Message to the Shareholders

Dear Shareholders,

Indonesia‟s was among a few countries leading ASEAN region‟s economic recovery by consistently reaching positive economic growth for the past two years. In the midst of financial crisis, Indonesia was able to grow 4.5% in 2009, and in 2010 the economy has expanded even higher by 6.1% growth. In the year 2010, Indonesian economy is in the stage of transformation to a new era, shifting from recovery phase towards a sustainable growth. The structure of growth is now relatively more broad-based. Growth occurred across all economic sectors, with 13.5% in transport and communication followed by trade & hotel at 8.7%, Construction sector at 7% services sector at 6% financial sector, real estate and business services at 5.7%, electricity, gas and water sector at 5.3% all largely driven by household consumption, Investments and export growth. The non-oil sector grew at 6.6%. Per capita GDP grew 13%, from Rp 23.9 million (US$2,349.6) to Rp 27.0 million (US$3,004.9). On the other hand the CPI inflation rate for 2010 increased to 6.96%, predominantly pushed by the high prices of food prices at the end of the year, which was a global phenomenon. On the international trade front, total exports in 2010 increased to US$157.78 billion, compared to US$ 116.51 billion in 2009, registering a growth of 35% over 2009. Export of oil and gas also increased by 47% over 2009 to US$ 28.05 billion, mainly due to increase in international prices of crude oil.

Indonesia‟s balance of payments reached a surplus of around USD 30 billion in 2010. International reserves also posted an increase as it reached USD 96.2 billion equivalents to 7.1 months of import and the repayment of short-term government debts due. A solid balance of payments and increased international reserves has put Indonesia‟s external liquidity position on a stronger footing. Stronger performance and resilience of the external sector was among the reason behind the recent improvement of our sovereign ratings. Surplus balance of payments was also reflected by a relatively stable rupiah. In 2010, rupiah strengthened 4.2%, in a range that is quite ideal and consistent with the macroeconomic and business environment. Bank Indonesia has maintained the BI rate 6.5% since 2009, but is projected to increase this to 9% during 2011. The strengthening Rupiah and higher interest rates will help mitigate inflationary pressures, particularly in foodstuffs.

Polyester Industry: Global and Domestic Trends

The global economic recoveries led by Asian countries, plus the gradual but continuing recovery of the U.S favorably impacted all segments of polyester markets in 2010. Textile and apparel consumption increased as consumers‟ retail spending and discretionary income improved along with the rise in per capita incomes, having a positive impact on global polymer consumption and production. Thus 2010 was a year of strong recovery for the polyester fiber and yarn industry, with a continuing surge in raw material prices coinciding with strong FG prices and upward-trend in polymer demand. The polyester industry worldwide experienced an additional boost with surging cotton prices, thus demand for man-made fiber market share achieved record levels. Global polymer production in 2010 reached 51.22 million tons, an increase of 5.43 million tons or 12% over 2009. In 2010, global polyester staple fiber production was estimated to be 13.3 million tons, as compared to 12.6 million tons, in 2009, and filament yarn production was estimated to be 22.0 million tons, as compared to 20.2 million tons in 2009. However, the growth projection of polyester fiber is cautiously optimistic and estimated to be at an average of slightly below 6%, to reach 45 million tons by 2014.

Raw material prices have been highly volatile for the past 18 months, with the oil prices touching all time peaks in 2008 and dropping as low as US$ 40 per barrel in first quarter of 2009. Prices remained fairly stable in the subsequent periods and are estimated to be around USD 85 – USD 90 during the next 3 years, as per PCI forecast. PX and MEG prices, which were US$800/MT and US$650/MT at the beginning of the year, closed at US$ 1600/MT and US$ 1400/MT, respectively, by year end. Following upon gradual economic recoveries worldwide, plus the commissioning of new capacities both for PX and MEG, RM prices are expected to settle at $1100/MT and $1200MT, respectively. Both commodities remain in fair supply/demand balance, and no anomalies in this regard are anticipated for the year.

Textile exports from Indonesia surged in 2010 to US$11.32 billion as compared to US$9.34 billion in 2009, with the increase mainly due to both price and volume increases. Domestic markets remained strong in 2010, despite fluctuations in raw material prices.

Company Performance

The Company continued to deliver strong performance in terms of profitability, productivity, market share, and operational efficiencies. With the continued working capital support from its majority secured creditors, the Company was able to achieve sales of Rp 4.455 trillion (US$489 million) as compared to Rp 3.511 trillion (US$ 339 million) in 2009, registering a growth of 44%. The increase in sales revenue is mainly due to higher volumes and increased selling prices, driven by strong demand for all polyester products in the market. Profitability more than doubled (over 2009) with an EBITDA of US$ 68.2 million, primarily contributed by significant cost advantages in raw material procurement and contract prices, coupled with improved contribution margins for all products. The Company was able to increase domestic market shares for staple fiber by increasing its volume by 18%. The Company also was able to take advantage of strong demand and proximity to the domestic market by optimizing its domestic allocation.

The Company has embarked on a Capex program focusing on increasing the volume of specialty and value added products, energy savings, improving efficiency, and the productivity of the plants, all aimed to strengthen its leadership position in the market and enhance the Company‟s competitiveness in the changing business environment. The Capex plan also included installation of waste recycling plant and application of greener technologies in manufacturing, enabling recycling of all its waste to convert them into marketable products for "green Label" usage. All these projects are nearing completion and expected to go on stream during 2011. The Company had incurred a capital expenditure of US$ 5.00 million with a financial assistance from its majority creditors.

The independent Accountants have expressed a qualified opinion on the financials of the Company for the year ended 31st December 2010. This was due mainly to the inadequate provision of allowances for doubtful accounts on trade receivables and other receivables from related parties and the nonavailability of confirmation of balances of its subsidiary. The Company will address the provision for allowances on trade and other receivables from related parties once the secured debt restructuring of the Company is completed.

Outlook

The Indonesian economy is predicted to grow at 6.5% or more in 2011 and 2012, supported by the investments and solid performance by external sectors in terms of more diversified export growth. There also will be serious challenges confronting 2011 in terms of inadequate infrastructure and the need for improvement in the investment climate. Stronger economic growth in 2011 is expected to be accompanied with rising inflationary pressure due to issues in market structure, especially related food commodities, problems in distribution, electricity and gas price hikes, and the dynamics of international pricing. The hike in electricity rates of 20% announced by PLN during 3rd quarter 2010, and the expected increase in gas prices by PGN in the coming year will have a cascading effect on the production costs. The strengthening of Indonesian Rupiah against US dollar in the near term will also have an adverse impact on our IDR denominated costs. The Company has, however, taken a series of cost-saving initiatives, especially in energy savings areas, to offset these cost increases.

With all the Capex projects initiated in 2010 are slated to go on stream in 2011, the benefits/savings of the projects will accrue to the Company effective 2nd semester of 2011. The Company will continue with its strategic capex investment proposals planned for the next three years at a capital outlay of US$50 million. These projects, including expansion of fiber capacity by 54,000 MT per annum, are strategically important to strengthen its leadership position, to move from highly competitive basic products to value added/specialty products thereby gaining entry into high growth and niche segments such as automotive, hygiene and healthcare, technical textiles and non-woven. The Company proposes to approach its existing financial creditors, Banks and institutions for short term borrowings to meet its Capex investments.

PX supply has been balanced-to-tight throughout 2010 and is expected to get long from 2nd half of 2011 onwards subject to successful start-ups of the two new plants in China and Korea. PX demand / supply position in Indonesia would be influenced by the ability of the domestic producers to be able to run their plant throughout the year.

The Company continues its dialogue with other secured creditors to find a suitable solution for its secured debt restructuring by the end of 2011. Meanwhile, the Company is continuing its efforts to secure replacement financing for its working capital requirements, which will facilitate optimizing operating rates, mitigate the impact of raw material fluctuations, sustain its profitability, and thereby provide adequate internal resources for high priority capex projects. The completion of the secured debt restructure will also enable a "quasi-reorganization", whereby adjustments and write downs of some of its liabilities will improve the Balance Sheet. This, in turn, will allow for a more conventional bank financing for its working capital needs. All of these efforts will improve substantially the performance of the Company, and to reposition it to the forefront of the polyester industry worldwide.

We would like to take this opportunity to express our sincere gratitude to our Shareholders, Customers, Suppliers, Bankers, and Employees who continue to support the Company during this crucial stage of restructuring and reemergence as a prominent leader in the manufacture of high quality polyester products.

V. Ravi Shankar

President Director