should help students to make a decision about their next step in education. During the week of the process industry in January various groups of students visited the plant site.

• A number of trainees from the Process College are offered an internship within our company. For some of them it resulted in employment with Indorama.

Indorama Petrochem Plant in Rayong undertook the following activities during the year

• Coordinated with IEAT and Ban Chang District local community leaders during Jun-Dec 09 on smell impact reduction plan to nearby communities.

• Regular visit to local communities every month during Jan-Dec 09. • Organized “School Safety Project” activities at Prachummit Bumrung School (basic fire fighting training for school children and teachers) on 4/9/09.

• Donating items , luncheon, and organizing sports activities for orphans at Huay Pong Youth Care Center, Rayong, on 26/12/09.

• Joined MPR (Map Ta Phut Public Relations Club) activity of “Happy Healthy Youth Camp with MPR” during 28-29/5/09 at PTT Herb Garden, Rayong.

• Supported gifts and presents to young children during 2009 National Children Day.

• Donated to support 2009 Rayong Red Cross Fair organized by Rayong Province.

• Donated to support Songkran Festival organized by Prachummit community and Chak Look Ya community.

• Donated to support 2009 Chinese temple charity at Payoon Chinese Temple

Indorama Ventures will always stand to support and contribute to the well being of its people, communities and the environment.


Report of Audit Committee for the Year 2009

The Audit Committee of Indorama Ventures PCL consists of three independent directors of the Company namely; • Mr. Rathian Srimongkol - Chairman • Mr. William Ellwood Heine - Member • Mr. Chakramon Phasukavanich – Member The Audit Committee was constituted by the Board at its meeting no. 6/2009 dated 18 September 2009 for a period of two years. An Audit Committee Charter was approved by the Board at the same meeting which incorporated the provisions of the SEC Act.During the year 2009, the Committee held 3 meetings (details provided in Corporate Governance Report) and performed the following tasks in accordance with the scope of their responsibilities as assigned by the Board of Directors and those required by regulations.

Reviewed the financial statements of the Company with the Company’s auditors, including the significant accounting policies, the preparation process for financial statements, information disclosures and other issues, for the third quarter of 2009 (reviewed) and for the annual audited financial statements in order to assure that the financial reports are accurate, reliable and in compliance with generally accepted accounting standards and relevant regulations.

Approved the Internal Audit Plan for 2009 and reviewed the opinion on internal control on all the major subsidiaries of Indorama Ventures with the Internal Auditor of the Company. The Audit Committee also approved the Internal Audit Plan for the year 2010. The Internal Audit Department carried out its audit activities covering all subsidiaries of IVL except two US units. US units have been included in the Internal Audit Plan for the year 2010.

Assessed the adequacy of internal control system of the company with the Company’s Auditors, Internal Auditors and Management. The Committee will work together with the Internal Auditor and Management to further streamline the systems and procedures.

Reviewed the company’s compliance with laws and regulations of the Stock Exchange of Thailand, the Securities and Exchange Commission and other relevant laws pertaining to the Company’s business and found no issue of non-compliance for the period.

Since the Audit Committee was not in existence at the time of the appointment of Company’s Auditors including the setting of the Annual Audit Fee for 2009, the same has been recommended to the Shareholders’ Meeting by the Board of Directors.The Committee reviewed for each quarter all connected party transactions of the Company and its subsidiaries and found the same to be line with the internal Related Party Transaction Policy on connected transactions and regulatory requirements. The Audit Committee believes that the Company’s financial statements are properly presented, Internal Controls are adequate and the Company’s practices are in compliance with relevant regulations and good governance practices.

Rathian Srimongkol Chairman of the Audit Committee February 24, 2010


Report of the Board of Directors’ Responsibilities for the Financial Statements

The Board of Directors of Indorama Ventures PCL places significance on its roles and responsibilities in supervising the Com-pany’s operations in compliance with good Corporate Governance Principles and is accountable for the financial statements including financial data as shown in the Annual Report.

The financial statements for the accounting year ended December 31, 2009 has been prepared under the generally accepted accounting standards of Thailand. In preparing the said financial statements, the Company has adopted accounting practices and standards that are appropriate to its nature of business. All material information has been sufficiently disclosed in the notes to financial statements. The financial statements have been audited by qualified and independent auditors who have confirmed that the said statements accurately reflect the actual financial standing, results and operating results over the past year, as well as being transparent.

Moreover, the Board of Directors has instituted and maintained internal control, internal audit, risk management and corporate governance in order to ensure the completeness, adequacy and accurateness of the financial statements. The Board of Direc-tors has appointed the Audit Committee to review the quality of financial reports, the internal control system as well as complete and appropriate disclosure of connected transaction.

The Board of Directors expresses its satisfaction on the adequacy, credibility and reliability on the internal control system and the financial statements of Indorama Ventures Public Company Limited and its subsidiary companies for the year ended December 31, 2009.

Mr. Sri Prakash Lohia Mr. Aloke Lohia Chairman Group CEO


FinancialStatements


Audit report of Certified Public Accountant

To the Shareholders of Indorama Ventures Public Company Limited

I have audited the accompanying consolidated and separate balance sheets as at 31 December 2009 and 2008, and the related statements of income, changes in equity and cash flows for the years then ended of Indorama Ventures Public Company Limited and its subsidiaries, and of Indorama Ventures Public Company Limited, respectively. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. I did not audit the financial statements of two subsidiaries acquired in 2008 included in the consolidation which had total assets as at 31 December 2009 and 2008 constituting 26 percent and 22 percent and total revenues for the years then ended constituting 22 percent and 5 percent, respectively, of the related consolidated totals. The carrying value of these investments in the separate balance sheets as at 31 December 2009 and 2008 amounted to Baht 3,752.2 million and Baht 2,928.2 million, respectively. The financial statements of the subsidiaries were audited by another auditor whose reports have been furnished to me, and my opinion, insofar as it relates to the amounts included for these subsidiaries, is based solely on the report of the other auditor.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits and the reports of the other auditor referred to in the first paragraph provide a reasonable basis for my opinion.

In my opinion, based on my audits and the reports of the other auditor, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial positions as at 31 December 2009 and 2008, and the results of operations and cash flows for the years then ended of Indorama Ventures Public Company Limited and its subsidiaries, and of Indorama Ventures Public Company Limited, respectively, in accordance with generally accepted accounting principles.

Without qualifying my opinion on the consolidated financial statements for the year ended 31 December 2008 of Indorama Ventures Public Company Limited and its subsidiaries, I draw attention to Note 4, during the year ended 31 December 2008, the Company completed a number of acquisitions, resulting in the recording of negative goodwill, which was recorded in the consolidated statement of income for the year ended 31 December 2008 in the amount of Baht 3,123.8 million.

(Vichien Thamtrakul)Certified Public Accountant Registration No. 3183

KPMG Phoomchai Audit Ltd.Bangkok25 February 2010


2009

1,396,824 1,162,929 9,962,811

- 9,673,954 1,369,479

23,565,997

- 32,706

- 49,505,319

878,874 277,216

50,694,115

74,260,112

Indorama Ventures Public Company Limited and its Subsidiaries Balance sheets

As at 31 December 2009 and 2008

Consolidated financial statements

Separate financial statements

Assets

Current assets Cash and cash equivalents Current investments Trade accounts receivable Short-term loans to related parties Inventories Other current assets Total current assets Non-current assets Investments in subsidiaries and associates Other long-term investments Long-term loans to related party Property, plant and equipment Intangible assets Other non-current assets Total non-current assets Total assets

Note

675, 8595, 10

1175121314

2008

1,179,241 257,020

8,525,056 212,800

7,419,235 1,242,144

18,835,496

- 100,118

- 49,641,830

967,825 222,806

50,932,579

69,768,075

(in thousand Baht)

2009

131,727 572,808

-

- 301,415

1,005,950

9,622,066 -

1,262,628 - - -

10,884,694

11,890,644

2008

27,450 - - - -

5,666 33,116

9,473,822 -

924,023 - - -

10,397,845

10,430,961

The accompanying notes are an integral part of these financial statements.




Indorama Ventures Public Company Limited and its Subsidiaries

Balance sheets


Liabilities and shareholders’ equity

Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Current portion of long-term loans from financial institutions Current portion of long-term loans from related parties Current portion of finance lease liabilities Income tax payable Other current liabilities Total current liabilities Non-current liabilities Long-term loans from financial institutions Long-term loans from related parties Finance lease liabilities Other non-current liabilities Total non-current liabilities Total liabilities

Note

1516

15

515

17

155

15

2009

10,004,447 9,003,958

4,643,396

24,467 24,538

313,643 1,770,907

25,785,356

25,330,385 -

73,374 605,182

26,008,941 51,794,297

2008

11,205,149 6,863,101

3,264,924

- 73,467 28,172

2,344,520 23,779,333

27,507,305 473,989 77,399

223,107 28,281,800 52,061,133

2009

- -

162,600

24,467 - -

222,255 409,322

2,155,158 - - -

2,155,158 2,564,480

2008

565,543 -

45,870

- - -

10,455 621,868

1,195,217 460,646

- -

1,655,863 2,277,731

(in thousand Baht)




Balance sheets




Liabilities and equity

Equity Share capital Authorised share capital Issued and paid-up share capital Additional paid-in capital Share premium Unrealized surpluses (deficits) Revaluation surplus Fair value changes on cash flow hedges Currency translation differences Excess of book value of acquired subsidiaries over cost Differences arising from common control transactions Retained earnings Appropriated Legal reserve Unappropriated Total equity attributable to equity holders of the Company Minority interests Total equity Total liabilities and equity

Note

1818

19

192919

19

19

19

2009

5,082,000 3,351,544

4,443,214

864,535 (132,795)(324,283)

173,674

(1,580,670)

290,575 10,093,238

17,179,032 5,286,783

22,465,815

74,260,112

2008

3,351,544 3,351,544

4,443,214

986,546 -

(109,247)

94,517

(1,580,670)

146,011 5,462,619

12,794,534 4,912,408

17,706,942

69,768,075

(in thousand Baht)

2009

5,082,000 3,351,544

4,443,214

- - - - - - -

- 1,531,406

9,326,164 -

9,326,164

11,890,644

2008

3,351,544 3,351,544

4,443,214

- - - - - - -

- 358,472

8,153,230 -

8,153,230

10,430,961




Statements of income

For the years ended 31 December 2009 and 2008

Revenues Revenue from sale of goods Interest income Dividend income Net foreign exchange gain Negative goodwill Other income Total revenues Expenses Cost of sale of goods Selling expenses Administrative expenses Management benefit expenses Impairment loss on investment Loss on disposal of subsidiary Net foreign exchange loss Total expenses Profit before finance costs and income tax expense Finance costs Profit before income tax expense Income tax expense Profit for the year Profit attributable to: Equity holders of the Company Minority interests Profit for the year Earnings per share - Basic (in Baht) Par value per share (in Baht)


Separate financial statements Note 2009 2008 2009 2008

(in thousand Baht)

55

4 (a)

5, 215, 225, 23

2411

4 (b)

5, 25

26

28

18

79,994,226 18,360

- 567,715

- 305,274

80,885,575

67,665,880 4,269,652

651,973 123,901

- - -

72,711,406

8,174,169 1,601,532 6,572,637 553,954

6,018,683

4,824,097 1,194,586 6,018,683

1.44

1

53,331,844 26,858

- -

3,123,837 122,358

56,604,897

48,178,261 2,553,200

366,274 53,044

- 287,202 523,765

51,961,746

4,643,151 1,467,460 3,175,691

52,641 3,123,050

2,656,296 466,754

3,123,050

16.51

10

- 33,074

1,232,471 - - -

1,265,545

- -

11,496 1,300

16,103 -

7,115 36,014

1,229,531 56,564

1,172,967 33

1,172,934

1,172,934 -

1,172,934

0.35

1

- 21,621

128,927 - - -

150,548

- -

6,438 - - -

26,892 33,330

117,218 20,619 96,599

31 96,568

96,568 -

96,568

0.60

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(281

,699

)

(379

,991

) 2

,656

,296

2

,276

,305

(261

,904

) 5

,423

- - 7

,227

,157

12,

794,

534

(132

,329

)

(132

,795

)

(215

,036

)

(480

,160

) 4

,824

,097

4

,343

,937

4

0,56

1 - - 1

7,17

9,03

2

2,8

00,0

64

(43,

827)

21,

376

(74,

179)

(96,

630)

466

,754

3

70,1

24

(267

,164

) 2

,145

,422

- (1

36,0

38) -

4,9

12,4

08

(194

,732

)

(72,

622)

(69,

825)

(337

,179

) 1

,194

,586

8

57,4

07

(301

,112

) - (1

81,9

20)

5,2

86,7

83

6,3

47,6

17

(150

,435

)

29,

692

(355

,878

)

(476

,621

) 3

,123

,050

2

,646

,429

(529

,068

) 2

,150

,845

- (1

36,0

38)

7,2

27,1

57

17,

706,

942

(327

,061

)

(205

,417

)

(284

,861

)

(817

,339

) 6

,018

,683

5

,201

,344

(2

60,5

51) -

(181

,920

) 2

2,46

5,81

5

The

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are

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Indorama Ventures Public Company Limited and its SubsidiariesStatements of Changes in Equity


Separate financial statements Additional

paid-in capital Retained earnings

Issued and

Balance at 1 January 2008Profit for the yearTotal recognised income Issue of share capitalBalance at 31 December 2008 and 1 January 2009Profit for the yearBalance at 31 December 2009

Note

18

paid-upshare capital

400,000 - -

2,951,544

3,351,544 -

3,351,544

Share premium

167,601 - -

4,275,613

4,443,214 -

4,443,214

Unappropriated

261,904 96,568 96,568

-

358,472 1,172,934 1,531,406

Totalequity

829,505 96,568 96,568

7,227,157

8,153,230 1,172,934 9,326,164

(in thousand Baht)


Bal

ance

at

1 Ja

nuar

y 20

08

U

nrea

lized

loss

es

D

epre

ciat

ion

of re

valu

atio

n in

crem

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in p

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and

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ipm

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of fi

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ces

Dis

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ess

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D

ivid

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Bal

ance

at 3

1 D

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008

and

1

Janu

ary

2009

U

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loss

es

D

epre

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ion

of re

valu

atio

n in

crem

ent

in p

rope

rty, p

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and

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ipm

ent

Cas

h flo

w h

edge

s Lo

ss re

cogn

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in e

quity

Tr

ansl

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n of

fina

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l

stat

emen

ts d

iffer

ence

s N

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xpen

se re

cogn

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ctly

in e

quity

P

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for t

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ear

To

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ecog

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ivid

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009



Statements of cash flows




(in thousand Baht)

Cash flows from operating activities Profit for the year Adjustments for Depreciation and amortisation Interest income Dividend income Finance costs Unrealized foreign exchange (gain) loss Recovery of bad and doubtful debts expense, net (Reversal) provision for inventory obsolescence (Gain) loss on disposal of property, plant and equipment Impairment loss on investment in subsidiary Loss on disposal of subsidiary Negative goodwill Income tax expense Changes in operating assets and liabilities Trade accounts receivable Inventories Other current assets Other non-current assets Trade accounts payable Other current liabilities Other non-current liabilities

Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Interest received Dividend received Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment (Purchase) sale of other investments, net Purchase of intangible assets Loans to a related party Cash outflow on acquisition of subsidiaries, including cash acquired of Baht 845,255,121 in 2008, and additional investment in subsidiaries Return of capital from subsidiary Net cash inflow on disposal of subsidiary Net cash provided by (used in) investing activities

11

11

6,018,683

3,081,932 (18,360)

- 1,601,532 (470,097) (28,527) (87,764) (1,045)

- - -

553,954 10,650,308

(1,080,090) (2,202,914)

319,836 86,085

1,886,452 (139,268) (33,875)

(263,634) 9,222,900

31,475 -

(3,784,501) 2,741

(900,082) (2,730)

(236,721)

(165,092) - -

(5,054,910)

3,123,050

1,566,585 (26,858)

- 1,467,460

491,627 (28,967) 229,564

156 -

287,202 (3,123,837)

52,641 4,038,623

3,734,855 679,669

(168,365) 51,753

(4,909,809) (968,500)

32,726 (27,565)

2,463,387

37,487 -

(4,855,854) 186,394 535,145 (7,372)

(42,612)

(14,474,047) -

279,941 (18,340,918)

1,172,934

- (33,074)

(1,232,471) 56,564 22,071

- - -

16,103 - -

33 2,160

- -

(301,188) - -

216,761 -

(33) (82,300)

3,962 1,232,471

- -

(572,808) -

(354,586)

(824,058) 659,711

- 144,692

96,568

- (21,621)

(128,927) 20,619 26,892

- - - - - -

31 (6,438)

- - - - -

345 -

(31) (6,124)

2,955 128,927

- -

90,189 -

(894,217)

(3,466,833) - -

(4,138,979)




Statements of cash flows




(in thousand Baht)

Cash flows from financing activities Interest paid Dividends paid Proceeds from borrowings Repayment of borrowings Repayment of finance leases Proceeds from issue of shares Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes on balances held in foreign currencies Cash and cash equivalents at end of year

6

(1,915,610) (181,920) 3,870,572

(5,618,712) (72,269)

- (3,917,939)

250,051 1,179,241

(32,468) 1,396,824

(1,338,520) (136,038)

18,699,773 (4,410,353)

(64,772) 4,025,136

16,775,226

897,695 281,654

(108) 1,179,241

(59,111) -

1,147,541 (1,046,545)

- -

41,885

104,277 27,450

- 131,727

(10,568) -

2,242,689 (2,131,010)

- 4,025,135 4,126,246

(18,857) 46,307

- 27,450

Non-cash transaction In 2008, the Company issued ordinary shares at a premium with an aggregate value of Baht 3,202,021,384 to acquire shares in a subsidiary and Baht 676,216,599 for additional investment in shares in a subsidiary.


Note 2009 2008 2009 2008 (in thousand Baht)



Notes to the financial statements


Note Contents 1 General information 2 Basis of preparation of the financial statements 3 Significant accounting policies 4 Acquisitions and disposal of subsidiaries 5 Related party transactions and balances 6 Cash and cash equivalents 7 Other investments 8 Trade accounts receivable 9 Inventories10 Other current assets11 Investments in subsidiaries and associates12 Property, plant and equipment13 Intangible assets14 Other non-current assets15 Interest-bearing liabilities16 Trade accounts payable17 Other current liabilities18 Share capital19 Additional paid-in capital and reserves20 Segment information21 Cost of sales22 Selling expenses23 Administrative expenses24 Employee benefit expenses25 Finance costs26 Income tax expense27 Promotional privileges28 Earnings per share29 Financial instruments30 Commitments with non-related parties31 Contingent liabilities32 Events after the reporting period33 Thai Accounting Standards (TAS) not yet adopted34 Reclassification of accounts





These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 25 February 2010.

1. General information

Indorama Ventures Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office at 75/102, Ocean Tower II, 37th Floor, Sukhumvit Soi 19, Asoke Road, Klongtoeynua, Wattana, Bangkok, Thailand.

Subsequent to 31 December 2009, the Company was listed on the Stock Exchange of Thailand (see note 32 (b)).

The immediate and ultimate parent company as at 31 December 2009 was Indorama Resources Limited, incorporated in Thailand, and Canopus International Limited, incorporated in Mauritius.

The principal business of the Company and its subsidiaries (collectively, the “Group”) is the manufacture and distribution of polyethylene terephthalate (“PET”), purified terephthalic acid (“PTA”) and related products: polyester fibres and yarns, and wool products. Details of the Company’s subsidiaries as at 31 December 2009 and 2008 were as follows:

Name of the entity

Direct subsidiariesIndorama Petrochem Limited

Indorama Holdings Limited

TPT Petrochemicals PublicCompany Limited

Direct and indirect subsidiariesIndorama Polyester Industries PublicCompany Limited[formerly Tuntex (Thailand)Public Company Limited]

Indo Poly (Thailand) Limited

Indorama Polymers PublicCompany Limited

Type of business

Manufacture of purifiedterephthalic acid (“PTA”)Manufacture of woolproducts, polyester fiber and yarns and furfural and furfural alcohol Manufacture of PTA

Manufacture of polyesterfibers and yarns

Manufacture of polyesterfibers and yarns

Manufacture and sale of solid-state polymerised chips (generally known as bottle grade resin chips), polyethylene terephthalate (“PET”)

Country ofincorporation

Thailand

Thailand

Thailand

Thailand

Thailand

Thailand

Effective ownership interest (%)

2009 2008

100.00

97.93

54.60

Direct64.94

Indirect33.9098.84Direct44.38


Indirect25.9368.74

100.00

97.93

50.56

Direct97.01

Indirect-

97.01Direct44.38


Indirect25.9368.74


Indirect subsidiariesUAB Indorama Holdings EuropeIndorama HoldingsRotterdam B.V. Indo Rama Textiles (Thailand) Limited UAB Indorama Polymers Europe Indorama PolymersRotterdam B.V. Indorama PolymersWorkington LimitedAlphaPet, Inc.

Indorama Polymers (USA), Inc.UAB Orion Global Pet

StarPet Inc.

Asia Pet (Thailand) Limited Petform (Thailand) Limited

TPT Utilities Company Limited

Chao Pha Ya HeritageCompany Limited

Indirect associatesTuntex Textile (Thailand) Company LimitedTri Ocean Tuntex Textile (Thailand) Company Limited




Name of the entity Type of business

Trading in PTAManufacture of PTA

Manufacture of wool top

Trading in PET

Manufacture of bottle-grade resin chips Manufacture of bottle-grade resin chips Manufacture of bottle-grade resin chips

Holding companyManufacture of PET bottle-grade resin chips Manufacture of bottle-grade resin chips Manufacture ofAmorphous chips Manufacture of PETpreforms, closures and blown bottles Power generation andother utilitiesReal estate development

Manufacture of fibersand yarns Trading of fibers and yarns

Country ofincorporation

LithuaniaThe Netherlands

Thailand

Lithuania

The Netherlands

United Kingdom

United Statesof America

(“USA”)USA

Lithuania

USA

Thailand

Thailand

Thailand

Thailand

Thailand

Thailand

Effective ownershipinterest (%)

2009 2008

97.9397.93

93.13

68.74

68.74

68.74

68.74

68.7468.74

68.74

68.74

41.24

54.60

98.84

16.48

5.93

97.9397.93

93.13

68.74

68.74

68.74

68.74

68.7468.74

68.74

68.74

41.24

50.56

97.01

16.17

5.82

On 19 March 2008, the Company registered a change in its name from “Beacon Global Limited” to “Indorama Ventures Limited” with the Ministry of Commerce, Kingdom of Thailand.

Effective 31 July 2009, Indo Poly (Thailand) Limited (“IPL”) transferred its entire business to Indorama Polyester Industries Public Company Limited (“IPI”). IPI purchased all the IPL’s assets and assumed all its liabilities for a consideration of Baht 1,487.5 million which was equal to the net book value of the IPL’s assets and liabilities as at 31 July 2009. IPL registered its dissolution with the Ministry of Commerce on 3 August 2009, but was still controlled by the Group as at 31 December 2009.

On 19 September 2009, the shareholders approved the change of the status of the Company from a private company to a public company.





On 25 September 2009, the Company registered a change in its name from “Indorama Ventures Limited” to “Indorama Ventures Public Company Limited” with the Ministry of Commerce.

On 27 October 2009, the shareholders approved a shareholding restructuring plan between Indorama Polymers Public Company Limited (IRP) and the Company wherein, upon the successful completion of the initial public offering by the Company in February 2010, the Company would exchange all of the shares in IRP currently held by IRP’s shareholders excluding those held by the Company and its subsidiaries for shares in the Company. IRP’s shares would then be subsequently delisted from the Stock Exchange of Thailand (“SET”). On 27 October 2009, IRP filed the application for delisting of shares with the SET. A tender offer for the IRP shares was initiated on 24 December 2009 (see note 32 (a)).

Effective 9 November 2009, IPI’s shares were delisted from the Stock Exchange of Thailand.

Effective 14 November 2009, TPT Utilities Company Limited (“TPT-UC”) transferred its entire business to TPT Petrochemicals Public Company Limited (“TPT”). TPT purchased all the TPT-UC’s assets and assumed all its liabilities for a consideration of Baht 1,556.9 million which was equal to the net book value of the TPT-UC’s assets and liabilities as at 14 November 2009. TPT-UC registered its dissolution with the Ministry of Commerce on 16 November 2009, but was still controlled by the Group as at 31 December 2009.

2. Basis of preparation of the financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language.

The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) and Thai Financial Reporting Standards (“TFRS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand.

On 15 May 2009, the FAP announced (Announcement No. 12/2009) the re-numbering of TAS to the same numbers as the In-ternational Accounting Standards (“IAS”) on which the TAS/TFRS are based.

The Group has adopted the following revised TAS/TFRS and accounting guidance which were issued by the FAP during 2008 and 2009 and effective for annual accounting periods beginning on or after 1 January 2009:

TAS 36 (revised 2007) Impairment of Assets

Framework for the Preparation and Presentation of Financial Statements (revised 2007) (effective 26 June 2009)

Accounting Guidance about Leasehold Right (effective 26 June 2009)

Accounting Guidance about Business Combination under Common Control

The adoption of these revised TAS/TFRS and accounting guidance does not have any material impact on the consolidated and separate financial statements.






The FAP has issued during 2009 a number of new and revised TAS/TFRS which are not currently effective and have not been adopted in the preparation of these financial statements. The revised TAS applicable to the Group is disclosed in note 33.

The financial statements are presented in Thai Baht, rounded to the nearest thousand unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies.

The preparation of financial statements in conformity with TAS and TFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which estimates are revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

Note 4 Business combinationsNote 24 Measurement of defined benefit obligationsNote 29 Valuation of financial instrumentsNote 31 Evaluation of contingent liabilities

3. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements relate to the Company and its subsidiaries and the Group’s interests in associates.

Business combinations

Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interest in the net identifiable assets and liabilities of the acquiree over cost (“negative goodwill”) is recognized in the consolidated statement of income.

Business combinations of entities or businesses under common control are accounted for using a method similar to the pooling of interests method and in accordance with the Guideline issued in 2009 by the FAP.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.





The difference between the proceeds from the disposal of a subsidiary and its carrying amount as of the date of disposal, includ-ing the cumulative amount of any currency translation differences that relate to the subsidiary recognised in equity, is recognised in the consolidated statement of income.

Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. The consolidated financial statements include the Group’s share of the income, expenses and equity movements of associates from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income.

Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange rates ruling at the dates of the transactions.

Foreign entities

The assets and liabilities of foreign entities are translated to Thai Baht at the foreign exchange rates ruling at the reporting date.

Goodwill and fair value adjustments arising on the date of acquisition of foreign entities are stated at exchange rates ruling on transactions dates.

The revenues and expenses of foreign entities are translated to Thai Baht at rates approximating the foreign exchange rates ruling at the dates of the transactions.

Foreign exchange differences arising on translation are recognised in a separate component of equity until disposal of the investments.






Where monetary items, in substance, form part of the Group’s net investment in a foreign entity, foreign exchange differences arising on such monetary items and related hedges are recognised directly in a separate component of equity until disposal of the investment.

(c) Derivative financial instruments

Derivative financial instruments are used to manage exposure to foreign exchange and interest rate risks arising from opera-tional, financing and investment activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the statement of income when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see accounting policy 3(d)).

The fair value of interest rate swaps is based on broker quotes at the reporting date. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date.

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed marked price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate (based on governmental bonds).

(d) Hedging

Fair value hedges

Where a derivative financial instrument hedges the changes in fair value of a recognised asset, liability or unrecognised firm commitment (or an identified portion of such asset, liability or firm commitment), any gain or loss on remeasuring the fair value or foreign currency component of the hedging instrument is recognised in the statement of income. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the statement of income.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity.

If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated cumulative gains or losses that were recognised directly in equity are recognised in the statement of income in the same period or periods during which the asset acquired or liability assumed affects the statement of income.

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the associated cumulative gains or losses that were recognised directly in equity are removed from equity and recognised in the statement of income in the same period or periods during which the asset acquired or liability assumed affects the statement of income.


For cash flow hedges other than those noted in the preceding two paragraphs, the associated cumulative gains or losses that were recognised directly in equity are removed from equity and recognised in the statement of income in the same period or periods during which the hedged forecast transaction affects the statement of income.

Discontinuing hedge accounting

Hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss on the hedging instrument existing in equity is retained in equity and is recognised when the forecast transaction is ultimately recognised in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is recognised in the statement of income immediately. (e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.

(f) Trade and other accounts receivableTrade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost principle, and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale.

(h) Investments

Investments in subsidiaries and associates

Investments in subsidiaries in the separate financial statements of the Company are accounted for using the cost method.

An investment in a subsidiary that is not controlled by the Group is accounted for using the cost method in the consolidated financial statements.






(i) Property, plant and equipment

Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, except for machinery and equipment related to the manufacture of textiles and related products which are stated at their revalued amounts. The revalued amount is the fair value determined on the basis of the assets’ existing use at the date of revaluation less any subsequent accumulated depreciation and impairment losses.

Leased assets

Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Property, plant and equipment acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.

Revalued assets

Revaluations are performed by independent professional valuers with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the reporting date.

Any increase in value, on revaluation, is credited to equity under the heading ‘revaluation surplus’ unless it offsets a previous decrease in value recognised in the statement of income in respect of the same asset. A decrease in value is recognised in the statement of income to the extent it exceeds an increase previously recognised in equity in respect of the same asset. The revaluation surplus is utilised by reference to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost and credited to accumulated depreciation. Upon disposal of a revalued asset, any remaining related revaluation surplus is transferred from equity to retained earnings and is not taken into account in calculating the gain or loss on disposal.

Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each item of prop-erty, plant and equipment. The estimated useful lives are as follows:

Land improvements 20-25 yearsBuildings and building improvements 20-30 yearsMachinery and equipment 5-30 yearsOffice furniture, fixtures and office equipment 3-10 yearsTransportation equipment 5-10 years

No depreciation is provided on freehold land or assets under construction.





(j) Intangible assets

Intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are amortised in the statement of income on a straight-line basis over their estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives are as follows:

Rights acquired 3-15 yearsSoftware licenses 5-7.5 yearsCustomer lists 9 yearsTechnology license 30 Years

(k) Impairment

The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.

Calculation of recoverable amount

The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized.

Impairment losses recognised in prior periods in respect of non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carry-ing amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(l) Interest-bearing liabilities

Interest-bearing liabilities are recognised initially at fair value. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of income over the period of the borrowings on an effective interest basis.









(m) Trade and other accounts payable

Trade and other accounts payable are stated at cost.

(n) Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of income as incurred.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available if it is realisable during the life of the plan, or on settlement of the plan liabilities.

(o) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(p) Revenue

Revenue excludes value added taxes and is arrived at after deduction of trade discounts.

Sale of goods

Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods.

Interest and dividend income

Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payment is established.





(q) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease.

Finance costs

Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognised in the statement of income using the effective interest method.

(r) Income tax

Income tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

4. Acquisitions and disposal of subsidiaries

(a) Acquisitions

(i) Negative Goodwill The excess of the Group’s interest in the net identified assets and liabilities of the companies acquired during the year ended 31 December 2008 is considered by management as negative goodwill attributable to bargain purchase factors, and is recognized in the consolidated statement of income and comprised the following:

(in thousand Baht) Eastman Chemical Company 1,027,446Indorama Petrochem Limited 1,339,860TPT Petrochemicals Public Company Limited 619,367Indorama Polyester Industries Public Company Limited (formerly Tuntex (Thailand) Public Company Limited) 137,164Total negative goodwill 3,123,837

(ii) Eastman Chemical Company

On 31 March 2008, the Group acquired the net assets (property, plant and equipment and working capital) and assumed the operations of two PET production facilities and a PTA production facility located in the Netherlands and the United Kingdom, previously owned and operated by Eastman Chemical Company (“Eastman”). The net assets were acquired for a cash con-sideration of €221.28 million (Baht 11,007.2 million).






The acquirees’ net assets at the acquisition date comprised the following:

Trade and other receivablesInventoriesProperty, plant and equipmentIntangible assetsTrade and other payablesNet identifiable assets and liabilitiesNegative goodwillTotal consideration

Recognisedvalues

2,918,7581,575,7547,872,052

552,364(884,268)

12,034,660(1,027,446)11,007,214

Fair value adjustments

--

487,637552,364

-1,040,001

Carryingamounts

2,918,7581,575,7547,384,415

-(884,268)

10,994,659

(iii) Indorama Petrochem LimitedEffective 30 September 2008, the Group acquired, from a shareholder group controlled by a related party, 100% of the outstanding shares of Indorama Petrochem Limited (“IRPTA”), in exchange for 26,115,400 shares of the Company with fair value of Baht 2,525.8 million. IRPTA is principally engaged in the manufacture and distribution of PTA.

IRPTA’s net assets at the acquisition date comprised the following:

Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwill Total consideration

Fair value of shares issuedCash acquiredNet cash inflow

Recognisedvalues

4,110

1,853,1211,466,235

265,70013,497,206

410,29012,827

(11,218,938)(2,383,134)

(41,752)3,865,665

100%

3,865,665(1,339,860)

2,525,805

(2,525,805)(4,110)

4,110

Fair value adjustments

----

266,697-----

266,697

Carryingamounts

4,1101,853,1211,466,235

265,70013,230,509

410,29012,827

(11,218,938)(2,383,134)

(41,752)3,598,968

(in thousand Baht)

(in thousand Baht)


(iv) TPT Petrochemicals Public Company Limited

In three transactions between 15 August 2008 to 16 October 2008, the Group obtained a 50.56% equity interest in TPT Petro-chemicals Public Company Limited (“TPT”) for a cash consideration of Baht 2,128.5 million. TPT is principally engaged in the manufacture and distribution of PTA.

The acquisition was considered effective on 30 September 2008. TPT’s net assets at the acquisition date comprised the following:




Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwillTotal consideration

Cash acquiredNet cash outflow

Recognisedvalues

Fair valueadjustments

Carryingamounts

(in thousand Baht)

518,080 2,042,591 898,048 378,298 9,789,620 9,380 155,601 (6,930,231) (969,715) (456,651) 5,435,021 50.56% 2,747,867 (619,367) 2,128,500 (518,080) 1,610,420

----

272,384 -----

272,384

518,080 2,042,591 898,048 378,298 9,517,236 9,380 155,601 (6,930,231) (969,715) (456,651) 5,162,637

(v) Indorama Polyester Industries Public Company Limited (formerly Tun tex (Thailand) Public Company Limited)

In two transactions on 16 September 2008 and 4 December 2008, the Group acquired a 97.01% equity interest in Tuntex (Thailand) Public Company Limited (“Tuntex”) for a cash consideration of Baht 799.7 million. Tuntex is principally engaged in the manufacture and distribution of polyester yarn.

The acquisition was carried out as part of a plan of a business rehabilitation plan for Tuntex, including the restructuring of debts with its lenders. On 25 September 2008, the business rehabilitation plan was completed and on 27 October 2008, the Central Bankruptcy Court approved the Company’s exit from the business rehabilitation process. The acquisition was considered effective on 30 September 2008.

The net assets of Tuntex after giving effect to the provisions of the rehabilitation plan comprised the following:



Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwillTotal consideration

Cash acquiredNet cash outflow




Recognised values(in thousand Baht)

323,06522,68370,34013,992

1,819,9831,968

13,790(1,210,632)

(34,670)(54,774)965,74597.01%936,847

(137,164)799,683

(323,065)476,618

(b) DisposalOn 19 June 2008, the Group sold its 89.71% interest in a subsidiary, Indo-Rama Chemicals (Thailand) Ltd., to a related party, for a cash consideration in the amount of Baht 279.9 million. As a result, the Group recognised a loss on the disposal in the amount of Baht 287.2 million in the 2008 consolidated statement of income.

5. Related party transactions and balancesRelated parties are those parties linked to the Group and the Company as shareholders or by common shareholders or direc-tors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.

Relationships with related parties that control the Company or are being controlled by the Company or have transactions with the Group were as follows:

Name of entity

Canopus International LimitedIndorama Resources Limited

Indorama PetrochemLimitedIndorama Holdings Limited

Country of incorporation/ nationality

Mauritius

Thailand

Thailand

Thailand

Nature of relationship

Ultimate parent company of the Group, some common directors Immediate parent company, 92.87% shareholder, some common directors Subsidiary, 100% shareholding; some common directorsSubsidiary, 97.93% shareholding, some common directors





Name of entity

Indorama Polyester Industries Public Company LimitedTPT PetrochemicalsPublic Company LimitedIndo Poly (Thailand) Limited

Indorama PolymersPublic Company Limited UAB Indorama HoldingsEurope Indorama HoldingsRotterdam B.V. Indo Rama Textiles (Thailand) Limited UAB Indorama Polymers Europe Indorama PolymersRotterdam B.V. Indorama PolymersWorkington LimitedAlphaPet, Inc.

Indorama Polymers(USA), Inc.UAB Orion Global Pet

StarPet Inc.

Asia Pet (Thailand) Limited Petform (Thailand) Limited TPT Utilities CompanyLimited Chao Pha Ya HeritageCompany LimitedTuntex Textile (Thailand) Company LimitedP.T. Indorama Synthetics TBK LimitedTri Ocean Tuntex Textile (Thailand) Company LimitedSerm Suk Public Company Limited Pacific Resources LimitedCryoviva (Thailand) Limited


Thailand

Thailand

Thailand

Thailand

Lithuania

The Netherlands

Thailand

Lithuania

The Netherlands

United Kingdom

USA

USA

Lithuania

USA

Thailand

Thailand

Thailand

Thailand

Thailand

Indonesia

Thailand

ThailandThailandThailand


Subsidiary, 64.94% shareholding and 33.90% interest held indirectly, some commondirectorsSubsidiary, 54.60% shareholding, some common directorsSubsidiary, 44.38% shareholding and 53.33% interest held indirectly, some common directorsSubsidiary, 42.81% shareholding and 25.93% interest held indirectly, some commondirectorsIndirect subsidiary, 97.93% effective interest, some common directorsIndirect subsidiary, 97.93% effective interest, some common directorsIndirect subsidiary, 93.13% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 41.24% effective interest, some common directorsIndirect subsidiary, 54.60% effective interest, some common directorsIndirect subsidiary, 98.84% effective interest

Indirect associate, 16.48% effective interest

Some common shareholders and directors

Indirect associate, 5.93% effective interest

Shareholder of subsidiary, 40% shareholding, some common directors Some common shareholdersSome common directors






Name of entity

Tuntex Petrochemical Inc.Era Global LimitedIndo-Rama Chemicals (Thailand) LimitedIndo Rama Synthetics (India) Limited


TaiwanGibraltarThailand

India


Shareholder of subsidiary, 21% shareholdingSome common shareholdersSubsidiary (up to June 2008), some common directorsFamily relationships with directors

The pricing policies for particular types of transactions are explained further below:

TransactionsSales of goodsPurchases of goodsInterest incomeOther incomeInterest expenseSelling and administrative expenses

Pricing policies Market pricesMarket pricesMarket linked rateContractually agreedMarket linked rateContractually agreed

Significant transactions for the years ended 31 December 2009 and 2008 with related parties were as follows:


Separate financial statements 2009 2008 2009 2008

(in thousand Baht)

SubsidiariesInterest incomeInterest expenseOther related partiesSales of goodsPurchases of goodsSelling and administrative expensesInterest incomeInterest expense

--

1,682,143823

7,94811,528

-

--

683,858-

5,24813,173

713

33,0537,436

-----

18,6662,415

-----

Balances as at 31 December 2009 and 2008 with related parties were as follows:

Trade accounts receivable from related parties

Other related partiesSerm Suk Public Company LimitedIndo Rama Synthetics (India) LimitedTuntex Textile (Thailand) Company Limited

Less allowance for doubtful accountNetBad and doubtful expense for the year



(in thousand Baht)

136,075244,457

-380,532

-380,532

-

125,016-

26,692151,708(26,692)125,016

26,692

--

---

-

--

---

-







2009 2008 2009 2008 (in thousand Baht)

Interest rate

2009 2008(% per annum)

Short-term loans to related parties

Comprising:

Short-term loans to related partyOther related partyIndo-Rama Chemicals (Thailand) Limited Total

Other receivables from related partySubsidiaryIndorama Holdings Ltd.Total

Total short-term loans to related parties

- 5.75 --

--

-

212,800212,800

--

212,800

--

--

-

--

5,6665,666

5,666



2009 2008 2009 2008 (in thousand Baht)

Interest rate

2009 2008(% per annum)

Long-term loans to related parties

Comprising:Long-term loans torelated partySubsidiaryIndorama Petrochem LimitedTotal

Other receivables fromrelated partySubsidiaryIndorama Petrochem LimitedTotal

Total long-term loansto related parties

2.42-5.13 5.58 -

-

--

-

-

-

--

-

1,217,2651,217,265

45,36345,363

1,262,628

911,023911,023

13,00013,000

924,023

The above long-term loan, including the related interest, is repayable only after full repayment of the long-term indebtedness of Indorama Petrochem Limited to a financial institution.

Summary of loans to related parties

Short-termLong-termTotal loans to related parties



2009 2008 2009 2008 (in thousand Baht)

---

212,800-

212,800

-1,262,6281,262,628

5,666924,023929,689


2009 2008 2009 2008 (in thousand Baht)





Movements of loans to related parties for the years ended 31 December 2009 and 2008 were as follows:



2009 2008 2009 2008 (in thousand Baht)

Loans to related parties

Short-term loans:Other related partyAt 1 JanuaryIncreaseDecreaseAt 31 December

Long-term loans:SubsidiaryAt 1 JanuaryIncreaseDecreaseAt 31 December

212,800-

(212,800)-

----

170,188212,800

(170,188)212,800

----

----

911,023354,587(48,345)

1,217,265

----

-911,023

-911,023

Loans from related parties

Long-term loansParentCanopus International Ltd.SubsidiaryIndorama Holdings LimitedOther related partyEra Global LimitedTotalLess current portionLong-term loans fromrelated parties



2009 2008 2009 2008 (in thousand Baht)

Interest rate

2009 2008(% per annum)

Nil

-

-

Nil

5.75

Nil

24,467

-

-24,467

(24,467)

-

403,171

-

70,818473,989

-

473,989

24,467

-

-24,467

(24,467)

-

350,824

109,822

-460,646

-

460,646

Movements of loans from related parties during the years ended 31 December 2009 and 2008 were as follows: Consolidated financial statements


2009 2008 2009 2008 (in thousand Baht) Long-term loans

Parent At 1 JanuaryIncreaseDecreaseAt 31 December

403,171-

(378,704)24,467

2,162,548352,520

(2,111,897)403,171

350,824-

(326,357)24,467

2,111,897350,824

(2,111,897)350,824







(in thousand Baht) SubsidiaryAt 1 JanuaryIncreaseDecreaseAt 31 December

Other related partyAt 1 JanuaryIncreaseDecreaseAt 31 December

Total long-term loansrelated partiesAt 1 JanuaryIncreaseDecreaseAt 31 December

----

70,818-

(70,818)-

473,989-

(449,522)24,467

----

53,75217,066

-70,818

2,216,300369,586

(2,111,897)473,989

109,822-

(109,822)-

----

460,646-

(436,179)24,467

-109,822

-109,822

----

2,111,897460,646

(2,111,897)460,646

Loans from related parties are unsecured and comprise the following:



(in thousand Baht)

Loan - USD 730,000 (2008: USD 10,000,000) repayable on or before 31 December 2013* Subordinated loan - nil (2008: USD 1,500,000), repayable on demand upon repayment of certain long-term loans from financial institutionsLoan, repayable on or before 31 December 2013Loan - nil (2008: Baht 53.8 million and USD 525,514), repayable on or before 31 December 2013Total

* The Company has declared its intention to repay the loan in 2010. As a result, the outstanding loan balance is classified as current liabilities at 31 December 2009.

24,467

--

-24,467

350,824

52,347-

70,818473,989

24,467

--

-24,467

350,824

-109,822

-460,646


2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)





6. Cash and cash equivalents



(in thousand Baht)

Cash on handCash at bank - current accountsCash at bank - savings accounts

Highly liquid short-term investmentsTotal

2,311557,619797,619

1,357,54939,275

1,396,824

4,000706,701467,077

1,177,7781,463

1,179,241

-1,252

130,475131,727

-131,727

-304

27,14627,450

-27,450

As at 31 December 2009, cash at bank amounting to USD 1.2 million (Baht 39.3 million; 2008: USD 1.3 million (Baht 44.8 million)), was restricted for loan principal and interest repayments to financial institutions.

The currency denomination of cash and cash equivalents as at 31 December was as follows:



2009 2008 2009 2008 (in thousand Baht)

Thai Baht (THB)United States Dollars (USD)Euro (EUR)Pounds Sterling (GBP)Lithuanian Litas (LTL)Total

391,40586,327

772,491101,02045,581

1,396,824

603,841178,694370,81615,82710,063

1,179,241

131,727----

131,727

27,450----

27,450

7. Other investments



2009 2008 2009 2008 (in thousand Baht)

Current investmentsShort-term deposits atfinancial institutions

Other long-term investmentsLong-term deposits atfinancial institutions

Total

1,162,9291,162,929

32,70632,706

1,195,635

257,020257,020

100,118100,118357,138

572,808572,808

- -

572,808

- -

- - -







(in thousand Baht)

The currency denomination of other investments as at 31 December was as follows:

THBUSDEURGBPLTLTotal

612,654347,837235,144

--

1,195,635

100,118-

215,92335,286

5,811357,138

572,808----

572,808

-----

-

Deposits in the amount of Baht 267.8 million (2008: Baht 357.1 million) have been pledged to secure loans from financial institutions.

8. Trade accounts receivable Consolidated financial statements


(in thousand Baht)

Note

Related partiesOther parties

Less allowance for doubtful accountsTotal

Reversal of bad anddoubtful debts expense during the year, net

5 380,5329,609,0119,989,543

(26,732)9,962,811

28,527

151,7088,428,6078,580,315

(55,259)8,525,056

28,967

-

-

-

-

-

-

Aging analyses for trade accounts receivable were as follows:



(in thousand Baht) Related partiesWithin credit termsOverdue:Less than 3 months Over 12 months

Less allowance for doubtful accountsNet

315,290

65,242 -

380,532 -

380,532

61,522

63,49426,692

151,708(26,692)125,016

-

- - - - -

-

- - - - -

-

-

-

-

-

-


2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)







(in thousand Baht) Other partiesWithin credit termsOverdue:Less than 3 months 3-6 months 6-12 months Over 12 months

Less allowance for doubtful accountsNet

Total

8,085,788

1,351,72164,92979,26127,312

9,609,011(26,732)

9,582,279

9,962,811

6,800,441

1,559,53235,6687,227

25,7398,428,607

(28,567)8,400,040

8,525,056

-

- - - - - - -

-

-

- - - - - - -

-

The normal credit term granted by the Group ranges from 15 days to 360 days.

The currency denomination of trade accounts receivable as at 31 December was as follows:



(in thousand Baht) THBUSDEURGBPLTLTotal

2,538,7254,864,7211,650,759

814,79693,810

9,962,811

968,0465,414,4621,285,388

835,79421,366

8,525,056

- - - - - -

- - - - - -

Trade accounts receivable with a carrying amount of Baht 3,125.7 million (2008: Baht 3,161.2 million) have been pledged as collateral to secure loans from financial institutions.

9. Inventories Consolidated financial statements


(in thousand Baht)

Finished goodsWork in processRaw materialsSpare parts and suppliesGoods in transit

Less allowance for decline in valueNet

4,483,816363,320

3,015,9311,231,797

600,9129,695,776

(21,822)9,673,954

3,658,588255,560

2,018,6161,191,811

536,9687,661,543(242,308)7,419,235

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-





The cost of inventories which is recognised as an expense and included in ‘cost of sale of goods’ for 2009 amounted to Baht 57,180 million (2008: Baht 40,482 million).

Inventories with a carrying value of Baht 1,959.3 million (2008: Baht 3,496.0 million) have been pledged as collateral to secure loans from financial institutions.

10. Other current assets Consolidated financial statements


(in thousand Baht)

Value added tax receivableDeferred initial public offering costs Export incentive receivablePrepaid expensesAdvance paymentsOthersTotal

417,327294,704179,960155,56572,968

248,9551,369,479

669,292-

70,391220,778

9,381272,302

1,242,144

-294,704

---

6,711301,415

-----

5,6665,666

11. Investments in subsidiaries and associates



(in thousand Baht)

At 1 JanuaryAdditional investments Impairment Return of investmentAt 31 December

-----

-----

9,473,822824,058(16,103)

(659,711)9,622,066

2,804,9676,668,855

--

9,473,822


2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)


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(%)

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98.8

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ed fo

r usi

ng th

e co

st m

etho

d.

- - - -


Indo

ram

a Ve

ntur

es P

ublic

Com

pany

Lim

ited

and

its S

ubsi

diar

ies

St

atem

ents

of i

ncom

e

Fo

r the

yea

rs e

nded

31

Dec

embe

r 200

9 an

d 20

08

Con

solid

ated

fina

ncia

l sta

tem

ents

Effe

ctiv

e ow

ners

hip

inte

rest

Pai

d-up

cap

ital

Cos

tIm

pairm

ent

Car

ryin

g am

ount

Div

iden

d in

com

e

20

09

2008

200

9

200

8

200

9

2008

2009

20

08

2

009

2

008

200

9

2008

2

009

2008

Ret

urn

of c

apita

l

(%)

(

in th

ousa

nd B

aht)

Not

e

Subs

idia

ries

Indo

ram

a P

etro

chem

Lim

ited

Indo

ram

a H

oldi

ngs

Lim

ited

Indo

ram

a P

olym

ers

Pub

lic C

ompa

ny L

imite

d

Indo

Pol

y (T

haila

nd)

Lim

ited

Indo

ram

a P

olye

ster

Indu

strie

s P

ublic

Com

pany

Lim

ited

TPT

Pet

roch

emic

als

Pub

lic C

ompa

ny L

imite

d

Tota

l

4 4 4

100.

0097

.93

42.8

1

44.3

8

64.9

4

54.6

0

100.

0097

.93

42.8

1

44.3

8

97.0

1

50.5

6

4,72

7,82

077

4,46

8

1,38

2,19

8

700,

000

2,20

2,85

0

4,92

5,00

0

4,72

7,82

077

4,46

8

1,38

2,19

8

700,

000

824,

350

4,92

5,00

0

2,52

5,80

51,

951,

147

1,39

2,47

0

676,

217

1,47

3,99

5

2,27

8,24

610

,297

,880

2,52

5,80

51,

951,

147

1,39

2,47

0

676,

217

799,

683

2,12

8,50

09,

473,

822

- - -

(16,

103) - -

(16,

103)

- - - - - - -

- - -

(659

,711

) - -(6

59,7

11)

- - - - - - -

2,52

5,80

51,

951,

147

1,39

2,47

0

403

1,47

3,99

5

2,27

8,24

69,

622,

066

2,52

5,80

51,

951,

147

1,39

2,47

0

676,

217

799,

683

2,12

8,50

09,

473,

822

709,

172

394,

371

128,

928

- - -

1,23

2,47

1

- -

128,

927 - - -

128,

927

The

mar

ket

pric

e of

the

Com

pany

’s d

irect

inte

rest

at

Indo

ram

a P

olym

ers

Pub

lic C

ompa

ny L

imite

d w

as B

aht

7,69

2,33

2 th

ousa

nd a

s at

31

Dec

embe

r 20

09 (

2008

: B

aht

3,19

5,28

2 th

ousa

nd).

Dur

ing

2009

, the

Com

pany

pur

chas

ed a

dditi

onal

sha

res

of In

dora

ma

Pol

yest

er In

dust

ries

Pub

lic C

ompa

ny L

imite

d (“

IPI”)

repr

esen

ting

a 1.

7% e

quity

inte

rest

for a

cas

h co

nsid

-er

atio

n of

Bah

t 12.

0 m

illio

n an

d su

bscr

ibed

to th

e ca

pita

l inc

reas

e of

IPI f

or a

cas

h co

nsid

erat

ion

of B

aht 6

62.3

mill

ion;

and

pur

chas

ed a

dditi

onal

sha

res

of T

PT

Pet

roch

emic

als

Pub

lic C

ompa

ny L

imite

d re

pres

entin

g a

4.0%

equ

ity in

tere

st fo

r a c

ash

cons

ider

atio

n of

Bah

t 149

.7 m

illio

n.

Dur

ing

2009

, the

Com

pany

rece

ived

a d

ivid

end

in th

e am

ount

of B

aht 3

50.6

mill

ion

from

Indo

Pol

y (T

haila

nd) L

imite

d, w

hich

is u

nder

the

proc

ess

of li

quid

atio

n, th

at w

as a

c-co

unte

d fo

r as

a re

turn

of c

apita

l.

New

and

add

ition

al in

vest

men

ts d

urin

g 20

08 w

ere

acqu

ired

in e

xcha

nge

for c

ash

and

the

assu

mpt

ion

of d

ebt i

n am

ount

s ag

greg

atin

g B

aht 3

,466

.8 m

illio

n an

d th

e is

sue

of

33,1

07,1

02 o

rdin

ary

shar

es o

f the

Com

pany

at a

pre

miu

m o

f Bah

t 2,8

71.0

mill

ion.

At 3

1 D

ecem

ber 2

009,

a p

ortio

n of

sha

res

of In

dora

ma

Pol

ymer

s P

ublic

Com

pany

Lim

ited,

Indo

ram

a P

etro

chem

Lim

ited,

and

TP

T P

etro

chem

ical

s P

ublic

Com

pany

Lim

ited

has

been

ple

dged

as

colla

tera

l for

loan

s ob

tain

ed fr

om v

ario

us fi

nanc

ial i

nstit

utio

ns.


Indo

ram

a Ve

ntur

es P

ublic

Com

pany

Lim

ited

and

its S

ubsi

diar

ies

St

atem

ents

of i

ncom

e

Fo

r the

yea

rs e

nded

31

Dec

embe

r 200

9 an

d 20

08

12

Prop

erty

, pla

nt a

nd e

quip

men

tC

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Land

and

land

im

prov

emen

ts

Bui

ldin

gs a

ndbu

ildin

gim

prov

emen

ts

Mac

hine

ry a

ndeq

uipm

ent -

text

ilepr

oduc

tion

Offi

ce fu

rnitu

re,

fixtu

res,

and

eq

uipm

ent

Tran

spor

tatio

n eq

uipm

ent

Mac

hine

ry a

ndeq

uipm

ent -

othe

rC

onst

ruct

ion

in p

rogr

ess

Tota

l(in

thou

sand

Bah

t)C

ost/r

eval

ued

At 1

Jan

uary

200

8A

dditi

ons

Acq

uisi

tions

thro

ugh

busi

ness

com

bina

tions

Tran

sfer

sD

ispo

sals

Dis

posa

l of s

ubsi

diar

yTr

ansl

atio

n di

ffere

nces

on

cons

olid

atio

nA

t 31

Dec

embe

r 200

8

and

1 Ja

nuar

y 20

09A

dditi

ons

Tran

sfer

sD

ispo

sals

Tran

slat

ion

diffe

renc

es o

n co

nsol

idat

ion

At 3

1 D

ecem

ber 2

009

Fina

nce

cost

s ca

pita

lised

Fina

nce

cost

s ca

pita

lized

du

ring

2008

(Not

e 25

) R

ates

of i

nter

est c

apita

lised

du

ring

2008

(% p

er a

nnum

) Fi

nanc

e co

sts

capi

talis

ed

durin

g 20

09 (N

ote

25)

Rat

es o

f int

eres

t cap

italis

ed

durin

g 20

09 (%

per

ann

um)

271

,800

1

05,6

16

763

,024

- -

(73,

644)

5,56

2

1,07

2,35

8 -50

,837

-(7

,669

)1,

115,

526 - - - -

2,43

9,51

3

22

,728

1,

526,

825

6

9,93

5

-

(140

,040

)5,

830

3,92

4,79

166

0,90

810

1,46

9 -(6

1,76

5)4,

625,

403 - - - -

7,74

9,84

649

,050

-61

,925

(1

,253

) - -

7,85

9,56

8

8,1

25 - - -

7,86

7,69

3 - - - -

11,0

41,4

5836

0,48

8 30

,256

,130

8

65,6

05

(285

,823

)(1

,831

,296

)13

9,28

4

40,5

45,8

462,

782,

067

1,11

4,10

8(8

,352

)(4

60,5

32)

43,9

73,1

37

1,42

2

4.8

- 6.

1 - -

233,

614

32,0

54

136,

325 -

(508

)

(27,

663)

408

374,

230

62,9

736,

892

(73)

(1,5

18)

442,

504 - - - -

165,

222

17,6

05

16,2

18 -

(3,6

54)

(19,

234) 26

176,

183

16,1

04-

(4,8

81)

6218

7,46

8 - - - -

885,

164

4,26

8,31

2 24

4,20

5 (9

97,4

65) - -

174,

859

4,57

5,07

527

3,75

4(1

,273

,306

) -(1

31,1

13)

3,44

4,41

0

59,8

89 5.2

113,

116

3.5

22,7

86,6

174,

855,

853

3

2,94

2,72

7 -(2

91,2

38)

(2

,091

,877

)32

5,96

9

58,5

28,0

513,

803,

931 -

(13,

306)

(662

,535

)61

,656

,141

61,3

11

4.8

- 6.1

113,

116

3.5


Indo

ram

a Ve

ntur

es P

ublic

Com

pany

Lim

ited

and

its S

ubsi

diar

ies

St

atem

ents

of i

ncom

e

Fo

r the

yea

rs e

nded

31

Dec

embe

r 200

9 an

d 20

08

Con

solid

ated

fina

ncia

l sta

tem

ents

Land

and

land

im

prov

emen

ts

Bui

ldin

gs a

ndbu

ildin

gim

prov

emen

ts

Mac

hine

ry a

ndeq

uipm

ent -

text

ilepr

oduc

tion

Offi

ce fu

rnitu

re,

fixtu

res,

and

eq

uipm

ent

Tran

spor

tatio

n eq

uipm

ent

Mac

hine

ry a

ndeq

uipm

ent -

othe

rC

onst

ruct

ion

in p

rogr

ess

Tota

l(in

thou

sand

Bah

t)

Acc

umul

ated

dep

reci

atio

nA

t 1 J

anua

ry 2

008

Dep

reci

atio

n ch

arge

for t

he y

ear

Dis

posa

ls

Dis

posa

l of s

ubsi

diar

yTr

ansl

atio

n di

ffere

nces

on

cons

olid

atio

n

At 3

1 D

ecem

ber 2

008

and

1 Ja

nuar

y 20

09D

epre

ciat

ion

char

ge fo

r the

yea

rD

ispo

sals

Tran

slat

ion

diffe

renc

es o

n co

nsol

idat

ion

At 3

1 D

ecem

ber 2

009

Net

boo

k va

lue

Ow

ned

asse

tsA

sset

s un

der fi

nanc

e le

ases

Tota

l at 3

1 D

ecem

ber 2

008

Ow

ned

asse

tsA

sset

s un

der fi

nanc

e le

ases

Tota

l at 3

1 D

ecem

ber 2

009

14,8

874,

724 -

(11,

160)

259

8,71

022

,626

-(4

25)

30,9

11

1,06

3,64

8 -1,

063,

648

1,08

4,61

5 -1,

084,

615

618,

947

126,

715 -

(72,

904)

1,16

7

673,

925

170,

226 -

(3,7

67)

840,

384

3,25

0,86

6 -3,

250,

866

3,78

5,01

9 -3,

785,

019

5,17

3,82

721

2,70

5 (1

10) - -

5,38

6,42

2

1

26,1

55 - -

5,51

2,57

7

2

,473

,146

-2,

473,

146

2,35

5,11

6 -2,

355,

116

2,54

1,19

01,

344,

532

(4

,742

)(1

,296

,851

)(1

1,31

5)

2,57

2,81

42,

918,

577

(2,3

16)

(50,

012)

5,43

9,06

3

37,7

92,9

2118

0,11

137

,973

,032

38,3

63,1

6517

0,90

938

,534

,074

155,

640

26,4

39(1

,560

)(2

3,75

1) 88

156,

856

63,9

08(7

3)(3

48)

220,

343

217,

374 -

217,

374

222,

161 -

222,

161

75,9

7322

,042

(2

,765

)

(7

,769

)13

87,4

9425

,982

(5,8

21)

(111

)10

7,54

4

74,6

2014

,069

88,6

89

50,2

4729

,677

79,9

24

- - - - - - - - - -

4,57

5,07

5 -4,

575,

075

3,44

4,41

0 -3,

444,

410

8,58

0,46

41,

737,

157

(9,1

77)

(1,4

12,4

35)

(9,7

88)

8,88

6,22

13,

327,

474

(8,2

10)

(54,

663)

12,1

50,8

22

49,4

47,6

50

194,

180

49,6

41,8

30

49,3

04,7

3320

0,58

649

,505

,319





The gross carrying amount of fully depreciated property, plant and equipment that was still in use as at 31 December 2009 amounted to Baht 3,514 million (2008: Baht 3,168 million).

In June 2005, certain subsidiaries of the Company revalued their machinery and equipment related to textile production at appraised values at 31 May 2005 by applying the fair market value as specified in the appraisal report dated 2 June 2005 obtained from an independent qualified appraiser.

Certain property, plant and equipment with a carrying value of Baht 45,148.2 million (2008: Baht 49,085.1 million) have been pledged as collateral to secure loans from financial institutions.


Indo

ram

a Ve

ntur

es P

ublic

Com

pany

Lim

ited

and

its S

ubsi

diar

ies

St

atem

ents

of i

ncom

e

Fo

r the

yea

rs e

nded

31

Dec

embe

r 200

9 an

d 20

08

13.

Inta

ngib

le a

sset

s

Con

solid

ated

fina

ncia

l sta

tem

ents

Cos

tA

t 1 J

anua

ry 2

008

Add

ition

sA

cqui

sitio

ns th

roug

h bu

sine

ss c

ombi

natio

nsTr

ansl

atio

n di

ffere

nces

on

cons

olid

atio

n A

t 31

Dec

embe

r 200

8 an

d 1

Janu

ary

2009

Add

ition

sTr

ansl

atio

n di

ffere

nces

on

cons

olid

atio

nA

t 31

Dec

embe

r 200

9

Acc

umul

ated

am

ortiz

atio

n an

d im

pairm

ent

At 1

Jan

uary

200

8A

mor

tisat

ion

char

ge fo

r the

yea

r R

ever

sal o

f im

pairm

ent c

harg

e Tr

ansl

atio

n di

ffere

nces

on

cons

olid

atio

n A

t 31

Dec

embe

r 200

8 an

d 1

Janu

ary

2009

Am

ortis

atio

n ch

arge

for t

he y

ear

Tran

slat

ion

diffe

renc

es o

n co

nsol

idat

ion

At 3

1 D

ecem

ber 2

009

Net

boo

k va

lue

At 3

1 D

ecem

ber 2

008

At 3

1 D

ecem

ber 2

009

Not

e 4

Rig

hts

acqu

ired

49,8

273,

776

9,38

1(8

4)62

,900

-(1

,262

)61

,638

11,9

752,

594 - 5

14,5

742,

996

(142

)17

,428

48,3

2644

,210

Softw

are

licen

ces

1,190

3,596

119,9

62 798

125,

546

8,341

(5,57

4)12

8,31

3

555

10,94

2(3

,556) 63

8,00

417

,044

(2,30

0)22

,748

117,

542

105,

565

Cus

tom

erlis

ts

-

-43

2,025

2,424

434,

449 -

(12,4

34)

422,

015 -

35,80

2 -20

136

,003

46,66

0(1

,055)

81,6

08

398,

446

340,

407

Tech

nolo

gylic

ence

-

-40

7,216

-

407,

216

-

-

407,

216 -

3,705 - -

3,70

514

,819 -

18,5

24

403,

511

388,

692

Tota

l

51,0

17

7,37

2

968,

584

3,13

81,

030,

111

8,34

1

(19,

270)

1,01

9,18

2

12,5

30

53,0

43

(3,5

56)

269

62,2

8681

,519

(3,4

97)

140,

308

967,

825

878,

874






14. Other non-current assets Consolidated financial statements


(in thousand Baht)

Deferred financing costsAdvance payment on purchase of machineryRefundable depositsOthersTotal

162,525

25,40947,19342,089

277,216

162,636

-5,082

55,088222,806

-

-

--

-

-

--

15. Interest-bearing liabilities

CurrentBank overdraftsShort-term loans fromfinancial institutions (a)Bank overdrafts andshort-term loansCurrent portion of long-termloans from financialinstitutions (b) Current portion of finance lease liabilities (c)

Non-currentLong-term loans from financial institutions (b) Long-term loan froma related partyFinance lease liabilities (c)

Total



(in thousand Baht) Note

5

24,776

9,979,671

10,004,447

4,643,396

24,53814,672,381

25,330,385

-73,374

25,403,759

40,076,140

21,866

11,183,283

11,205,149

3,264,924

73,46714,543,540

27,507,305

-77,399

27,584,704

42,128,244

-

-

-

162,600

-162,600

2,155,158

--

2,155,158

2,317,758

-

565,543

565,543

45,870

-611,413

1,195,217

109,822-

1,305,039

1,916,452



(in thousand Baht)

The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities, as at 31 December were as follows:

Within one yearAfter one year but within five yearsAfter five yearsTotal

14,647,84319,885,2645,445,121

39,978,228

14,470,07318,518,6238,988,682

41,977,378

162,6001,708,348

446,8102,317,758

611,413723,402581,637

1,916,452







(in thousand Baht)

Secured interest-bearing liabilities as at 31 December were secured on the following assets:

Current investmentsOther long-term investmentsTrade accounts receivableInventoriesProperty, plant, and equipmentShares of subsidiariesTotal

235,14432,706

3,125,6901,959,314

45,148,17110,198,34460,699,369

257,020100,118

3,161,2233,496,031

49,085,12810,033,40266,132,922

-----

2,207,0402,207,040

-----

958,283958,283

(a) Short-term loans from financial institutionsShort-term loans from financial institutions comprise the following:



(in thousand Baht)

Short-term loans, secured by property,plant and equipmentShort-term loans, secured by shares ofa subsidiaryRevolving loan (USD 62,430,195)(2008: USD 55,889,175) due inMay 2014, secured by tradeaccounts receivable and inventoriesRevolving loan (EUR 4,000,000)(2008: EUR 7,587,355) secured by property, plant and equipment Revolving loan secured by property, plantand equipment Liabilities under trust receiptsPacking credits Promissory note Call loansBill discounted and otherTotal

2,009,900

-

2,069,954

191,174

179,000597,186

2,368,346-

1,943,366620,745

9,979,671

2,834,334

565,543

1,950,404

373,309

-1,864,2461,532,4801,314,967

748,000-

11,183,283

-

-

-

-

-------

-

565,543

-

-

------

565,543

Under the terms of trust receipt agreements with banks, certain imported inventory has been released by the bank to the Group in trust. The Group is accountable to the banks for the inventory or its related sales proceeds until the inventory is fully paid for.

Although the Group has no current expectations it will repay the full amount of the USD revolving credit loan before the agree-ment expires in 2014, the borrowings have been classified as short-term debt on the Group’s balance sheets due to certain subjective provisions available to the bank that are included in the loan document.

All short-term loans bear interest at floating rates with the exception of the short-term loans secured by shares of a subsidiary which are interest-free.


2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)





(b) Long-term loans from financial institutionsAll long-term loans are secured by property, plant and equipment and additionally (or except) as disclosed below and bear interest at floating rates except as disclosed below as follows:



(in thousand Baht)

Term loan, due in December 2013,secured additionally by inventoriesTerm loan, due in November 2015,secured additionally by guaranteeby a related partyTerm loan, due in March 2013, securedadditionally by guarantee by arelated partySyndicated term loan, due in August2012, secured additionally by landsublease rights, cash inflows and shares in a subsidiaryTerm loan, due in March 2015, securedby shares of a subsidiaryUnsecured loan, due in January 2014Term loan, repayable in monthly installments of Baht 17.1 million,with interest at the rate of fixed rateUnsecured loan, repayable in semi-annualinstallments of USD 1.1 millioncommencing in September 2010Term loan due in November 2015,secured additionally by a restrictedbank accountTerm loan, repayable in monthlyinstallments of Baht 3.8 million,with interest at 4% per annum for thefirst three years and a floating ratethereafter, secured by shares in TPTOther long-term loans

Less portion due within one yearNet

7,398,269

3,840,306

1,487,974

1,332,480

867,250866,311

853,660

535,200

499,316

485,01811,807,99729,973,781

(4,643,396)25,330,385

8,415,453

2,826,585

1,901,390

1,742,155

708,000993,030

1,024,800

560,200

647,005

530,88711,422,72430,772,229

(3,264,924)27,507,305

-

-

-

-

--

-

535,200

-

485,0181,297,5402,317,758

(162,600)2,155,158

-

-

-

-

--

-

560,200

-

530,887150,000

1,241,087

(45,870)1,195,217

The above loan agreements contain certain covenants relating to the declaration and payment of dividends, maintenance of financial ratios, acquisition of major fixed assets, additional indebtedness and share transfers.

As at 31 December 2009, the Company had unutilised credit facilities totaling Baht 13,710 million (2008: Baht 12,345 million).





(c) Finance lease liabilitiesFinance lease liabilities as at 31 December were payable as follows:

Consolidated financial statements2009 2008

Principal Interest Payments Principal Interest Payments(in thousand Baht)

Within one yearAfter one year but within five years Total

24,538

73,37497,912

5,593

7,90813,501

30,131

81,282111,413

73,467

77,399150,866

7,656

13,21920,875

81,123

90,618171,741

The currency denomination of interest-bearing liabilities as at 31 December was as follows:



(in thousand Baht)

THBUSDEUR Total

15,685,20415,861,7738,529,163

40,076,140

15,568,83717,599,2618,960,146

42,128,244

1,205,018535,199577,541

2,317,758

1,356,252560,200

-1,916,452

16. Trade accounts payableThe currency denomination of trade accounts payable as at 31 December was as follows:



(in thousand Baht)

THBUSDEUR GBPLTLTotal

2,519,8363,131,5233,165,223

82,732104,644

9,003,958

716,7343,083,5022,944,159

9,161109,545

6,863,101

- - - - -

-

- - - - -

-


2009 2008 2009 2008 (in thousand Baht)





17. Other current liabilities




Accrued operating expensesOther payablesAccrued initial publicoffering costsInterest payablePayable to Eastman Chemical Company OthersTotal

5

4

825,320381,073

213,269103,571

-247,674

1,770,907

666,246537,709

-335,231

709,89595,439

2,344,520

3,730-

213,2695,088

-168

222,255

400-

-10,051

-4

10,455

18. Share capital

AuthorisedAt 1 January- ordinary sharesReduction in par valuefrom Baht 10 to Baht 1Increase of new sharesIncrease of new sharesAt 31 December- ordinary shares- ordinary shares

Issued and paidAt 1 January- ordinary sharesReduction in par valuefrom Baht 10 to Baht 1Increase of new sharesAt 31 December- ordinary shares- ordinary shares

Par valueper share(in Baht)

10

1101

101

10

110

101

Number

335,154

3,351,544-

1,730,456

-5,082,000

335,154

3,351,544-

-3,351,544

Amount

3,351,544

--

1,730,456

-5,082,000

3,351,544

--

-3,351,544

2009

(thousand shares / thousand Baht)

Number

40,000

-295,154

-

335,154-

40,000

-295,154

335,154-

Amount

400,000

-2,951,544

-

3,351,544-

400,000

-2,951,544

3,351,544-

2008

The reduction in par value of the authorised share capital from Baht 10 to Baht 1 and the increase of authorised shares from 3,351,544 thousand shares (par value 1 Baht per share) to 5,082,000 thousand shares (par value 1 Baht per share) was approved in a shareholders’ meeting on 28 September 2009.

The increase in authorised share capital was approved in shareholders’ meetings held during 2008, as follows:





10 June 20082 September 200817 September 2008Total

Increase in authorised share capital

(in thousand shares)217,50058,36419,290

295,154

The issue of shares during the year ended 31 December 2008 resulted in the increase in balances in share capital and share premium as following:

Increase in authorised share capital

(in thousand shares)2,525,805

676,2174,025,1357,227,157

Shares issued in acquisition of IRPTAShares issued in additional investment in IPLSubscription monies receivedTotal

19. Additional paid-in capital and reservesShare premium

Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.

Revaluation surplus

Revaluation surplus recognised in equity relates to cumulative net changes in the surplus arising from the revaluation of machinery and equipment related to textile production. The revaluation surplus is not available for dividend distribution.

Currency translation changes

The currency transaction changes recognised in equity relate to foreign exchange differences arising from the translation of the financial statements of foreign operations to Thai Baht.

Differences arising from common control transactions

The differences arising from common control transactions represent the excess of the book values of certain subsidiaries over their cost as of the date of their acquisition and have been recorded as a reserve. It is non-distributable and will be retained until the respective subsidiaries are sold or otherwise disposed of.


2009 2008 2009 2008 (in thousand Baht)





Legal reserve

Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

20. Segment information

Segment information is presented in respect of the Group’s business and geographic segments based on the Group’s man-agement and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Business segments

The Group comprises the following main business segments:

Segment 1

Segment 2Segment 3

Manufacture and distribution of solid state polymerised chips, PET performs, closures and blown bottles (“PET”)Manufacture and distribution of purified terephthalic acid (“PTA”)Manufacture and distribution of fibers and yarns (“Fibers and yarns”)

Starting from 1 January 2009, management has decided to present three business segments compared to the four business segments previously reported. The “Polyester fibre & yarns” and “Wool yarns” business segments have been aggregated and reported as one segment under “Fibres & yarns”. In management’s view, these two business segments have similar production process and products and are under one management group, and furthermore, the wool yarns business segment is not considered sufficiently material to be reported separately. The 2008 comparative information has been disclosed accordingly.

Geographic segments

In presenting information on the basis of geographical segments, segment revenue is based on the geographic location of cus-tomers. Segment assets are based on the geographical location of the assets.

The following are the main geographical locations:

Segment 1Segment 2Segment 3Segment 4

ThailandNorth America

EuropeRest of the world


Indo

ram

a Ve

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es P

ublic

Com

pany

Lim

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and

its S

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ies

St

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of i

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31

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Con

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fina

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tem

ents

(

in th

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Bus

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2009

2

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200

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8

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2008

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9

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Una

lloca

ted

reve

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and

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Dep

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Net

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Una

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Tota

l exp

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s

44,4

64,8

39

4,18

0

115,

597

-

44,5

84,6

16

38,3

55,4

03

2,76

3,31

4

887,

738

-

-42

,006

,455

40,9

69,1

42

8,79

5

-

-

40,9

77,9

37

36,4

93,0

60

2,09

3,51

1

726,

585

335,

434

-39

,648

,590

45,98

0,655

2,265

440,3

11 -46

,423

,231

37,78

9,156

1,419

,143

1,773

,575 - -

40,9

81,8

74

14,73

2,136

1,641 - -

14,7

33,7

77

13,30

6,735

564,1

54

567,1

51

206,1

40 -14

,644

,180

12,18

0,920

22,49

2

4,083

-

12,2

07,4

95

11,11

9,397

764,8

54

420,6

19 -

-12

,304

,870

6,652

,811

15,05

2

-

-

6,66

7,86

3

5,754

,182

411,8

25

272,8

49

(31,9

83)

-

6,40

6,87

3

(22,6

32,18

8)(1

0,597

) - -(2

2,64

2,78

5)

(22,5

93,58

4)

(1,00

6) - - -(2

2,59

4,59

0)

(9,42

6,378

)(2

3,747

) - -(9

,450

,125

)

(9,14

6,428

)

(286

,470) - - -

(9,4

32,8

98)

79,99

4,226

18,34

0

559,9

9131

3,018

80,8

85,5

75

64,67

0,372

4,946

,305

3,081

,932 -

12,79

772

,711

,406

52,92

7,711

(a)

1,741 -

3,675

,445

56,6

04,8

97

46,40

7,549

2,783

,020

1,566

,585

509,5

9169

5,001

51,9

61,7

46

(a) T

his

incl

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amou

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rela

ted

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sub

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2008

.



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Con

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fina

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l sta

tem

ents

(

in th

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2009

2

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200

9

20

08

200

9

200

8

200

9

2008

200

9

2

008

PE

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T

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xex

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Inte

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exp

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Inco

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tax

expe

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item

s

Pro

fit (l

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afte

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Min

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inte

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s

Pro

fit (l

oss)

for t

heye

ar

2,57

8,16

152

6,25

031

4,55

5

-

1,73

7,35

6

-

1,73

7,35

6

1,32

9,34

769

2,01

4

3,80

3 -

633,

530 -

633,

530

5,44

1,35

786

4,76

1

236,

405 -

4,34

0,19

1 -

4,34

0,19

1

89,5

9756

0,45

131

,773

-

(502

,627

) -

(502

,627

)

(97,

375)

198,

161

2,96

1 -

(298

,497

) -

(298

,497

)

260,

990

206,

361

13,6

72

-

40,9

57-

40,9

57

(48,

195)

(44,

203) - -

(3,9

92) -

(3,9

92)

(17,

227)

(23,

747) - -

6,52

0 -

6,52

0

8,17

4,16

91,

544,

969

553,

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56,5

96

6,01

8,68

31,

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586

4,82

4,09

7

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seg-

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To P

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**In

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ated

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pro

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on

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s to

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ness

seg

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To P

ET

To F

iber

s &

Yar

ns

2009

200

8(in

thou

sand

Bah

t)

15,4

17,5

896,

692,

548

1,45

5,29

263

1,72

1

8,64

4,93

037

6,89

9

(294

,945

)(1

2,85

9)

4,64

3,15

11,

435,

079

49,2

4835

,774

3,12

3,05

046

6,75

4

2,65

6,29

6


Indo

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Com

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St

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(

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2009

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ets

445,

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4,77

1,18

8

18,6

16,7

51

-

23,8

33,6

80

14,6

14,9

38

-14

,614

,938

2,67

9,40

7

837,

195

50,5

43 77

284,

746

3,62

3,02

2

17,0

36,2

81

-

20,9

44,0

49

14,8

83,3

48

-14

,883

,348

4,10

6,19

3

687,

794

38,7

91

(552

)

772,

334

2,94

1,45

4

25,4

52,6

02-

29,1

66,3

90

18,5

20,6

12

-18

,520

,612

411,

648

1,74

3,34

3

30,2

32 206

765,

379

2,55

6,19

4

27,3

06,7

65-

30,6

28,3

38

21,4

37,9

57

-21

,437

,957

61,7

45

554,

038

13,1

13

(33)

47,0

231,

988,

552

5,43

5,96

6 -7,

471,

541

5,84

7,78

5 -5,

847,

785

712,

876

419,

875

744

762

101,

666

1,24

2,24

7

5,29

8,78

4 -6,

642,

697

4,77

8,33

1 -4,

778,

331

686,

564

272,

070

1,13

9

429

-(2

7,24

0) - -(2

7,24

0)

(1,2

24,9

54) -

(1,2

24,9

54) - - - -

-(2

,228

) - -(2

,228

)

(887

,844

) -(8

87,8

44) - - - -

1,26

5,09

89,

673,

954

49,5

05,3

1913

,815

,741

74,2

60,1

12

37,7

58,3

81

14,0

35,9

1651

,794

,297

3,80

3,93

1

3,00

0,41

3

81,5

19

1,04

5

1,15

1,79

17,

419,

235

49,6

41,8

3011

,555

,219

69,7

68,0

75

40,2

11,7

92

11,8

49,3

4152

,061

,133

4,85

5,85

3 (a

)

1,51

3,54

2

53,0

43

(156

)

(a) T

his

incl

udes

una

lloca

ted

amou

nts

rela

ted

to a

sub

sidi

ary

sold

dur

ing

2008

.





Geographic segments

21. Costs of sales

(in thousand Baht)



(in thousand Baht) Changes in inventories of finishedgoods and work in processRaw materials and consumables usedDepreciation and amortisationOthersTotal

(1,191,579)58,371,9992,995,5087,489,952

67,665,880

(515,318)40,996,8221,445,9166,250,841

48,178,261

-----

-----

22. Selling expenses Consolidated financial statements


(in thousand Baht) DistributionDepreciation and amortisationInsurance expenseTravelling expenseOthersTotal

3,865,42586,42441,40637,228

239,1694,269,652

2,403,33465,87121,65422,32240,019

2,553,200

------

------

23. Administrative expenses Consolidated financial statements


(in thousand Baht) Professional feesPersonnel expenseDepreciation and amortisationOthersTotal

164,912187,894

-299,167651,973

136,374158,30154,79816,801

366,274

10,311--

1,18511,496

5,972--

4666,438


Revenue from sale of goods Segment assets Capital expenditure

ThailandNorth AmericaEuropeRest of the worldTotal

2009

11,916,52412,437,63930,368,90625,271,15779,994,226

2008

6,063,55212,547,68325,500,3539,220,256

53,331,844

2009

43,799,12513,167,05617,293,931

-74,260,112

2008

41,265,70310,927,46617,574,906

-69,768,075

2009

1,430,0402,255,015

118,876-

3,803,931

2008

1,246,0433,539,386

70,424-

4,855,853

One subsidiary acquired in 2008 recorded depreciation and amortisation expense in administrative expenses during a period in which the subsidiary was not producing goods for sale.







(in thousand Baht)

24. Employee benefit expenses

ManagementWages and salariesContribution to defined contributionplans and social securityOthers

Other employeesWages and salariesContribution to defined contributionplans and social securityBonusStaff welfareOthers

Total

97,458

1,16325,280

123,901

1,666,987

81,540167,42775,840

317,0222,308,816

2,432,717

45,825

1,2365,983

53,044

1,090,549

68,13728,28044,099

142,2611,373,326

1,426,370

-

-1,3001,300

-

-----

1,300

-

---

-

-----

-

Provident funds

The defined contribution plans comprise provident funds established by a subsidiary of the Company for its Thai employees. Membership to the funds is on voluntary basis. Contributions are made monthly by the employees at the rate of 2% of their basic salaries and by the Company at the rate of 2% of the employees’ basic salaries. The provident funds are registered with the Min-istry of Finance as juristic entities and are managed by a licensed Fund Manager. Total expense recognised by the Thai entities for contribution plans for the year ended 31 December 2009 amounted to approximately Baht 0.6 million (2008: Baht 0.5 million).

Employee retirement schemes

A U.S. subsidiary has established a 401(k) plan that allows eligible employees to contribute up to 60% of their compensation, with the Company matching 50% of employee contributions up to 6% of their compensation. The plan also allows discretionary profit sharing contributions to be made by management. Total expense recognised for the plan for the year ended 31 December 2008 amounted to approximately USD 0.1 million (Baht 1.6 million) (2008: USD 0.1 million (Baht 1.7 million) for the year ended 31 December 2009.

Two subsidiaries in Europe have established defined benefit plans that provide pension benefits for their employees upon retire-ment. The plans entitle a retired employee to receive an annual payment equal to 1/60 of final salary for each year of employ-ment. Total expense recognised for the plan for the year ended 31 December 2009 amounted to EUR 1.4 million (Baht 64.9 million) (2008: EUR 0.4 million (Baht 18.6 million)).

One subsidiary in Europe has established defined contribution plan that provide pension benefits for its employees upon retire-ment. The benefits calculations are based on the annual salary. Total annual contribution by the employer to the plan is defined by the annual and risk premiums charged by theinsurance company. Total expense recognised for the plan for the year ended 31 December 2009 was GBP 0.3 million (Baht 15.5 million) (2008: GBP 0.3 million (Baht 15.8 million).


2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)

2009 2008 2009 2008 (in thousand Baht)





The following information below relates to the defined benefit plans operated by the two European subsidiaries:



(in thousand Baht)

(1) Total pension costCurrent service costInterest costTotal periodic pension cost

The expense is recognized in thefollowing line items in the statementof income:Cost of salesAdministrative expensesTotal

(2) Change in present value of definedbenefit obligationDefined benefit obligation at beginning of yearDefined benefit obligation assumedupon acquisition of subsidiaries(Note 4 (a)(ii))Current service costInterest costActuarial (gain) lossTotal defined benefit obligation at endof period

(3) Less fair value of pension plan assetsat end of year

(4) Liability recognized in thebalance sheet (5) Principal actuarial assumptions at endof period Discount rateExpected long-term rate of returnon plan assetsFuture salary increase

53,78311,20864,991

64,991-

64,991

51,612

119,56953,78311,208

(10,326)

225,846

(107,534)

(118,312)

5.20%

5.20%3.50%

17,3681,279

18,647

18,647-

18,647

-

28,340 17,368

1,2794,625

51,612

-

(51,612)

5.90%

5.90%3.50%

---

---

----

-

-

-

-

--

---

---

----

-

-

-

-

--





25. Finance costs Consolidated financial statements



Interest expense:Related parties Financial institutions

Capitalised as part of construction in progressNet

5

12

-1,714,6481,714,648

(113,116)1,601,532

7131,528,0581,528,771

(61,311)1,467,460

49,1287,436

56,564

-56,564

2,41518,20420,619

-20,619

26. Income tax expense Consolidated financial statements


(in thousand Baht)

Current tax expenseCurrent yearAdjustments for prior yearsTotal

523,93730,017

553,954

51,4411,200

52,641

33-

33

31-

31

The current tax expense in the consolidated statement of income is less than the amount determined by applying the Thai cor-poration tax rate to the accounting profit for the year, principally because a significant portion of the Group’s profit was derived from promoted activities (see Note 27) which are not subject to tax, and unutilised tax losses brought forward from the previous year have been utilised during the year to set-off against the current year’s tax charge.

Deferred income tax liabilities recorded in the accounts of subsidiaries located in jurisdictions outside Thailand and not included in the consolidated financial statements amounted to Baht 960.2 million as at 31 December 2009 (2008: Baht 998.9 million).

27. Promotional privilegesBy virtue of the provisions of the Industrial Investment Promotion Act B.E. 2520, the Company and certain subsidiaries incorporated in Thailand have been granted privileges by the Board of Investment at various times relating to their manufacturing of worsted wool yarn, wool top, Purified Terephthalic Acid (PTA), polyethylene terephthalate resin, PET preforms and closures and amorphous resin (“promoted operations”). The privileges granted include:

(a) exemption from payment of import duty on machinery approved by the Board of Investment;

(b) exemption from payment of income tax on net profit from promoted operations for a period of eight years from the date on which income is deemed to first derive from such operations;

(c) a 50% reduction in the normal income tax rate on the net profit derived from promoted operations for a period of five years, commencing from the expiry date in (b) above;

(d) a five-year carry forward period for losses for tax purposes from promoted operations during the period in (b) above;


2009 2008 2009 2008 (in thousand Baht)





(e) income exclusions and additional deductions in computing the taxable income for promoted operations during the period in (b) above;

(f) exemption from income tax on dividend paid to the shareholders from the profit of the promoted operation during the corporate income tax exemption period; and

(g) double deduction of the cost of transportation, electricity and water supply for corporate income tax purposes for a period of ten years, from the date on which income is deemed to first derive from promoted operations.

As promoted companies, the subsidiaries in Thailand must comply with certain terms and conditions prescribed in the promotional certificates.

Summary of revenue from promoted and non-promoted businesses:

Consolidated financial statements2009 2008

Export salesLocal salesTotal revenue

Promotedbusinesses

20,178,46019,159,41839,337,878

Non-promoted

businesses

11,257,40210,555,19521,812,597

Total (a)

31,435,86229,714,61361,150,475

(in thousand Baht)

Promotedbusinesses

6,012,093 9,461,644

15,473,737

Non-promoted

businesses

4,293,789 2,194,077 6,487,866

Total (a)

10,305,882 11,655,721 21,961,603

(a) excluding revenues from foreign subsidiaries and inter-company eliminations.

28. Basic earnings per share

The calculations of basic earnings per share for the years ended 31 December 2009 and 2008 were based on the profit for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding dur-ing the years (for 2009, after giving effect to the reduction in par value (Note 18)) as follows:



(in thousand Baht / thousand shares) Profit attributable to equity holdersof the Company (basic)Number of ordinary shares outstandingat 1 JanuaryEffect of shares issued on:9 July10 October17 October8 DecemberWeighted average number ofordinary shares outstanding (basic)

Earnings per share (basic) (in Baht)Par value per share (in Baht) (see note 18)

4,824,097

3,351,544

----

3,351,544

1.44

1

2,656,296

40,000

104,28013,1143,324

196

160,914

16.51

10

1,172,934

3,351,544

----

3,351,544

0.35

1

96,568

40,000

104,28013,1143,324

196

160,914

0.6010





29. Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes.

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an ac-ceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its cash flows. The Group is primarily exposed to interest rate risk from its borrowings (see Note 15).

The effective interest rates of loans to related parties as at 31 December and the periods in which the loans mature or reprice were as follows:

2008CurrentShort-term loans to related partyTotal

5.8212,800212,800

--

--

212,800212,800

Separate financial statementsEffective interest

rate(% per annum)

Within 1 year

After 1 year but within 5

yearsAfter 5 years Total

2.4-5.1

2009Non-currentLong-term loans to relatedpartiesTotal 2008Non-currentLong-term loans to relatedpartiesTotal

--

--

--

--

1,262,6281,262,628

911,023911,023

1,262,6281,262,628

911,023911,0235.6

(in thousand Baht)


Effective interest

rate(% per annum)

Within 1 year



(in thousand Baht)


2009 2008 2009 2008 (in thousand Baht / thousand shares)





The effective interest rates of loans from related parties as at 31 December and the periods in which the loans mature or reprice were as follows:


rate(% per annum)

Within 1 year



(in thousand Baht)

2008Non-currentLong-term loans from a related partyTotal

5.8 --

109,822109,822

--

109,822109,822

The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which those liabilities mature or re-price were as follows:


Effective interest

rate(% per annum)

Within 1 year



(in thousand Baht)

2009CurrentBank overdraftsShort-term loans from financial institutionsLong-term loans from financial institutionsFinance lease liabilitiesNon-currentLong-term loans from financial institutionsFinance lease liabilitiesTotal

5.2 to 8.2

2.0 to 5.2

2.0 to 5.92.7 to 6.2

2.0 to 5.92.7 to 6.2

24,776

9,979,671

4,643,39624,538

--

14,672,381

-

-

--

19,885,26473,374

19,958,638

-

-

--

5,445,121-

5,445,121

24,776

9,979,671

4,643,39624,538

25,330,38573,374

40,076,140

2008CurrentBank overdraftsShort-term loans from financial institutionsLong-term loans from financial institutionsFinance lease liabilitiesNon-currentLong-term loans from financial institutionsFinance lease liabilitiesTotal

5.0 to 7.2

2.0 to 7.5

2.0 to 7.85.0 to 7.5

2.0 to 7.85.0 to 7.5

21,866

11,183,283

3,264,92473,467

--

14,543,540

-

-

--

18,518,62377,399

18,596,022

-

-

--

8,988,682-

8,988,682

21,866

11,183,283

3,264,92473,467

27,507,30577,399

42,128,244






rate(% per annum)

Within 1 year



2009CurrentLong-term loans from financial institutionsNon-currentLong-term loans from financial institutionsTotal

2008CurrentShort-term loans fromfinancial institutions Long-term loans from financial institutionsNon-currentLong-term loans from financial institutionsTotal

3.4 to 5.1

3.4 to 5.1

nil

3.4 to 5.1

3.4 to 5.1

162,600

-162,600

565,543

45,870

-611,413

-

1,708,3481,708,348

-

-

613,580613,580

-

446,810446,810

-

-

581,637581,637

162,600

2,155,1582,317,758

565,543

45,870

1,195,2171,806,630

Foreign currency risk

The Group is exposed to foreign currency risk relating to purchases and sales which are denominated in foreign currencies. The Group primarily utilises forward exchange contracts with maturities of less than one year to hedge certain financial assets and liabilities denominated in foreign currencies. The forward exchange contracts entered into at balance sheet date also relate to anticipated purchases and sales, denominated in foreign currencies, for the subsequent period.

As at 31 December, the Group and the Company were exposed to foreign currency risk in respect of financial assets and li-abilities denominated in the following currencies:



(in thousand Baht / thousand shares)

United States DollarsCash and cash equivalentsOther investmentsTrade accounts receivableInterest-bearing liabilitiesTrade accounts payableGross balance sheet exposure

Not

678

1516

86,327347,837

4,864,721(15,861,773)(3,131,523)

(13,694,411)

178,694-

5,414,462(17,599,261)(3,083,502)

(15,089,607)

--

-(535,199)

-

(535,199)

--

-(560,200)

-

(560,200)








(in thousand Baht)

EuroCash and cash equivalentsOther investmentsTrade accounts receivableInterest-bearing liabilitiesTrade accounts payableGross balance sheet exposure

Pounds SterlingCash and cash equivalentsOther investmentsTrade accounts receivableTrade accounts payableGross balance sheet exposure

Lithuanian LitasCash and cash equivalentsOther investmentsTrade accounts receivableTrade accounts payableGross balance sheet exposure

678

1516

678

16

678

16

Note

772,491235,144

1,650,759(8,529,163)(3,165,223)

(9,035,992)

101,020-

814,796(82,732)

833,084

45,581-

93,810(104,644)

34,747

370,816215,923

1,285,388(8,960,146)(2,944,159)

(10,032,178)

15,82735,286

835,794(9,161)

877,746 10,063 5,811 21,366 (109,545)

(72,305)

---

(577,541) -

(577,541)

----

-

----

-

---

- -

-

----

-

----

-

The net fair value of forward exchange contracts at 31 December 2009 was Baht 1,275.5 million (net asset transactions) (2008: Baht 1,076.6 million).

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Group as and when they fall due.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the Group’s customer base, management does not anticipate material losses from its debt collection.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

As at 31 December 2009, current liabilities exceeded current assets by Baht 2,219.4 million in the consolidated financial statements (2008: Baht 4,943.8 million) and by Baht 596.6 million in the separate financial statements (2008: Baht 588.8 million). Management views that working capital positions in 2009 and 2008 are due to a significant degree to the financing of the various acquisitions in 2008 (principally, property plant and equipment and other long term assets - Note 4), by short and





medium term debt. Management believes that the Group and parent company will continue to experience improved cash flows in 2010 from the synergies related to the integration of the acquired companies into the Group, from utilization of the proceeds of the initial public offering (see Note 32), from the operations of the acquired companies and from the completion of construction of a significant factory by a subsidiary and commencement of its operations at full capacity in the early 2010. Management uses available lines of credit (Baht 13,710 million as at 31 December 2009) for re-financings, as necessary.

Fair values

The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

The fair value of trade and other accounts receivables is taken to approximate the carrying value.

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

The fair value of forward exchange contracts is based on their listed market prices, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

As at 31 December 2009 and 2008, the financial assets and liabilities have fair values that do not differ significantly from the amounts recorded in the balance sheet.

Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as result from operating activities divided by total shareholders’ equity, excluding minority interests. The Board of Directors also monitors the level of dividends to ordinary shareholders.

30. Commitments with non-related partiesConsolidated

financial statements 2009 2008

(in million Baht)

Capital commitmentsContracted but not provided forBuildings and other constructionsMachinery and equipmentTotal

34854

402

1,15153

1,204


2009 2008 2009 2008 (in thousand Baht)





Consolidatedfinancial statements

2009 2008(in million Baht)

Non-cancellable operating lease commitmentsWithin one yearAfter one year but within five yearsAfter five yearsTotal

Other commitmentsSold receivables with recoursePurchase orders and letters of creditsfor goods and suppliesService commitmentForward and swap contractsBank guaranteesBills discountedTotal

126397508

1,031

-

54311

1,2851,3961,4264,661

138352372862

12

14,249360

1,9031,448

37318,345

Other commitments

Certain subsidiaries have executed long-term purchase agreements committing them to purchase agreed quantities of raw ma-terials for periods up to three years, at prices linked to the market prices of the underlying commodities.

31. Contingent liabilitiesOn 18 December 2009, Eastman Chemical Company ("Eastman") filed a complaint in the Delaware District Court, USA against four subsidiaries of the Company alleging the infringement of certain patents owned by Eastman, a breach of the technology license agreement between Eastman and the defendants and the misappropriation of Eastman’s confidential and proprietary trade secret information. No damages were specified.

The defendants are defending themselves against the claims. The subsidiaries have appointed legal counsel to defend their interests. At this time, the outcome of the proceedings or the total amount of possible damages, if any, cannot be reasonably estimated. Management believes that the outcome of the proceedings will not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

32. Events after the reporting perioda) Pursuant to the shareholding restructuring plan for the exchange of shares in IRP for shares in the Company (see Note 1), the Company successfully concluded the tender offer on 1 February 2010. The tender offer resulted in the increase in the combined direct and indirect shareholding of the Company in IRP from 69.29% to 99.08%. The shares of IRP were delisted on 5 February 2010 from the Stock Exchange of Thailand.

b) On 1 February 2010, the Company received the proceeds for the initial public offering of ordinary shares of 400 million shares at an issue price of Baht 10.20 per share. The issued and paid-up capital of the Company increased from Baht 3,351,543,910 to Baht 4,334,271,047 as a result of





the initial public offering and the exchange offer (described in paragraph (a)). The costs of the initial public offering have been deferred (see Note 10) and will be deducted from share premium.

On 3 February 2010, the Company registered the increase in issued and paid-up capital with the Ministry of Commerce, Thai-land and the Securities and Exchange of Thailand approved the listing and trading of the shares of the Company. The first trading day of the shares was 5 February 2010.

c) On 25 February 2010, the Board of Directors proposed for the dividend payment of Baht 0.33 per share, amounting to Baht 1,430.3 million. This dividend payment is subject to the approval by the shareholders of the Company.

33. Thai Accounting Standards (TAS) not yet adopted

The Group has not adopted the following revised TAS that has been issued as of the reporting date but are not yet effective. The revised TAS are anticipated to become effective for annual financial periods beginning on or after 1 January in the year indicated.

TAS Topic Year effectiveTAS 24 (revised 2009) Related Party Disclosures (formerly TAS 47) 2011

Management is presently considering the potential impact of adopting and initial application of this revised TAS on the consolidated and separate financial statements.

34. Reclassification of accounts

Certain accounts in the 2008 financial statements have been reclassified to conform to the presentation in the 2009 financial statements, as follow:

Selling expenses, administrative expenses and management benefits expenses are now disaggregated.

Comparative figures have been reclassified accordingly.

The reclassification has been made to comply with the classification set out in the Pronouncement of the Department of Business Development Re: Determination of items in the financial statements B.E. 2552 dated 30 January 2009.


รายงานประจำาปี 2552 145

ivl : annual report 2009

Documents

annual report

minority baht

people involvement

growth continuessales

share baht ebitda baht

key focus

key drivers

key factor