CLARIANT LTD (a Swiss stock corporation incorporated with limited liability under the laws of Switzerland)

Transcription

1 CLARIANT FINANCE (LUXEMBOURG) S.A. (incorporated as a société anonyme under the laws of The Grand Duchy of Luxembourg registered with the Luxembourg Register of Commerce and Companies under No. B114770) 600,000, per cent. Guaranteed Notes due 2013 guaranteed by XIII 4.1 XIII 4.2 CLARIANT LTD (a Swiss stock corporation incorporated with limited liability under the laws of Switzerland) The issue price of the 600,000, per cent. Guaranteed Notes due 2013 (the Notes ) of Clariant Finance (Luxembourg) S.A. (the Issuer ) is per cent. of their principal amount. XIII 4.5 Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 5 April The Notes are subject to redemption in whole at their principal amount at the option of the Issuer at any time in the event of certain changes affecting taxation in Luxembourg or Switzerland. In addition, the holder of a Note may under certain circumstances, by the exercise of the relevant option, require the Issuer to redeem or repurchase such Note at the Put Amount (as defined in Condition 5(c)) upon the occurrence of certain change of control events relating to the Guarantor as set out in Condition 5(c). See Terms and Conditions of the Notes - Redemption and Purchase. The Notes will bear interest from 6 April 2006 at the rate of per cent. per annum payable annually in arrear on 5 April in each year, commencing on 5 April 2007, which first interest payment will be in respect of the period from (and including) 6 April 2006 to (but excluding) 5 April 2007 (a short first coupon), subject to adjustment if any such day is not a business day. Payments on the Notes will be made in euro without deduction for or on account of taxes imposed or levied by Luxembourg or Switzerland to the extent described under Terms and Conditions of the Notes - Taxation. Clariant Ltd (the Guarantor or the Company ) will unconditionally and irrevocably guarantee the due and punctual payment of all amounts at any time becoming due and payable in respect of the Notes (the Guarantee ). This Prospectus has been approved by the United Kingdom Financial Services Authority (the FSA ), which is the United Kingdom competent authority for the purposes of Directive 2003/71/EC (the Prospectus Directive ) and relevant implementing measures in the United Kingdom, as a prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in the United Kingdom for the purpose of giving information with regard to the issue of the Notes. Applications have been made to admit the Notes to listing on the Official List of the FSA and to trading on the gilt edged and fixed interest market of the London Stock Exchange plc (the London Stock Exchange ). The London Stock Exchange is a regulated market for the purposes of Directive 93/22/EC. See Risk Factors for a discussion of certain factors that should be considered in connection with an investment in the Notes. The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act ) and are subject to United States tax law requirements. The Notes are being offered outside the United States by the Managers (as defined in Subscription and Sale ) in accordance with Regulation S under the Securities Act ( Regulation S ), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes will be in bearer form and in the denominations of 50,000 and, for so long as the Notes are represented by a Global Note (as defined below) and Euroclear Bank S.A./N.V., as operator of the Euroclear System ( Euroclear ) and Clearstream Banking, société anonyme, Luxembourg ( Clearstream, Luxembourg ) (or other relevant clearing system) allow, in denominations of 1,000 in excess of 50,000. The Notes will initially be in the form of a temporary global note (the Temporary Global Note ), without interest coupons, which will be deposited on or around 6 April 2006 (the Closing Date ) with a common depositary for Euroclear and Clearstream, Luxembourg. The Temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent global note (the Permanent Global Note, and together with the Temporary Global Note, each a Global Note ), without interest coupons, not earlier than 40 days after the Closing Date upon certification as to non-u.s. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non-u.s. beneficial ownership. The Permanent Global Note will be exchangeable in certain limited circumstances in whole, but not in part, for Notes in definitive form in principal amounts equal to 50,000 each and with interest coupons attached. See Summary of Provisions Relating to the Notes in Global Form. Joint Lead Managers ABN AMRO CITIGROUP UBS INVESTMENT BANK Co Managers Banco Bilbao Vizcaya Argentaria, S.A. Commerzbank Corporates & Markets Dresdner Kleinwort Waserstein HSBC Landesbank Baden-Württemberg Helaba 4 April 2006 XIII 4.8 XIII 4.13 VI 1 VI 2 XIII 5.1 XIII 4.4

2 Each of the Issuer and the Guarantor (whose registered offices are set out on the back page of this Prospectus) accepts responsibility for the information contained in this Prospectus. The Issuer and the Guarantor declare that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect its import. Each of the Issuer and the Guarantor has confirmed to the Managers named under Subscription and Sale below (the Managers ) that this Prospectus contains all information regarding the Issuer, the Guarantor and the Notes which is (in the context of the issue of the Notes) material (including all information in relation to the Guarantor as is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, prospects of the Guarantor and of the rights attaching to the Notes); such information is true and accurate in all material respects and is not misleading in any material respect; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer or (as the case may be) the Guarantor are honestly held or made and are not misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in such context) not misleading in any material respect; and all proper enquiries have been made to ascertain and to verify the foregoing. No person has been authorised to give any information or to make any representation not contained in or not consistent with this Prospectus or any other document entered into in relation to the issue of the Notes or any information supplied by the Issuer or the Guarantor or such other information as is in the public domain and, if given or made, such information or representation should not be relied upon as having been authorised by the Issuer, the Guarantor or any Manager. None of the Managers has separately verified the information contained in this Prospectus. Accordingly, no representation or warranty is made or implied by the Managers or any of their respective affiliates, and neither the Managers nor any of their respective affiliates makes any representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Prospectus. Each person receiving this Prospectus acknowledges that such person has not relied on any of the Managers in connection with its investigation of the accuracy of such information or its investment decision and each person must rely on its own examination of the Issuer and the Guarantor and the merits and risks involved in investing in the Notes. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall, in any circumstances, create any implication that the information contained in this Prospectus is true subsequent to the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or the Guarantor since the date thereof or, if later, the date upon which this Prospectus has been most recently amended or supplemented or that any other information supplied in connection with the issue of the Notes is correct at any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same. This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, the Notes and should not be considered as a recommendation by the Issuer, the Guarantor, the Managers or any of them that any recipient of this Prospectus should subscribe for or purchase any Notes. The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer, the Guarantor and the Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see Subscription and Sale. In particular, neither the Notes nor the Guarantee have been or will be registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons. In this Prospectus, unless otherwise specified, references to a Member State are references to a Member State of the European Economic Area, references to EUR, euro or are to the single currency IX 1.1 IX 1.2 XIII 1.1 XIII 1.2 V1.3 ii

3 introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended and references to CHF or Swiss franc are to Swiss francs. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. Market information and other statements presented in this Prospectus regarding the position of the Guarantor relative to its competitors is based on the Guarantor s good faith belief. These estimates are based upon the Guarantor s internal market research, and unpublished market research carried out on behalf of the Guarantor. As far as the Issuer and the Guarantor are aware and are able to ascertain, no facts have been omitted which would render the information inaccurate or misleading. In connection with the issue of the Notes, UBS Limited (the Stabilising Manager (or persons acting on behalf of the Stabilising Manager)) may over allot Notes (provided that the aggregate principal amount of the Notes allotted does not exceed 105 per cent. of the aggregate principal amount of the Notes) or effect transactions with a view to supporting the price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. IX iii

4 CONTENTS Page Risk Factors... 1 Overview Of The Offering Terms And Conditions Of The Notes Summary Of Provisions Relating To The Notes In Global Form Use Of Proceeds Description Of The Issuer Page Taxation Subscription And Sale General Information Narrative Of Differences Of Accounting Principles Index To Financial Statements And Auditors Reports Description Of The Guarantor iv

5 RISK FACTORS An investment in the Notes involves certain risks. In addition to the other information in this Prospectus, prospective investors should carefully consider, in light of their own financial circumstances and investment objectives, the following risks before making an investment in the Notes. If any of the following risks actually occur, the market value of the Notes may be adversely affected. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are also described below. The Issuer and the Guarantor believe that the factors described below represent the principal risks inherent in investing in the Notes, but the Issuer and the Guarantor may be unable to pay interest, principal or other amounts on or in connection with any Notes and/or under the Guarantee, as the case may be, for other reasons and neither the Issuer nor the Guarantor represent that the statements below regarding the risks of holding any Notes are exhaustive. Words and expressions defined in the section headed Terms and Conditions of the Notes shall have the same meanings in this section. IX 3.1 XIII 2 VI 3 Risks Relating To The Notes Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) (ii) (iii) (iv) (v) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Prospectus or any applicable supplement; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal and interest payments (euro) is different from the potential investor s currency; understand thoroughly the terms of the Notes and be familiar with the behaviour of financial markets in which they participate; and be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. The Notes may be redeemed prior to maturity In the event that the Issuer or the Guarantor would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of Luxembourg or Switzerland or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions. Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer and/or the Guarantor The Notes will be represented by the Global Notes except in certain limited circumstances described in the Permanent Global Note. The Global Notes will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in certain limited circumstances described in the Permanent Global Note, 1

6 RISK FACTORS investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by the Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. The Issuer and the Guarantor will discharge their payment obligations under the Notes by making payments to the common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. The Issuer and the Guarantor have no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Notes will not have a direct right under the Global Notes to take enforcement action against the Issuer or the Guarantor in the event of a default under the Notes but will have to rely upon their rights under the Deed of Covenant. Minimum Denomination of 50,000, and integral multiples thereafter of less than 50,000 The Notes have a minimum denomination of 50,000. The Conditions provide that, for so long as the Notes are represented by a Global Note and Euroclear and Clearstream, Luxembourg (or other relevant clearing system) so permit, the Notes will be tradeable in nominal amounts (a) equal to, or integral multiples of, the minimum denomination, and (b) equal to the minimum denomination plus integral multiples thereafter of 1,000. Definitive Notes will only be issued if (a) Euroclear or Clearstream, Luxembourg (or other relevant clearing system) is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 8 (Events of Default) occurs. If Definitive Notes are issued, such Notes will be issued only in denominations of 50,000. As such, a holder of Notes who does not have an integral multiple of the minimum denomination in his account with the relevant clearing system at the relevant time may not receive all of his entitlement in the form of definitive Notes unless and until such time as his holding becomes an integral multiple of the minimum denomination. Definitive Notes will in no circumstances be issued to any person holding Notes in an amount lower than the minimum denomination. Change of Control and Put Event Upon the occurrence of certain change of control events relating to the Guarantor together with a rating decline, as set out in the terms and conditions of the Notes under Terms and Conditions of the Notes - Redemption and Purchase - Redemption at the Option of Noteholders (Change of Control), under certain circumstances the Noteholders will have the right to require the Issuer to redeem or, at its option, repurchase all outstanding Notes at an amount which may be more than or less than the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption or repurchase. However, it is possible that the Issuer or the Guarantor will not have sufficient funds at the time of the change of control to make the required redemption or repurchase of Notes. Assuming there are sufficient funds for the redemption or repurchase, Noteholders may receive less than the principal amount of the Notes should they elect to exercise such right. In addition, except as specifically set out in Terms and Conditions of the Notes - Redemption and Purchase - Redemption at the Option of Noteholders (Change of Control), the Notes do not contain provisions that provide a right to Noteholders to require the Issuer to repurchase or redeem the Notes in the event of a change of control, reorganisation, restructuring, merger, asset sale, recapitalisation or similar transaction. 2

7 RISK FACTORS Credit Rating The Notes are expected to be rated Baa2 by Moody s Investor Services Limited ( Moody s ) and BBB by Standard & Poor s Rating Services, a division of the McGraw Hill Companies, Inc. ( S&P ). One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above and other factors that may affect the value of the Notes. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Any adverse change in an applicable credit rating could adversely affect the trading price for the Notes. EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). A number of non-eu countries and territories including Switzerland have agreed to adopt similar measures (a withholding system in the case of Switzerland) with effect from the same date. If a payment is to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of tax is to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. For so long as any Note is outstanding, the Issuer undertakes to maintain a Paying Agent in a Member State of the European Union that does not impose an obligation to withhold or deduct tax pursuant to this Directive. Risks Relating to the Market Generally There is no active trading market for the Notes The Notes are new securities which may not be widely distributed and for which there is currently no active trading market. If the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer and the Guarantor. Although applications have been made for the Notes to be admitted to listing on the Official List of the UK Listing Authority and to trading on the gilt-edged and fixed interest market of the London Stock Exchange, there is no assurance that such applications will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Notes. Liquidity may have a severely adverse effect on the market value of the Notes. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes in euro. This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency ) other than euro. These include the risk that exchange rates may significantly change (including changes due to devaluation of the euro or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to the euro would decrease (1) the Investor s Currency-equivalent yield on the Notes; (2) the Investor s Currency equivalent value of the principal payable on the Notes; and (3) the Investor s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. XIII 5.1 3

8 RISK FACTORS Interest rate risks Investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Notes are legal investments for it, (2) the Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules. Risks Relating to the Issuer and the Guarantor that may affect their ability to fulfil their obligations Factors that may affect the Issuer s ability to fulfil its obligations under the Notes The Issuer s principal purpose is to provide funding, through the international capital and money markets, to the Guarantor. Therefore, the Issuer s ability to fulfil its obligations under the Notes is entirely dependent on the performance of the Guarantor, as a result of which the risk factor analysis set out below is mostly meaningful for and focused on the Guarantor and its consolidated subsidiaries (the Group ). IX 3.1 VI 3 Factors that may affect the Guarantor s ability to fulfil its obligations under the Guarantee The Group s inability to implement its business strategies and maintain and improve the benefits from restructuring its business may have a material adverse impact on it A significant part of the Group s strategy is based on its transformation programme (the Transformation Programme ) which aims at a significant and sustained debt reduction and improvement of profitability. For a more detailed description of the Transformation Programme, see Description of the Guarantor - Overview and Strategy - Transformation Programme. The Clariant Performance Improvements Programme (the CPIP ), as part of the Transformation Programme, has already resulted in tangible improvements to operating performance and debt reduction. These benefits have been partly offset by rises in raw material prices, unfavourable foreign exchange rates and continuing competition in the Group s markets leading to pressure on sales prices. The sale of non-core businesses is also largely complete, with strategic activity being the main focus. Every effort is made to identify opportunities that will benefit the Group overall but there can be no certainty that any such activities will meet the planned results. There can be no assurance that the benefits achieved can be maintained and improvements continue. Responsibility for continuing management of the CPIP has been given to divisional management. There is no certainty that this allocation of resources will not distract managers from their main duties as well as reducing the overall attention given to CPIP improvements. Monitoring the CPIP improvements will become more difficult over time and the benefits less quantifiable. As part of its business strategy and, in particular, the Transformation Programme, the Group expects to substantially reduce its headcount, and there can be no assurance that this reduction will be achieved without disruption to the Group s business. In addition, the Group s business strategy and its Transformation Programme are based on assumptions about future demand for the Group s existing products and services, new products and services that the Group is developing and on its ability to provide a high level of customer service in certain key areas. Each of these factors depends on the Group s ability to finance its operations, its product development activities, and its ability to maintain high-quality and efficient manufacturing operations, respond to competitive and regulatory changes, access quality raw materials in a cost-effective and timely manner and to attract and retain key personnel. Many of these factors are beyond the Group s control and, accordingly, the Group may be unable to implement its business strategy on a timely basis. In addition, the Transformation 4

9 RISK FACTORS Programme may not have the anticipated effect, as competitors may undertake similar efforts and consequently lower prices, which could neutralise any positive effects of the Group s business strategies and, in particular, its Transformation Programme. Failure to compete successfully may materially adversely affect the Group The Group operates in highly competitive environments, in particular with respect to product performance, product pricing and differentiation, customer service, new product development and introduction, and the development of integrated systems and applications that address business challenges faced by the Group s customers. The relative importance of these factors differs across the geographic markets and product areas that the Group serves. Actions of Group competitors could reduce its profitability and market share. The Group s operating results significantly depend on the development of commercially viable new products, product innovations and technical advances. Furthermore, the Group devotes substantial resources to research and development. If the Group is unsuccessful in developing new products and production processes in the future, its competitive position and operating results will be harmed. The Group competes with major global as well as regional and local companies. Some of the Group s competitors are sophisticated companies that, in some cases, have significant financial and other resources that may allow them to develop products and services superior to the Group s or may allow them to adapt more quickly to new technologies, evolving customer requirements or industry changes. The Group s ability to compete successfully greatly depends on its ability to keep pace with technological changes in the markets that it serves and, to a considerable extent, on its relationships with third-party researchers and machinery manufacturers with which the Group has partnerships. The Group may fail to anticipate or may not have sufficient financial resources to respond to these competitive pressures or technological developments, and any failure in this regard may have a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. As an international business, the Group is exposed to various global economic, social and local business risks associated with conditions in those markets that may have a material adverse effect on it The Company is incorporated in Switzerland and the Group operates in more than 60 countries. Accordingly, the Group s results of operations and financial condition are affected by developments and trends in the world market. Due to these market pressures, the Group has decided in recent years to move certain of its operations to new locations and markets. These locations are usually in markets with lower costs and prices. However, due to its current structure, the Group could be obliged to continue to bear comparatively higher costs than its competitors if it continues to operate at its existing locations while establishing new production plants in lower cost regions. Duplication of a site s costs and the delay associated with moving production to new sites could have a negative impact on the Group s business operations and results of operations. In addition, the emerging markets in which the Group has established and is continuing to establish new operations are characterised by significant political and economic risks, including, in particular, exchange rate risks. There can be no assurance that the Group will be able to manage and respond to the challenges created by changes in the world market. If the Group is not able to manage these risks effectively, the implementation of the CPIP could be hindered and could have a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. In addition, the Group s results are affected by global economic cycles, certain regional and local economies and the business cycles of certain industries served directly or indirectly by the Group, including the automotive, oil, mining, plastic, textile, paper, leather, life science and construction industries. The Group s results in the past have been, and in the future may be, materially adversely affected by such cycles, including, in particular, by downturns in the textile and paper industries and difficult trading conditions in the life sciences section. The Group is subject to risks normally associated with international operations. These risks include the following: tariffs and trade barriers; 5

10 RISK FACTORS exchange controls; requirements relating to withholding taxes on remittance and other payments by subsidiaries; requirements regarding transfer pricing; national and local labour strikes; restrictions on the ability to own or operate subsidiaries or acquire new businesses in certain countries, including rules on local ownership of businesses; restrictions on the ability to repatriate funds from subsidiaries; required compliance with a variety of foreign laws, including tax laws; the difficulty of enforcing agreements and collecting receivables through foreign legal systems; and political and cultural differences. The Group s operations and growth in emerging markets require it to respond to rapid changes in market conditions within legal and regulatory systems less developed and less well-enforced than those in industrialised countries. Therefore, the Group s overall success as a global business depends, in part, on its ability to succeed under different economic, social and political conditions in each country in which the Group operates. There can be no assurance that the Group will continue to be able to develop and implement policies and strategies that are effective in each country and region in which it operates. The Group has operations in more than 60 countries and may be materially adversely affected by currency fluctuations The financial condition and results of operations of the Group s subsidiaries outside Switzerland are reported in the relevant foreign currencies and then translated into Swiss francs at applicable exchange rates for inclusion in the Group s consolidated financial statements. The exchange rates between these currencies and the Swiss franc may fluctuate substantially. Because the Group generates approximately 98 per cent. of its revenues and 91 per cent. of its operating expenses in currencies other than the Swiss franc, fluctuations in the value of the Swiss franc against other currencies have in the past had, and may in the future have, a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. Currency fluctuations may also significantly affect the comparability of the Company s results between financial periods. In addition to currency translation risks, the Group incurs currency transaction risks whenever one of its operating subsidiaries enters into either a purchase or a sale transaction using a currency other than its functional currency. The Group s results and financial condition are particularly affected by significant changes in the value of the Swiss franc, euro, U.S. dollar, British pound, Japanese yen and Brazilian real. Given the volatility of exchange rates, the Group may not be able to effectively manage its currency transaction or translation risks. The volatility of currency exchange rates may, therefore, have a material adverse effect on its business operations, liquidity, financial condition and results of operations. Environmental, safety and health laws and regulations may expose the Group to liability and result in increased costs The Group is subject to stringent environmental, safety and health laws and regulations in the various jurisdictions in which it operates. Such laws and regulations govern, among other things: the Group s manufacturing process (with such regulations, including, among others, those of the U.S. Food and Drug Administration governing the manufacture of pharmaceutical products); the storage, handling, treatment, transportation and disposal of hazardous substances and wastes; 6

11 RISK FACTORS water discharge; air emissions; health and safety; certain products manufactured by the Group and certain raw materials used in the production of these products; and the sale, use and increasingly end-of-life waste management practices of products the Group manufactures. These laws and regulations, which have in recent years become, and are expected to continue to be, increasingly stringent, require, and will continue to require, the Group to incur substantial ongoing expenditures to ensure compliance, and these laws and regulations may also affect the marketability of the Group s products. In particular, potentially significant expenditures may be necessary in order to comply with future environmental, safety and health law and regulations or the more stringent enforcement of existing rules, such as the Registration, Evaluation and Authorisation of Chemicals ( REACH ) directive currently being implemented by the European Union. REACH is expected to treat certain raw materials and products of the Group as having a toxicological or health-related impact on the environment or the Group s customers or employees. These regulations are expected to apply both to products manufactured by the Group in the European Union and imported into the European Union by it. If such classification occurs, the relevant raw materials or products may be banned or the Group may be required to incur increased costs to comply with new regulatory requirements. Violations of environmental, safety and health laws and regulations may result in substantial fines or penalties, as well as other civil or criminal sanctions, damages or other costs or restrictions on, or the suspension of, the Group s operating activities. Many of the Group s sites have an extended history of industrial chemical processing, storage and related activities. As is typical for such businesses, soil and ground water contamination have occurred in the past at some sites and may occur, or be discovered, at the Group s sites in the future. At several of the Group s sites, there is extensive contamination that will require significant monitoring and remediation expenditures in the foreseeable future. The Group also has full or partial responsibility for a number of off-site waste disposal activities under the U.S. superfund law and laws of other applicable jurisdictions, with remediation at these facilities currently in various stages of investigation, planning, implementation or completion. Substantial provisions have been established for remediation sites at Bonfol and Kölliken in Switzerland, Höchst and Griesheim in Germany, Mount Holly in the United States, Suzano in Brazil and Turin in Italy. While the Company believes that the provisions it has established will adequately meet the Group s current, known and anticipated environmental liabilities, including remediation costs, there can be no assurance that significant additional environmental costs and liabilities, including in connection with the Transformation Programme, will not be incurred in the future, which could have a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. The Group could also be subject to claims by third parties seeking damages for alleged personal injury or property damage resulting from hazardous substances, contamination or exposure caused by the Group s operations or products. Such matters could require the Group to incur significant costs which could have a material adverse effect on its business operations, liquidity, financial condition and results of operations. The Group may be materially adversely affected if it must pay increased raw material prices and is unable to pass these increases on to its customers or if prices for its products decrease faster than raw material prices The Group depends on a variety of raw materials, such as ethylene. The prices and availability of these raw materials may vary with market conditions and may be highly volatile. In addition, although the Group does not purchase more than 10 per cent. of its raw materials from any single source, it is dependent on its raw material suppliers. There have been in the past, and may be in the future, periods during which raw materials used by the Group are unavailable within the geographic area from which they are sourced for 7

12 RISK FACTORS reasons beyond the Group s control. Such shortages may lead to an interruption of supply, price increases or even structural change within the chemical industry, which may have a material adverse effect on the Group s business, liquidity, financial condition and results of operations. In addition, if the Group is not able to pass raw material price increases on to its customers, it may be similarly materially adversely affected. The Group may be unable to attract or retain personnel who are integral to the success of its business The Group s future growth and success, as well as its ability to implement its strategies, and, in particular, CPIP, depend on its ability to attract, retain, train and motivate skilled managerial, sales, administrative, operating, product development and technical personnel. Competition for qualified professionals is high in the markets in which the Group operates, and the Group may not be successful in retaining and attracting such professionals. The loss of the Group s key management and operating personnel or the failure to attract and retain additional key personnel could have a material adverse effect on its business operations, liquidity, financial condition and results of operations. In addition, there can be no assurance that the Group will not be subject to significant labour disputes in the future or that future reductions in headcount will not similarly materially adversely affect the Group. Litigation, regulatory proceedings and similar claims could materially adversely affect the Group From time to time the Group is involved in various lawsuits, regulatory proceedings and similar matters incidental to the ordinary operations of its business. These could result in fines or other sanctions that could have a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. The Group s pension obligations may adversely impact its business and these obligations may be affected by the performance of stock markets The Group s funded pension plans have assets invested in equities and bonds. The largest funded pension plans of the Group are in Switzerland, the United Kingdom, the United States and Japan. The assets of these pension plans are subject to stock market volatility. If the Group is required to make contributions to its pension plans, cash available for other uses may be significantly reduced, which could have a material adverse effect on the Group s business operations, liquidity, financial condition and results of operations. In addition, the Group also has unfunded pension plans and other post-retirement benefit plans, including, in particular, in Germany. Although these plans do not have the volatility of funded plans, they represent a long-term liability, which could limit the financial flexibility of the Group. The move towards funded pension plans, the transparency of the reported figures in the accounts of pension plans and the involvement of regulators in certain countries may accelerate cash payments into pension plans. This could adversely affect the Group s cash planning and the availability of funds for investment. The Group depends on proprietary technologies and its competitive position may be adversely affected if the Group fails to protect its intellectual property rights The Group owns, has applied for, or has licenses under, numerous patents relating to its products. The Group has in the past received, and may continue to receive in the future, claims from third-parties asserting that certain of its products and applications infringe the proprietary rights of others. These claims could subject the Group to costly and prolonged litigation, usually involving complex questions such as whether specific processes or materials may, in fact, be validly patented, whether the relevant patents were validly granted, whether the individual claims relating to valid patents are enforceable and whether the relevant product infringes any valid patents. Defending such litigation is costly, and, if a final judgment of infringement is rendered against the Group, the Group could be required to pay substantial damages and/or become subject to substantial limitations or prohibitions regarding its rights to market or otherwise make use of a disputed product or technology. Patent infringement claims may also divert management from its responsibilities, which could have a material adverse effect on the Group s business operations, liquidity, 8

13 RISK FACTORS financial condition and results of operations. For further information on the Group s intellectual property, see Description of the Guarantor - Group-wide Functions and Information - Intellectual Property. The Group may be affected by business interruptions The Group s operations are subject to the hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These include fire, lightning, explosion and transport risks, as well as risks relating to natural disasters, mechanical failures and the release of toxic and hazardous substances and other environmental risks. Although the Group maintains property and business interruption insurance coverage which it believes is appropriate to protect against losses resulting from the occurrence of any of these hazards, there can be no assurance that this insurance will be sufficient and that the Group will not incur losses in excess of its insurance coverage. 9

14 OVERVIEW OF THE OFFERING The following overview refers to certain provisions of the Terms and Conditions of the Notes and is qualified by the more detailed information contained elsewhere in this Prospectus. Terms which are defined in Terms and Conditions of the Notes have the same meaning when used in this overview. Issuer: Guarantor: Lead Managers: Co Managers: Fiscal Agent: Clariant Finance (Luxembourg) S.A. Clariant Ltd ABN AMRO Bank N.V., Citigroup Global Markets Limited, UBS Limited. Banco Bilbao Vizcaya Argentaria, S.A., Commerzbank Aktiengesellschaft, Dresdner Bank AG London Branch, HSBC france, Landesbank Baden-Württemberg, Landesbank Hessen- Thüringen Girozentrale. Citibank, N.A. IX VI 3 The Notes: 600,000, per cent. Guaranteed Notes due Issue Price: per cent. of the principal amount of the Notes. XIII 3 XIII 4.1 XIII 4.2 XIII 4.8 Issue Date: Expected to be on or about 6 April Maturity Date: 5 April XIII 4.9 Use of Proceeds: Interest: Status of the Notes and the Guarantee: Form and Denomination: General corporate purposes of the Clariant group. See Use of Proceeds. The Notes will bear interest from 6 April 2006 at a rate of per cent. per annum payable annually in arrear on 5 April in each year, commencing on and including 5 April 2007, which first interest payment will be in respect of the period from (and including) 6 April 2006 to (but excluding) 5 April 2007 (a short first coupon). The Notes are senior, unsubordinated, unconditional and unsecured obligations of the Issuer. The guarantee is a senior, unsubordinated, unconditional and unsecured obligation of the Guarantor. XIII 4.6 VI 1 XIII 4.4 The Notes will be issued in bearer form in the denominations of 50,000 and, for so long as the Notes are represented by a Global Note and Euroclear and Clearstream, Luxembourg (or any other relevant clearing system) allow, will be tradeable in integral multiples of 1,000 in excess thereof. The Notes will initially be in the form of a temporary global note (the Temporary Global Note ), without interest coupons, which will be deposited on or around the Closing Date with a common depositary for Euroclear and Clearstream, Luxembourg. The Temporary Global Note will be exchangeable, in whole or in part, for interests in the Permanent Global Note, without interest coupons, not earlier than 40 days after the Closing Date upon certification as to non-u.s. beneficial ownership. Definitive Notes will only be XIII

15 OVERVIEW OF THE OFFERING available in the limited circumstances set out on the Permanent Global Note. Redemption at the Option of the Noteholders (Change of Control): Redemption at the Option of the Issuer for Tax Reasons: Negative Pledge: Cross Default: Rating: The Notes will be redeemable at the Put Amount (as defined in the Terms and Conditions of the Notes) at the option of the holders of the Notes in the event of a Put Event (as defined in Condition 5 (Redemption and Purchase). Early redemption by the Issuer will only be permitted for tax reasons as described in Condition 5 (Redemption and Purchase). The Terms and Conditions of the Notes will contain a negative pledge provision as further described in Condition 3 (Negative Pledge). The Terms and Conditions of the Notes will contain a cross default provision as further described in Condition 8 (Events of Default). The Notes are expected to be rated Baa2 by Moody s and BBB by S&P. XIII 7.5 Withholding Tax: Governing Law: Listing and Trading: All payments in respect of principal and interest by or on behalf of the Issuer and the Guarantor shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by Luxembourg or Switzerland or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the appropriate withholding or deduction shall be made and the Issuer or the Guarantor shall pay any additional amounts to Noteholders to compensate for such withholding or deduction, with the exception of certain circumstances, as more fully described in Condition 7 (Taxation). The Notes, the Fiscal Agency Agreement, the Deed of Covenant, the Deed of Guarantee and the Subscription Agreement will be governed by English law. Applications have been made for the Notes to be admitted to listing on the Official List of the FSA and to trading on the gilt edged and fixed interest market of the London Stock Exchange. VI 3 XIII 4.3 XIII 5.1 Clearing Systems: Selling Restrictions: Risk Factors: Euroclear S.A./N.V. and Clearstream, Luxembourg. See Subscription and Sale. There are restrictions on the offer, sale and delivery of the Notes in, inter alia, the United States, the United Kingdom and Luxembourg. Investing in the Notes involves risks. See Risk Factors. XIII