2. Risk Factors and Risk Management

1.  We operate in highly competitive industries and actions of our
    competitors could impact our profitability and market share

The industries in which we operate are characterized by high levels of
price and other competition. 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
competitive 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 demand 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 which we do not
possess.

2.2 The continuous demand growth 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 which may lead to downward
margin pressure.

2.3 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.

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 fully recover increases in the
cost of raw materials due to contractual arrangements or to weaknesses
in demand for, or oversupply of, our products.

However, the Company intends to acquire its main raw material, PX,
mainly by entering into supply agreements with suppliers. The Company is
able to secure volume and purchases at monthly market prices for ability
to pass through prices to customers. In year 2011 the Company entered
into supply agreements for 94% of its total PX requirements. The balance
was purchased from spot markets at market prices.

2.4 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
degree, 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 by reason of 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.

5.  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 production 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.

However, the company has insurance policies that cover damage to
inventories, property, plant and equipment and loss from business
interruption caused by accidents and natural disasters including floods
for its business. The assets and business are fully covered through
insurance policy for claims for damages. In addition, the company has
geographical diversification to mitigate the risk of disruption from
natural disasters or unexpected events which may impact one plant. The
company has multiple plants in each region to serve its customers.

6.  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.

2.7 Significant capital investments including future development of new
facilities have been, and may in the future continue 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 upgrade 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 produced 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.

2.8 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.

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, our TPT
Petrochemicals PTA facility, our Indorama PET Nigeria Limited, our
Guangdong IVL PET Polymer Company Limited and our Indorama Ventures
Poland Sp.z.o.o. 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.

2.9 Exchange rate and/or interest rate fluctuations may have a
significant adverse impact on our business, financial condition, results
of operations and prospects

As a result of the global nature of our business, changes in foreign
currency rates could have an adverse impact on our business, financial
condition, results of operations and prospects. Currency fluctuations
affect us because of mismatches between the currencies in which
operating costs are incurred and those in which revenues are received.
We sell products that are typically priced by reference to prices in
U.S. dollars or Euros, while a portion of operating costs are incurred
in local currencies, including the Baht, Pound Sterling pound,
Lithuanian litas, Mexican Peso, Chinese Yuan and Indonesia Rupiah.

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 overseas subsidiaries report their results of
operations. Overseas subsidiaries represent around 48% and 68% of
consolidated sales in 2010 and 2011.

In order to minimize currency risks, our operating subsidiaries usually
borrow in the principle currency. At the end of December 31, 2011, the
currency exposure for long term loans is 66% in Baht, 23% in US dollars,
10% in Euros and 1% in others. Generally, the long term loans are
borrowed on floating interest rates and are linked to the benchmark
interest rates for each currency. The floating interest rates are
impacted by macro-economic conditions and the monetary policy of each
region. However, the company has alleviated the risk by contracting a
fixed interest rate and the issuance of debentures.

2.10 Litigation

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.

Eastman requested the court to, among other things, award compensatory,
punitive and/or exemplary damages in favor of Eastman, including
reasonable royalties, enjoin AlphaPet from further infringement of
various patents, enjoin the defendants from unauthorized use of
Eastman’s confidential, proprietary and trade secret information,
including injunctive relief, and award interest, costs and attorney’s
fees. The complaint filed on December 18, 2009 does not request for
pre-trial temporary injunctive relief. On March 12, 2010, AlphaPet, IRP
Rotterdam, IRP Workington, IRH Rotterdam and Indorama Polymers Public
Company Limited submitted a motion to dismiss due to Eastman’s failure
to state a breach of contract and trade secret claim and due to a lack
of personal jurisdiction over Indorama Polymers Public Company Limited.
On May 19, 2010 Eastman opposed defendants’ motion to dismiss and
additionally submitted a motion to compel personal jurisdictional
discovery. On November 4, 2011, the court granted in part the motion to
dismiss due to Eastman’s failure to state a breach of contract and trade
secret claim and granted in part the motion to compel personal
jurisdiction discovery.

The AlphaPet PET facility uses technology called melt-to-resin that was
licensed from Uhde Inventa Fischer AG. AlphaPet contracted with Uhde
Inventa Fischer AG to oversee construction of the AlphaPet PET facility
and provide design services and equipment.

In January 2011, DAK Americas LLC (“DAK”) acquired Eastman and Grupo
Petromex, S.A. DE C.V. (“Petromex”) acquired the intellectual property
on technology of Eastman, with DAK as the exclusive licensee. On
February 18, 2011, Eastman filed a motion to substitute DAK and Petromex
as plaintiffs, but AlphaPet and the European Defendants opposed the
motion. On June 1, 2011, Eastman requested a joint status and scheduling
conference with Eastman, DAK, Petromex, AlphaPet and European
Defendants.

As a result of DAK’s and Petromex’s acquisition mentioned above, DAK and
Petromex filed another complaint against AlphaPet in the Delaware
District Court on August 10, 2011, on the patent infringement ground,
claiming that AlphaPet has infringed certain patents by making, using,
selling and offering for sale products or composition in the polyester
field. DAK and Petromex requested the court to, among other things,
grant an injunction against continued infringement, award damages, costs
and attorney fees. On December 29, 2011, Eastman’s case and the case of
DAK and Petromex were consolidated.

We believe that all of the claims of Eastman, DAK and Petromex are
without merit. However, we cannot predict when these legal proceedings
will be completed and we cannot assure you that the Delaware District
Court will dismiss the claims or rule in our favor. The Delaware
District Court could grant temporary or permanent injunctive relief
against us (which could result in the cessation of operations at the
AlphaPet PET facility), deliver a ruling in favor of Eastman, DAK and/or
Petromex and/or award substantial monetary damages against us and/or
impose royalties. In addition, if the court were to find that the
European Defendants had materially breached the Technology License
Agreement, Eastman may be able to terminate the agreement and all
licenses granted thereunder. We may also incur significant costs and
expenses as a result of these legal proceedings.

If the Technology License Agreement were to be terminated by Eastman, we
believe that the facilities of the European Defendants are able to use
alternative conventional technologies for relatively low cost and can be
implemented with minimal or no disruption to our operations.

2.11 Indorama Petrochem PTA Facility may have a material adverse effect
on our business

Lawsuit regarding improvement of project to increase production
efficiency and improve the air pollution treatment system

On June 19, 2009, the Stop Global Warming Association and a number of
other people living in Map Ta Phut, Ban Chang and Muang District, Rayong
Province (the “Claimants”) filed a lawsuit in the Thai Central
Administrative Court (the “CAC”) against various Thai governmental
entities and Ministers (the “Respondents”). This lawsuit requests the
CAC to render a judgment ordering the Respondents to revoke the
environmental impact assessment reports (the “EIA Report”) and to revoke
their approvals of projects or activities required to prepare the EIA
Report that are located in Map Ta Phut, Ban Chang and the surrounding
area in Rayong Province, Thailand. The lawsuit alleges that 76 projects
in such areas may cause serious impact on the community with regard to
the quality of environment, natural resources and health. One of the
projects named in the lawsuit is the improvement of project to increase
production efficiency and improve the air pollution treatement system of
Indorama Petrochem PTA facility, which was approved by the Minister of
Industry.

On September 2, 2010, the CAC issued the judgment revoking the
permission granted to the projects or activities which may cause serious
impact on the community with regard to the quality of environment,
natural resources and health and which have not completely complied with
the provision of Paragraph two of Section 76 of the Constitution.
According to the judgment, the project of Indorama Petrochem is not
classified as a project for which permission to operate the projects is
revoked.

However, on October 1, 2010, the Claimants filed an appeal to the
Supreme Administrative Court (the “SAC”) requesting the SAC to reverse
the judgment of the CAC and not to rely on the Notification of the
Ministry of Natural Resources and Environment, and to rule that the
Respondents must revoke the environment impact assessment reports and
permission granted to the projects or activities which have been
approved or obtained from August 24, 2007 onwards until the study and
assessment of impact on the quality of environment and health has been
completed as required by the Constitution. On December 7, 2010, the
Respondents submitted the statement of defense against the appeal of the
Claimants. At present, the SAC has not yet issued the judgment on this
case.

Lawsuit regarding improvement of the projct to improve the reverse
osmosis (RO) system

On March 10, 2010, the Claimants filed a lawsuit in the CAC against the
Respondents. This lawsuit requests the CAC to render a judgment ordering
the Respondents to revoke the EIA Report and to revoke their approvals
of projects or activities required to prepare the EIA Report that are
located in Map Ta Phut, Ban Chang and the surrounding area in Rayong
Province, Thailand. The lawsuit alleges that 9 projects in such areas
may cause serious impact on the community with regard to the quality of
environment, natural resources and health. The Claimants also requested
that the CAC suspend any current activities of such projects, activities
or operations of applicants or owners because they may have breached
relevant procedures specified under the Constitution and other relevant
laws, including the commissioning of a HIA Report, the holding of a
public hearing and the hearing of opinions from independent
environmental organizations, prior to operating such projects or
activities. One of the projects named in the lawsuit is the improvement
of the project to improve the reverse osmosis (RO) system of Indorama
Petrochem PTA facility, which was approved by the Minister of Industry.

On February 28, 2011, the CAC issued an order dismissing the petition
for an injunction of the Claimants on the grounds that the facts claimed
by the Claimants are not sufficient to issue a court injunction and
there is no evidence to prove that the Claimants will be damaged by the
operation of the projects. At present, the CAC has not yet issued the
judgment on this case.

However, we cannot assure you whether the CAC or SAC, in each case,
would not issue the judgment revoking the permission granted to the
project of PTA facility. Those revoking will have a material adverse
effect on business, financial position, result of operation and business
opportunities.

2.12 Changes in laws and regulations relating to beverage containers and
packaging could reduce demand for such end use products

Legal requirements have been enacted in various jurisdictions in the
United States and elsewhere requiring that deposits or certain ecotaxes
or fees be charged for the sale, marketing and use of certain
nonrefillable beverage containers. Other proposals relating to
additional beverage container deposits, recycling, ecotax 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 legislation 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 impacted the demand
for PX, PTA and PET resin. PET can be recycled, IVL is making
investments in PET recycling projects in the USA and Thailand at its
existing sites.

2.13 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 assurance 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.

2.14 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 experience 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 operations 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 operations and their contributions to
our overall financial performance. Similarly, events beyond our control,
such as political instability or social unrest, could impact consumer
demand in general and increase volatility in price of raw materials and
other costs.

2.15 Our business depends, in part, on our informal relationships with
other Indorama group entities in Indonesia and India

We are a part of an informal Indorama Group, which consists of three
independently managed associate groups, namely ourselves, the S.P. Lohia
Group Indonesia and the O.P. Lohia Group India. The Indorama Group was
founded by Mr. M.L. Lohia in 1976 in Indonesia, and each of the groups
is currently managed by one of Mr. M.L. Lohia’s sons.

The Indorama name does not belong to us, and we have a non-exclusive
license for its use pursuant to a License Agreement with Lohia Global
Holdings Limited, a company controlled by Mr. M.L. Lohia. IVL paid Baht
45 million on a consolidated basis for year 2010 and Baht 71 million on
a consolidated basis for year 2011 to Lohia Global Holdings Limited for
the use of Indorama name under the agreement. The S.P. Lohia Group and
the O.P. Lohia Group also use the Indorama name. We do not control how
the S.P. Lohia Group and the O.P. Lohia Group use the Indorama name and
cannot assure you that their actions will not adversely impact the
reputation associated with the Indorama name.

2.16 The Company is a holding company and is dependent on the receipt of
dividends to make dividend payments on our shares

As a holding company, the Company is dependent on the receipt of
dividends from its subsidiaries and associated companies, the payment of
which will depend on their future financial performance, which in turn
depends on successfully implementing their strategies and on financial,
competitive, regulatory, technical and other factors, general economic
conditions, demand and selling prices for their products and other
factors specific to their respective industries or specific projects,
many of which are beyond our control.

The subsidiaries have dividend policies paid not over 80% of net profit
after tax and legal reserve. However, the board of those subsidiaries
will approve dividend paid from time to time. By considering some
factors i.e. cash reserved for loan repayment, expansion investment or
support the cash flow of the company in case of impact by market
condition change. In the period ended December 31, 2010 and 2011, IVL
company only received dividend income of Baht 3,496.7 million and Baht
7,046.8 million respectively from its direct subsidiaries. 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 with respect to the shares, our
ability to pay dividends in the future will depend upon a decision of
the Board of Directors and/or the approval of the shareholders at a
general meeting, our results of operations, cashflows, financial
condition, contractual restrictions and restrictions imposed by
applicable law and other factors the Board of Directors deems relevant.