asiapacificfibers.com · 2017-09-11 · Company Description. PT Asia Pacific Fibers Tbk (formerly...

Contents

Company Description 3

Financial Highlights 4

Message from the President Commissioner 5

Message to Shareholders 7

Management of the Company 10

Management Report 14

Management Discussion and Analysis 19

Corporate Governance 20

Corporate Information 22

Independent Auditor Report 29

Annual Report 2012

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Company Description

PT Asia Pacific Fibers Tbk (formerly PT Polysindo Eka Perkasa Tbk), established in 1984, is a leading

polyester manufacturer in Indonesia. Its manufacturing operations span the entire polyester

production chain, from raw materials to end products, ensuring quality and consistency. PT Asia

Pacific Fibers is the only integrated producer of polyester in Indonesia. The manufacturing facility for

PTA, continuous polymer, and staple fiber is located in Karawang, West Jawa. Filament yarn,

produced at the largest yarn facility in Indonesia, is located in Semarang, Central Jawa. PT Asia Pacific Fibers’ current products include Purified Terephthalic Acid (PTA), polyester chips, polyester staple fiber, polyester filament yarn, and performance fabrics. The Company´s products are marketed and sold both in domestic and international markets. The following is the report on the business performance of PT Asia Pacific Fibers Tbk in 2010. The term “Company” used throughout the report refers to PT Asia Pacific Fibers Tbk and all its subsidiaries. The term “APF” refers to PT Asia Pacific Fibers Tbk as a stand-alone entity, while the term “Texmaco Jaya” refers exclusively to PT Texmaco Jaya Tbk.

Annual Report 2012

4

Financial Highlights

The following table sets forth the financial highlights of the Company for the years ended 31st December 2008 to 2012. The Company’s current auditors are Drs. Hendrawinata Eddy & Siddhartha (Indonesian Member firm of Kreston International)

31st

December

2012

US$ 000 2011

(2)

US$ 000 2010

Rp Mill 2009

Rp Mill 2008

Rp Mill

Current Assets

Fixed Assets-Net

Total Assets

Liabilities

Equity

Net Sales

Gross Profit

Operating Profit

Net Income

Net Working Capital (1)

Profit per Share-Net

Gross Profit Margin %

Net Profit Margin %

Return on Investment %

Return on Equity %

Current Ratio

Debt to Total Assets

Debt to Equity

237,040

129.394

403.252

1,201,091

(797,838)

599,331

(5,982)

(23,515)

(32,119)

(931,551)

US$ (0.01)

0.07

0.11

NA

NA

0.2

2.98

(1.51)

231,660

184.837

452.635

1,218,898

(766,263)

635,535

13,879

(19.863)

(8,840)

(936,758)

US$ 0.00

2.18

1.39

NA

NA

0.2

2.69

(1.59)

1,698,564

1,775,584

3,948,489

11,900,693

(7.952.202)

4,455,449

331,393

14,196

334,977

(9,522,265)

Rp141

0.07

0.08

8,5

NA

0.2

2.98

(1.50)

1,423,994

2,290,009

4,569,624

12,449,681

(7,880,058)

3,511,507

(43,902)

(314,297)

1,182,788

(10,226,269)

Rp(498)

(1.3)

33.7

25.9

NA

0.1

2.72

(1.58)

1,235,848

2,802,157

4,912,990

13,979,999

(9,067,010)

3,740,569

(217,811)

(518,217)

(2,120,676)

(11,798,530)

Rp(245)

(5,8)

(56,7)

(43.1)

NA

0.1

2.85

(1.54)

Notes: (1)

Current Assets minus Current Liabilities (2)

As Restated

Annual Report 2012

5

Message from The President Commissioner

Dear Esteemed Shareholders, The polyester industry has moved into secular decline after witnessing two successive peak years in 2010 and 2011. Global economic concerns and particularly Europe’s well advertised problem and a slower than expected U.S. economic recovery have severely affected the global textile trade, and dampened the demand outlook. Polyester chain margins continued to slide primarily driven by a crash in PTA margins. Significant capacity addition in China during the year and the resultant excessive supply position has triggered this decline. The performance of Asia Pacific Fibers during the year 2012 has witnessed declining profitability. The Company has posted EBITDA of US$36.84 million on sales of US$600 million for the year. Nonetheless, the Company was able to maintain the operations of both its plants near full capacity through the year supported by strong domestic market demand. The Company increased its supply of its PSF and PFY products to the domestic market and continued to play a leadership role in providing essential raw material to the downstream textiles and clothing sector in Indonesia. Despite financial constraints, the Company continued to implement certain strategic Capex investments with financial assistance from its majority creditors and shareholders. This has helped increase its competitiveness and allowed it to diversify into specialty and value added products in niche markets. Economic conditions worldwide continued to deteriorate through the third quarter of fiscal 2012—the year ending March 31, 2013—as the impact of persistent economic problems in Europe, already weakened by austerity measures, particularly in southern Europe, spread to other regions. The effects of the European slump, a reversal in the trend toward excessive investment, and monetary restraint fuelled greater fears of a slowdown in the emerging economies overall. However, the Indonesian economy continued to maintain a growth rate of above 6%, strongly supported by its robust domestic consumption and investment growth helping to shield it from the global economic turmoil. GDP expanded 6.23% in 2012 while the outlook for 2013 remains positive at 6.3% affirming Indonesia’s position as one of Asia’s fastest growing economies and next only to China. Foreign direct investments in Indonesia grew 26% to a record US$24.5 billion in 2012 as companies invested in areas such as coalmining and automotive plants to tap the country’s abundant natural resources and 240 million-strong consumer markets. FDI is likely to remain robust over the medium term after Moody’s Investors Service and Fitch Ratings upgraded Indonesia’s credit rating to investment grade last year. Due to thedeclining trend in commodity prices, Indonesia’s exports in value terms has fallen to US$190.04 billion in 2012 from US$203.6 billion (-6.61%) with the textiles sector accounting for US$12.56 billion (6.60% of total exports). On the other hand imports for the year increased to US$191.67 billion from US$177.44 billion (8.02%) as a consequence of accelerated economic activity. The imports are more related to raw materials and capital goods rather than consumer goods.

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The Company’s continuous efforts to restructure its balance sheet have been positive with PPA, one of the company’s secured creditors, actively reviewing a proposal to resolve their outstanding issues. After this restructuring, the Company will be in a position to significantly improve its financial standing and will finally be able to implement its long-term growth plan. The Commissioners wish to extend their appreciation to the Directors and all APF employees for their continued efforts and dedication throughout 2012 year where the company faced continued financial and operational challenges whilst strengthening its strategic market position. The Company continued to improve its corporate governance standards and complied with the various regulations and requirements by BAPEPAM and BEI. We also wish to acknowledge our sincere gratitude to our customers, suppliers, and shareholders for their continued support and the confidence they have entrusted to the Company in this critical transition period.

Robert Clive Appleby President Commissioner

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Message to Shareholders

Dear Shareholders: Despite slower global economic growth and continued uncertainty in the global financial markets, Indonesia’s economic growth remained strong throughout 2012. Indonesia’s GDP grew 6.23% in 2012 and the country remained among the world’s fastest-growing economies (the second best after that of China among G-20 members). While many other emerging markets in Asia are reliant on exports, more than 60% of Indonesia’s GDP is generated by domestic consumption, shielding it from the vicissitudes of the global economy. Indonesia's resilience to the global economic slowdown driven by its robust domestic consumption has made it a magnet for foreign investment. However, the growth was slightly below 2011’s 6.5% growth, primarily due to slowing export growth of commodities such as coal and palm oil to China. The deceleration in the fourth quarter 2012 should provide a cautious approach for future. On the other hand, Indonesia suffered its first ever-annual trade deficit in 2012 as exports to most of its trading partners fell during the year amid the slowdown in the global economy. The country’s first annual trade deficit in 2012 has put pressure on the rupiah currency. The rupiah weakened through the year 2012 and has fallen steeply to close at Rp 9,670 per US$ as compared to Rp 9,068 per US$ as at December 2011, depreciating over 6.6% during the year. The county’s trade deficit reached US$1.65 billion last year, the first such deficit in Indonesia’s history. Exports dropped to US$190.04 billion, down by 6.61% from last year, much deeper than the forecast. Imports, on the other hand surged by 8.2% to US$191.67 billion, driven by imports of intermediary goods for domestic production (73.10%), followed by capital goods (19.90%) and consumer goods (7%). Polyester Industry: Global and Domestic Trends After a strong performance in 2010 and 2011 supported by handsome commodity margins, especially PTA margin and positive substitution effect from Cotton, 2012 saw a reversal of all these favorable conditions. Asian commodity segment has significantly underperformed hit by the economic turmoil. Huge capacity additions in PTA, polyester fiber and polyester filament led to lower operating rate weakened the spreads across the polyester value chain. Added to this, steep fall in cotton prices during the year had also put pressure on polyester prices and polyester chain margins. These factors have impacted the performance of the polyester Industry globally. Global economic downturns driven by European debt concerns and the US economic concerns have severely affected the global textile trade, and dampening the demand outlook. However from the production standpoint the polyester industry remained buoyant with the overall polyester polymer production reaching 58.90 million tons, a growth of 3.1 million tons or 5.5% year 2012, marginally slowed down from 6.0% in 2011 as the global economy stumbles along. But a gradual recovery is anticipated over the 2013-2016 period at between 6-7% per annum, marginally lower than last year’s estimates. Long term growth rates are trending lower but still look impressive compared with other major petrochemical related business sectors. It is anticipated that the polyester growth would be driven by fundamental new domestic growth within key Asian countries such as China, India and Indonesia as the demographic and economic shifts lead to higher local

Annual Report 2012

8

demand for fibers. This in turn looks set to stimulate a reversal in future trade flows of both higher added value textiles and apparel.

Soft outlook for crude, improving capacity positions in PTA, supported by PX should ensure soft price structure for polyester in 2013 –15, while the polyester consumption is expected to remain strong. Besides, soft cotton prices projected till end of the cotton season would also limit the polyester prices and margins in 2013. Hence the prices of PSF and yarn are expected to remain soft and the polyester chain margins will be under pressure at least in 2013. Any longer term shortages of cotton would only add further upside to the projected growth and margins. Domestic market continue to remain strong, irrespective of declining prices, driven by strong domestic consumption with per-capita consumption rose to 6.18 kg in 2012 from 6.03 kg for the previous year. While the domestic demand for polyester staple fiber increased by 7%, the filament yarn demand rose by 16% over shooting the growth in production forcing significant increase in import of filament yarn. Import of filament yarn increased by 45% in volume during 2012. Prompted by this strong growth in domestic consumption for polyester, the upstream manufacturers have taken up capacity additions to increase up to 1 million tons each for fiber and filament yarn capacities by 2014 from the current levels of 700 thousand tons and 850 thousand tons respectively. Supported by a strong and sustained economic growth of 6.23% in 2012 and projected growth of 6.3% in 2013 with the inflation under check, the consumer confidence level continues to remain robust boosting the domestic consumption. The per capita consumption of textiles is projected to move up to 6.60 kg in 2013 with corresponding increase in polyester consumption. Textile exports from Indonesia decreased in 2012 to US$12.56 billion as compared to US$13.26 billion in 2011. While the total volume of textile exports increased marginally by 0.5%, the decrease in value was mainly due to fall in prices triggered by the global recessionary trend and drop in international prices for cotton and polyester. Whereas, volume of textile imports in 2012 surged significantly by 12.2% mainly driven by yarn imports (both spun and filament yarn). However, in value terms textile imports decreased to US$7.94 billion in 2012 as compared to US$8.53 billion in 2011, registering a decrease of 6.9%, mainly due to declining price trend. Company Performance The Company’s performance was significantly impacted by the down turn in global economy during the year 2012, rising energy costs coupled with decline in polyester chain margins. Despite the dampening market conditions, the Company was able to maintain the operations of both of its plants to the near full capacity with high standards of efficiency. The Company has posted a sales turn over of US$600 million as compared to US$635 million in the previous year. Despite increased volume of production and sales, the total sales revenue declined due to drop in selling prices for all products triggered by sharp fall in PTA margins during the year. The company has therefore ended the year with an operating loss of US$23.51 million as compared to US$19.86 million for the previous year. However the Company was still able to post an EBITDA of US$36.84 million for 2012 as compared to an EBITDA of US$77.7 million for 2011. Performance Fabric division of the Company significantly improved its performance during the year 2012 by achieving sales revenue of US$11.32 million with an EBITDA of US$1.74 million. The overall fall in profitability is primarily on account of the steep fall in PTA margins during 2012 that bottomed out in last quarter below the cash cost. This steep fall in margin was mainly driven by the huge capacity addition of PTA in China coupled with weak demand for polyester products on account of lull in global textile trade.

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We are pleased to inform that the Company added a range of specialty and value added products to its existing product portfolio through Capex investments and successfully placed these products both in domestic and international markets.

The fiber expansion project at Karawang with a capacity addition of 54,000 MT per annum was completed during the year 2012 and the commercial production started from May 2012, resulting in PSF volume increase of 13% for part of the year. With the benefits of the on going Capex projects accruing to the Company effective 2013, the Company expects to gain significant contribution to its future earnings.

In compliance with the PSAK 10 (Indonesian Accounting Standards), the Company has reported its financials in US Dollars for the year 2012 as US Dollar being the dominant functional currency.

Outlook

The economic outlook for Indonesia in 2013 remains positive despite a weak global economy, but maintaining strong investment growth is vital. The World Bank projects a marginal rise in GDP to 6.3 percent in 2013. This projection assumes that domestic consumption and investment growth remain strong, while improving growth in Indonesia’s major trading partners supports a modest recovery in exports.

However, domestic environment for manufacturing sectors expect to undergo a tough phase with the looming escalatory trend in two major cost fronts viz., manpower and energy. Both gas prices and electricity tariff are increasing in 2013, with further increases beyond 2014 not entirely ruled out. These factors will add to the pressure on cost competitiveness of the domestic manufacturers. The Company has, however, taken a series of cost-saving initiatives, especially in energy saving areas and manpower rationalization efforts to offset these cost increases. In order to fully secure the energy supplies and also to optimize its cost of energy for the manufacturing unit in Karawang, the Company is actively pursuing through restructure and reorganization of power producing plant in Karawang. The Company is actively engaged with its secured creditors to find a solution to its long pending secured debt restructuring at the earliest possible time. The Company has presented an alternate restructuring option to its secured creditors that are under active consideration. Post restructure, the Company will have a sound and healthy financial base with its debts brought down to sustainable levels. This would in turn enable the company to raise finance from market to meet its short and long term investments to fund its growth plans. All of these efforts will improve the performance of the Company significantly, and to reposition it to the forefront of the polyester industry combining market reach, innovation and integration driving superior performance and reputation.

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 re-emergence as a prominent leader in the manufacture of high quality polyester products.

V. Ravi Shankar President Director

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Management of the Company

Commissioners and Directors

In accordance with its Articles of Association, Asia Pacific Fibers is managed by a Board of Directors

under the supervision of a Board of Commissioners. The members of the Board of Commissioners

and the Board of Directors are chosen and appointed by the shareholders of APF at the Annual

General Meeting. The Articles of Association permit the President Director to act alone, or where the

President Director is unable to act, any two directors to represent and act on behalf of the Board of

Directors.

The Current members of the Board of Commissioners of APF are as follows:

Name Age Principal Occupation

Robert Clive Appleby 50 President Commissioner of APF since 2007. Director

and Chief Investment officer of Asia Debt

Management Hongkong Limited (ADM). Prior to

joining ADM, he was a Managing Director of the Asian

Fixed Income Division at Credit Agricole Indosuez

specializing in structured Asian Debt.

Christopher Robert Botsford 51 Commissioner of APF since 2007. Chief Executive

Officer and Director of Asia Debt Management

Hongkong Limited (ADM). Prior to establishing ADM,

he ran the Asia-Pacific regional debt and derivatives

operations for Republic National Bank of New York

which provided hedging and other debt management

structures to regional users.

Robert McCarthy 58 Commissioner of APF since June 2008. He holds a

Master in Business Administration from Yale School of

Management, and a Masters Degree in Medieval

History from Columbia University. He manages

distressed investments for the Spinnaker Funds. He

was founding director of Morgan Grenfell and worked

as director of Deutsche Bank.

Dono Iskandar Djojosubroto 68 Commissioner of APF since February 2008. He holds a

degree from University of Indonesia and MA & PhD in

Economics from The University of Illinois, USA.

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11

Previously he worked as the Secretary General of the

Minister of Finance, Deputy Governor of Bank

Indonesia, and Executive Director representing twelve

Asian Countries in the IMF. He was also a member of

Board of Commissioners and Supervisory Board in

various Government Institutions, such as PT Jasindo,

PT Jasa Marga, Bank BRI and Bank BTN.

Timbul Thomas Lubis SH, LLM 60 Commissioner of APF since 1990, Partner of Lubis

Ganie & Surowidjojo Law Firm since 1982. He is a

graduate of University of Indonesia and University of

Washington Law School.

Kamun Cheong 33 Commissioner of APF since 2012. She is a bachelor

degree holder in Commerce (Honours) from the

University of Melbourne. Currently involved in the

analysis of equity, credit and private investments in

South East Asia region for Spinnaker Capital funds.

Prior to joining Spinnaker she worked in Deloitte &

Touché and ABN handling financial advisory services

and Debt/Investment management functions.

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The Current members of the Board of Directors of APF are as follows:

Name Age Principal Occupation

V. Ravi Shankar 49 President Director of APF since 2002. He is a graduate of

Production Engineering. He has also completed Advanced

Management Programme from Harvard University in 2004.

Prior to joining APF, he managed the Textiles Division of the

subsidiary Company of APF and also worked in a machinery

manufacturing company in Indonesia and India.

Masjhud Ali, MBA 71 Director of APF since 2002. Prior to joining APF, he was

Director of PT Bank Pembangunan Indonesia (Bapindo) and

was a Director in Bank Putera.

S. Jegatheesan 63 Director of APF since 2002. He is a graduate in Electrical

Engineering and has been with APF since 1989. Prior to

joining APF, he was General Manager of a yarn producing

company and worked as Project Manager for an engineering

company in India.

Peter Vinzenz Merkle 55 Director of APF since 2007. He joined APF in 2000 as head of

the Karawang unit producing PTA, Polymer, and Fiber. Prior

to joining APF, he worked in various renowned chemical and

fiber companies such as Trevira Group and Hoechst AG as

the head of their R&D and Technology Development

Divisions. He has an MS in Chemical Engineering from

University of Stuttgart, Germany, specializing in polymer

processing and environmental technologies.

Annual Report 2012

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Annual Report 2012

14

Management Report

An Overview of Polyester Industry

The Year 2012 was a year of challenges for the polyester industry. Polyester production growth has certainly slowed to reflect the economic conditions but the industry continues to add significant capacity with over 30 million tons of new polymer capacities still being added in the 2012-2015 time frame, most of which again is being built in Asia and of course predominantly inside China. This is driving production growth somewhat higher than true demand and has manifested itself in a very noticeable stock overhang of finished polyester related products.

Global petroleum prices has exhibited a declining trend in 2012 and remained less volatile closing at US$88/barrel (WTI) in December 12 averaged at US$94/barrel. Whereas the prices of the Company’s primary raw materials, Paraxylene and MEG, on the contrary, continued to be highly volatile strongly triggered by tight supply situation. The volatility trend continued into the year 2013 as well with the supply situation remains balanced to tight.

The year 2012 saw a slowdown in polymer production, a growth of 3.1 million tons or 5.5%, which is a marginally below normal trend line growth with the total production reaching around 58.9 million tones. The Asian markets in particular have suffered a significant slowdown and will take some time to adjust to this new growth trend particularly inside China and India. However, the polymer production in 2013 is estimated to grow at 7% with an annual rise of 4.1 million tons. On the longer term the industry will be driven by fundamental new growth within key Asian countries such as China, India and Indonesia as the demographic and economic shifts lead to higher local demand for fibers.A further upside in Polyester demand is possible in the event of cotton shortages as predicted by experts. Total Indonesian exports of all goods reached US$190.04 billion in 2012, as compared to US$203.50 billion in 2011. While the exports of textile products accounted for US$12.56 billion, as compared to US$13.26 billion in 2011. The decrease in textile exports in year 2012 was mainly due to drop in commodity prices.

Domestic market continued to remain strong with the per capita consumption increased to 6.18 kg from 6.03 kg in 2011. Domestic demand for both polyester staple fiber and filament yarn increased significantly by 7% and 16% respectively in the year 2012. The excessive demand for filament yarn was met from increased volume of imports at relatively lower prices putting pressure on domestic prices. With the ongoing investments by the upstream on expansion, both the polyester staple fiber and filament yarn capacity is expected to increase up to 1 million tons each in 2014. While the domestic demand for polyester is expected to grow in the near term, prices and margins will be under pressure due to stiff competition and cheap imports from China and Malaysia.

PTA (Pure Therepthalic Acid) & Polymer

The global production of PTA in 2012 grew by around 5.4% or just over 2.6 million tons to reach 50.2 million tons. The markets are being influenced by massive new PTA investments taking place globally in the second half 2012-17-time frame. We estimate total effective PTA capacity will grow by 34.5 million tons from 58.8 million tons in 2012 to around 93.3 million tons in 2017.

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15

Staple Fiber

Global polyester staple fiber production in 2012 was estimated to be 15.23 million tons as compared to 14.51 million tons in 2011, registering a growth of 5% over 2011. The Company’s staple fiber production in the year 2012 increased by 13% over the previous year mainly contributed by the capacity increase supported by steady demand in the domestic market.

Filament Yarn

In 2012, global polyester filament yarn production was estimated at 26.68 million tons as compared to 25.13 million tons in 2011, thus registering a growth of over 6%. The Company’s filament yarn production continues to remain at optimum levels and increased by 5% driven by steady market demand.

Performance Fabric

The performance fabric division continued to operate through a production tolling arrangement with its erstwhile subsidiary, Texmaco Jaya. Even after the bankruptcy of PT Texmaco Jaya, the tolling arrangements continued with the approval of the commercial court. The production and sales of performance fabrics optimized during the year 2012.

Product Range

The Company’s product range includes:

Product Type Utilization

1. PTA (Purified Therepthalic Acid) Manufacture of Polyester Chips

2. Polyester Chips Semi-Dull Super Bright

Optical Bright

Polyester Filament yarn/staple fiber Filament yarn/ staple fiber

Polyester staple fiber Filament yarn

3. Polyester Staple Fiber Normal Spun Yarn Non Woven

Fiber Fill

4. Polyester Filament Yarn Normal Micro Filament

Hi filament

Differential Shrinkage

Tailored Clothing - Formal and Casual Super fine apparel fabrics with cotton

tencel free Fine apparel fabrics

Fine apparel fabrics

5. Fabrics High

performance

fabrics

Outdoor wear, Winter clothing active wear,

sportswear, children’s wear

Annual Report 2012

16

Marketing Distribution

APF is a trusted long-term partner for global textile consumers producing fabrics for apparel, home- textiles, Automotive, footwear, sportswear, hygiene and health care and various other applications.

The Company has a very strong marketing network and supply chain management which differentiate it from its competitors. It maintains a very close collaboration with its customers through tailored and innovative branded products unique to APF and enjoy high level of customer loyalty. As a strategic move, the marketing team focuses on product and application innovation to customize products for value creation. APF has recently developed and branded the premium tier of its portfolio of specialty products that provide performance Comfort, aesthetic and other advantages.

APF continues to focus its efforts to maintain the leadership position in the domestic market and increase its market share for its products filament yarn and staple fiber.The Company has allocated higher volume of production to domestic market to meet the increased requirement of the down stream customers. Domestic sale proportion has increased to 83% in 2012 as compared to 78.8% for the previous year.

Human Resources

Asia Pacific Fibers recognizes that human resources are the core assets of the company and continuously strives to nurture and develop the talents and skills to keep pace with the advancement in technology and changing customer needs. The employees are put on specialized training to upgrade their skill levels with a view to provide career growth opportunities. A well-structured performance appraisal and incentive scheme is in place to boost the motivation of the employees. The employees are encouraged to participate in collective decision-making process through well-established communication channels across the organization and contribute to value creation. The Company endeavors to maintain harmonious industrial relations and implemented a number of welfare measures such as education, health, and social security to improve their social status. The Company has also formulated an Employee Stock Option Plan to reward performance and promote a sense of belongingness amongst the employees.

Environment

With its strong commitment to environmental safety and protection, the Company is strictly adhering to stringent emission norms of its effluents. The Company is fully compliant to all applicable environmental standards of Indonesia, with Badan Pengendali Lingkungan (BAPEDAL) as its regulating authority. The Company also installed and commissioned 100% waste recycling facility at Karawang (“Glycolysis”) to convert all its waste into ‘green label products’ and to ensure ZERO waste from its production facilities.

Location & Type of Assets Work more than 5% of Total Assets

The Company has certain assets whose values exceed 5% of the Company’s total assets. For APF, these assets, which essentially consist of land, machinery and buildings, including the PTA Plant, Polymer facilities, fiber line and yarn equipment, and are located in two manufacturing facilities in Kaliwungu, in Central Java, and Karawang, in West Java.

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17

Hypothecated Fixed Assets

APF has production facilities at Karawang and Kaliwungu. Land totaling 15.9 hectares, with buildings, plant and equipment and located in Kaliwungu facilities, are hypothecated to IBRA (Indonesia Bank Restructuring Agency). Land totaling 26.62 hectares, with buildings, and production facilities at Karawang are secured to the Company’s guaranteed Secured Notes.

Dividend Policy

APF has historically paid an annual dividend after approval of the Company’s shareholders at the Annual General Meeting of the shareholders. However in view of the current financial situation, APF has not declared a dividend for 2012.

Stock Price Performance

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

2012

Highest

Lowest

Volume

2011

Highest

Lowest

Volume

(Rp)

(Rp)

(Shares)

(Rp)

(Rp)

(Shares)

485

330

10,158,900

245

170

4,343,500

480

220

14,103,900

540

180

38,711,200

315

188

8,344,200

810

365

70,257,100

245

196

11,564,500

590

310

33,241,900

Restructuring Status & Financing Activities

The secured debt restructuring is under active consideration by its majority creditors and PPA. After several rounds of discussions amongst the Company and the Secured creditors, final response in the form of a counter proposal is still awaited from PPA. In the meantime, Damiano Investments BV, the majority shareholder is also the majority holder of secured debts other than the PPA portion, has provided a working capital and Letter of Credit facilities for the procurement of raw materials. This has primarily helped the Company to sustain its operations and maintain optimum capacity utilization of its production facilities. Damiano Investments BV have also extended Capex loan to fund its capital expenditure projects that are critical to improve the competitiveness of the Company.

In view of its tight working capital position and non completion of secured debt restructuring, in January 2011 APF sought and received the approval of its unsecured creditors for the postponement of repayment of its first installment for the unsecured New Notes due on 15th February 2010 till 15th February 2012. The majority of New Note holders have approved the request by Polysindo (now APF) to postpone the repayment until (and commencing in) February 2012.

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18

Subsequently in January 2012, the Company again sought and obtained approval of its unsecured creditors for extension 3 years time and re-schedule principal repayments commencing from February 2015 instead of February 2012 as approved earlier. The majority New Note holders have approved the above request by the Company in their meeting held on 16th January 2012 at Singapore. The Company has subsequently started servicing of interest on new notes with effect from 15th May 2012 and has so far paid interest for three quarters during the year 2012.

The Company has four subsidiaries: PT Texmaco Jaya Tbk. (Bankrupt – under liquidation), Polysindo International Finance Company BV. (PIFC), Polysindo Mauritius Ltd., and PT EastindoPolymertama (Eastindo).

PT Texmaco Jaya Tbk (Bankrupt – under liquidation)

PT Texmaco Jaya’s was declared bankrupt by the commercial court Jakarta on 19th August 2011 as per the Court order 10/PKPU/2010/PN.NIAGA.JKT.PST. Jo No: 71/PAILIT/2010/PN.NIAGA.JKT.PST. The Court also appointed Dr. MARSUDIN NAINGGOLAN SH., as the supervisory Judge and a team of Receivers (Curators) Peter Kurniawan, SH., M.Kn., Lili Badrawati, SH., and Permata N. Daulay, SH. MH. to monitor and enforce the liquidation process as per the law. Subsequent to completion of debt verification, the Court had declared PT Texmaco Jaya Tbk insolvent and ordered liquidation of the bankrupt estate – vide Court order no 71/PAILIT/2010/PN.NIAGA.JKT.PST dated 26th September 2011. The Company is currently under liquidation process. In the meantime, the Court has approved continued operation of its Performance Fabrics division as a going concern with a view to maintain the value of the bankrupt assets. In accordance with the Court approval and pursuant to the tolling agreement between the team of curators and PT Asia Pacific Fibers, the Performance Fabrics division continues to operate on tolling basis.

Polysindo International Finance Company BV. (PIFC) and Polysindo (Mauritius) Ltd.

Polysindo International Finance Company BV (PIFC) and Polysindo (Mauritius) Ltd. are wholly owned subsidiaries of PT. Asia Pacific Fibers Tbk and act as financing vehicle for APF. The double taxation treaty between Indonesia and Mauritius has expired, hence APF intends to wind-up Polysindo (Mauritius) Ltd.

PT Eastindo Polymertama (Eastindo)

Eastindo was originally formed to implement the expansion of PTA and polymer production in Karawang which was later implemented through APF. As Eastindo has not engaged in any manufacturing activity, the Company is planning to wind-up PT Eastindo Polymertama.

Annual Report 2012

19

Management Discussion and Analysis

Overview The revenue of the company is derived from the sale of filament yarn, staple fiber, polyester chips, and performance fabrics, both in domestic and export markets. Total sales in 2012 have decreased from the previous year mainly due to drop in selling prices for all products during the year. Though the sales volumes increased with respect to fiber and filament yarn, the price drop on account of declining polyester chain margins has caused drop in sales revenue. The rupiah weakened during the year and closed at Rp 9,670/US$ as of 31st December 2012, compared to Rp 9,068/US$ in 2011. Pursuant to the Indonesian accounting standards 10 (PSAK 10), the Company had changed the reporting currency from IDR to US$ with effect from 1st January 2012 and had accordingly published the financial statements in US Dollar. Consequently the assets and liabilities of the Company was recalculated and restated wherever necessitated.

Results of Operations

In 2012, net sales revenue was US$599.33 million, as compared to US$635.53 million in 2011. The decline in net sales in 2012 was primarily on account of drop in in the selling prices for all products during the year, despite increased volume of sales. The drop in selling prices was on account of significant reduction in polyester chain margins triggered by falling PTA prices and margins. Export sales were US$101.79 million or 16.98% of the net sales, and domestic sales were US$497.54 million accounting for 83.04% of the net sales. Other operational revenue was US$1.20 million, realized through the sale of indirect materials.

Gross Profit/ (Loss)

The Company incurred a Gross loss of US$5.98 million in 2012, as compared to a profit of US$13.88 million in 2011. This loss was mainly due to significant drop is price realization and margins for all products during the year caused by weak market conditions coupled with falling polyester chain margins as explained in the foregoing paragraphs.

Operating Profit / (Loss)

The operations of the company had, therefore resulted in an operating loss in 2012 at US$17.53 million compared to US$19.86 million in 2011. The operating loss was after considering the foreign exchange gain of US$11.82 million in 2012 and a loss of US$2.16 million in 2011. Selling and General Administrative overhead in the year 2012 was US$31.89 million as compared to US$32.45 million in 2011. The decrease in the selling and administrative overhead was mainly due to reduction in export sales volume during the year 2012.

Net Income

The Company incurred net loss of US$32.12 million in 2012, as compared to a net loss of US$8.84 million in 2011. However, the Company posted an EBITDA of US$36.84 million in 2012, compared to an EBITDA of US$77.85 million in 2011.

Annual Report 2012

20

Business Risks

The buoyancy and high profit margin prevailed in 2011 for the polyester products took a downward trend in 2012 as PTA margin and the price of cotton crashed drastically. The volatility in the price of raw materials Paraxylene and MEG and the price of PTA pose uncertainty with regard to the selling price of polyester products. The envisaged expansion of polyester products in Indonesia has been put on hold with uncertainty in the market condition. The increase volume of imports of polyester filament yarn into Indonesia is putting pressure on the domestic prices as China and India are dumping their production in Indonesia. Currently the crude oil price (WTI Crude) is hovering above US$100/barrel. While pricing typically trends with oil prices, in recent months the price for PX is tracking more to industry supply/demand. PX supply has been balanced to tight during the year 2012 and forecast to remain tighter during first semester of 2013. The Company is still depending on pre-financing arrangements, in addition to the working capital facility provided by the majority owner, for the procurement of raw materials and in the absence of a conventional source of working capital through normal banking channels. A formal working capital loan through a bank will be possible only when the secured debt is restructured.

Debt Restructuring

The secured debt restructuring has not yet been completed, as the Company still awaits a response from the PPA. Damiano Investments BV, the majority shareholders is also the majority holders of secured debt, other than the PPA portion. Damiano Investments BV continued to provide working capital loans and a Letter of Credit facility for the procurement of raw materials. This has helped the Company to maintain optimum capacity utilization of the Company’s production facilities. In view of its tight working capital position and non-completion of secured debt restructuring, in January 2012, Asia Pacific Fibers (APF) sought and received the approval of its unsecured creditors for extension of the principal repayment schedule by 3 years and accordingly the first installment will be due on 15th February 2015.

Corporate Governance

The Company has complied with the various statutory requirements of Indonesian Corporate Law, Capital Market Law, and Stock Exchange Regulations. The Board of Commissioners is represented by eminent people in the field of Finance, Economics, and Law, in addition to the majority shareholders’ representatives. The Board of Commissioners meets on a quarterly basis to review the operations of Board of Directors and the Company. The Board of Directors of the Company meets frequently to review the operations of the Company and to discuss and finalize important issues. The Company’s Internal Audit Department is headed by Mr. Yohanes Baptis Galuh Adjar Pamungkas, ably assisted by experienced staff members. Internal audits on various functions are conducted concurrently and the audit reports are being reviewed by the Independent Commissioner and the Board of Directors periodically to ensure remedial actions. The Company has a “Corporate Secretarial Department” headed by Mr. Tunaryo, and assisted by experienced staff in the field of finance and legal affairs.

Annual Report 2012

21

The Company has been disclosing material information to the shareholders, stakeholders, and the public. The Company will continue to strive to bring more transparency and fairness in its reporting to its shareholders, stakeholders, and the public.

Corporate Social Responsibility (CSR)

The Company has been continuosly and consistently participating in the community development programme through its Corporate Social Responsibility Programmes (CSR) over the past several years as a part of its commitment to create a value for society. APF has been actively involved, as a part of its social obligation to create a better community and environment in and around its operational facilities. APF’s major intiatives are in the field of education, health, environmental control, civic amenities, infrastructure and development of vocational skills. APF has been carrying out these CSR activities on a more channelised and focusssed manner through “Yayasan Asia Pacific Fibre”. Some of the major ongoing activities and initiatives are given below:

Education Programmes:

a) Construction of elementary school building in the Blendung Village, Klari, Karawang district.

b) Distribution of scholarships to students in Karawang and Kaliwungu region.

Health care programme:

a) Providing free medical treatment and medicines to the needy people in Sumberejo and Nolokerto, Kaliwungu, Kendal

b) Construction of building to house the primary health centre for in patients at Klari, Karawang

Religious and Cultural activities:

a) Construction of boarding school for religious studies, prayer halls and facilities at Karawang and Kaliwungu.

b) Actively supporting religious and cultural activities in the region to improve social harmony.

Environmental aspects:

a) “Go Green” movement in coordination with the University of Jenderal Sudirman Purwokerto.

b) Planting of teakwood trees in Kaliwung region.

Humanatarian Relief:

a) Renovation/reconstruction of flood effected schools Mangkang Kulon, Semarang. b) Relief assistance to disaster effected people in Megelang and Padang.

Social and Economic empowerment:

a) Financial assitance to small scale/cottage industries in the region b) Promotion of fiber waste processing units in the region to provide self employment to

local people.

Annual Report 2012

22

Corporate Information

Date of Incorporation February 15th, 1984 Listing on the Indonesia Stock Exchange 1. Public Offering in February 1991

Partial Listing of 24,000,000,000 shares on 12 March 1991 on the Jakarta and Surabaya Stock

Exchanges.

2. Company Listing in January 1992

Company listed 68,000,000 shares on 3 January 1992 on the Jakarta and Surabaya Stock

Exchanges. The Company’s total number of listed shares was 92,000,000.

3. Rights Issue Offering in October 1993

Between November 1, 1993 and January 3, 1994, the Company launched the first Rights Issue

Offering of 184,000,000 shares. After the rights issued, the number of issued shared shares of

the company totaled to 276,000,000.

4. Stock Splits in March 1995

With the stock splits on 27 March 1995 respectively, a total of 552,000,000.

5. Bonus issue and dividend shares in April 1995

On 12 April 1995 and 17 April 1995, respectively, a total of 552,000,000 bonus and dividend

share were listed on Jakarta and Surabaya Stock Exchanges. The total number of listed on both

Jakarta and Surabaya Stock Exchanges amounted to 1,104,000,000.

6. Rights Issue Offering II in June 1996

With the second Right Issue Offering on 10 June 1996, 1,104,000,000 shares were listed on

Jakarta and Surabaya Stock Exchanges, which gives a total of 2,208,000,000 shares listed on

the Stock Exchange Houses.

7. Rights Issue Offering III in December 1997

The third Rights Issue Offering on 24 December 1997 launched a sum of 2,185,920,000 shares

on Jakarta and Surabaya Stock Exchanges. Thus, after the completion of rights Issue III, the

Company’s total number of listed shares is 4,393,920,000.

8. Debt to Equity Swap in September 2006

APF has received approval from Department of Justice and Human Right for the issue of

43,144,238,750 shares to its unsecured creditor as a part of debt to equity swap as approved

by Jakarta Commercial Court. Out of that as on 31st December 2006, APF has allotted

36,093,831,290 shares to unsecured creditors who have made their claim with the Company.

APF has also received approval from Department of Justice and Human Right for the

40,340,241,250 shares to be issued to its secured creditors as per Secured Debt Restructure

Proposal (“SDRP”). APF has not allotted any shares so far as of 31st December 2007.

9. Reverse Stock in February 2008

The Company has amended its Articles of Association in connection with the reverse stock split

with ratio 20:1. And based on notarial deed of Sutjipto SH No. 91 dates February 21, 2008

Annual Report 2012

23

about the changes of Articles of Association, the authorized capital of the Company amounts

to Rp 16,000,000,000,000 consisting of 12,357,255,040 shares. The deed was approved by

Minister of Justice and Human Rights in its decision letter No. AHU-10588.AH.01.02 Year 2008

dated March 3, 2008.

10. The Company obtained the approval of the shareholders of the Company in the Extra Ordinary

General Meeting of Shareholders held on 24th March 2009, the issuance of 5% (118,845,397

shares) of Issued and Paid-up capital of series ‘C’ share without preemptive right, for providing

stock option to the Company management and employees (Management Employee Stock

Option Programme).

11. The Company obtained the approval for the change of name to PT Asia Pacific Fibers Tbk from

Minister of Justice on 10th November 2009 and Indonesian Investment Coordinating

Board/BKPM on 2nd December 2009.

12. Based on the notaries deed of Aryanti Artisari, SH, M.Kn. No 107 dated February 23, 2012, the

stockholders agreed to used their option right regarding the Management Employee Stock

Option Programme (MESOP). It was connected with the notarial deed of Sutjipto, SH No. 91

dated March 24, 2009 regarding the issuance of 118,845,397 new authorized shares series ‘C’

(5% of issued and paid-up capital) without preemptive rights at par value of Rp 40 each. The

execution price at March 5, 2012 is Rp 45 each, and the shares have been fully paid-up on

February 20, 2012 and February 21, 2012. The shares also registered in the Indonesian Stock

Exchange through announcement No. Peng-P-00032/BEI.PPR/03-2012 dated March 5, 2012

and No. Peng-P-00033/BEI.PPR/03-2012 dated March 7, 2012.

Total Structure listed on Indonesia Stock Exchange as of 31 December 2012

2,495,753,347

Capital Structure as 31 December 2012

Serie A

Authorized Capital Rp 8,500,000,000,000

Nominal Value per share Rp 10,000

Paid-up Capital Rp 2,196,960,000,000

Serie C

Authorized Capital Rp 166,968,960,000

Nominal Value per share Rp 40

Paid-up Capital Rp 91,042,293,920

Shareholders

Damiano Investment 51.65%

KYOA Investment Limited 6.04%

PT. Multikarsa Investama* 5.26%

Public 37.05%

* Shares transferred by PT. Multikarasa Investama to PT. Bina Prima Perdana under IBRA

restructuring. Registration with Indonesia Stock Exchange yet to be completed.

Annual Report 2012

24

Board of Commissioners

President Commissioner Robert Clive Appleby Commissioner Kamun Cheong Commissioner Robert McCarthy Commissioner Christopher Robert Botsford IndependentCommissioner Dono IskandarDjojosubroto Independent Commissioner Timbul T. Lubis, SH, LLM

Board of Directors

President Director Vasudevan Ravi Shankar Director Drs. Masjhud Ali, MBA Director Seeniappa Jegatheesan Director Peter Vinzenz Merkle

Company’s Activities

Engaged in the production of PTA, Polymer, Polyester Fiber, Filament Yarn and Synthetic Fabrics. Production Capacity as of 31 December 2012

Purified Therepthalic Acid (PTA) 340.000 tons/year Polyester Chips 330.400 tons/year Polyester Staple Fiber 198.000 tons/year Polyester Filament Yarn 140.000 tons/year

Representative Office

The East 35th Floor, Unit 5-6-7 Jl. Lingkar Mega Kuningan Kav. E3.2 No. 1 Jakarta 12950 Tel : (62-21) 579-38555 Fax : (62-21) 579-38565

Registered Office

Desa Nolokerto Kecamatan Kaliwungu, Kendal Tel : (62-24) 8660272 Fax : (62-24) 8660275

Manufacturing Facilities Plant 1: Plant 2: Desa Kiara Payung, Jl. Raya Kaliwungu Km. 19 Klari, Karawang Kendal, Semarang West Java - Indonesia Central Java - Indonesia Tel : (62-267) 431971 Tel : (62-24) 8660272 Fax : (62-267) 431975 Fax : (62-24) 8660275

Annual Report 2012

25

Share Registrar

PT. Datindo Entrycom Wisma Dinners Club Annex Jl. Jend. Sudirman 34-35 Jakarta 10220 Registered Public Accountant

Hendrawinata, Eddy & Siddhartha (Indonesian Member firm of Kreston International) Intiland Tower 18th Floor Jl. Jend. Sudirman Kav.32 Jakarta 10220, Indonesia Tel: (62-21) 571-2000 Fax: (62-21) 570-6118

Annual Report 2012

26

REPRESENTATION LETTER MEMBERS OF BOARD OF COMMISSIONERS AND DIRECTORS

REGARDING RESPONSIBILITY FOR ANNUAL REPORT 2012

PT ASIA PACIFIC FIBERS Tbk.

We, the undersigned, certify that all the information in the Annual Report of PT Asia Pacific Fibers Tbk. 2012, is complete and we are fully responsible for the accuracy of the contents. Such statement was made correctly.

Jakarta, 23 April 2013

Robert Clive Appleby Komisaris Utama

Vasudevan Ravi Shankar Direktur Utama

Kamun Cheong Komisaris

Drs. Masjhud Ali MBA Direktur

Christopher Robert Botsford Komisaris

Seeniappa Jegatheesan Direktur

Robert McCarthy Komisaris

Peter Vinzenz Merkle Direktur

Annual Report 2012

27

Timbul Thomas Lubis, SH LLM Komisaris Independen

Dono Iskandar Djojosubroto Komisaris Independen

Consolidated Financial Statements and Independent Auditors’ Report PT Asia Pacific Fibers Tbk And Its Subsidiaries December 31, 2012, December 31, 2011 and January 1, 2011

CONTENTS

Board of Directors’ Statement Independent Auditors’ Report Page Consolidated Financial Statements Consolidated Statements of Financial Position 1 Consolidated Statements of Comprehensive Income 4 Consolidated Statements of Changes in Equity 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 Schedule

Supplementary Financial Information 1 – 6

ASIA PACIFIC FIBERS

PT. Asia Pacific Fibers Tbk.

The EASI 35'h Floor Unit 5-6-7

Jl. DR. lde Anak Agung Cde AgungKav. E3.2 No. 1

Jakarta 12950 - INDONESIA

Phone : +6221 57938555Fax. : +62 2'l 57938565E-mail : [email protected]

BOARD OF DIRECTORS STATEMENTREGARDING

THE RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTSAS AT DECEMBER 3I,aOIa,DECEMBER 3I,2OII AI\D JANUARY I,2OII

AI\D FoR THE YEARS ENDED DECEMBER 31, 2012 AI\D 20ttPT ASIA PACIFIC FIBERS TbK AND ITS SUBSIDIARIES

We, the undersigned :

1. NameOffice address

Residential addressAs stated in ID

Telephone numberTitle

NameOffrce address

Residential addressAs stated in ID

Telephone numberTitle

2.

Vasudevan RavishankarThe East 35ft floor Unit 5-6-7Jl. Lingkar Mega Kuningan Block E3-Z Kav. IJakarta12950Jl. Jambu No. 30 RT 005/002Gondangdia - MentengJakarta Pusat021-s7938ss5President Director

Peter Yinzenz MerkleThe East 35ft floor lJntt 5-6-7Jl. Lingkar Mega Kuningan Block E3-2 Kav. IJakarta 12950Ap arteme nt P laza S enayanJl. Tinju No. I Pintu Satu SenayanJakarta021-579385ssDirector

Declare that :

1. W-e areresponsible for the preparation and presentation ofthe consolidated financial statements ofpT Asia pacificFibers Tbk and its Subsidiaries;

2. The corsolidated financial statements of PT Asia Pacific Fibers Tbk and its Subsidiaries have been prepared andpresented in accordance with the Indonesian Financial Accounting Standards;3. a. All information in the consolidated financial statements ofPT Asia Pacidc Fibers Tbk and its Subsidiaries

have been disclosed in a complete and truthfrl manner;b. The consolidated financial statement ofPT Asia Pacific Fibers Tbk and its Subsidiaries clo not contain any

incorrect information or material fact, nor do they omit infomration or material fact;4' We are responsible for PT Asia Pacific Fibers Tbk and its Subsidiaries' intemal controisystem.

Thus this statement is made trutbirlly.

19,2013Director

,ru.ft'/lrVasudevan Ravi Shankar Peter Yinzerw Merkle

Registered Office: Jl. Raya Kaliwungu Km.19, Nolokerto Kaliwungu Kendal 513372 CentralJava - INDONESIA

Phone: +62 24 8660272 Fax.: +62 248660275

E Kreston lnternationalA global network of independent accounting firms

fiENDRAWI NATATDDYA SIDDHARTARegistered Public Accountants

License: 1095/KM .1,/ ZOLL

Ariobimo Sentral 3rd floorJl. H.R. Rasuna Said Blok X-2 Kav. 5Jakarta l-2950. lndonesipTel. : 62-2L 5290 091-8Fax. : 62-2L 5290 0917e-nra i I : hes-ku n i nga n@kreston-i ndonesia.co. id

No. : 044a/02|ISS/IV13

INDEPENDENT AUDITORS' REPORT

The Stockholders, Directors, and CommissionersPT ASIA PACIFIC FIBERS TbK

We have audited the accompanying consolidated statements of financial position of PT Asia Pacific FibersTbk (the "Company") and its Subsidiaries as of December 31, 2012, December 31, 20ll and

- January l,20ll, and the related consolidated statements of comprehensive income, consolidated statementsof changes in equity and consolidated statements of cash flows for the years ended December 31,2012 and.2011. These consolidated financial statements are theresponsibility of theCompany's management. Ourresponsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audits in accordance with auditing standards established by the Indonbsian Institute ofCertified Public Accountants. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,the consolidated financial position of PT Asia Pacific Fibers Tbk and its Subsidiaries as ofDecember 3I, 2012, December 3I, 20ll and January I, 2011, and the consolidated results of theiroperations and their cash flows for the years ended December 3I, 2012 and 2011, in conformity withIndonesian Financial Accounting Standards.

As disclosed in Note 4 to the consolidated financial statements, commencing January I,zIl2,the Companychanged its reporting cuffency from Indonesian Rupiah to United States Dollars by adopting FinancialAccounting Standard No. 10 (Revised 2010) "The Effects of Changes in Foreign Exchange Rate". As aresult, the consolidated statements of financial position as of December 31,2011 and January 1,2011 andthe related consolidated statement of comprehensive income, consolidated statement of changes in equityand consolidated statement of cash flows for the year ended December 31,2011, which had been previouslypresented in Indonesian Rupiah, have been re-measured to United States Dollar.

As disclosed in Note 55 to the consolidated financial statements, the Company has made adjustments on thebalance of property, plant and equipments and beginning balance of accumulated deficit stated in theconsolidated statements of financial position which the previously were reported in the consolidatedfinancial statements for the year ended December 3I, 2011 and January 1,2011. As a result, the 20llconsolidated financial statements, were previously issued, have been restated. In our opinion, suchadjustments are appropriate and have been properly applied. In addition, as disclosed in Note 56 to theconsolidated financial statements, certain accounts in the consolidated financial statements for the yearsended December 31,2011and January l,20ll have been reclassified to confirms with the presentation ofthe consolidated financial statements for the year ended December 31, 2012 which are in accordance withthe Capital Market and Financial Institution Supervisory Agency (BAPEPAM-LK)'s RegulationNo. VItr.G.7, enclosed in the decision letter No. KEP-34718L12012.

License : L22O / t\M ^V 2A3,1

Kreston Building.,11" Palang [Vlerah No. 40

Medan 7AYJ" lndonesiaTel.: 62-61 455 7925, 4.15 7295

Fax": 62-61 451 3159e-mE i I : hes-meda n@kreston-i ndonesia.co.id

License: tZtz/ V\M.I/ 20 tLlntiland Tower 18tn floor

Jl. Jend. $udirman Kav. 32Jakarta LA22A. lndonesla

Tel.: 62-21 571 2000Fax.: 62-2L57A 6LL8, 571 1818

e-ma i I : hes-sud i rma n@kreston-i ndon e$ia.co. id

www. kreston-l n donesia.co. id

Kreston lnternationalA global network of independent accounting firms

+{ENDRAWINATAf DDYA SIDDHARTA

Page 2

The accompanying consolidated financial statements have been prepared assuming the Company and itsSubsidiaries will continue as a going concern. As disclosed in Note 2 to the consolidated financialstatements, as of December 31, 2012, December 31, 2011 and January l, 2011, the Company and itsSubsidiaries had capital deficiency of US$ 797,838,849, US$ 766,263,067 and US$ 773,804,972,respectively, while the current liabilities exceeded its total of the assets by US$ 765,339,239,US$ 714,783,22I, and US$ 690,782,523, respectively. The Company and its Subsidiaries' current liabilitiesas of December 31, 2012 of US$ 1,000,263,703 or 86Vo of total current liabilities represent the secureddebts. As of the date of this report, one of the Company's secured creditors is PT Perusahaan PengelolaAsset (PPA) (288o) has not yet given its approval on the restructuring plan proposed by the Company.However, Damiano Investments BV., Netherland, a majority shareholder of the Company(51.65Vo ownership) and majority secured debt holder (66Vo) provided working capital loan facility totalingUS$ 17,340,000 and letter of credit facility of US$ 78,752,462 for raw material procurement. DamianoInvestments BV., Netherland, is still provides the requisite funds for the Company's expenses in subsequentyear through its Third Loan Agreement. The Company's management also continues to exert effort andexpects to obtain the resolution of the secured debt restructuring in order for the Company to obtain workingcapital from banks. The consolidated financial statements do not include adjustments that might result fromthe outcome of this uncertainty.

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements ofPT Asia Pacific Fibers Tbk and its Subsidiaries as of December 31, 2012, December 3I, 2011 andJanuary 1,2011 and for the years ended December 31,2012 and20ll, taken as whole. The supplementaryfinancial information of PT Asia Pacific Fibers Tbk (Parent Company only) as of December 31, 2012,December 31, 20ll and January 1,2011, and for the years ended December 31, 2Ol2 and 20ll in scheduleI to schedule 6 is presented for the purpose of additional analysis and is not a required part of the basicconsolidated financial statements in accordance with Indonesian Financial Accounting Standards suchsupplementary financial information has been subjected to the auditing procedures applied in the audit of thebasic consolidated financial statements and, in our opinion, is fairly stated, in all material respects, inrelation to the basic consolidated financial statements, taken as whole.

HENDRAWINATA, EDDY & SIDDHARTA

IskarimLicense

SupardjoNo. AP. 0336

March 18,2013

The accompanying consolidated financial statements are intended to present the consolidated financial positions, resultsof operations, and consolidated cash flows in accordance with accounting principles and practices generally accepted inIndonesia and not that of any other jurisdictions. The standards, procedures and practices to audit such consolidatedfinancial statements are those generally accepted and applied in Indonesia.

PT ASIA PACIFIC FIBERS Tbk AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31, 2012, December 31, 2011 and January 1, 2011

The accompanying notes to consolidated financial statements are an integral part of the consolidated financial statements

1

Notes December 31,

2 0 1 2 December 31,

2 0 1 1 (As Restated)

January 1, 2 0 1 1

(As Restated)

US$ US$ US$

ASSETS

CURRENT ASSETS Cash and cash equivalents 3g,i,6 9,793,989 3,438,164 9,775,651 Trade receivables, net after

allowance for impairment of US$ 15,657,945 in 2012 and 2011 and US$ 6,839,009 in 2010 Third parties 3h,i,7 57,988,028 50,095,415 46,948,272 Related parties 3h,i,7 27,789,291 29,634,147 29,887,938 Other receivables, net after allowance for impairment of US$ 36,721,575 in 2012 and 2011

and US$ 56,805,405 in 2010

Third parties 3h,i,8 3,300,907 2,529,473 492,869 Other current financial assets 3h,i,9 7,720,808 6,067,345 3,055,625 Inventories 3j,10 79,954,633 87,677,359 51,397,186 Purchase advances 11 34,605,192 37,846,870 32,373,354 Prepaid taxes 3t,29a 14,786,048 13,202,393 14,070,762 Prepaid expenses 3k,12 1,101,627 1,169,786 894,164

Total Current Assets 237,040,523 231,660,952 188,895,821

NON–CURRENT ASSETS Non-trade receivables from related

parties, net after allowance for impairment of US$ 111,962,653 in 2012 and 2011, and US$ 5,551,941 in 2010 3h,i,14 32,474,040 34,996,344 47,392,149 Other non-current financial assets 3h,i,15 1,113,711 1,140,893 1,905,194 Property, plant and equipment, net after accumulated depreciation of US$ 1,658,522,816 in 2012, US$ 1,588,852,556 in 2011, and

US$ 1,895,950,101 in 2010 3l,m,n,16 129,394,646 184,837,123 304,460,819 Intangible assets 3o,17 12,750 – – Deferred tax assets 3t,29d 3,216,621 − 14,570,331

Total Non–Current Assets 166,211,768 220,974,360 368,328,493

TOTAL ASSETS 403,252,291 452,635,312 557,224,314


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2012, December 31, 2011 and January 1, 2011


2

Notes

December 31, 2 0 1 2


(As Restated)

January 1, 2 0 1 1

(As Restated)

US$ US$ US$

LIABILITIES AND EQUITY (DEFICIENCY)

CURRENT LIABILITIES Trade payables Third parties 3q,18 22,942,334 23,798,883 24,811,511 Related parties 3q,18 7,150 − −

Accrued expenses 3q,19 43,319,170 45,606,299 77,375,906 Taxes payable 3t,29b 1,751,095 1,937,308 2,523,059 Bank Loans 3q,20 78,752,462 70,339,624 48,046,644 Secured Debts 3q,21 1,000,263,703 1,012,928,220 1,012,905,635

Short term loans 3q,22 − − 36,054,041

Notes payable 3q,23 − − 20,259,235

Current portion of long-term liabilities :

Working capital loans 3q,25 17,340,000 8,500,000 4,333,000 Credit financing payables 3p,26 64,651 57,035 52,884 Finance Lease Liabilities 3p,27 − − 4,300,981

Other short-term financial liabilities 3q 4,150,965 4,251,161 17,343,941

Total Current Liabilities 1,168,591,530 1,167,418,530 1,248,006,837

NON–CURRENT LIABILITIES Borrowing from Other Financial Institutions : Unsecured Debts and Notes Payable 3q,24 22,169,338 21,945,011 21,077,129 Working capital loans 3q,25 − 14,500,000 36,277,862

Credit financing payables 3p,26 55,535 48,524 77,437 Long-term Employee Benefits Liabilities 3s,28 10,274,737 8,561,749 8,189,736 Deferred tax liabilities 3t,29d − 6,424,565 17,400,285

Total Non–Current Liabilities 32,499,610 51,479,849 83,022,449


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2012, December 31, 2011 and January 1, 2011


3

Notes



January 1, 2 0 1 1

(As Restated) (As Restated)

US$ US$ US$


EQUITY (DEFICIENCY) Share Capital Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value per per Series B and

Rp 40 par value per Series C in 2012, 2011 and 2010 Issued and paid up 219,696,000 Series A and 2,276,057,347 Series C in 2012 and 2,157,211,950 Series C in 2011 and 2010 30 635,689,316 635,165,191 635,165,191 Additional paid-in capital 3u,31 624,344,507 624,325,603 624,325,603

Other components of equity 1c (21,339) (21,339) (21,339) Retained earnings (accumulated deficit) : Appropriated 32 2,345,301 2,345,301 2,345,301 Unappropriated (2,060,196,634) (2,028,077,823) (2,019,125,048)

Equity attributable to the owners of the Company (797,838,849) (766,263,067) (757,310,292) Non-controlling interests 33 − − (16,494,680)

Total Equity (Deficiency) (797,838,849) (766,263,067) (773,804,972)

TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 403,252,291 452,635,312 557,224,314


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2012 and 2011


4

Notes 2 0 1 2 2 0 1 1 (As Restated)

US$ US$ Continuing Operations :

REVENUES Net sales 3v,37 599,330,876 635,534,718 Other operating revenues 3v,38 1,200,875 533,044

Total revenues 600,531,751 636,067,762

COST OF GOODS SOLD 3v,39 (606,514,179) (622,188,564)

GROSS PROFIT (LOSS) (5,982,428 ) 13,879,198

Selling expenses 3v,41 (14,052,194) (13,725,399) General and administrative expenses 3v,42 (17,843,646 ) (18,726,822 ) Insurance claim settlement, net 3v,36 1,667,691 86,182 Gain (loss) on foreign exchange transactions, net 3c 11,816,164 (2,158,190) Miscellaneous income, net 3v,44 879,907 782,045

(17,532,078 ) (33,742,184)

LOSS FROM OPERATIONS (23,514,506 ) (19,862,986)

Finance costs 43 (18,245,491) (16,315,341)

LOSS BEFORE INCOME TAX (41,759,997 ) (36,178,327)

TAX INCOME (EXPENSE) 3t Current period 29e – – Deferred 29e 9,641,186 9,892,352

Total Tax Income 9,641,186 9,892,352

TOTAL LOSS FOR THE YEAR FROM CONTINUING OPERATIONS

(32,118,811

) (26,285,975

)

Discountinued Operations : Loss from discontinued operations 3b,45 – (6,396,381 )

Gain from disposal of Subsidiary 3b,45 – 23,841,586

TOTAL PROFIT FOR THE YEAR FROM DISCOUNTINUED OPERATIONS

–

17,445,205

TOTAL LOSS FOR THE YEAR (32,118,811 ) (8,840,770 )

OTHER COMPREHENSIVE INCOME, NET AFTER TAX

–

–

TOTAL COMPREHENSIVE LOSS (32,118,811 ) (8,840,770 )


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued) For the years ended December 31, 2012 and 2011


5

Notes 2 0 1 2 2 0 1 1

(As Restated)

US$ US$

TOTAL NET LOSS ATTRIBUTABLE TO : Owners of the Company (32,118,811 ) (8,952,775 ) Non-controlling interests – 112,005

Total Net Loss For The Year (32,118,811 ) (8,840,770 )

TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO :

Owners of the Company (32,118,811 ) (8,952,775 ) Non-controlling interests – 112,005

Total Comprehensive Loss (32,118,811 ) (8,840,770 )

EARNING (LOSS) PER SHARES : 3w

Basic 34a (0.01 ) (0.00) Diluted 34b (0.01 ) (0.00)


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2012 and 2011


6

Other Component

Retained earnings

of Equity (accumulated deficit)

Notes

Capital stock

Additional paid-in capital

Difference on restructuring among

under common control companies

Appropriated

Unappropriated

Total equity (deficiency) attributable

to the owners of the

Company

Non-Controlling

Interest

Total equity (deficiency)

US$ US$ US$ US$ US$ US$ US$ US$ Balance as of January 1, 2011 (As Restated) 635,165,191 624,325,603 (21,339) 2,345,301 (2,019,125,048) (757,310,292) (16,494,680) (773,804,972) Reclassified due to lost of controls 33 – – – – – – 16,382,675 16,382,675 Total loss for the year – – – – (8,952,775) (8,952,775) 112,005 (8,840,770) Other comprehensive income, net – – – – – – – –

Balance as of December 31, 2011 (As Restated) 635,165,191 624,325,603 (21,339) 2,345,301 (2,028,077,823) (766,263,067) – (766,263,067) Issuance of share capital 30,31 524,125 18,904 – – – 543,029 – 543,029 Total loss for the year – – – – (32,118,811) (32,118,811) – (32,118,811) Other comprehensive income, net – – – – – – – –

Balance as of December 31, 2012 635,689,316 624,344,507 (21,339) 2,345,301 (2,060,196,634) (797,838,849) – (797,838,849)


CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2012 and 2011


7

Notes 2 0 1 2 2 0 1 1 (As Restated)

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES Receipt from customers 634,181,470 646,901,210 Payment to suppliers (107,539,191) (121,707,320) Payment of salaries (16,579,363) (15,571,185) Other operating cash payments, net (61,251,557) (38,847,286)

Cash provided by operations 448,811,359 470,775,419 Interest received 31,754 21,064 Interest expense and bank charges paid (17,979,160) (15,781,720) Cash receipt from insurance claim settlement 36 1,667,691 86,182

Payment of income tax 29 (4,911,388) (11,407,441) Refund of income tax 29 5,940,924 7,119,722

Net Cash Provided By Operating Activities 433,561,180 450,813,226

CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire property, plant and equipment 16 (13,295,299) (9,005,981) Increase of other current financial assets 9 (521,237) (233,946) Payment of non-trade receivables from related parties 14 (2,224,168) (2,825,916 )

Net Cash Used In Investing Activities (16,040,704 ) (12,065,843 )

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of share capitals 30 591,434 – Payment of bank loans 20 (404,619,673) (428,449,261) Receipt of working capital loans 25 12,940,000 8,500,000

Payment of working capital loans 25 (18,600,000) (26,110,862) Receipt of credit financing payables 27 83,316 35,069 Payment of credit financing payables 27 (68,689) (59,831)

Net Cash Used In Financing Activities (409,673,612 ) (446,084,885 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

7,846,864

(7,337,502

)

EFFECT OF FOREIGN EXCHANGE RATE (1,491,039) 1,035,533

BALANCE OF UNCONSOLIDATED SUBSIDIARY 45 – (35,518 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

6

3,438,164

9,775,651

CASH AND CASH EQUIVALENTS AT END OF YEAR

6

9,793,989

3,438,164


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2012 and 2011

8

1. GENERAL a. Establishment and General Information

PT Asia Pacific Fibers Tbk (“the Company”) was established within the framework of the Domestic Capital Investment Law No. 6 year 1968, as amended by Law No. 12 year 1970 based on notarial deed No. 22 dated February 15, 1984 of Januar Tirtaamidjaja, S.H., notary in Jakarta. The above laws were subsequently amended by the Limited Liability Company Law of Republic of Indonesia No. 40 year 2007 dated August 16, 2007. The deed of establishment was approved by the Minister of Justice of the Republic of Indonesia based on decision letter No. C2–6107.HT.01.01.TH.84 dated October 26, 1984 and was published in Supplement No. 3247 of State Gazette No. 72 dated September 7, 1990. The Article of Association has been amended based on notarial deed No. 92 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta to adjust the Company’s Article of Association with Bapepam-LK No. IX.J.1 dated May 14, 2008 concerning the Principles of Association of Public Offering of Conduct Equity Securities and Public Companies. The deed of establishment was approved by the Minister of Justice of the Republic of Indonesia based on decision letter No. AHU-0052618.AH.01.09.Tahun 2009 dated August 14, 2009. The Articles of Association have been amended several times. The latest amendment of the Company’s Articles of Association was based on notarial deed No. 50 dated September 10, 2009 of Sutjipto, S.H., notary public in Jakarta, concerning the change in the Company’s name from PT Polysindo Eka Perkasa Tbk to PT Asia Pacific Fibers Tbk. The deed was approved by the Minister of Law and Human Rights of the Republic Indonesia based on his decision letter No. AHU-54294.AH.01.02.Tahun 2009 dated November 10, 2009 and the publishment in Supplement No. 21449 of State Gazette No. 77 dated September 24, 2010. The Articles of Association have been amended several times. The latest amendment of the Company’s Articles of Association was based on the notarial deed No. 107 dated February 23, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, concerning the implemented the Management Employee Stock Option Programme (MESOP) based on the Capital Market and Financial Institution Supervisory Agency (BAPEPAM-LK)’s Regulation No. IX.D.4. The deed was approved by the Minister of Justice and Human Rights of the Republic Indonesia based on his decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012. On February 4, 2011, the Company obtains the approval from the Chairman of the Capital Investment Coordinating Board (BKPM) in his letter No. 2/B/II/PMDN/2011 with regard to the cancellation of approval from the Chairman of the Capital Investment Coordinating Board (BKPM) in his letter No. 249/II/PMDN.1997 dated December 2, 1997. Further, the Company has received the approval of the Chairman of the Capital Investment Coordinating Board (BKPM) for the expansion of the Fibre capacity in Karawang side through the approval letter No. 2/B/II/PMDN/2011 dated February 24, 2011. This project has started in the second quarter of 2012.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2012 and 2011

9

1. G E N E R A L (Continued) a. Establishment and General Information (Continued)

In accordance with Article 3 of the Company’s Articles of Association, the scope of the Company’s activities are mainly to engage in the manufacturing of chemical and synthetic fiber, weaving and knitting, and other activities related to the textile industry. The Company is domiciled in Kendal, Central Java with its plants located in Kendal, Central Java and Karawang, West Java. The Company’s representative office is located at The East Building, 35th Floor, Jl. Lingkar Mega Kuningan Kav. E-3 No. 1, Jakarta. The Company started its commercial operations in 1986. The Company’s products are marketed both domestically and internationally, including Europe, United States of America, Asia, Australia and the Middle East. The Company has many ongoing social activities in the local environs of its two plant location in Semarang and Karawang which the purpose of this activity is to improve the livelihood of the surrounding communities. In order to carry out these programes more effectively, the Company has established a foundation, “Yayasan Asia Pacific Fibre” on January 15, 2010. The deed was approved by the Minister of Justice and Human Rights of the Republic Indonesia based on decision letter No. AHU-960.AH.01.04.Tahun 2010 dated March 15, 2010. The Company’s immediate parent company is Damiano Investments BV., incorporated in Netherland, and its ultimate parent company is ADM Capital and Spinnaker Capital Group, incorporated and domiciled in Hong Kong and United Kingdom.

b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries

• On December 14, 1990, the Company offered 12,000,000 shares to the public through the Jakarta and Surabaya Stock Exchanges, now known as Indonesian Stock Exchange.

• On October 8, 1993, the Company obtained the notice of effectivity from the Chairman of the Capital Market Supervisory Agency (BAPEPAM), in his letter No. S-1738/PM/1993, for its limited offering of 184,000,000 shares through rights issue with preemptive rights to stockholders. These shares were listed in the Jakarta and Surabaya Stock Exchanges on November 1, 1993.

• On December 15, 1994, the Company obtained the notice of effectivity from the Chairman of BAPEPAM, in his decision letter No. S-2027/PM/1994, for the change of par value from Rp 1,000 to Rp 500 per share.

• On May 20, 1996, the Company obtained the notice of effectivity from the Chairman of BAPEPAM, in his decision letter No. S-778/PM/1996, for its offering of 1,104,000,000 shares through rights issue II with preemptive rights to stockholders. These shares were listed in the Jakarta and Surabaya Stock Exchanges on June 10, 1996.



10

1. GENERAL (Continued) b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries (Continued)

• On December 11, 1997, the Company obtained the notice of effectivity from the Chairman of BAPEPAM, in his decision leter No. S-2844/PM/1997, for its offering of 2,185,920,000 shares through rights issue III with preemptive rights to stockholders. These shares were listed in the Jakarta and Surabaya Stock Exchanges on January 5, 1998.

• In 1994, the Company issued US$ 125,000,000 Unsecured Senior Notes which are listed in Luxembourg. In 1996, the Company offered to the holders of the said unsecured notes to exchange their notes with US$ 125,000,000 Guaranteed Senior Notes issued by PIFC with the Company as the guarantor. These notes were listed in the Luxembourg Stock Exchange.

• In 1996, PIFC, with the Company as a guarantor, also issued US$ 50,000,000 Secured Floating Rate Notes and US$ 260,000,000 Guaranteed Secured Notes which were listed in the Luxembourg Stock Exchange.

• In 1997, PIFC, with the Company as a guarantor, issued US$ 250,000,000 Guaranteed Secured Notes which were listed in the Luxembourg Stock Exchange.

• Prior to January 2000, the above notes issued by PIFC were delisted from Luxembourg Stock Exchange.

• Beginning December 2004, all of the Company’s outstanding shares totaling 4,393,920,000 shares were suspended regarding the the bankruptcy proceeding against the Company and delay in submitting the required consolidated financial statements. The Company’s shares were still suspended after the Company removes their bankruptcy. However, the Company took efforts to remove its suspension which includes submitting Company’s future plan of actions. Further in July 2006, all of the Company’s shares resumed trading.

• In 2006, The Company converted the unsecured debt amounted to 43,144,238,750 shares as part of the implementation of Composition Plan which have been approved and ratified by the Commercial Court. Based on the condition issued by Indonesian Stock Exchange, the new shares can not be traded for 1 (one) year. Further in October 2007, the new Company’s shares were traded.

• Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on February 21, 2008, the stockholders approved the reverse stock split (split down) with a ratio of 20:1 wherein 20 old shares will become 1 new share. Reverse stock splits are conducted for the Company’s shares to be more liquid and in line with the Company’s performance. Due to the changes in the Company’s number of shares and par value, the Company amended its Articles of Association and the notarial deed regarding the changes of the Company’s Article of Association had been approved by the Minister of Justice and Human Rights on March 3, 2008.



11

1. GENERAL (Continued) b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries (Continued)

• Further, based on the notarial deed of Sutjipto, S.H., No. 122 dated February 27, 2008 regarding shares purchase as the result of reverse stock split named PT Trimegah Securities Tbk as “Stand by Buyer”. In addition, all shares from reverse stock were traded on March 14, 2008.

• On October 10, 2008, the Subsidiary’s shares (PT Texmaco Jaya Tbk) have been delisted from the Indonesian Stock Exchange based on its letter No. S-04741/BEI.PSR/09/2008 and Peng-004/BEI.PSR/DEL/09-2008 due to the suspension of the trading shares and going concern problem of the Subsidiary.

• Since December 2, 2009, the Company’s shares in the Indonesian Stock Exchange have been changed with the new Company’s name.

• Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009 and based on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta, the stockholders approved the issuance of 118,845,397 new authorized shares series C (5% of issued and paid-up capital) without preemptive rights, for providing stock options to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). The notarial deed was approved by the Minister of Justice of the Republic of Indonesia based on his decision letter No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. As per the Company’s schedule that was reported to Indonesian Stock Exchange dated March 17, 2009, its programe will be implemented at the latest period (February 1, 2012). Further, based on the notarial deed No. 107 dated February 23, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, the Management Employee Stock Option Programme / MESOP) has been implemented with the execution price of Rp 45 each. All shares under MESOP have been fully paid up through the Company’s bank accounts dated February 20 and 21, 2012. It has been registered in the Indonesian Stock Exchange through announcement No. Peng-P-00032/BEI.PPR/03-2012 dated March 5, 2012 and No. Peng-P-00033/BEI.PPR/03-2012 dated March 7, 2012.

• Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and based on the notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, the stockholders approved the issuance of 74,872,600 new authorized shares series C (3% of issued and paid-up capital) without preemptive rights, for providing stock options to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). Up to December 31, 2012, the Company has not issued shares under this scheme. However, the Company has informed to Bapepam / IDX on the deferment of the issuance of shares with letter dated December 3, 2012.



12

1. GENERAL (Continued) c. Consolidated Subsidiaries

The Company has ownership interest of more than 50%, directly or indirectly, in the following subsidiaries :

Commercial Percentage of Total Assets Subsidiaries Domicile Nature of Business Operations Ownership 2012 2011 2010

% US$ US$ US$ (in million) (in million) (in million) PT Texmaco Jaya Tbk (TJ)

Karawang Trading, weaving, knitting and processing

1972 92.00 *) *) 68

PT Texmaco Graha Jakarta Trading of textile 1994 91.08 *) *) 19 Busana (TGB) and producing (99% owned by TJ) ready to wear garments and

accessories

Polysindo International Finance Company BV (PIFC)

Netherlands Financial services 1994 100.00 759 759 759

Polysindo (Mauritius) Ltd. (PML)

Republic of Mauritius

Financial services Pre-operating

100.00 – – –

*) Not applicable due to PT Texmaco Jaya Tbk (TJ) and PT Texmaco Graha Busana (TGB)

deconsolidation (Note 45).

• In 2001, the Company acquired 10,000 shares which represent 100% ownership in Polysindo (Mauritius) Ltd. The shares were acquired for the amount of US$ 10,000. The difference between the acquisition cost and the net assets of PML amounted to Rp 221,924,188 (equivalent to US$ 21,339) was recorded as “difference on restructuring among companies under common control” account as part of the other component equity in the consolidated statements of financial position.

• There were no transactions between the Company and Polysindo (Maurutius) Ltd and Polysindo International Finance Company BV during 2012, 2011 and 2010. The Company intends to close the operation of its subsidiaries along with the restructuring of the Company.

• Since April 2008, PT Texmaco Jaya Tbk (TJ) operations (Fleece division) are conducted by the Company with tolling basis.

• Since the second semester of 2004, PT Texmaco Graha Busana has halted its business operations.



13

1. GENERAL (Continued) d. Employees, Directors and Commissioners

• The members of the Company’s board of commissioners and directors as of December 31, 2012, 2011 and 2010 are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 Board of Commissioners :

President Commissioner : Mr. Robert Clive Appleby Mr. Robert Clive Appleby Mr. Robert Clive Appleby Independent Commissioners : Mr. Dono Iskandar

Djojosubroto Mr. Dono Iskandar Djojosubroto

Mr. Dono Iskandar Djojosubroto

Mr. Timbul Thomas Lubis SH



Commissioners : Mrs. Cheong Kamun Mr. Antonitris Mr. Antonitris Mr. Christopher

Robert Botsford Mr. Christopher Robert Botsford

Mr. Christopher Robert Botsford

Mr. Robert Mc Carthy Mr. Robert Mc Carthy Mr. Robert Mc Carthy Board of Directors :

President Director : Mr. Vasudevan Ravi Shankar

Mr. Vasudevan Ravi Shankar

Mr. Vasudevan Ravi Shankar

Directors : Mr. Masjhud Ali Mr. Masjhud Ali Mr. Masjhud Ali Mr. Seeniappa

Jegatheesan Mr. Seeniappa Jegatheesan

Mr. Seeniappa Jegatheesan

Mr. Peter Vinzenz Merkle


Mr. Peter Stanley Grant


Mr. Antonitris, one of the Commissioners of the Company, resigned from the Board of Commissioners based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 87 dated June 18, 2012. Mr. Peter Stanley Grant, one of the Directors of the Company, resigned from the Board of Directors based on the resolution passed at the Extraordinary Shareholder’s Meeting held on February 10, 2011.

• Audit Committee is appointed based on BAPEPAM regulation No. IX.1.5 regarding the forming and work guidance audit committee to comply with BAPEPAM-LK regulation Board of Commissioners has formed Audit Committee. The members of the Company’s Audit Committee as of December 31, 2012, 2011 and 2010 are as follows : Chairman : Mr. Timbul Thomas Lubis, S.H. Member : Mr. Drs. Heroe Pramono Mr. Djati Suara



14

1. GENERAL (Continued) d. Employees, Directors and Commissioners (Continued)

• The Company’s corporate secretary as of December 31, 2012, 2011 and 2010 is Mr. Tunaryo.

• In February 2009, the Company formed an internal audit department based on BAPEPAM-LK regulation. The head of internal audit is Mr. Yohanes Baptis Galuh Adjar Pamungkas.

• The total number of the Company’s permanent employees as of December 31, 2012, 2011 and 2010 were 3,507; 3,366 and 3,158 persons, respectively (unaudited). As of December 31, 2012, 2011 and 2010, the Subsidiary’s permanent employees were Nil, Nil and 238 persons, respectively (unaudited).

e. Presentation and Responsibility of the Consolidated Financial Statements

The consolidated financial statements were authorized by the Board of Directors on March 18, 2013.

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS a. Going Concern

After a strong performance in 2011 supported by handsome commodity margins, especially PTA margins and the substitution effects of Cotton, in 2012 saw a reversal of all these favorable factors. PTA margins continue to decline through the year and hit the bottom by at end of the year. Cotton prices had also dropped steeply during the year putting downward pressure on Polyester prices, Polyesther Staple Fibers prices in particular. These factors have impacted the performance of the Polyester Industry globally. Global economic downturns driven by European debt concerns and the US economic concerns have severely affected the Global textile trade, and dampening the demand outlook. Huge capacity additions in PTA, Polyester Fiber and Polyester Filament led to lower operating rates, putting further downward pressure on polyester chain margins.

Despite the dampening market conditions, the Company operated its plant to its near full capacity supported by the sustained demand from domestic market. The Company has also continued its Capex investment plans and completed some of the strategically important projects during the year 2012. The expansion of fiber line has become fully operational in the year and the installation of five (5) new texturizing machines has also been completed and commercial production also commenced during the year. Damiano Investments BV., Netherland has been providing the requisite funds for the above-mentioned capital expenditure through Third Loan facility.



15

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS (Continued) a. Going Concern (Continued)

While the paraxylene supply position remained tight and the prices remained fairly firm, the PTA prices continued to decline thru’ the year and the margins crashed and bottomed out by the end of the year. Consequently the selling prices of PSF and PFY were under pressure during the year and margins plummeted to the lowest levels in the second semester of the year. Hence the sales revenue has dropped to US$ 600 million as compared to US$ 636 million for the previous year, despite increase in volume of production and sales.

The escalation in the cost of gas had a cascading effect on the cot of production that further dented the profitability of the Company. The cash profit also slumped to US$ 36 million from the previous level of US$ 78 million. With the result of lower profitability cash flow position remained tight through the year. Prudent working capital management has helped the Company to tide over tough phase and operate the plants at near full capacity and also to meet all its commitments without default. Damiano Investments BV., Netherland continued to support the Company by increasing the letter of credit working capital to around US$ 84 million. Despite tight working capital position, Company started servicing of interest to its unsecured creditors (New Notes) effective May 2012. Interest on the third loan (CAPEX loan) and letter of credit facility was also serviced during the year. Polyester chain margins that bottomed out in the fourth quarter of last year are expected to stage a recovery from second quarter of 2013 supported strong domestic demand from China. Despite fluctuations in the price, polyester sector will grow over 6% in the next three (3) years. Strengthening of cotton prices due to anticipated shortfall in production would help stabilizing the polyester prices and demand during the year. The Company with its capability to increase the volume of specialty products and cost effective production of commodity products, will be able to face the competition and sustain its market share besides making entry into new market segments. This will in turn enable the Company to sustain its financial performance on a longer term. Until March 2013, the Secured Debt Restructuring Plan (SDRP) is not approved by, particularly by PT Perusahaan Pegelola Asset (PPA) which owned about 28% of the total secured debt as some of the terms under the SDRP are not agreed by PPA. The Company and its majority stockholders continue to have request PT PPA for its consent to the restructuring of its secured debt. Upon completion of this restructuring, and the consequent reorganization of its consolidated statement of financial position, the Company is confident of securing a formal working capital lending from a conventional banking sources. The major terms of the Secured Debt Restructuring Plan (SDRP) are as follows: Proposed Restructuring Date July 1, 2007



16


Interest on New Notes Interest shall be payable on the New Notes quarterly in arrears and

calculated on the outstanding principal amount of the New Notes during the quarter at the per annum rates shown in the table below : Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 0.0% 2.0% 2.0% 2.0% 4.0% 4.0% 4.0% 4.0% 4.0%

Amortisation Principal repayment shall be made at the end of each 12-month period

beginning on the fourth anniversary of the Restructuring Date. The amount payable shall be equal to the percentages of the restructured principal amount shown in the table below:

Yr1 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 0% 0% 0% 5.0% 17.5% 17.5% 17.5% 20.0% 22.5%

Debt Restructuring New Secured Notes will be exchanged at 10.73 Cents per US$ 1.

40.90% of the expanded equity will be allotted to the Secured Creditors as per the Debt /Equity swap indicated in the SDRP

In addition, the Company and its Subsidiaries’ consolidated financial condition in 2012 showed the following :

• Total comprehensive loss amounting to US$ 32,118,811.

• Negative working capital amounting to US$ 931,551,007.

• Capital deficiency amounting to US$ 797,838,849. In 2012, there was a significant improvement in the capacity utilization of Company’s facilities in Karawang and Semarang. It achieved a capacity utilization level of more than 95% in both the facilities. Subsidiary’s Operations (PT Texmaco Jaya Tbk) : Consequent to declaration of bankruptcy of PT Texmaco Jaya by the commercial court of Jakarta on 19th August 2011 as per the court order No. 10/PKPU/2010/PN.NIAGA.JKT.PST Jo No: 71/PAILIT/2010/PN.NIAGA.JKT.PST, the management of the Company and enforcement of the liquidation process was under the team of curators appointed by the Court and monitored by the supervisory judge. Subsequently, the Curators had conducted debt verification and registration process as per the provisions of the law and the final registered debt is as follows:



17


Subsidiary’s Operations (PT Texmaco Jaya Tbk) (Continued) :

Sl No Details Amounts in Rupiah No of Creditors

1 Preferred Creditors 15,478,161,747.06 4

2 Secured Creditors 602,914,924,862.14 3

3 Unsecured Creditors 1,515,354,797,944.92 47

Total 2,133,747,884,554.12 54 Subsequent to completion of debt verification, the Court had declared PT Texmaco Jaya Tbk insolvent and ordered liquidation of the bankrupt estate – vide Court Order No 71/PAILIT/2010/PN.NIAGA.JKT.PST dated September 26, 2011. The total receivable amount from PT Texmaco Jaya of Rp 1,106,832,761,717 was acknowledged and registered as unsecured debt by the curators. In the meantime, the Court has approved continued operation of its Fleece division as a going concern with a view to maintain the value of the bankrupt assets. In accordance with the Court approval and pursuant to the tolling agreement between the team of curators and PT Asia Pacific Fibers Tbk, the Fleece division continued to be operated on tolling basis. Pursuant to PSAK 10 (Revised 2010), the Company and its Subsidiaries have determined US Dollar as its functional currency as predominant financial transaction such as Sales, Purchases, Pricing, etc., are transacted in US Dollar currency. Hence the Company and its Subsidiaries have chosen to prepare and present its consolidated financial statements in US Dollar currency effective in January 2012. The consolidated financial statements for the year ended December 31, 2012 was prepared in accordance with the guidelines provided under PSAK 10 and recalculated/ restated its assets and liabilities wherever required. The accompanying consolidated financial statements have been prepared on a going concern basis, and do not include any adjustment that might result from the outcome of these uncertainties. Related effects will be reported in the consolidated financial statements as they become known and can be estimated. To date, the Company, in running its operations is supported through the letter of credit facility and other working capital loans from Damiano Investments BV., Netherland and through the confidence and support of its suppliers and customers. Damiano Investments BV., Netherland has also increased the bank loan facility for the procurement of raw materials from US$ 80 million to US$ 100 million. Damiano Investments BV., Netherland has also provided the requisite funds for the Company’s capital expenses programs in 2012 and the next year through its Third Loan facility.



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2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS (Continued) b. Debt Restructuring

The Company has executed the restructuring agreement with the unsecured creditors as approved by the creditors and ratified by the Court. Accordingly, the total unsecured loans after the restructuring stands at US$ 18,670,630 plus unpaid capitalized interest until February 2012 of US$ 3,498,708 or amounted to US$ 22,169,338. The Company has also submitted restructuring proposal to the secured creditors (SDRP). In March 2007, the Company reissued the SDRP proposal to all of its secured creditors, including PPA, as the earlier SDRP proposal has time barred. However, no response has been received from PT Perusahaan Pengelola Aset (PPA) on the proposal. The proposal has the support of Damiano Investment BV., Netherland, the majority holder of the other secured debts of the Company. The Company has taken all the required corporate actions towards the implementation of the Composition Plan (“Peace Plan”) as approved by the unsecured creditors of the Company and ratified by the Commercial Court. The steps involve the issuance of the new debts secured or unsecured in exchange of the old unsecured debts and issuance of shares for the reduction of the principal amount of debts as per the terms of the Composition Plan. The Company has reduced its unsecured debts as per the Composition Plan and increased its share capital as additional capital pending allotment to the creditors. The Company has appointed The Hongkong and Shanghai Banking Corporation Limited, Hong Kong to act as its Fiscal Agent, Paying Agent and Trustees for its new unsecured notes which are eurocleared. In January 2012, the Company sought and got the approval of its Unsecured New Note Holders for the extension of its maturity from February 2012 to February 2015. The details are as below:

Redemption Date

Redemption Table (Revised for PIK)

Subject to PIK Outstanding Redemption Redemption % Request Amount Amount

February 15, 2005 US$ 18,670,630.00 US$ 18,670,630.00 0.00%

to May 15, 2012 US$ 3,498,707.77 US$ 22,169,337.77 0.00%

February 15, 2015 US$ 21,080,870.88 (US$ 1,108,466.89) 5.00%

February 15, 2016 US$ 17,181.236.77 (US$ 3,879,634.11) 17.50%

February 15, 2017 US$ 13,301.602.66 (US$ 3,879,634.11) 17.50%

February 15, 2018 US$ 9,421,968.55 (US$ 3,879,634.11) 17.50%

February 15, 2019 US$ 4,988,101.00 (US$ 4,433,867.55) 20.00%

February 15, 2020 US$ 0.00 (US$ 4,988,101.00) 22.50%

US$ 22,169,337.77 US$ 22,169,337.77 100.00%



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2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS (Continued) b. Debt Restructuring (Continued)

PT Perusahaan Pengelola Asset (PPA) announced a sale programme of Texmaco Group’s assets and shares, including that of Semarang site of the Company in December 2010. However the programme was later cancelled and called off. PT Asia Pacific Fibers Tbk has been in active discussion with PPA for the restructure of the Company and awaiting their response of PPA in this regard.

c. Economic Condition

Despite slower global growth and continued uncertainty in the global financial market, Indonesia’s economic growth remained strong throughout 2012. Indonesia’s GDP grew 6.20 percent in 2012, slightly below 2011 is 6.50 percent due to the continuing slower growth of exports as the slowdown in China hit demand for Indonesian commodities such as coal and palm oil. Indonesia's resilience to the global economic slowdown and its domestic consumption continued to drive robust economic growth and have made it a magnet for foreign investment in recent years, but the country's first annual trade deficit in 2012 has put pressure on the rupiah currency. While many other emerging markets in Asia are reliant on exports, more than 60 percent of Indonesia’s GDP is generated by domestic consumption, shielding it from the vicissitudes of the global economy. Indonesia’s growth rate of 6.23 percent last year meant that the country remained among the world’s fastest-growing economies (the second best after that of China among G-20 members), the deceleration in the fourth quarter 2012 should provide a cautious approach for future. However on the other hand, Indonesia suffered its first ever-annual trade deficit in 2012 as exports to most of its trading partners fell during the year amid the slowdown in the global economy. The county’s trade deficit reached US$1.65 billion in 2012 being the first such deficit in Indonesia’s history. Exports dropped to US$190.04 billion, down by 6.61 percent from last year, much deeper than the forecast. Imports, on the other hand surged by 8.20 percent to US$191.67 billion, were driven by imports of intermediary goods for domestic production (73.10 percent, followed by capital goods (19.90 percent) and consumer goods (7.00 percent). The rupiah weakened through the year 2012 and has fallen steeply to close at Rp 9,670 per US$ 1 as compared to Rp 9,068 per US$ 1 as at December 2011 (depreciating over 6.60% during the year). The economic outlook for Indonesia in 2013 remains positive despite a weak global economy, but maintaining strong investment growth is vital. The World Bank projects a marginal rise in GDP to 6.30 percent in 2013. This projection assumes that domestic consumption and investment growth remain strong, while improving growth in Indonesia’s major trading partners supports a modest recovery in exports.



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2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS (Continued) c. Economic Condition (Continued)

However, domestic environment for manufacturing sectors expect to undergo a tough phase with the looming escalatory trend on two major fronts viz., manpower and energy costs. Both Gas prices and electricity tariff are increasing in 2013, with further increases beyond 2014 not entirely ruled. These factors will add to the pressure on cost competitiveness of the domestic manufacturers.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies that have been used by the Company and its Subsidiaries in the preparation of these consolidated financial statements are summarized in subsequent paragraphs. a. Basis of Preparation of Consolidated Financial Statements

The Company and its Subsidiaries’ consolidated financial statements have been prepared in accordance with the Indonesian Financial Accounting Standards (“PSAK”) and its interpretations (“ISAK”) established by the Indonesian Institute of Accountants (IIA), Regulation No. VIII G.7 of Bapepam-LK regarding the Guidelines on Presentation of Financial Statements included in Appendix of the Decree of the Chairman of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) No. KEP-347/BL/2012 and the Circular Letter No. SE-17/BL/2012 regarding Guidelines on Presentation and Disclosures of Financial Statements for Publicly Listed Manufacturing Companies, and using checklist for disclosures financial statements for all industry in Indonesian Capital Market. The Company and its Subsidiaries’ consolidated financial statements are in compliance with the applicable PSAK without exception. The Company and its Subsidiaries’ consolidated financial statements for the years ended December 31, 2012 and 2011 have been prepared in accordance with PSAK No. 1 (Revised 2009), “Presentation of Financial Statements”. In accordance with PSAK No. 1 (Revised 2009), the consolidated statement of comprehensive income has been presented in these consolidated financial statements. The Company and its Subsidiaries have been elected to present all items of income and expense in the single statement. As of August 19, 2011, the Commercial Court had declared that the Subsidiary (PT Texmaco Jaya Tbk) is bankruptcy and insolvency effective on September 26, 2011. Effective this period, the Subsidiary becomes subject to the control of the Court, and causing the Company loss its controls. Consequently, the total comprehensive income from Subsidiary up to August 19, 2011 is classified as “Discountinued Operations” and the outstanding of non-controlling interests balance from Subsidiary of Rp 140,217,500,266 has been written-off from the consolidated statements of financial position and adjusted into retained earnings (accumulated deficit).



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) a. Basis of Preparation of Consolidated Financial Statements (Continued)

In relation to the PSAK No. 4 (Revised 2009), “Consolidated and Separate Financial

Statements”, the Company has measured investment in subsidiaries using cost method, which were previously accounted for using equity method. The Company and its Subsidiaries’ consolidated financial statements have been prepared on the historical cost basis of accounting, except for the certain accounts are prepared based on the other measurement that are more fully described in the accounting policies below. The consolidated financial statements are prepared under the accrual basis of accounting, except for the consolidated statements of cash flows. The consolidated statements of cash flows have been prepared using the direct method, present receipts and disbursements of cash and cash equivalents classified operating, investing and financing activities. The reporting currency used in preparation of the financial statements is US Dollar, which is the Company’s functional and presentation currency. All figures presented in the notes to the Company’s financial statements are expressed in fully US Dollar amount unless otherwise stated. From January 1, 2012, the Company changed its reporting currency from Rupiah to US Dollar (Note 4).

b. Principles of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of the subsidiaries to bring the accounting policies used in line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in subsidiaries are identified separately and presented within equity. Effective January 1, 2011, the interest of non-controlling shareholders maybe initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net asset. The choice of measurement is made on acquisition by acquisition basis.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) b. Principles of Consolidation (Continued)

Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Previously, the non-controlling interest is measured on initial recognition at the non-controlling interests’ proportionate share in the historical cost of the identifiable net assets of the acquiree. Where the losses applicable to the non-controlling interests exceed their interest in the equity of the subsidiary, the excess and any further losses attributable to the non-controlling interest are charged against the majority interest except to the extent that the non-controlling interest has a binding obligation to, and is able to, make good the losses. Changes of the Company interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Company and its subsidiaries interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributable to owners of the Company. According to PSAK No. 4 (Revised 2009), when the Company losses control of a Subsidiary, the Company should derecognizes the assets (including any goodwill) and liabilities of the Subsidiary at their carrying amount at the date when the control is lost. Also, derecognizes the carrying amount of any non-controlling interests in the former Subsidiary at the date when control is lost (including any component of other comprehensive income attributable to them). The Company has carried forward and opted to present as a separate item within equity, the remaining balance related to the effect of prior year’s capital transactions of the Subsidiary with third parties.

c. Foreign Currency Transaction and Balances

• Functional and presentation currency Items included in the financial statements of each of the Company and its Subsidiaries are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements are presented in US Dollar, which is the functional and presentation currency of the Company and its Subsidiaries.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) b. Principles of Consolidation (Continued)

• Transactions and balances Foreign currency transactions are translated into US Dollar using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary assets and liabilities denominated in foreign currencies are translated into US Dollar using the closing exchange rate. Exchange rate used as benchmark is the rate which is issued by Bank Indonesia. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of comprehensive income. Foreign currency 2 0 1 2 2 0 1 1 2 0 1 0 Rp Rp Rp US$ 1 9,670 9,068 8,991JPY 1 112 117 110HKD 1 1,247 1,167 1,155NOK 1 1,736 1,313 1,330CHF 1 10,597 9,636 9,600SGD 1 7,907 6,974 6,981GBP 1 15,579 13,969 13,894EUR 1 12,810 11,739 11,956SEK 1 1,488 1,314 1,331

d. Transactions with Related Parties

The Company and its Subsidiaries enters into transactions with related parties as defined in PSAK 7 (Revised 2010) “Related Party Disclosure”. Related party is principally defined as follows: (i) A person or a close member of that person’s family is related to a reporting entity if that

person :

• Has control or joint control over the reporting entity.

• Has significant influence over the reporting entity.

• Is a member of the key management personnel of the reporting entity or of a parent of reporting entity.

(ii) An entity is related to a reporting entity if any of the following conditions applies :

• The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

• One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• Both entities are joint ventures of the same third party.

• One entity is a joint venture of a third entity and the other entity is an associate of the third entity.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Transactions with Related Parties (Continued)

• The entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

• The entity is controlled or jointly controlled by a person identified in (i).

• A person identified in (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

All significant transactions and balances with related parties, whether or not conducted under normal terms and conditions similar to those with third parties are disclosed in Note 46.

e. New Accounting Standards to Existing Standards

In 2012, the Company and its Subsidiary adopted for the first time the following revised accounting standards which are mandatory for accounting periods beginning on or after January 1, 2012 :

PSAK 10 (Revised 2009) : The Effects of Changes in Foreign Exchange Rate PSAK 16 (Revised 2011) : Property, Plant and Equipment PSAK 24 (Revised 2010) : Employee Benefits PSAK 26 (Revised 2011) : Borrowing Costs PSAK 30 (Revised 2011) : Leases PSAK 46 (Revised 2010) : Income Taxes PSAK 50 (Revised 2010) : Financial Instruments : Presentation PSAK 55 (Revised 2011) : Financial Instruments : Recognition and Measurement PSAK 56 : Earning per shares PSAK 60 : Financial Instruments : Disclosures ISAK 25 : Landrights

Discussed below are the impacts on the consolidated financial statements of these revised accounting standards. (i) PSAK 10 (Revised 2009) : The Effects of Changes in Foreign Exchange Rate. PSAK 10

requires an entity to determine its functional currency and measure its results of operations and financial position in that currency. Furthermore, it prescribes how to include foreign currency transactions and foreign operations in the consolidated financial statements of an entity and translate the consolidated financial statements into a presentation currency.



25

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) e. New Accounting Standards to Existing Standards (Continued)

(ii) PSAK 16 (Revised 2011) : Property, Plant and Equipment. PSAK 16 clarifies that an entity

is required to apply the principles of this revised standard to items of property, plant and equipment used to develop or maintain : (a) biological assets and (b) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. The scope of this revised standard includes : (1) an asset that is being built or developed for future use as investment property; (2) accounting treatment for property, plant and equipment classified as held for sale ; and (3) recognition of property, plant and equipment from government grants.

(iii) PSAK 24 (Revised 2010) : Employee Benefits. PSAK 24 provices guidance for calculation

and additional disclosures for employee benefits with some transitional provisions, which include short-term employee benefits and long-term employee benefits. It provides an option for recognition of actuarial gains or losses in addition to using the 10% corridor approach, that is immediate recognition of actuarial gains or losses in period in which such occur and as part of other comprehensive income. The revised standard also introduces a number of disclosure requirements including disclosure of : (a) The percentage or amount of each major category of investment making up total plan assets; (b) a narrative description of the basis used to determine the overall expected rate of return on assets; (c) the amounts for the current annual periods of present value of the defined benefit obligation and fair value of the plan assets; and (d) the amounts for the current annual period and the previous four annual periods of experience adjustments arising on the plan liabilities and plan assets.

(iv) PSAK 26 (Revised 2011) : Borrowing Costs. PSAK 26 clarifies that a borrowing costs,

either directly or indirectly used in financing the construction of a qualifying asset, are capitalized up to the date when construction is complete. For borrowings that are specific to the acquisition of a qualifying asset, the amount to be capitalized is determined as the actual borrowing costs incurred during the period, less any income earned from the temporary investment of such borrowings. For borrowings that are not specific to the acquisition of a qualifying asset, the amount to be capitalized is determined by applying a capitalization rate to the amount expensed on the qualifying asset. All other borrowing costs are expensed as incurred.

(v) PSAK 30 (Revised 2011) : Leases. Under PSAK 30, when the lease contains elements of

land and buildings at the same time, the entity must review the classification for each element separately, whether as a finance lease or operating lease. As a result of a separate study conducted by the Entity taking into account the ratio between the economic life of the lease with the re-examined from each of the elements and other factors that are relevant, any element might result in a different lease classification.



26


(vi) PSAK 46 (Revised 2010) : Income Taxes. PSAK 46 describes the accounting treatment for

income taxes to account for the current and future tax consequences of the future recovery / (settlement) of the carrying amount of assets (liabilities) that are recognized in the consolidated statement of financial position ; and transactions and other events of the current period that are recognized in the consolidated financial statements. In additon, the Company also recorded interest and penalty for lack / excess income tax, if any, as part of the current tax income (expense) in the consolidated statement of comprehensive income.

(vii) PSAK 50 (Revised 2010) : Financial Instruments : Presentation. PSAK 50 contains

requirements for the presentation of financial instruments and identifies the information that must be disclosed. The applicability of disclosure requirements to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. PSAK requires disclosure of, among other things, information about factors that affect the amount, timing and certainty of future cash flows an entity associated with financial instruments and the accounting policies applied to the instrument.

(viii) PSAK 55 (Revised 2011) : Financial Instruments : Recognition and Measurement. PSAK 55

set the principles for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. PSAK, among other things, provides the definition and characteristics of derivatives, the category of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships.

(ix) PSAK 56 : Earnings per share. PSAK 56 requires the comparison of performance between

different entities in the same period and between difference reporting periods for the Company. Earning per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of shares outstanding during the period.

(x) PSAK 60 : Financial Instruments : Disclosures. PSAK 60 introduces new disclosures to

improve the information about financial instruments. It requires extensive disclosures about the significance of financial instruments for an entity’s financial position and performance, and quantitative and qualitative disclosures on the nature and extent of risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, as well as sensitivity analysis to market risk. It also requires disclosures relating to fair value measurements using a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values and provide more direction in the form of quantitative disclosures about fair value measurements and require information to be disclosed in a tabular format unless another format is more appropriate.



27


(xi) ISAK 25 : Landrights. Under ISAK 25, the cost of acquiring land rights in the form of right

to cultivate, right to build and use rights are recognized as property, plant and equipment. Cost is a cost directly attributable to obtaining land rights, including the cost of handling the legal rights to land when the land was first acquired. Land rights in the form of right to cultivate, right to build and use rights are not depreciated, unless there is evidence indicating that the extension or renewal of land is likely to or definitely not be obtained. While the cost of the extension or renewal of legal rights to land are recognized as an intangible asset and amortized over the life of the rights of land rights or economic life whichever is shorter.

The Company and its Subsidiaries determined that the adoption of these new and revised standards, except for PSAK 10 (Revised 2010), did not materially effect its consolidated financial statements. In addition, the Company and its Subsidiaries have disclosed the revealed information regarding the presentation of consolidated financial statements and the disclosures. The adoption of the following new standards, revised standards and interpretations did not have any significant impact on the consolidated financial statements.

• PSAK 13 (Revised 2011) – Investment Property

• PSAK 18 (Revised 2010) – Accounting and Reporting by Retirement Benefit Plans

• PSAK 28 (Revised 2010) – Accounting for Loss Insurance

• PSAK 33 (Revised 2010) – Stripping Activities and Environmental Management in General Mining

• PSAK 34 (Revised 2010) – Construction Contracts

• PSAK 36 (Revised 2010) – Accounting for Life Insurance

• PSAK 45 (Revised 2010) – Financial Reporting for Non-Profit Organizations

• PSAK 53 (Revised 2010) – Share-based Payments

• PSAK 61 – Accounting for Government Grants and Disclosure of Government Assistance

• PSAK 62 – Insurance Contracts

• PSAK 63 – Financial Reporting in Hyperinflationary Economies

• PSAK 64 – Exploration and Evaluation of Mineral Resources

• ISAK 15 – The Limit on a Defined Benefit Asset, Minimum Funds Requirements and Their Interaction

• ISAK 16 – Service Concession Arrangements

• ISAK 18 – Government Assistance – No Specific Relation to Operating Activities

• ISAK 19 – Applying the Restatement Approach under PSAK 63 : Financial Reporting in Hyperinflationary Economies

• ISAK 20 – Income Taxes – Changes in the Tax Status of an Entity or its Shareholder



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• ISAK 22 – Service Concession Arrangements : Disclosure

• ISAK 23 – Operating Leases – Incentives

• ISAK 24 – Evaluating the Substance of Transactions Involving the Legal Form of a Lease

• ISAK 26 – Reassessment of Embedded Derivatives

f. Financial assets

Financial assets include cash and other financial instruments. Financial assets, other than hedging instruments, are classified into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated at every reporting date at which date a choice of classification or accounting treatment is available, subject to compliance with specific provisions of applicable accounting standards. Regular purchases and sales of financial assets are recognized on their trade date. All financial assets that are not classified as at fair value through profit or loss are initially recognized at fair value plus any directly attributable transaction costs. Financial assets carried at fair value through profit or loss is initially recognized at fair value and transaction costs are expensed in the consolidated statement of comprehensive income. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in the active market. They arise when the entity provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the consolidated statement of financial position date which are classified as non-current assets. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less impairment loss, if any. Any change in their value is recognized in the consolidated statement of comprehensive income. Impairment loss is provided when there is objective evidence that the entity will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets’ carrying amount and the present value of estimated cash flows.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Financial Assets (Continued)

The Company and its Subdiaries’s financial assets categorized as Loans and Receivables, are presented as Cash and Cash Equivalents, Trade Receivables, Other Receivables, Other Current Financial Assets, Non-trade receivables from Related Parties, and Other Non-current Financial Assets in the consolidated statement of financial position. All income and expenses, including impairment losses, relating to financial assets that are recognized and presented as part of finance costs in the consolidated statement of comprehensive income. Non-compounding interest, dividend income and other cash flows resulting from holding financial assets are recognized in profit or loss when earned, regardless of how the related carrying amount of financial assets is measured. Derecognition of financial assets occurs when the rights to receive cash flows from the financial instruments expire or are transferred and are substantially all of the risks and rewards of ownership have been transferred.

g. Cash and Cash Equivalents

Cash and cash equivalents are defined as cash on hand, demand deposits, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

h. Trade and Other Receivables

Trade receivables are amounts due from customers for product sold performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Non-trade receivables from related parties are receivables balance reflecting loan given to related parties of the Company and its Subsidiaries. Trade and non-trade receivables are recognized initially at fair calue and subsequently measured at amortized cost using the effective interest method, if the impact of discounting is significant, less any provision for impairment. Collectability of trade and non-trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Entity will not be able to collect all amounts due according to the original terms of the receivables.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) h. Trade and Other Receivables (Continued)

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or ginancial reorganization and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognized in the consolidated statement of comprehensive income within “general and administrative expenses”. When a trade and non-trade receivables for which an impairment allowance had been recognized becomes uncollectible in a subsequent period, it is written off againse the allowance account. Subsequent recoveries of amounts previously written off are credited against “miscellaneous income (expense), net” in the consolidated statement of comprehensive income.

i. Impairment of Financial Assets

The entity assesses at each consolidated statement of financial position dates whether there is any objective evidence that a financial asset or a group of financial assets is impaired. For loans and receivables carried at amortized cost, the entity first assesses whether objective evidence of impairment exists individually significant, or collective for financial assets that are not individually significant. If the entity determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring impairment loss is the current effective interest rate. The carrying amount of the financial asset is reduced through the use of an allowance for impairment account and the amount of the loss is recognized in the consolidated statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the financial asset. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the entity.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) i. Impairment of Financial Assets (Continued)

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance for impairment account. If a future write-off is later recovered, the recovery is recognized in the consolidated statement of comprehensive income.

j. Inventories

Finished goods, work in process, raw materials and indirect materials are carried at the lower of cost and net realizable value. Cost is determined by the average method. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

An allowance for impairment is determined on the basis of estimated future usage or sale of individual inventory items. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

k. Prepaid Expenses

Prepaid expenses are charged to operations over the periods benefit using the straight-line method. l. Property, Plant and Equipment

Initially, an item of property, plant and equipment is measured at its cost, which comprises its purchase price and any cost directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management, and also include the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Subsequent expenditures such as replacement and major inspection are added to the carrying amount of the asset when it is probable that future economic benefits will flow to the entity and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced or any remaining carrying amounts of the cost of the previous inspection is derecognized. The costs of day-to-day servicing of an asset are recognized as an expense in the period in which they are incurred.



32

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) l. Property, Plant and Equipment (Continued)

Depreciation is recognized on straight-line method to write down the depreciable amount of property, plant and equipment. The estimated useful lives of the assets are as follows: Years Buildings and improvement 20 Machinery and equipment 3-20 Transportation equipment 5 Office equipment 5 Store equipment 5 Land is stated at cost and is not depreciated. The residual values, useful lives and depreciation method are reviewed at each reporting date to ensure that such residual values, useful lives and depreciation method are consistent with the expected pattern of economic benefits from those assets. Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation does not cease when the assets become idle or is retired from active use unless the asset is fully depreciated. Fully depreciated assets are retained in the accounts until they are no longer in use and no further charge for depreciation is made in respect of those assets. When an asset is disposed of or when no future economic benefits are expected from its use or disposal, the cost and accumulated depreciation and impairment losses, if any, are removed from the accounts. Any resulting gains or losses from derecognition of an item of property, plant and equipment is included in the consolidated statement of comprehensive income. The Company and its Subsidiaries’ property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses, if any, since the Company and Subsidiaries adopt the cost method.

m. Contruction in Progress

Construction in progress is stated at cost and presented as part of property, plant and equipment. The accumulated cost will be reclassified to the appropriate property, plant and equipment account when the contruction is substantially completed and the asset is ready for its intended use.



33

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) n. Impairment of Non-Financial Assets

The Company and its Subsidiaries’ property, plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s net selling price and value in use.

o. Intangible asset

The certain cost associated with the renewal of legal titles on the landrights are deferred and amortized during twenty (20) years since April 2012.

p. Leases

Determination whether an arrangement is, or contains, a lease is made based on the substance of the arrangement and assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset or assets, and the arrangement convey a right to use the asset. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases, Payments made under operating lease (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line method over the term of the lease. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in “Credit Financing Payables”. The interest element of the finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

q. Financial Liabilities

Financial liabilities include Trade Payables, Accrued Expenses, Bank Loans, Secured Debts, Short-term Loans, Notes Payable, Other Short-term Financial Liabilities, Borrowing from Other Financial Institution (such as : Unsecured Debts and Notes Payables, Credit Financing Payables, Working Capital Loans, and Finance Lease Liabilities), which are measured at amortized cost using the effective interest rate method.



34

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) q. Financial Liabilities (Continued)

Financial liabilities are recognized when the entity becomes a party to the contractual terms of the instrument. All interest-related charges are recognized as an expense in the consolidated statement of comprehensive income. Bank Loans, Secured Debts, Short-term Loans, Notes Payable and Borrowing from Other Financial Institution are raised for support of short-term funding of operations. They are recognized at proceeds received, net of direct issue costs. Credit Financing Payables and Finance Lease Liabilities are measured at initial value less the capital element of lease repayments. Trade Payables, Accrued Expenses, and Other Short-term Financial Liabilities are initially recognized at their fair value and subsequently measured at amortized cost less settlement payments. Financial liabilities are derecognized from the consolidated statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration.

r. Determination of Fair Value

Fair value is defined as the amount at which the financial instruments could be exchanged in a current transaction between knowledgeable, willing parties in an arm’s length transaction, other than in a forced sale or liquidation. Fair values are obtained from quoted prices, discounted cash flow models, as appropriate. The face values less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate to their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the entity for similar financial instruments.

s. Employees’ Benefit

(i) Short-term employee benefits

Short-term employee benefits are recognized when they accrue to the employees.



35

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) r. Determination of Fair Value (Continued)

(ii) Post-employment obligation

Employee entitlements to service and compensation payments relating to the employee’s separation, gratuity and compensation are recognized. A provision is made for the estimated liability as a result of past services rendered by employees up to the reporting date and is calculated based on the Manpower Law No. 13/2003 issued by the Government of Republic Indonesia in April 2003. The cost of providing post-employment benefit is determined using the Projected Unit Credit Method. The accumulated unrecognized actuarial gains and losses that exceed 10% of the present value of the entity’s defined benefit obligations is recognized on a straight-line basis over the expected average remaining working lives of the participating employees. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation, as adjusted for unrecognized past service cost and unrecognized actuarial gains and losses. The Company and its Subsidiaries have elected to continue to use the corridor approach in the recognition of actuarial gains/(losses).

(iii) Termination benefits

Termintation benefits are payable when employment is terminated by the Entity before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Entity recognized termination benefits when it is demonstrably committed to a termination when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefit are measured based on the number of empliyees expected to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to their present value.

(i) Bonus

The Entity recognized a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Company’s shareholder after certain adjustments. The Entity recognized a provision where contractually obliged or where there is a past practice that has created a constructive obligation.



36

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) t. Income Tax

The tax expense comprises current and deferred tax. Tax is recognized in the consolidated statement of comprehensive income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. The current income tax charge is calculated on the basis of the tax laws enacted or subsequently enacted at the reporting date, where the Company and its Subsidiaries operate and have a taxable income. Management periodically evaluates positions taken in tax returns (SPT) with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill and deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects netihter accounting nor taxable profit or loss. Deferred income tax is determined using tax rates that have been enacted or substantially enacted as at reporting period and is expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax assets and liabilities are offset when there is a legal enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Amendments to taxation obligations are recorded when an assessment is received or, if objected to or appealed against, when the result of the objection or appealed is determined.

u. Additional Paid-in Capital

Expenses related to the issuance of the Company’s shares to the public were deferred and amortized over a ten-year period using the straight-line method. In 1997, the Company opted to amortize the remaining balance of this account over five years. Based on BAPEPAM’s decision letter KEP-No.06/PM/2000 dated March 13, 2000, the share issuance costs were retroactively recorded into “Additional Paid-in Capital”.



37

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) v. Revenue and Expense Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: (i) Sale of goods – Revenue is recognized when the risks and rewards of ownership of the goods

have passed to the buyer, i.e. generally when the goods are delivered to the customers. (ii) Interest income – Revenue is recognized as the interest accrues taking into account the

effective yield of the asset. Revenue is measured by reference to the fair value of consideration received or receivable by the entity for goods supplied. Expenses are recognized upon utilization of the service or at the date they are incurred.

w. Earnings per Share

Basic earnings per share are calculated by dividing the profit (loss) attributable to the equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earning per share is calculated by adjusting the weighted average number of ordinary shares outstanding.

x. Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as Board of Director that makes strategic decisions. An operating segment is a component of an entity : 1. that engages in business activities from which it may earn revenue and incur expenses

(including revenue and expenses relating to the transaction with other components of the same entity).

2. whose operating results are reviewed regularly by the entity’s chief operating decision maker to make decision about resources to be allocated to the segments and assess its performance.

3. for which discrete financial information is available.



38

4. CHANGE IN REPORTING CURRENCY On January 1, 2012, the Company changed its reporting currency from Indonesian Rupiah to US Dollar, its functional currency, due to substantially, if not all : a. The Company’s sales and earnings are originated in US Dollar. b. The Company’s purchases are originated in US Dollar. c. The Company’s financing activities are originated in US Dollar. As such, the Board of Directors believes the change will result in a more appropriate presentation of the Company’s transaction in the consolidated financial statements. The change of the Company’s reporting currency has been accounted for in accordance with PSAK No. 10 (Revised 2010) “The

Effects of Changes in Foreign Exchange Rate” which should be applied on or after January 1, 2012. For comparative purposes, the consolidated financial statements and associated notes as at and for the years ended December 31, 2011 and 2010 have been remeasured, as though the US Dollar were the reporting currency in that year, using the procedures outlined below: a. The Company’s monetary items are converted into US Dollar using the closing rate, while

nonmonetary items including equity are converted using the exchange rate at the date of the transactions; and

b. Income and expenses are converted using the exchange rate at the date of the transactions. The following is the consolidated statements of financial position as of December 31, 2011 and 2010 presented in Indonesian Rupiah currency. December 31,


2 0 1 0

Rp Rp

CURRENT ASSETS Cash and cash equivalents 31,177,273,662 87,892,873,462 Short-term investments 3,000,000,000 1,000,000,000

Trade receivables Third parties 454,265,227,439 422,111,905,807 Related parties 268,722,447,175 268,722,447,175 Other receivables

Third parties 22,937,261,126 4,431,384,634 Inventories 795,058,287,598 462,112,098,195 Purchase advances 343,195,422,233 291,068,826,915

Prepaid taxes 119,411,500,545 126,510,220,118 Prepaid expenses 10,588,262,122 8,241,335,214 Advances for investment in a joint venture − − Other current assets 52,018,685,430 26,473,126,432

Total Current Assets 2,100,374,367,330 1,698,564,217,952



39

4. CHANGE IN REPORTING CURRENCY (Continued) December 31,


2 0 1 0

Rp Rp

NON–CURRENT ASSETS Non-trade receivables from related parties 317,368,061,827 425,918,780,239

Restricted cash in banks 10,345,623,643 17,129,600,731 Property, plant and equipment, net 1,255,117,683,754 1,775,584,133,376 Deferred tax assets − 31,293,233,848

Total Non–Current Assets 1,582,831,369,224 2,249,925,748,194

TOTAL ASSETS 3,683,205,736,554 3,948,489,966,146

CURRENT LIABILITIES

Bank Loans 637,839,711,337 431,987,380,441 Secured Debts 9,185,233,096,043 9,107,034,576,501 Short term loans − 324,161,880,678

Notes payable − 182,150,784,488

Trade payables Third parties 215,808,272,379 223,080,294,936 Liabilities for purchase of property, plant and equipment − 274,011,964

Taxes payable 17,567,520,945 22,684,826,196

Accrued expenses 413,557,919,140 695,686,772,082 Current maturity of long-term liabilities: Working capital loans 77,078,000,000 38,958,003,000 Obligation under finance lease − 38,670,122,950

Credit financing payables 517,187,846 475,480,013

Other current liabilities 38,573,261,263 155,665,338,586

Total Current Liabilities 10,586,174,968,953 11,220,829,471,835

NON–CURRENT LIABILITIES Long-term liabilities - net of current maturity :

Unsecured Debts and Notes Payable 198,997,359,748 189,504,468,044 Working capital loans 131,486,000,000 326,174,259,309 Credit financing payables 440,023,412 696,228,253 Employees’ benefit liabilities 77,637,935,506 73,633,912,844

Deferred tax liabilities 30,516,083,167 89,854,542,024

Total Non–Current Liabilities 439,077,401,833 679,863,410,474



40

4. CHANGE IN REPORTING CURRENCY (Continued) December 31,


2 0 1 0

Rp Rp

EQUITY (DEFICIENCY) Capital stock

Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value per Series B and Rp 40 par value per Series C in 2011 and 2010 Issued and paid up 219,696,000 Series A and

2,157,211,950 Series C in 2011 and 2010 2,283,248,477,500 2,283,248,477,500 Additional paid-in capital 5,586,506,149,053 5,586,506,149,053 Other components of equity 12,075,095,048 12,232,185,356 Retained earnings (accumulated deficit)

Appropriated 8,280,000,000 8,280,000,000 Unappropriated (15,232,156,355,833) (15,701,308,253,547)

Equity attributable to the owners of the Company (7,342,046,634,232) (7,811,041,441,638) Non-controlling interests − (141,161,474,525)

Total Equity (Deficiency) (7,342,046,634,232) (7,952,202,916,163)

TOTAL LIABILITIES AND EQUITY (DEFICIENCY)

3,683,205,736,554

3,948,489,966,146

The following is the consolidated statement of comprehensive income for the year ended December 31, 2011 presented in Indonesian Rupiah currency. 2 0 1 1

Rp

OPERATING REVENUES Net sales 5,577,223,233,050

Other operating revenues 4,673,888,541

Total operating revenues 5,581,897,121,591

COST OF GOODS SOLD (5,191,343,118,311 )

GROSS PROFIT 390,554,003,280

Selling expenses (120,468,271,917 ) General and administrative expenses (164,956,335,861 ) Insurance claim settlement, net 755,425,253

Loss on foreign exchange transactions, net (83,939,034,346 ) Miscellaneous income, net 6,804,776,757

(361,803,440,114 )



41

4. CHANGE IN REPORTING CURRENCY (Continued) 2 0 1 1

Rp

OPERATING LOSS 28,750,563,166

Finance costs (142,618,575,240 )

LOSS BEFORE INCOME TAX (113,868,012,074 )

TAX INCOME (EXPENSE) Current period −

Deferred 59,286,095,421

Total Tax Income 59,286,095,421

Total Net Loss for the year from continuing operations (54,581,916,653 )

Discontinued operations : Profit from discontinued operations 8,301,337,613

Gain from disposal of Subsidiary 656,593,951,279

Profit from discountinued operations 664,895,288,892

TOTAL NET LOSS FOR THE YEAR 610,313,372,239

OTHER COMPREHENSIVE INCOME, AFTER TAX Foreign currency translation (209,453,744 ) Related income tax 52,363,436

Total Other Comprehensive Income, Net of Tax (157,090,308 )

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 610,156,281,931

Net profit attributable to : Owners of the Company 609,369,397,980

Non-controlling interests 943,974,259

Total Net Profit For The Year 610,313,372,239

Total comprehensive income attributable to : Owners of the Company 609,212,307,672 Non-controlling interests 943,974,259

Total Comprehensive Income For The Year 610,156,281,931

EARNING PER SHARE 257



42

5. ESTIMATION UNCERTAINTY The preparation of the consolidated financial statements in conformity with Indonesian Financial Accounting Standard required management to make judgments, estimates and assumption that effect the application of accounting policies and amounts reported in the consolidated financial statements. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on going basis. Revisions to accounting estimates are recognized in the period in with the estimates are revised and in the future period effected. Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows : Functional currency The functional currency of the Company and its Subsidiaries are the currency of the primary economic environment in which each entity operates. The Company and its Subsidiaries consider some factors in determining its functional currency, among others, the currency that mainly influences the revenue, cost and financing activities, and the currency in which receipts from operating activities are usually retained. Based on the economic substance of the underlying circumstances relevant to the Company and its Subsidiaries, the functional currency has been determined to be US Dollar, as this reflected the fact that majority of the Company and its Subsidiaries’ operational businesses are influenced by pricing in domestic commodity markets with a US Dollar economic environment. Impairment An impairment loss is recognized for the amount by which the assets or cash-generating unit’s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Company and Subsidiaries’ assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.



43

5. ESTIMATION UNCERTAINTY (Continued) Pension and employees’ benefit The determination of the Company and its Subsidiaries’ obligations and cost for pension and employee benefits liabilities is dependent on its selection of certain assumptions used by the independent actuaries in calculating such amounts. Those assumptions include among others, discount rates, annual salary increase rate, annual employee turn-over rate, disability rate, retirement age and mortality rate. Actual results that differ from the Company and its Subsidiaries’ assumptions which effects are more than 10% of the defined benefit obligations are deferred and being amortized on a straight-line basis over the expected average remaining service years of the qualified employees. While the Company and its Subsidiaries believe that its assumptions are reasonable and appropriate, significant differences in the actual results or significant changes in the Company and its Subsidiaries’ assumptions may materially affect its estimated liabilities for pension and employee benefits and net employee benefit expense. Useful lives and depreciation of property, plant and equipments and intangible assets

Management determined the estimates the useful lives of these property, plant and equipment and its depreciation expenses, and intangible assets and its amortization expenses based on the expected utility of the assets. These are common life expectancies applied in the industries where the Company and its Subsidiaries conducts its business. Actual results may vary due to technical obsolescence. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, and therefore future depreciation charges could be revised. Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date. Assessing income tax and Realization of deferred tax assets Determining provision for corporate income tax requires significant judgment by management. There are certain transactions and computation for which the ultimate tax determination is uncertain during the ordinary course of business. The Company and its Subsidiaries recognizes liabilities for expected corporate income tax issues based on estimates of whether additional corporate income tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will have an impact on the current and deferred tax assets and liabilities in the period in which such determination is made. The Company and its Subsidiaries conducted a review of the carrying amount of deferred tax assets at each end of reporting period and reduce the value of such assets by as much as possible can not be realized, where the availability of taxable income allow to use all or part of the deferred tax assets.



44

5. ESTIMATION UNCERTAINTY (Continued) Assessing income tax and Realization of deferred tax assets (Continued) The Company and its Subsidiaries’ review on the recognition of deferred tax assets for deductible temporary difference can be deductible based on the level and timing from the estimated taxable income for the next reporting period. The estimation is based on the achievement of the Company and its Subsidiaries in the past and future expectation toward income and expenses, as well as with the tax planning strategies in the future. But there is no certainty that the Company and its Subsidiaries can generate sufficient taxable income to allow use of part or all of these deferred tax assets.

6. CASH AND CASH EQUIVALENTS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Cash on hand : Rupiah 37,789 41,957 41,281 US Dollar 27,650 33,635 33,113 Singapore Dollar 6,644 6,354 2,223 European Euro 8,315 3,039 719 Norwegian Krone 170 161 164

80,568 85,146 77,500

Cash in banks : Third Parties : Deutsche Bank US Dollar account 7,780,057 1,447,706 7,408,441 Rupiah account 935,461 1,133,745 1,275,831 PT Bank CIMB Niaga Tbk US Dollar account 50,152 86,338 12,190 Rupiah account 359,146 179,040 103,022 PT Bank Central Asia Tbk US Dollar account 271,211 293,405 713,036 Rupiah account 103,049 59,989 49,732 PT Bank Negara Indonesia (Persero) Tbk Rupiah account 214,345 152,795 132,151 US Dollar account − − 1,691

Carried forward 9,713,421 3,353,018 9,696,094



45

6. CASH AND CASH EQUIVALENTS (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Cash in banks ::

Third Parties :

Brought forward 9,713,421 3,353,018 9,696,094

PT Bank Mandiri Tbk Rupiah account − − 1,160

PT Bank Rakyat Indonesia Tbk Rupiah account − − 897

9,713,421 3,353,018 9,698,151

Total 9,793,989 3,438,164 9,775,651

• Cash at bank can be withdrawn at anytime. Cash in banks generally earn interest at rates based on daily bank deposit rates.

• No cash and cash equivalents are placed with the related parties.

• The Company’s cash on hand were covered by insurance with PT Asuransi Rama Satria Wibawa against direct loss or damage to the cash and cheque of Rp 3,900,000,000 (equivalent to US$ 403,309 in 2012, US$ 430,084 in 2011 and US$ 433,767 in 2010), respectively. Management believes that the insurance coverage is adequate to cover possible losses arising from such risks.

• The net carrying value of cash and cash equivalents are considered a reasonable approximation of fair value.

7. TRADE RECEIVABLES

This account consists of :

Third parties : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Local debtors 51,373,330 44,356,060 48,239,699 Foreign debtors 6,614,698 5,739,355 5,547,579

Total 57,988,028 50,095,415 53,787,278 Less : Allowance for impairment − − (6,839,006 )

Net 57,988,028 50,095,415 46,948,272



46

7. TRADE RECEIVABLES (Continued) A summary of the aging of trade receivables from third parties based on the date of invoice is as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Up to 1 month 43,545,691 38,252,438 37,065,253 > 1 month – 3 months 14,145,445 11,725,493 9,651,522 > 3 months – 6 months 204,355 25,509 231,497 > 6 months – 1 year 92,537 91,975 − > 1 year − − 6,839,006

Total 57,988,028 50,095,415 53,787,278

Changes in the allowance for impairment from third parties are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Beginning balance − 6,839,006 6,839,006 Balance of unconsolidated subsidiary − (6,839,006 ) − Movement during the year : Addition − − − Deduction − − −

Ending balance − − 6,839,006

Trade receivables from third parties are short-term and non interest bearings. All amounts of trade receivables from third parties have been reviewed for indication of impairment. Based on the review of the status of individual trade receivables from third parties as of December 31, 2012 dan 2011, the Company and its Subsidiaries’ managements believe that there is no requirement of allowance for impairment as the amounts are fully collectible. And based on the review of the status of individual trade receivables from third parties as of December 31, 2010, the Company and its Subsidiaries’ managements believe that the impairment of trade receivables from third parties are adequeate to cover possible losses on uncollectible receivables from third parties because of the financial difficulties of the Subsidiary’s customers. The net carrying value of trade receivables from third parties is considered a reasonable approximation of fair value.



47

7. TRADE RECEIVABLES (Continued) The details of trade receivables from third parties based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 57,779,157 50,084,099 47,394,372 Rupiah Rp 2,019,778,766 in 2012, Rp 102,616,673 in 2011, and Rp 57,478,608,468 in 2010 208,871 11,316 6,392,906

Total 57,988,028 50,095,415 53,787,278

Related parties : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ PT Multikarsa Investama 27,789,291 29,634,147 29,887,938 PT Texmaco Jaya Tbk (under bankruptcy) 15,657,945 15,657,945 –

Total 43,447,236 45,292,092 29,887,938 Less : Allowance for impairment (15,657,945 ) (15,657,945 ) –

Net 27,789,291 29,634,147 29,887,938

A summary of the aging of trade receivables from related parties based on the date of invoice is as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Up to 1 month – – – > 1 month – 3 months – – – > 3 months – 6 months – – – > 6 months – 1 year – – – > 1 year 43,447,236 45,292,092 29,887,938

Total 43,447,236 45,292,092 29,887,938



48

7. TRADE RECEIVABLES (Continued) Changes in the allowance for impairment of trade receivables from related parties are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Beginnning balance 15,657,945 – – Movement during the year : Addition – 15,657,945 – Deduction – – –

Ending balance 15,657,945 15,657,945 –

Trade receivables from related parties are short-term and non interest bearings. Additions in allowance for impairment in 2011 of US$ 15,657,945 (equivalent to Rp 141,986,246,529) due to the impairment loss on uncollectible trade receivables from PT Texmaco Jaya Tbk (under bankruptcy), and has been eliminated with the discountinued operations financial statements from Subsidiary (Note 45). Based on the review of the status of the trade receivables from related parties, management believes that the carrying value is a reasonable approximation of fair value. The impairment was not provided since the related party, PT Multikarsa Investama, is under debt restructuring program and the settlement of the receivables from related party will be done when the debt restructuring is completed. The details of trade receivables from related parties based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 15,657,945 15,657,945 – Rupiah Rp 268,722,447,174 in 2012, 2011 and 2010 27,789,291 29,634,147 29,887,938

Total 43,447,236 45,292,092 29,887,938

The net carrying value of trade receivables from related parties is considered a reasonable approximation of fair value.



49

7. TRADE RECEIVABLES (Continued) In 2012 and 2011, all trade receivables are used as collateral for the Company’s bank loans and working capital loans that were received from Damiano Investments BV., Netherland (Notes 20 and 25). And in 2010, all trade receivables are used as collateral for the Company’s bank loans, working capital loans and the Subsidiary’s short-term loans that were received from Damiano Investments BV., Netherland (Notes 20, 22 and 25).

8. OTHER RECEIVABLES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Third parties : Receivables from purchase discounts 646,363 225,314 −

Receivables from import clearance 144,976 190,169 116,174 MESOP receivables 341,499 – −

Receivables from employees 33,612 38,283 93,509 Interest receivables on time deposit 4,486 735 201 Others 369,615 291,902 282,985

1,540,551 746,403 492,869

Other third parties : Operational Advances to : PT Wastra Indah 15,812,049 15,823,861 18,248,643 PT Texmaco Perkasa Engineering Tbk 5,679,940 5,694,585 8,855,883 PT Wahana Perkasa Auto Jaya 5,579,991 5,579,991 5,650,035 PT Sumatex Subur 3,192,784 3,192,784 3,811,313 PT Texmaco Taman Synthetics 3,094,847 3,114,230 4,123,251 Drapper Texmaco Inc. Co., America 2,065,103 2,065,103 2,065,103 Norfil Ltd., England 728,191 728,191 728,191 PT Bina Prima Perdana 583,812 515,892 – Commonwealth Holdings Pte. Ltd., Singapore

496,867

496,867

496,867

PT Jaya Perkasa Engineering 442,916 472,320 – PT Perkasa Heavyndo Engineering 194,587 194,587 209,491 PT Wismakarya Prasetya 181,639 193,698 – PT Raja Busana Mahameru 136,945 136,945 3,423,049 PT Supermitory Utama Tbk 93,407 93,407 287,251 PT Saritex Jaya Swasti 68,868 72,199 737,959 PT Merauke Rayon Raya 49,883 49,883 49,883 PT Devrindo Widya 25,434 25,434 36,957 PT Perkasa Indobaja 15,816 15,816 101,539

Carried forward 38,443,079 38,465,793 48,825,415



50

8. OTHER RECEIVABLES (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Brought forward 38,443,079 38,465,793 48,825,415

PT Perkasa Indosteel 13,327 13,327 173,041 PT Wahana Jaya Perkasa 11,102 11,102 11,102 PT Sarana Daycrown Industri 11,102 11,102 11,102 PT Bina Peranan Busana 2,336 2,336 2,336 PT Citra Indah Textile 985 985 2,030 PT Mutiara Persada Inti − − 3,231,099 Polysindo (UK) Ltd., England − − 2,471,054 Coastal Group Ltd., South Africa − − 867,530 PT Ungaran Sari Garments − − 309,316 Polysindo (USA) Inc., America − − 266,231 PT Elok Prima Mitra Busana − − 217,937 PT Citra Abadi Sejati − − 150,638 PT Cipta Busana Jaya − − 97,725 PT Kreasi Indah Textile − − 81,050 PT Busana Perkasa Garments − − 45,777 PT Mahkota Indah Sentosa − − 42,022

Total 38,481,931 38,504,645 56,805,405 Less : Allowance for impairment (36,721,575 ) (36,721,575 ) (56,805,405 )

Net 1,760,356 1,783,070 −

Total 3,300,907 2,529,473 492,869

Other receivables from these above companies represent the loans and advances for working capital purposes. The loans and advances are not subject to interest and have no terms of repayment. Until now, these Companies above are unable to pay their payables to the Company and its Subsidiaries due to their financial difficulties. Most of the companies have already stopped operations and are still under the restructuring program with PT Perusahaan Pengelola Asset (PPA). As of March 2013, the debt restructuring program has not yet been completed. Changes in the allowance for impairment are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Beginning balance 36,721,575 56,805,405 56,771,705Balance of unconsolidated subsidiary – (20,053,331) – Movement during the year : Addition – – 33,700 Deduction – (30,499) –

Ending balance 36,721,575 36,721,575 56,805,405



51

8. OTHER RECEIVABLES (Continued) Deductions in allowance for impairment in 2011 of US$ 30,499 (equivalent to Rp 274,213,845) was a reversal of allowance for impairment due to the collectible, and are presented as part of the miscellaneous income (expense), net in the consolidated statements of comprehensive income (Note 44). Additions in allowance for impairment in 2010 of US$ 33,700 (equivalent to Rp 303,000,000) was recognized due to the uncollectible other receivables, and are presented as part of the general and administrative expenses in the consolidated statements of comprehensive income. MESOP receivables are due to loans given to selected employees for purchasing the Company’s shares on the MESOP programme (Note 30). These amounts are being recovered from the employees over a period. Other receivables from employees represent advances to employees. These advances are not subject to interest and the payments are made based on the terms of the repayment schedule. All amounts of other receivables have been reviewed for indication of impairment. Based on the review of the status of individual other receivables, the Company and its Subsidiaries’ managements believe that the impairment of other receivables are adequate to cover possible losses on uncollectible other receivables. The details of other receivables based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollars 37,925,716 37,242,664 56,805,405 Rupiah Rp 20,275,727,220 in 2012, Rp 18,212,026,112 in 2011, and Rp 4,431,385,179 in 2010 2,096,766 2,008,384 492,869

Total 40,022,482 39,251,048 57,298,274

The net carrying value of other receivable are considered a reasonable approximation of fair value.



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9. OTHER CURRENT FINANCIAL ASSETS This account consists of : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Time deposits : Third party : Deutsche Bank, Jakarta 827,301 330,834 111,222

Bank guarantees / SBLC 6,654,903 5,483,630 2,696,000

Security deposits : Third parties : Security deposit for electricity 181,489 193,538 195,195 Security deposit for rental 51,357 54,361 48,183 Others 5,758 4,982 5,025

Total refundable deposits 238,604 252,881 248,403

Total 7,720,808 6,067,345 3,055,625

a. Time Deposits

• In 2012, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 206,825) represents one year time deposit with interest rate of 5.00% per annum, due on September 30, 2013.

• In 2012, time deposit with Deutsche Bank, Jakarta of Rp 3,000,000,000 (equivalent to US$ 310,238) represents one year time deposit with interest rate of 5.10% per annum, due on September 6, 2013.

• In 2012, time deposit with Deutsche Bank, Jakarta of Rp 1,000,000,000 (equivalent to US$ 103,413) represents one year time deposit with interest rate of 4.50% per annum, due on May 24, 2013.

• In 2012 and 2011, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 206,825 and US$ 220,556) represents one year time deposit with interest rate of 5.80% per annum, due on December 10, 2013.

• In 2011, time deposit with Deutsche Bank, Jakarta of Rp 1,000,000,000 (equivalent to US$ 110,278) represents one year time deposit with interest rate of 6.25% per annum, due on May 20, 2012. The time deposit is liquidated on May 21, 2012.



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9. OTHER CURRENT FINANCIAL ASSETS (Continued) a. Time Deposits (Continued)

• In 2010, time deposit with Deutsche Bank, Jakarta of Rp 1,000,000,000 (equivalent to US$ 111,222) represents one year time deposit with interest rate of 6.25% per annum, due on May 18, 2011. The time deposit is liquidated on May 18, 2011.

b. Bank Guarantees / SBLC

Based on the purchase and sale gas agreement No. 001016.PK/HK.02/USH/2010 between the Company, PT Perusahaan Gas Negara (Persero) and PT Wismakarya Prasetya, the Company should provide the bank guarantee for gas supplies equivalent to approximately two months consumption value and the balance of gas. As of December 31, 2012, 2011 and 2010, the Company provided the bank guarantee (SBLC) through Deutsche Bank, Jakarta for an amount equal to US$ 3,793,043 plus Rp 16,498,800,000 (equivalent to US$ 5,499,227), US$ 2,915,282 plus Rp 14,248,812,000 (or equivalent with 4,486,611) and US$ 1,466,368 plus Rp 7,124,400,000 (or equivalent with US$ 2,258,760), respectively representing 2 month’s consumption. The bank guarantees still have terms of 3 (three) and 9 (nine) months after the reporting date and will due on March 31, 2013 and September 30, 2013. In order to obtain the SBLC, the Company deposited an amount equal to US$ 6,654,903, US$ 5,483,630 and US$ 2,696,000 as of December 31, 2012, 2011 and 2010 in Deutsche Bank, Hong Kong as collateral through Kyoa account. The collateral represents approximately 120% of SBLC amount.

The details of other current financial assets based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 6,661,003 5,489,730 2,696,000 Rupiah Rp 10,248,315,332 in 2012, Rp 5,237,815,332 in 2011, and Rp 3,233,390,432 in 2010 1,059,805 577,615 359,625

Total 7,720,808 6,067,345 3,055,625

No other current financial assets are placed with the related parties. The net carrying value of other current financial assets is considered a reasonable approximation of fair value.



54

10. INVENTORIES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Finished goods 34,787,985 35,079,711 19,839,474 Work in process 6,073,039 6,781,122 4,824,283 Raw materials 19,078,632 28,114,454 10,607,108 Indirect materials 20,014,977 17,702,072 16,126,321

Total 79,954,633 87,677,359 51,397,186 Less : Allowance for impairment – – –

Net 79,954,633 87,677,359 51,397,186

Based on the review of the physical condition of the inventories at the end of each year, the Company and its Subsidiaries’ management believe that no allowance for impairment is deemed necessary. As at December 31, 2012, 2011 and 2010, the Company’s inventories are covered by insurance with PT Asuransi Indrapura against fire loss and other risks totaling US$ 79,500,000, US$ 68,000,000 and US$ 51,000,000, respectively, which in the opinion of the management is adequate to cover losses arising from such risks. As at December 31, 2010, the Subsidiaries’ inventories were not covered by insurance against fire loss and other risks. In 2012 and 2011, all inventories were used as collateral for the Company’s bank loans and working capital loans that were received from Damiano Investments BV., Netherland (Notes 20 and 25). And in 2010, all inventories were used as collateral for the Company’s bank loans, working capital loans and the Subsidiary’s short-term loans received from Damiano Investments BV., Netherland (Notes 20, 22 and 25).

11. PURCHASE ADVANCES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Third parties : Purchase of property, plant and equipments 1,865,844 5,462,897 2,860,793 Purchase of inventories 4,680,032 4,494,903 3,403,251 Purchase of turbines’ spareparts 1,109,367 860,912 127,212

7,655,243 10,818,712 6,391,256

Other third party : PT Wismakarya Prasetya 26,949,949 27,028,158 25,982,098

Total 34,605,192 37,846,870 32,373,354



55

11 PURCHASE ADVANCES (Continued) In 2012, total purchases advance of property, plant and equipments of US$ 1,865,844 (equivalent to Rp 17,513,121,317) represents the balance in connection with the purchases of machineries and equipments with total amounts of US$ 1,055,555 (equivalent to Rp 10,065,798,027) in filament yarn division and the purchases of fiber machineries and equipments for expansion with total amounts of US$ 810,289 (equivalent to Rp 7,447,323,290). The machineries and equipments will be received in 2013. In 2011, total purchases advance of property, plant and equipments of US$ 5,462,897 (equivalent to Rp 49,537,553,869) represents the balance in connection with the purchases of machineries and equipments with total amounts of US$ 1,843,567 (equivalent to Rp 16,717,469,383) in filament yarn division and the purchases of fiber machineries and equipments for expansion with total amounts of US$ 3,619,330 (equivalent to Rp 32,820,084,486). The machineries and equipments had been received in 2012. In 2010, total purchase advances of property, plant and equipments of US$ 2,860,793 (equivalent to Rp 25,721,389,072) represents the balance in connection with the purchases of machineries and equipments with total amounts of US$ 608,052 (equivalent to Rp 5,466,999,072) in filament yarn division and the expansion for Batch Poly (chips) with total amounts of US$ 2,252,741 (equivalent to Rp 20,254,390,000). The machineries and equipments had been received in April 2011 and May 2011. The payment made by the Company to PT Wismakarya Prasetya in excess of the invoice amount in treated as advance payment to PT Wismakarya Prasetya in line with the agreement between PT Wismakarya Prasetya and the Company on November 16, 2006, and the working capital provided to PT Wismakarya Prasetya in the past for the payment of its old dues to PT Perusahaan Gas Negara (PGN) or PT Perusahaan Listrik Negara (PLN) and taxation.

12. PREPAID EXPENSES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Prepaid insurance 1,061,627 1,081,786 850,592 Prepaid rent 40,000 88,000 43,572

Total 1,101,627 1,169,786 894,164



56

13. ADVANCES FOR INVESTMENT IN A JOINT VENTURE This account consist of advances for the Company’s investment in land to be used for a joint venture project between the Company and Eastman Kodak Company, USA to manufacture special types of polyester chips and fiber in Karawang - West Java. Total advances represent 17% of the joint venture’s subscribed capital. However the necessity for continuing with the joint venture is being assessed by both joint venture partners. As there is no possibility of the start-up this venture, it is thought fit to provide impairment for this equivalent amount in 2010.

14. NON-TRADE RECEIVABLES FROM RELATED PARTIES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ PT Texmaco Jaya Tbk (under bankruptcy) 106,410,712 106,410,712 – PT Multikarsa Investama 38,025,981 40,548,285 52,944,090

Total 144,436,693 146,958,997 52,944,090 Less : Allowance for impairment (111,962,653) (111,962,653) (5,551,941 )

Net 32,474,040 34,996,344 47,392,149

Non-trade receivables from PT Multikarsa Investama represent the cash receipts from AR International Limited, Hong Kong of Rp 51,421,394,625 (equivalent to US$ 5,317,621 in 2012, US$ 5,670,643 in 2011 and US$ 5,719,208 in 2010) due to refund on the Company’s advances for the purchase of property, plant and equipment (machinery and equipment). The remaining balance of US$ 32,708,360, US$ 34,877,642 and US$ 47,224,882, respectively as of December 31, 2012, 2011 and 2010 represents advance payments for salary and other expenses. Changes in the allowance for impairment are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Beginning balance 111,962,653 5,551,941 5,551,941Movement during the period : Addition – 106,410,712 – Deduction – – –

Ending balance 111,962,653 111,962,653 5,551,941

Addition in allowance for impairment in 2011 of US$ 106,410,712, which were recognized as additional of allowance for impairment due to the uncollectible non-trade receivables from PT Texmaco Jaya Tbk (under bankruptcy), and and has been eliminated with the discountinued operations financial statements from Subsidiary (Note 45).



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14. NON-TRADE RECEIVABLES FROM RELATED PARTIES (Continued) Based on the review of the status of the non-trade receivables from related parties, management believes that the carrying value is a reasonable approximation of fair value. The impairment was not provided with properly since the related party, PT Multikarsa Investama, is under the debt restructuring program and the settlement of the non-trade receivables from related parties will be done when the debt restructuring is completed. The details of non-trade receivables from related parties based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 109,297,108 109,297,108 2,886,396 Rupiah Rp 339,799,791,085 in 2012, Rp 341,518,009,452 in 2011, and Rp 450,068,726,754 in 2010 35,139,585 37,661,889 50,057,694

Total 144,436,693 146,958,997 52,944,090

15. OTHER NON-CURRENT FINANCIAL ASSETS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Restricted Cash In Banks :

IBRA (PPA) :

PT Bank Dharmala Rupiah account 2,799 2,985 7,125

PT Bank Putera Multikarsa Rupiah account 402,735 429,470 619,467 US Dollar account 702,330 702,330 1,272,458

PT Bank Papan Sejahtera Rupiah account 3,863 4,120 4,155

PT Bank Umum Nasional US Dollar account 1,927 1,927 1,927

PT Bank Asia Pacific Rupiah account 57 61 62

Total 1,113,711 1,140,893 1,905,194



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15. OTHER NON-CURRENT FINANCIAL ASSETS (Continued) As the Company and its Subsidiaries are under restructuring process with the Indonesian Bank Restructuring Agency (IBRA), the aggregate balances of cash in banks were restricted by IBRA. The Indonesian government through the Indonesian Bank Restructuring Agency (IBRA) suspended the bank operating licences of PT Bank Putera Multikarsa, a related party, on January 28, 2000; PT Bank Dharmala, PT Bank Asia Pacific and PT Bank Papan Sejahtera on March 13, 1999; and PT Bank Umum Nasional on August 21, 1998. As a result, the balance of bank as of December 31, 2012, 2011 and 2010 amounting to US$ 1,113,711, US$ 1,140,893 and US$ 1,905,194, respectively, is shown as other non-current financial assets in the consolidated statements of financial position. Deduction in 2011 represents the deduction of restricted cash in banks which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The Company and its Subsidiaries’ management determined that the restricted cash in banks do not need impaired, because the outstanding balance of restricted cash in banks will be settled upon Company and its Subsidiaries’ loan repayment or upon completion of the restructuring program with the creditors and PPA. The net carrying value of restricted cash in banks is considered a reasonable approximation of fair value.

16. PROPERTY, PLANT AND EQUIPMENT 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Carrying cost : Direct acquisition 1,784,685,143 1,770,504,803 2,185,541,688 Assets under finance lease − − 13,071,160

Total carrying cost 1,784,685,143 1,770,504,803 2,198,612,848

Accumulated depreciation : Direct acquisition 1,658,522,816 1,588,852,556 1,882,878,941 Assets under finance lease − − 13,071,160

Total accumulated depreciation 1,658,522,816 1,588,852,556 1,895,950,101

Book value 126,162,327 181,652,247 302,662,747

Contruction in progress 3,232,319 3,184,876 1,798,072

Total 129,394,646 184,837,123 304,460,819



59

16. PROPERTY, PLANT AND EQUIPMENT (Continued) The details of property, plant and equipment are as follows : Direct acquisition : 2 0 1 2 Changes during the current period

Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$

Carrying cost : Land 15,529,702 – – – 15,529,702 Building and improvement 47,221,395 – – – 47,221,395 Machinery and equipment 1,699,859,778 3,864,156 – 10,190,189 1,713,914,123 Transportation equipment 5,038,480 107,454 – – 5,145,934 Office equipment 2,855,448 18,541 – – 2,873,989 –

1,770,504,803 3,990,151 – 10,190,189 1,784,685,143

Accumulated depreciation : Building and improvement 39,518,357 1,767,285 – – 41,285,642 Machinery and equipment 1,541,723,603 67,807,126 – – 1,609,530,729 Transportation equipment 4,756,473 93,275 – – 4,849,748 Office equipment 2,854,123 2,574 – – 2,856,697

1,588,852,556 69,670,260 – – 1,658,522,816

Book value 181,652,247 126,162,327

2 0 1 1 Changes during the current period

Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$

Carrying cost : Land 47,994,266 – 32,464,564 – 15,529,702 Building and improvement 87,838,121 211,434 40,828,160 – 47,221,395 Machinery and equipment 2,028,307,217 5,562,433 335,807,944 1,798,072 1,699,859,778 Transportation equipment 8,529,463 46,934 3,537,917 – 5,038,480 Office equipment 10,800,334 304 7,945,190 – 2,855,448 Store equipment 2,072,287 – 2,072,287 – –

2,185,541,688 5,821,105 422,656,062 1,798,072 1,770,504,803

Accumulated depreciation : Building and improvement 68,494,097 3,432,065 32,407,805 – 39,518,357 Machinery and equipment 1,793,371,132 83,975,302 335,622,831 – 1,541,723,603 Transportation equipment 8,144,799 98,534 3,486,860 – 4,756,473 Office equipment 10,796,626 1,659 7,944,162 – 2,854,123 Store equipment 2,072,287 – 2,072,287 – –

1,882,878,941 87,507,560 381,533,945 – 1,588,852,556

Book value 302,662,747 181,652,247



60

16. PROPERTY, PLANT AND EQUIPMENT (Continued) Changes during the current period 2 0 1 0 Beginning Addition Deduction Reclassification Ending

US$ US$ US$ US$ US$ Carrying cost : Land 47,994,266 – – – 47,994,266 Building and improvement 87,838,121 – – – 87,838,121 Machinery and equipment 2,026,820,002 1,487,215 – – 2,028,307,217 Transportation equipment 8,412,632 342,333 225,502 – 8,529,463 Office equipment 10,798,613 1,721 – – 10,800,334 Store equipment 2,072,287 – – – 2,072,287

2,183,935,921 1,831,269 225,502 – 2,185,541,688

Accumulated depreciation : Building and improvement 64,455,940 4,038,157 – – 68,494,097 Machinery and equipment 1,709,318,037 84,053,095 – – 1,793,371,132 Transportation equipment 8,313,091 57,210 225,502 – 8,144,799 Office equipment 10,791,548 5,078 – – 10,796,626 Store equipment 2,072,287 – – – 2,072,287

1,794,950,903 88,153,540 225,502 – 1,882,878,941

Book value 388,985,018 302,662,747

Assets under finance lease : Changes during the current period 2 0 1 1 Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment 13,071,160 – 13,071,160 – –

13,071,160 – 13,071,160 – –

Accumulated depreciation : Machinery and equipment 13,071,160 – 13,071,160 – –

13,071,160 – 13,071,160 – –

Book value – –

Changes during the current period 2 0 1 0 Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment 13,071,160 – – – 13,071,160

13,071,160 – – – 13,071,160



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16. PROPERTY, PLANT AND EQUIPMENT (Continued) Changes during the current period 2 0 1 0 Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Accumulated depreciation : Machinery and equipment 13,071,160 – – – 13,071,160

13,071,160 – – – 13,071,160

Book value – –

Construction in progress : 2 0 1 2 Changes during the current period

Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment 3,184,876 10,237,632 – 10,190,189 3,232,319


Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment 1,798,072 3,184,876 – 1,798,072 3,184,876


Beginning Addition Deduction Reclassification Ending US$ US$ US$ US$ US$ Carrying cost : Machinery and equipment – 1,798,072 – – 1,798,072

2 0 1 2 2 0 1 1 US$ US$ Depreciation expenses are allocated to :

Direct acquisition : Continued operations : Manufacturing expense (Note 40) 69,574,411 86,134,534 General and administrative expenses (Note 42) 95,849 91,527

69,670,260 86,226,061

Discountinued operations (Note 45) : Manufacturing expense − 48,416

General and administrative expenses − 8,665

Other income (charges) − 1,224,418

− 1,281,499

Total 69,670,260 87,507,560



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16. PROPERTY, PLANT AND EQUIPMENT (Continued) In 2012 and 2011, the Company own several pieces of land located in Karawang and Kendal amounted to 751,357.40 square meters with certificate Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 – 30 years which will be expired between 2006 and 2029. And in 2010, the Company and its Subsidiary own several pieces of land located in Karawang, Kendal and Pemalang amounted to 1,265,486.40 square meters with certificate Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 – 30 years which will be expired between 2006 and 2029. For the ownership certificate of the land were located in Semarang of 78,111 square meters have been extended up to November 29, 2027. Management believes that there will be no difficulty in the extension of the certificate of landrights since all the landrights were acquired legally and supported by sufficient evidence of ownership. In 2002 and 2001, the addition of land of Rp 220,685,580 and Rp 1,753,645,426 consist of land located in Semarang of 24,120 square meters and in Karawang 1,962.60 square meters. The ownership certificate processing of the land is still in progress. Deduction in 2011 represents the deduction of property, plant and equipments which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The part of the Company’s land in Karawang, with the certificate Building Use Right (HGB) No. 13 of 33,630 square meters and with the certificate Building Use Right (HGB) No. 14 of 35,380 square meters, are pledged to PT Bank Negara Indonesia (BNI) or PT Bina Prima Perdana (BPP) towards secured debts’ PT Texmaco Jaya Tbk (in bankruptcy) (Note 49). The land of 166 square meters amounted to US$ 68,347 and on building amounted to US$ 96,441 represent the acquisition cost of the Company’s land and building in Bandung in 1995. In 1995, the Company purchased them at total amount of Rp 380,000,000 (the conversion rate of US$ 1 is Rp 2,360). The fair value of land (166 sqm) based on NJOP (Tax Object Market Value) is Rp 514,600,000 (equivalent to US$ 53,216) and the fair value of building (529 sqm) based on NJOP is Rp 726,124,000 (equivalent to US$ 75,090). The value of building is fully depreciated. In 2012, the part of additional machinery and equipment amounted to US$ 932,483 (equivalent to Rp 8,519,168,000) represent the expenditure for overhaul PTA machinery and will be extended the useful lives of machinery and equipment of 3 (three) years. Machinery and equipment construction in progress as of December 31, 2012 of US$ 3,232,319 are connected with the increasing of the Company’s filament yarn. Up to December 31, 2012, the percentage of completion for this project is approximately 33% and will be completed in 2013. Management believes that there is no impediment to the completion of the contruction in progress. Machinery and equipment construction in progress as of December 31, 2011 of US$ 3,184,876 are connected with the increasing of the Company’s filament yarn and fiber capacity. These have been completed in 2012. Machinery and equipment construction in progress as of December 31, 2010 of US$ 1,798,072 are connected with the Company’s development in the new product yarn (SILKRA’s branded) and the Company’s Batch Poly capacity. These have been completed in August 2011 and December 2011, respectively.



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16. PROPERTY, PLANT AND EQUIPMENT (Continued) All of the Company and its Subsidiaries’ property, plant and equipment, except land were insured with PT Asuransi Rama Satria Wibawa as lead insurance company from loss and other risks including earthquake valuing in total US$ 605,070,000 plus Rp 609,000,000 as of December 31, 2012, US$ 561,520,000 as of December 31, 2011 and US$ 571,850,000 plus Rp 2,813,350,000 as of December 31, 2010, respectively. The Company’s management, the sum insured as stated above is adequate to cover possible losses arising from such risks. The fair value of land (762,538 sqm) based on NJOP (Tax Object Market Value) is Rp 224,888,000,000 (equivalent to US$ 23,256,256) and the fair value of building (210,582 sqm) based on NJOP is Rp 219,324,000,000 (US$ 22,680,869). Based on the appraisal’s report of KJPP Wilson and Rekan dated January 30, 2012, total market value of the Company’s land, building and improvement were Rp 444,212,000,000. And based on the appraisal’s report of Nirboyo A., Dewi A. & Rekan dated January 19, 2012, total market value of machinery and transportation equipment in Karawang is US$ 274,860,902. Based on the appraisal’s report of Nirboyo A., Dewi A. & Rekan dated January 20, 2010, total market value of the Company’s property, plant and equipment (except for office equipments) are US$ 591,782,199. The valuation, which conforms to International Valuation Standards, was determined by reference to recent market transactions on arm’s length terms. Appraisal method used is Market Data Approach Methods. Elements used in data comparison process to determine assets’ fair value are as follows : a. Type of right on property. b. Market condition c. Location d. Land and Physical characteristics e. Income producing characteristics All of property, plant and equipment as at reporting date are fully used to support the Company’s operation activities. As of December 31, 2012 and 2011, total acquisition cost of property, plant and equipment with zero net carrying amounts (fully depreciated assets) amounted to US$ 742,492,712 and US$ 702,128,695, respectively, but the company is still used them for their operational. Management believes that the estimated recoverable amounts of property, plant and equipment exceed their carrying values and, hence, no impairment of property, plant and equipment should be recorded as at the reporting date. In 2012 and 2011, All of the Company’s land, machinery and equipment are used as collateral for secured bond holders and working capital loans from Damiano Investments BV., Netherland and PT Bina Prima Perdana (BPP) / PT Perusahaan Pengelola Asset (PPA) (Notes 21 and 25).



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16. PROPERTY, PLANT AND EQUIPMENT (Continued) And in 2010, All of the Company and Subsidiaries’ land, machinery and equipment are used as collateral for the secured bond holders, working capital loans and notes payable from Damiano Investments BV., Netherland and PT Bina Prima Perdana (BPP) / PT Perusahaan Pengelola Asset (PPA) (Notes 21, 23 and 25).

17. INTANGIBLE ASSETS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Legal processing of landrights 13,247 – – Less : accumulated amortization (497) – –

Net 12,750 – –

Amortization expense are allocated to : General and administrative expenses (Note 42) 497 – –

Intangible assets represents legal cost associated with the acquisition of landrights for land located at Bandung (166 square meters) and is amortized over the useful life (Hak Guna Bangunan) of 20 years

18. TRADE PAYABLES This account consist of : Third parties : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Local suppliers 10,537,328 16,123,355 12,313,277 Foreign suppliers 12,405,006 7,675,528 12,498,234

Total 22,942,334 23,798,883 24,811,511



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18. TRADE PAYABLES (Continued) A summary of the aging of trade payables to third parties based on the date of invoice is as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Up to 1 month 18,541,840 19,161,428 15,659,849 > 1 month – 3 months 2,697,906 2,811,274 2,464,002 > 3 months – 6 months 565,265 356,290 529,857 > 6 months – 1 year 612,648 492,350 426,336 > 1 year 524,675 977,541 5,731,467

Total 22,942,334 23,798,883 24,811,511

The details of trade payables to third parties based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 18,551,978 19,653,155 11,091,004 Rupiah Rp 30,425,613,348 in 2012, Rp 35,088,919,356 in 2011, and Rp 117,868,634,044 in 2010 3,146,392 3,869,532 13,109,625 European Euro EUR 284,392 in 2012, EUR 136,455 in 2011 and EUR 419,905 in 2010 8376,738 176,648 558,379 Japan Yen Yen 4,780,473 in 2012, Yen 3,779,861 in 2011, and Yen 1,431,156 in 2010 55,368 48,770 17,509 Great British Poundsterling GBP 16,660 in 2011 and GBP 11,788 in 2010 – 25,665 18,216 Singapore Dolar SGD 27,904 in 2012, SGD 32,654 in 2011 and SGD 20,022 in 2010 22,817 25,113

15,546

Carried forward 22,153,293 23,798,883 24,810,279



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18. TRADE PAYABLES (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Brought forward 22,153,293 23,798,883 24,810,279

Swedish Krona SEK 5,128,579 in 2012 789,041 – – Swiss Franc CHF 1,154 in 2010 – – 1,232

Total 22,942,334 23,798,883 24,811,511

Related party : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ PT Texmaco Jaya Tbk (under bankruptcy) 7,150 – –

A summary of the aging of trade payables to related party based on the date of invoice is as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Up to 1 month 7,150 – –

The details of trade payables to related party based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Rupiah Rp 69,142,248 in 2012 7,150 – –

Trade payables to third parties local and foreign suppliers represent payables for purchase of raw materials and indirect materials. These are non-interest bearing with clear terms of repayments. The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered a reasonable approximation of fair value. There is no guarantee given on the trade payables.



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19. ACCRUED EXPENSES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Interest 39,768,727 42,083,898 72,752,046 Electricity 1,925,678 2,058,155 2,437,592 Transportation 948,570 748,081 923,795 Salary 365,393 349,969 962,337 Rent 117,671 133,709 122,107 Professional fee 81,000 75,000 70,000 Others 112,131 157,487 108,029

Total 43,319,170 45,606,299 77,375,906

The accrued interest of certain secured debts, short-term loans and notes payable represent interest expenses accrued from the year 2001, 2002 and 2003, while all the unpaid and accrued interest up to 2000 according to the MOA had been waived. The interest expense after the year 2003 has not been recorded by the Company and its Subsidiaries due to the restructuring process that has not yet been completed (Note 21). In February 2010, PT Perusahaan Listrik Negara (Persero) had filed a petition in The Hight Court of Central Java (Pengadilan Tinggi Jawa Tengah) to the Subsidiary for the recovery of their outstanding on electricity bill for December 2003 up to September 2004 amounting to Rp 2,821,800,525. Until August 19, 2011, the outstanding payable has not yet paid by the Subsidiary. Deduction in 2011 represents the deduction of accrued expenses which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The details of accrued expenses based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 592,330 278,033 19,789,653 Rupiah

Rp 413,168,541,805 in 2012, Rp 411,036,714,332 in 2011, and Rp 517,758,000,723 in 2010 42,726,840 45,328,266 57,586,253

Total 43,319,170 45,606,299 77,375,906

The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered reasonable approximation of fair value.



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20. BANK LOANS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Related Party : Damiano Investment BV., Netherland 78,752,462 70,339,624 48,046,644

According to the amendment loan agreement dated March 3, 2006 and August 31, 2006 between the Company (Borrower), and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to provide the Letter of Credit facility in the aggregate principal amount of US$ 50,000,000. Accordingly, the Company can also use the lender name as guarantor for opening Letter of Credit in Barclays Bank Plc, Hongkong (Barclays). In addition, the Company should pay a financing fee of 2.25% per month on the aggregate amounts of the facility in Barclays to Damiano Investments BV., Netherland. Based on the amendment loan agreement dated January 1, 2009 between the Company (Borrower), and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), from April 3, 2009 onwards, any and all references to “Barclays Letter of Credit Facility” shall be moved to “Deutsche Bank AG : Letter of Credit Facility”. The fee charges by Damiano Investments BV., Netherland on this facility was 1.50% per month. The Letter of Credit facility always changed based on the Company’s requirements for purchasing of raw materials. Based on the recent amendment loan agreement dated April 8, 2011 between the Company (Borrower) and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to increase the Letter of Credit facility in the aggregate principal amount from US$ 50,000,000 to US$ 80,000,000. Further, based on the recent amendment loan agreement on July 2012 between the Company (Borrower) and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to increase the Letter of Credit facility in the aggregate principal amount from US$ 80,000,000 to US$ 100,000,000. The availability of facility as of December 31, 2012, 2011 and 2010 were US$ 84,019,693, US$ 76,934,921 and US$ 50,717,707, respectively. And the letter of credit is used by the Company to purchase of raw materials totaling US$ 78,752,462 in 2012, US$ 70,339,624 in 2011 and US$ 48,046,644 in 2010, respectively. This is a revolving facility. All bank loans are denominated in US Dollar. For the years ended December 31, 2012 and 2011, a fee on Bank Loan has been recognized in the amount of US$ 13,969,873 and US$ 10,433,384, respectively, and is presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 43).



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20. BANK LOANS (Continued) All bank loans from Damiano Investments BV., Netherland are collateralized by the Company’s trade receivables and inventories (Notes 7 and 10). The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered a reasonable approximation of fair value.

21. SECURED DEBTS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Bonds : 13% Guaranteed Secured Notes 122,526,000 122,526,000 122,526,000 Secured Floating Rate Notes 50,000,000 50,000,000 50,000,000 9.375% Guaranteed Secured Notes 250,000,000 250,000,000 250,000,000 11.375% Guaranted Secured Notes 260,000,000 260,000,000 260,000,000

682,526,000 682,526,000 682,526,000

PT Bina Prima Perdana PT Bank Negara Indonesia (Persero) Tbk IDR 1,302,583,907,331 134,703,610 143,646,218 144,876,422 United States Dollar 29,055,834 29,055,834 29,055,834 EUR 849,872 1,125,826 1,100,204 1,130,119 YEN 3,001,711,400 34,756,139 38,664,463 36,819,558

199,641,409 212,466,719 211,881,933

Banks Damiano Investments BV., Netherland (Ex. PT Bank Finconesia) EUR 7,471,539 9,897,556 9,672,290 9,935,285

Damiano Investments BV., Netherland (Ex. Union Europeene de CIC, Singapore) EUR 5,941,395 7,870,573 7,691,440 7,900,575

Damiano Investments BV., Netherland (Ex. Credit Agricole Indosuez, Singapore) 12,117,088 12,117,088 12,117,088

Damiano Investments BV., Netherland (Ex. Bangkok Bank, Singapore) 3,303,097 3,303,097 3,303,097

33,188,314 32,783,915 33,256,045



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21 SECURED DEBTS (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Ministry of Finance (Ex. BNI LC) : PT Bank Negara Indonesia (Persero) Tbk United States Dollar 78,628,322 78,628,322 78,628,322 IDR 41,968,807,083 4,340,104 4,628,232 4,667,869 EUR 1,426,173 1,889,252 1,846,253 1,896,454 CHF 45,902 50,302 48,779 49,012

84,907,980 85,151,586 85,241,657

Total secured debts 1,000,263,703 1,012,928,220 1,012,905,635

On November 30, 2001, the Company entered into Definitive Memorandum of Agreement (MOA) with the noteholders regarding the restructuring plan of the Company. However, it has not yet been executed by the Company and the MOA and automatically terminated. However, on March 14, 2007, the Company has issued a new SDRP (Secured Debt Restructure Proposal) to its secured creditors for the restructure of its Secured debts including the bonds. Up to March 2013, the Company has not obtained the approval from the secured creditors, particularly from PPA (28% of total secured debt) has not given their decision on restructuring settlement. In July 2007, the Company submitted a Secured Debt Restructure Plan (SDRP) to its secured creditors comprising of secured bond holders and PPA. However, PPA has not approved this SDRP till March 2012, though the same is being supported by Damiano Investments BV., Netherland. Damiano Investments BV., Netherland currently hold approximately 93% of the secured bonds and banks, other than PPA. In November 2010 and December 2010, PPA announced a “Sale of Texmaco Assets and Shares” programme which includes the fixed assets held as security by PPA in the Company-Semarang’s site. However for some reasons, the programme was later called off and cancelled. A. 13% Guaranteed Secured Notes, US$ 122,526,000.

The Company issued US$ 125,000,000 Unsecured Senior Notes in June 1994 carrying an interest rate of 13% per annum. The notes are due for repayment in 2001. In May 1996, the Company offered to the holders of the said unsecured notes to exchange their notes with 13% Guaranteed Senior Notes due in 2001 which were listed in Luxembourg Stock Exchanges and issued by PIFC with the Company as the guarantor. All holders of the unsecured notes exchanged their notes with the new secured notes except for the holders of unsecured notes amounting to US$ 2,474,000. In August 1997, the Company paid part of the 13% Unsecured Senior Notes amounting to US$ 1,250,000.



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21 SECURED DEBTS (Continued) B. Secured Floating Rates Notes, US$ 50,000,000.

In February 1996, PIFC, with the Company as a guarantor, issued the US$ 50,000,000 Secured Floating Rate Notes which were listed in Luxembourg Stock Exchanges with carrying an interest rate of 3% above LIBOR and were due in 1999.

C. 9.375% Guaranteed Secured Notes, US$ 250,000,000.

In July 1997, PIFC, with the Company as a guarantor, issued the US$ 250,000,000 Guaranteed Secured Notes due in 2007 which were listed in Luxembourg Stock Exchange with carrying an interest rate of 9.375% per annum. The proceeds from issuance of these notes were used to finance a portion of phase I of the Company’s expansion program.

D. 11.375% Guaranteed Secured Notes, US$ 260,000,000.

In June 1996, PIFC, with the Company as a guarantor, issued the US$ 260,000,000 Guaranteed Secured Notes due in 2006 which were listed in Luxembourg Stock Exchange. The notes carry an interest rate of 11.375% per annum. The proceeds from issuance of these notes were used to pay off other debts and loans.

Currently all these notes have been delisted from Luxembourg Stock Exchanges and are secured by liens of the collateral, which consist of real property, moveable assets (other than inventories) and proceeds of collateral on a pari-passu basis with the other notes payable and obligations of the Company (Note 16). Loans to PT Bina Prima Perdana (BPP) represent loans from PT Bank Negara Indonesia (Persero) Tbk which had been defaulted and transferred to IBRA. Further, pursuant to debt restructuring scheme in Master Restructuring Agreement (MRA) dated May 23, 2001, in 2002 the Company’s debts to IBRA have been transferred to BPP. For this transfer, BPP issued Exchangeable Bond (EB) to IBRA. But, on February 26, 2004, IBRA issued a letter of default notice to PT Bina Prima Perdana. The letter stated that PT Bina Prima Perdana as the textile holding company had failed to pay the Exchangeable Bond (EB) coupons due on August 18, 2003. The Company did not recognize the interest expenses on secured debts since 2004 since the Company is under restructuring process, and the interest payable will not be counted. As of December 31, 2012, 2011 and 2010, the Company had interest payable of Rp 380,648,007,290 (equivalent to US$ 39,363,806 in 2012, US$ 41,977,063 in 2011 and US$ 42,336,560 in 2010) and was presented as part of accrued expenses in the consolidated statements of financial position (Note 19).



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21. SECURED DEBTS (Continued) The breakdown of secured debts by currency is as follows: 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar 805,630,341 805,630,341 805,630,341

European Euro (EUR 15,688,979 in 2012, 2011 and 2010) 20,783,207 20,310,187 20,862,433

Japan Yen (JPY 3,001,711,400 in 2012, 2011 and 2010) 34,756,139 38,664,463 36,819,558

Swiss Franc (CHF 45,902 in 2012, 2011 and 2010) 50,302 48,779 49,012

Rupiah (Rp 1,344,552,714,414 in 2012, 2011 and 2010) 139,043,714 148,274,450 149,544,291

Total 1,000,263,703 1,012,928,220 1,012,905,635

The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered a reasonable approximation of fair value.

22. SHORT–TERM LOANS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Working capital loan facility : PT Bina Prima Perdana : PT Bank Negara Indonesia (Persero) Tbk Hong Kong Branch − − 18,587,500

Pekalongan Branch (Rp 53,122,755,829)

−

− 5,908,437

Karawang Branch (Rp 88,695,795) − − 9,865

PT Bank Dharmala (Rp 8,000,000,000) − − 889,779

PT Bank Putera Multikarsa (Rp 1,197,490,480)

−

− 133,188

Catora International BV., Netherlands − − 400,000

Damiano Investments BV., Netherlands − − 200,000

Total working capital loans − − 26,128,769



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22. SHORT–TERM LOANS (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Letter of Credit facility : PT Bina Prima Perdana : PT Bank Duta (Rp 28,175,026,153) − − 3,133,692

PT Bank Putera Multikarsa − − 1,670,669

Total − − 4,804,361

Others : PT Bank Sumitomo Mitsui Indonesia − − 1,906,484

PT Bank Negara Indonesia (Persero) Tbk (US$ 198,595 and Rp 27,115,346,119) − − 3,214,427

Jumlah lain-lain − − 5,120,911

Total letter of credit facility − − 9,925,272

Total short-term loans − − 36,054,041

Loans to PT Bina Prima Perdana (BPP) represent loans to PT Bank Negara Indonesia (Persero) Tbk, PT Bank Dharmala and PT Bank Putera Multikarsa which have been default and transferred to IBRA. Pursuant to the debt restructuring scheme of the Master Restructuring Agreement (MRA) dated May 23, 2001, the Subsidiaries’ debts to IBRA are to transferred to BPP in 2002. For this transfer, BPP issued Exchangeable Bond (EB) to IBRA. On November 30, 2001, the Subsidiary entered into Definitive Memorandum of Agreement (MOA) with the bondholders and IBRA for restructuring plan of Subsidiary. However, it has not yet been executed by the Subsidiary and the MOA could be automatically terminated. On February 26, 2004, IBRA issued a letter of default notice to PT Bina Prima Perdana. The letter stated that PT Bina Prima Perdana as the textile holding company has failed to pay the Exchangeable Bond (EB) coupons due on August 18, 2003. On February 27, 2004, IBRA was dissolved by the Government. The outstanding or unfinished affairs under the handling of IBRA were transferred to a company called PT Perusahaan Pengelola Assets (PPA) for further management and restructuring process under the supervision of the Ministry of Finance. The significant information relating to the loans are as follows :



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22 SHORT–TERM LOANS (Continued) a. Working Capital Loan Facility

PT Bank Negara Indonesia (Persero) Tbk (BNI) The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Negara Indonesia (Persero) Tbk (BNI) since 2004 due to the Subsidiary is under the restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary has interest payables of amounting to Rp 50,280,187,912 plus US$ 9,031,692.27 (equivalent to US$ 14,623,972), and was presented as part of accrued expenses in the consolidated statements of financial position. PT Bank Dharmala The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Dharmala since 2004 due to the Subsidiary is under the restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary has interest payables of Rp 7,856,714,054 (equivalent to US$ 873,842), and was presented as part of accrued expenses in the consolidated statements of financial position. PT Bank Putera Multikarsa The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Putera Multikarsa since 2004 due to the Subsidiary is under the restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary has interest payable of Rp 98,149,297 (equivalent to US$ 10,916), and was presented as part of accrued expenses in the consolidated statements of financial position. Catora International BV., Netherlands On January 27, 2006, the Subsidiary obtained a short term working capital loan facility amounting US$ 500,000 from Catora International B.V., Netherlands (“CIBV.”) for the purchase of raw materials (import and local) and to meet some of critical operational expenses such as wages, electricity etc. This facility bears interest rate 18% p.a. with the final repayment due on August 31, 2006, and is secured by inventories under fiduciary in favour of CIBV. At a minimal amount of US$ 750,000. The facility had been amended on August 2006 to provide the Subsidiary with total credit facility up to US$ 750,000 and the final repayment due on May 31, 2007. During 2007, the Company has paid US$ 200,000 on August 14, 2007 and US$ 100,000 on September 13, 2007. During 2008, the Subsidiary has paid US$ 50,000 on April 9, 2008. Subsequently, the loan was assigned in favour of Mr. Marimutu Sinivasan as per the assignment agreement dated July 29, 2008.



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22 SHORT–TERM LOANS (Continued) a. Working Capital Loan Facility (Continued)

Catora International BV., Netherlands (Continued) As of December 31, 2010, the Subsidiary has not paid the remaining working capital loan amounting to US$ 400,000 which is already due because of financial difficulties and cash flow problem. This agreement has not yet been renewed. As of December 31, 2010, the Subsidiary has interest payables were US$ 149,946 (equivalent with Rp 1,348,164,450), and was presented as part of accrued expenses in the consolidated statements of financial position. For the period ended August 19, 2011, interest expense of short-term loans from Catora International BV., Netherland amounted to US$ 51,333 (equivalent to Rp 425,399,333) and was presented as part of discountinued operations financial statements from Subsidiary (Note 45). Damiano Investment BV., Netherlands Based on the loan agreement dated January 8, 2008 among the Subsidiary (Borrower), Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to provide working capital loan facility in the aggregate principal amount of US$ 1,000,000. The interest chargeable in this loan is 25% per annum, repayable in six (6) months after the date of execution or due on August 2008. On August 14, 2008 and September 1, 2008, the Subsidiary has paid US$ 700,000 and US$ 100,000 respectively. As of December 31, 2011 and 2010, the Subsidiary has not paid the remaining balance of US$ 200,000 respectively due to financial difficulties or cash flow problem. For the period ended August 19, 2011, interest expense on short-term loans from Damiano Investment BV., Netherland amounted to US$ 35,645 (equivalent to Rp 287,763,423) and was presented as part of discountinued operations financial statements from Subsidiary (Note 45).

b. Letter of Credit Facility

PT Bank Negara Indonesia (Persero) Tbk (BNI) In August 2000, the Subsidiary obtained Letter of Credit facilities from PT Bank Negara Indonesia (Persero) Tbk (BNI) with a maximum credit of US$ 100,000,000 for importing raw materials, supplies and consumable goods for textile and chemical industries. The Letter of Credit Facility provided by BNI guaranteed by IBRA, was stopped by BNI in March 2003.



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22. SHORT–TERM LOANS (Continued) b. Letter of Credit Facility (Continued)

PT Bank Negara Indonesia (Persero) Tbk (BNI) (Continued) The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Negara Indonesia (Persero) Tbk (BNI) since 2004 due to the Subsidiary is under the restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary had interest payables of Rp 17,414,256,284 plus US$ 56,730.30 (equivalent to US$ 1,993,585), respectively, and was presented as part of accrued expenses in the consolidated statements of financial position. PT Bank Duta and PT Bank Sumitomo Mitsui Indonesia The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Duta and PT Bank Sumitomo Mitsui Indonesia since 2004 due to the Subsidiary is under the restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary had interest payables of Rp 22,512,136,671 plus US$ 89,072.89 (equivalent to US$ 2,592,925), and was presented as part of accrued expenses in the consolidated statements of financial position. The Letter of Credit facilities from PT Bank Duta and PT Bank Sumitomo Mitsui Indonesia are categorized as secured debt to BPPN/PPA. PT Bank Putera Multikarsa The Subsidiary did not recognize the interest expense incurred from the short-term loan from PT Bank Putera Multikarsa since 2004 due to the Subsidiary is under restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary had interest payables of US$ 73,997.97, and was presented as part of accrued expenses in the consolidated statements of financial position. The letter of credit facilities from PT Bank Putra Multikarsa is categorized as unsecured debt to BPPN/PPA.

Deduction in 2011 represents the deduction of short-term loans which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered a reasonable approximation of fair value.



77

22. SHORT–TERM LOANS (Continued) The above short-term loans are collateralized by the Subsidiary’s trade receivables, inventories, property, plant and equipment, personal guarantees of the directors of the Subsidiary, and a pledge of 5,000,000 shares of the Subsidiary (Notes 7, 10 and 16).

23. NOTES PAYABLE

2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ PT Bina Prima Perdana : US Dollar – – 5,000,000 Rupiah (Rp 37,026,286,647) – – 4,118,150

– – 9,118,150

Others : US Dollar – – 11,141,085

Total – – 20,259,235 Less : currently maturing of notes payable – – (20,259,235 )

Long-term notes payable – – –

2 0 1 2 2 0 1 1 2 0 1 0 Discounted interest rate : Rupiah – – 18.75% US Dollar – – 10.50% Due to the suspension of the bank operations as noteholders in 1999, the loans have been transferred to IBRA for administration. Pursuant to the debt restructuring scheme of the Master Restructuring Agreement (MRA) dated May 23, 2001, the Subsidiary’s debts to IBRA are to be transferred to a new holding company (NewCo), PT Bina Prima Perdana in 2002. For this transfer, PT Bina Prima Perdana issued Exchangeable Bond (EB) to IBRA. The above notes payable are unsecured. The arranger of the notes payable is PT Asia Kapitalindo Securities. On February 26, 2004, IBRA issued a letter of default notice to PT Bina Prima Perdana. The letter stated that PT Bina Prima Perdana as the textile holding company has failed to pay the Exchangeable Bond (EB) coupons due on August 18, 2003.



78

23 NOTES PAYABLE (Continued)

On February 27, 2004, IBRA was dissolved by the Government. The outstanding or unfinished affairs under the handling of IBRA were transferred to a company called PT Perusahaan Pengelola Assets (PPA) for further management and restructuring process under the supervision of the Ministry of Finance. The Subsidiary did not recognize the interest expense incurred from the notes payable since 2004 due to the Subsidiary is under restructuring process, and the interest payables will not be counted. As of December 31, 2010, the Subsidiary has interest payables of US$ 732,349 plus Rp 3,082,246,608 (equivalent to US$ 1,075,164), and was presented as part of accrued expenses in the consolidated statements of financial position. Deduction in 2011 represents the deduction of notes payable which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The above notes payable are collateralized by the Subsidiary’s property, plant and equipment (Note 16). The fair value of these short-term financial liabilities is not individually determined as the carrying amount is considered a reasonable approximation of fair value.

24. UNSECURED DEBTS AND NOTES PAYABLE 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

The Hongkong and Shanghai Banking Corporation Limited 22,169,338 21,945,011 21,077,129

The Company has taking steps to implement the Composition Plan (Rencana Perdamaian) as approved by the unsecured creditors of the Company and ratified by the Commercial Court. On September 29, 2006, the unsecured creditors comprising of Banks, PT Bina Prima Perdana, Leasing, and Notes stand at US$ 18,670,630 was restructured into Fixed Rate Notes under custodian of The Hongkong and Shanghai Banking Corporation Limited, Hong Kong. As of December 31, 2012, 2011 and 2010, the total restructured unsecured debt were US$ 22,169,338, US$ 21,945,011 and US$ 21,077,129, respectively which are comprising of principal notes at US$ 18,670,630 plus unpaid capitalized interest of US$ 3,498,708 in 2012, US$ 3,274,381 in 2011 and US$ 2,406,499 in 2010. Based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and The Hongkong and Shanghai Banking Corporation Limited (Noteholder) dated January 30, 2009, the Noteholder shall defer the redemption dated of the unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption dates below :



79

24. UNSECURED DEBTS AND NOTES PAYABLE (Continued)

Years Rate of return

2012 5.00% 2013 17.50% 2014 17.50% 2015 17.50% 2016 20.00% 2017 22.50%

Further, based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and The Hongkong and Shanghai Banking Corporation Limited (Noteholder) dated December 23, 2011, the Noteholder shall defer the redemption dated of the unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption dates below :

Years Rate of return

2015 5.00% 2016 17.50% 2017 17.50% 2018 17.50% 2019 20.00% 2020 22.50%

All unsecured debts and notes payable are denominated in US Dollar. For the years ended December 31, 2012 and 2011, the interest charges on the unsecured debts were US$ 885,278 and US$ 861,026, respectively, and are presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 43). The fair value of long-term financial liabilities have been determined by calculating their present value at the statement of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position.

25. WORKING CAPITAL LOANS 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Related Party : Damiano Investments BV., Netherland 17,340,000 23,000,000 40,610,862 Less : current maturity of long-term liabilities (17,340,000 ) (8,500,000 ) (4,333,000 )

Long-term liability – net of current maturity – 14,500,000 36,277,862



80

25. WORKING CAPITAL LOANS (Continued) According to the Composition Plan approved by the creditors, Damiano Investments BV., Netherland has provided US$ 15,000,000 working capital loans for the Company. The interest chargeable on this loan is 9% per annum till the implementation of the Composition Plan. Upon implementation of the Composition Plan, the rate of interest and repayment of the principal amount are as per the terms of the “New Notes / Loan restructure”. The working capital loans have been fully paid by the Company during 2011. In addition to the above working capital loan, Damiano Investments BV., Netherland has also provided US$ 10,687,669.23 as working capital loans to the Company with interest rate of 15% per annum. The part of these working capital loans with totalling of US$ 6,777,924.23 have been repaid by the Company in 2011 while the remaining balance of US$ 3,909,745 was repaid by the Company in 2012. Damiano Investments BV., Netherland has also provided US$ 3,336,000 as advances. Based on the termination agreement dated January 1, 2008, Damiano Investments BV., Netherland agreed to reclassify the advances into a working capital loan agreement. It has been repaid by the Company in 2012. Based on the termination deed dated January 1, 2008, Damiano Investments BV., Netherland also agreed to reclassify outstanding amounts of principal and its interest from Catora’s pre-financing facility amounting to US$ 4,000,000 and US$ 2,399,255, respectively into a working capital loan agreement. It has been repaid by the Company in 2012. Based on the third loan agreement dated August 14, 2008 and September 19, 2008, the Company obtained additional working capital loan from Damiano Investments BV., Netherland amounting to US$ 700,000 and US$ 155,000, respectively. It has been repaid by the Company in 2012. During the year 2009, Damiano Investments BV., Netherland has also provided US$ 1,625,000 as a part of the Third Loan Agreement. The part of these short-term working capital loans with totaling of US$ 1,257,839 have been repaid by the Company in the 2009 while the remaining balance of US$ 367,161 was repaid by the Company in 2010.

During the year 2010, Damiano Investments BV., Netherland has also provided US$ 4,333,000 as part of the Third Loan Agreement for the Company’s capital expenditure. It has been repaid by the Company during February 2011 until June 2011. During the year 2011, Damiano Investments BV., Netherland has also provided US$ 8,500,000 as part of the Third Loan Agreement for the Company’s capital expenditure. The part of these short-term working capital loans of US$ 4,100,000 have been repaid by the Company in 2012 while the remaining balance of US$ 4,400,000 will be repaid by the Company in December 2013.



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25. WORKING CAPITAL LOANS (Continued) During the year 2012, Damiano Investments BV., Netherland has also provided US$ 12,940,000 as part of the Third Loan Agreement for the Company’s capital expenditure. It will be repaid by the Company in December 2013. All working capital loans are denominated in US Dollar. For the years ended December 31, 2012 and 2011, the interest charge on the working capital loans from Damiano Investments BV., Netherland were US$ 2,936,962 and US$ 4,586,244, respectively, and are presented as part of finance costs accounts in the consolidated statements of comprehensive income (Note 43). The fair value of long-term financial liabilities have been determined by calculating their present value at the statement of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position. In 2012, 2011 and 2010, working capital loans from Damiano Investments BV., Netherland are collateralized by the Company’s trade receivables, inventories and property, plant and equipments as collateral (Notes 7, 10 and 16).

26. CREDIT FINANCING PAYABLES 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Credit financing payable: PT Andalan Finance Indonesia 59,272 45,758 66,909 PT Astra Sedaya Finance 17,010 31,973 8,814 PT Staco Estetika Sedaya Finance 6,946 27,828 46,194 PT Toyota Astra Financial Service 36,958 − 8,404

Total credit financing payables 120,186 105,559 130,321

Less : current maturity of credit financing payable: PT Andalan Finance Indonesia (33,586) (22,780) (20,758 ) PT Astra Sedaya Finance (11,043) (13,834) (5,567 ) PT Staco Estetika Sedaya Finance (6,946) (20,421) (18,155 ) PT Toyota Astra Financial Service (13,076) − (8,404 )

Total current maturity of credit financing payables (64,651

) (57,035

) (52,884

)

Credit financing payables – net of current maturity 55,535

48,524

77,437



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26. CREDIT FINANCING PAYABLES (Continued) Based on agreement dated August 5, 2008, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Honda All New CRV) amounting to Rp 200,200,000 with interest rate of 8.25% per annum, repayable in monthly installments from August 30, 2008 up to July 30, 2012. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp Nil, Rp 29,195,845 (equivalent to US$ 3,219) and Rp 79,245,841 (equivalent to US$ 8,814), respectively. Based on agreement dated December 28, 2009, the Company obtained a credit financing from PT Toyota Astra Financial Services for purchasing of a car (Toyota Innova) amounting to Rp 164,850,000 with interest rate of 6.00% per annum, repayable in monthly installments from December 30, 2009 up to November 30, 2011. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp Nil, Rp Nil and Rp 75,556,250 (equivalent to US$ 8,404), respectively. Based on agreement dated May 24, 2010, the Company obtained a credit financing from PT Staco Estetika Sedaya Finance for purchasing of a car (Toyota Fortuner) amounting to Rp 513,000,000 with effective interest rate of 12.83% per annum, repayable in monthly installments from May 28, 2010 up to April 28, 2013. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp 67,160,963 (equivalent to US$ 6,946), Rp 252,341,940 (equivalent to 27,828) and Rp 415,331,575 (equivalent to US$ 46,194), respectively. Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 137,547,400 with effective interest rate of 10.04% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp 46,118,818 (equivalent to US$ 4,769), Rp 91,836,615 (equivalent to US$ 10,127) and Rp 133,141,400 (equivalent to US$ 14,808), respectively. Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 137,547,400 with effective interest rate of 10.04% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp 46,118,818 (equivalent to US$ 4,770), Rp 91,836,615 (equivalent to US$ 10,128) and Rp 133,141,400 (equivalent to US$ 14,809), respectively Based on agreement dated December 14, 2010, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Fortuner) amounting to Rp 346,385,800 with effective interest rate of 10.03% per annum, repayable in monthly installments from December 10, 2010 up to November 10, 2013. As of December 31, 2012, 2011 and 2010, the outstanding credit financing payable balances were Rp 116,130,040 (equivalent to US$ 12,009), Rp 231,261,986 (equivalent to US$ 25,503) and Rp 335,291,800 (equivalent to US$ 37,292), respectively.



83

26. CREDIT FINANCING PAYABLES (Continued) Based on agreement dated June 16, 2011, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Isuzu Elf) amounting to Rp 185,598,390 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 19, 2011 up to June 19, 2014. As of December 31, 2012 and 2011, the outstanding credit financing payable balances were Rp 99,884,706 (equivalent to US$ 10,329) and Rp 158,471,324 (equivalent to US$ 17,476), respectively. Based on agreement dated June 20, 2011, the Company obtained a credit financing from PT Astra Sedaya Finance for purchasing of a car (Toyota Avanza) amounting to Rp 119,640,000 with effective interest rate of 10.74% per annum, repayable in monthly installments from July 22, 2011 up to June 22, 2014. As of December 31, 2012 and 2011, the outstanding credit financing payable balances were Rp 64,605,671 (equivalent to US$ 6,681) and Rp 102,266,933 (equivalent to US$ 11,278), respectively. Based on agreement dated July 30, 2012, the Company obtained a credit financing from PT Toyota Astra Finance Services for purchasing of a car (Toyota Innova) amounting to Rp 232,700,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 24, 2012 up to June 24, 2015. As of December 31, 2012, the outstanding credit financing payable balance was Rp 160,872,118 (equivalent to US$ 16,637). Based on agreement dated July 30, 2012, the Company obtained a credit financing from PT Toyota Astra Finance Services for purchasing of a car (Toyota Innova) amounting to Rp 284,250,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from July 24, 2012 up to June 24, 2015. As of December 31, 2012, the outstanding credit financing payable balance was Rp 196,507,062 (equivalent to US$ 20,321). Based on agreement dated November 12, 2012, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 295,000,000 with effective interest rate of 9.14% per annum, repayable in monthly installments from November 19, 2012 up to October 19, 2015. As of December 31, 2012, the outstanding credit financing payable balance was Rp 208,935,649 (equivalent to US$ 21,607). Based on agreement dated November 12, 2012, the Company obtained a credit financing from PT Andalan Finance Indonesia for purchasing of a car (Toyota Innova) amounting to Rp 214,600,000 with effective interest rate of 10.24% per annum, repayable in monthly installments from December 3, 2012 up to December 3, 2015. As of December 31, 2012, the outstanding credit financing payable balance was Rp 155,855,000 (equivalent to US$ 16,117). The interest expenses incurred on this credit financing for the years ended December 31, 2012 and 2011 were Rp 118,812,998 (equivalent to US$ 12,287) and Rp 136,723,195 (equivalent to US$ 15,140), respectively, and is shown as part of the finance costs accounts in the consolidated statements of comprehensive income (Note 43).



84

26. CREDIT FINANCING PAYABLES (Continued) The fair value of the long-term financial liabilities – credit financing payables as of December 31, 2012, 2011 and 2010 have been determined by calculating their present value at the consolidated statement of financial position date, using fixed effective market interest rates available to the Company. No fair value changes have been included in consolidated statements of comprehensive income for the period as financial liabilities are carried at amortized cost in the consolidated statements of financial position.

27. FINANCE LEASE LIABILITIES Lessors Type of asset 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

PT Perjahl Leasing Indonesia Machinery – – 1,233,718 PT Piranti Mulia Bisnisindo Machinery – – 1,165,187 PT Hanil Bakrie Finance Corporation Machinery – – 970,270 PT Koexim Mandiri Finance Machinery – – 602,339 PT GE Astra Finance Machinery – – 329,467

Total – – 4,300,981

Less : Current maturity of long-term liabilities – – (4,300,981)

Long-term liability – net of current maturity – – –

As of December 31, 2010, the interest rate and lease period are as follows :

Lessor Interest rate Period ended PT Hanil Bakrie Finance Corporation SIBOR + 2 % 2007 PT Koexim Mandiri Finance SIBOR + 2.55% 2004 PT Perjahl Leasing Indonesia SIBOR + 2.8125% 2003 PT Piranti Mulia Binisindo SIBOR + 2% 2005 PT GE Astra Finance SIBOR + 4.75% for 1999

SIBOR + 2.75% from 2000 until 2002

2002

The future minimum lease payments under finance lease as of December 31, 2012, 2011 and 2010 are as follows :



85

27. FINANCE LEASE LIABILITIES (Continued)

2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Total minimum lease payments – – 4,891,397 Less : amount representing interest – – (590,416 )

Obligation under finance lease – – 4,300,981 Less : Current maturity of long-term liabilities – – (4,300,981)

Long-term liability – net of current maturity – – –

In 2007, PT Koexim BDN Finance (formerly PT Koexim Mandiri Finance) had filed a petition to the Hight Jakarta Court for recovery of leased equipment. In 2010, PT Hanil Bakrie Finance Corporation with PT Koexim BDN Financing (Formerly PT Koexim Mandiri Finance) had filed a petition to the District Jakarta Court. And on August 19, 2011, the Commercial Court of Central Jakarta declared that the Subsidiary (PT Texmaco Jaya Tbk) is in state of bankruptcy and insolvency. Deduction in 2011 represents the deduction of obligation under finance lease which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The fair value of these obligation under finance lease is not individually determined as the the carrying amount is considered a reasonable approximation of fair value. The details of obligation under capital lease based on currencies are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ United States Dollar – – 4,300,981

28. LONG-TERM EMPLOYEE BENEFITS LIABILITIES On June 20, 2000, the Ministry of Manpower issued Decree No. KEP-150/Men/2000 regarding the settlement of work dismissal and determination of separation, appreciation and compensation payment to employees, which requires companies to pay their employees gratuity and compensation benefits in case of employees resignation based on the employee’s number of years of service and salaries provided the conditions set forth in the decree are met.



86

28. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued) In April 2003, the Government of the Republic Indonesia issued Labour Law No. 13/2003 replacing the Decree No. KEP-150/Men/2000. The Company has defined benefit pension plans covering substantially all of their eligible permanent employees. The balances of long-term employee benefit liabilities as of December 31, 2012, 2011 and 2010 of US$ 10,274,737, US$ 8,561,749, and US$ 8,189,736, respectively are calculated by independent actuary on a yearly basis, as set out in their reports dated March 8, 2013. The amounts recognized in the consolidated statements of financial position are determined as follows:

2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Present value of obligations 18,296,212 15,100,623 12,809,715 Unrecognized past service cost (1,616,334) (1,955,813) (2,206,725) Unrecognized actuarial losses (6,405,141) (4,583,061) (2,413,254)

Net liability 10,274,737 8,561,749 8,189,736

The movements in the present value of unfunded obligation over the year are as follows:

2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Beginning of the year 15,100,623 12,809,715 8,143,997 Balance of unconsolidated Subsidiary – (1,652,239) – Foreign exchange translation (940,080) (127,873) 370,470 Current service cost 1,387,440 1,273,683 1,179,859 Interest costs 960,116 962,304 722,058 Actuarial loss recognized during the year 2,279,745 2,269,428 2,998,329 Benefit paid (491,632 ) (434,395) (604,998)

End of the year 18,296,212 15,100,623 12,809,715

As of December 31, 2012, 2011 and 2010, all of defined benefit obligation is unfunded obligation so there is no fair value of plan assets. The amounts recognized in the consolidated statements of comprehensive income are as follows:

2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$

Current service cost 1,387,440 1,273,683 1,179,859 Interest costs 960,116 962,304 722,058 Past service cost 217,721 232,174 185,221 Losses on curtailments and settlements 172,350 79,129 48,942

Total (Note 42) 2,737,627 2,547,290 2,136,080



87

28. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued) The movements in the net liability recognized in the consolidated statements of financial position are as follows : 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Beginning of the year 8,561,749 8,189,736 6,368,931 Balance of unconsolidated subsidiary – (1,652,239) – Foreign exchange translation (533,007 ) (88,643) 289,723 Benefits payment (491,632 ) (434,395) (604,998) Amount charged to income 2,737,627 2,547,290 2,136,080

Ending of the year 10,274,737 8,561,749 8,189,736

The cost of providing post-employment benefits is calculated by independent actuary, PT Sienco Aktuarindo Utama as of December 31, 2012, 2011 dan 2010 using the following key assumptions : Discount rate : 6.10% p.a. in 2012, 6.90% p.a. in 2011, and 8.90% p.a. in 2010 Salary growth rate : 8.00% p.a. in 2012, 2011 and 2010 Mortality rate : The 1980 Commissioners’ Standard Ordinary Mortality Table. Normal retirement age : 10% in 20 years old and decline until 54 years old Probability of resigned : 1% of mortality rate Fund method : Projected Unit Credit Method Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory. In Indonesia, the mortality assumptions used are based on Commissioner Standard Ordinary Tables 1980 (“CSO 1980”). Management reviewed the assumptions used and is of the opinion that the assumptions are reasonable. Management believes that the provision for severance provided is adequate to cover the potential liability required by Labour Law No. 13/2003. The sensitivity of the present value of defined benefit obligation and current service cost to changes in the weighted principal assumptions of 1% is as follows :

Descriptions Discount Rate Discount Rate

5.10% 7.10% In US$ In % In US$ In %

Present value of defined obligation 20,202,437 10.42% 16,651,745 (8.99%) Current service cost 1,562,980 12.65% 1,241,350 (10.53%)



88

28. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 2 0 0 8 US$ US$ US$ US$ US$

Present value of defined benefit obligation 18,296,212 15,100,623 12,809,715 8,143,997 7,347,382 Fair value of plan assets ─ ─ ─ ─ ─

Deficit in the plan 18,296,212 15,100,623 12,809,715 8,143,997 7,347,382

Experience adjustments on plan liabilities 1,158,683 (65,731) 1,649,536 681,563 (65,020)

Experience adjustments on plan assets ─ ─ ─ ─ ─

29. TAXATION

a. Prepaid Taxes 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Overpayment of corporate income tax 2008 – – 104,455 2009 – – 2,122,264 2010 – 3,997,374 4,018,172 2011 3,988,440 3,988,440 – 2012 4,911,387 – – Value added Tax 5,886,221 5,216,579 7,825,871

Total prepaid taxes 14,786,048 13,202,393 14,070,762

b. Taxes Payable 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Income tax article 21 127,291 104,109 243,011 Income tax article 23 61,260 64,596 121,927 Income tax article 26 143,125 254,953 259,272 Income tax article 4(2) – – 1,565 Value added tax 1,419,419 1,513,650 1,680,596 Tax penalty – – 216,688

Total taxes payable 1,751,095 1,937,308 2,523,059



89

29. TAXATION (Continued)

c. Corporate Income Tax A reconciliation between loss before income tax as shown in the statements of comprehensive income and estimated taxable loss which was calculated by the Company for the years ended December 31, 2012 and 2011 are as follows : 2 0 1 2 2 0 1 1 US$ US$ Loss before income tax as per consolidated statements of comprehensive income (41,759,997 ) (36,178,327 ) Profit before income tax of the Subsidiaries − −

Elimination with discountinued operations − (122,068,657 )

Loss before income tax as per statement of comprehensive income of the Company (41,759,997 ) (158,246,984)

Fiscal adjustments consisted of : Permanent difference : Non deductible expenses (non taxable income) : Loss (gain) on foreign exchange rate (50,856,056 ) 5,722,906 Entertainment and representation 107,849 106,338 Donation 12,719 19,725 Allowance for impairment – (30,499) Tax expense 920,620 2,493,421 Payables’ written-off (383,000 ) (349,556) Interest income (31,754 ) (21,064)

(50,229,622 ) 7,941,271

Timing differences : Depreciation expense of property, plant and Equipment 36,996,057 41,983,699 Amortization of deferred charges (131,555 ) (138,478) Intangible assets (12,750 ) – Long-term employee benefits liabilities 1,712,988 2,057,666

38,564,740 43,902,887

Estimated taxable loss for the year before fiscal loss carry forward (53,424,879 ) (106,402,826) Fiscal loss carry forward (146,189,664 ) (39,786,838)

Total estimated accumulated taxable loss (199,614,543) (146,189,664)



90


c. Corporate Income Tax (Continued) 2 0 1 2 2 0 1 1 US$ US$ Estimated corporate income tax – –

Prepaid taxes : Income tax article 22 (4,903,200) (3,988,440) Income tax article 23 (8,187) –

Total prepaid taxes (4,911,387) (3,988,440)

Estimated overpayment of corporate income tax (4,911,387) (3,988,440)

The estimated taxable loss for the year ended December 31, 2011 as reported in the 2011 corporate income tax return amounted to Rp 981,369,261,111 (equivalent to US$ 107,902,063), and the tax return was submitted to the tax office in April 2012. For this discrepancy, the Company did not make any correction to the corporate income tax return.

• A reconciliation the estimated taxable loss between the amounts computed by functional/presentation currency and taxation purpose for the years ended December 31, 2012 and 2011 are as follows: December 31, 2012 Tax Reporting

Currency

Exchange Rate

Tax Reporting Currency

Functional Currency

Rp Rp US$ US$ Loss before income tax as per consolidated statements of

comprehensive income (800,263,385,084 ) (41,759,997 ) (41,759,997 ) Profit before income tax of the Subsidiaries

–

–

–

Elimination with discountinued operations

–

–

–

Loss before income tax as per statements of comprehensive Income of the Company (800,263,385,084 ) (41,759,997 ) (41,759,997 )



91


c. Corporate Income Tax (Continued)

December 31, 2012 Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$ Fiscal adjustments consisted of :

Permanent difference : Non deductible expenses (non taxable income) :

Gain on foreign exchange rate – – (50,856,056 ) (50,856,056 ) Entertainment and representation 1,010,866,399 9,373 107,849 107,849 Donation 120,247,500 9,454 12,719 12,719

Tax expenses 8,331,874,273 9,050 920,620 920,620 Payables’ written-off (3,483,385,000 ) 9,095 (383,000 ) (383,000 ) Interest income (299,613,563 ) 9,435 (31,754 ) (31,754 )

5,679,989,609 (50,229,622 ) (50,229,622 )

Timing differences : Depreciation expense of property, plant and

equipment 254,626,452,689 6,883 36,996,057 36,996,057 Amortization of deferred charges (295,053,242 ) 2,243 (131,555 ) (131,555 ) Intangible assets (115,500,000 ) 9,059 (12,750 ) (12,750 )

Long-term employee benefits liabilities 21,718,769,343 12,679 1,712,988 1,712,988

275,934,668,790 38,564,740 38,564,740

Estimated taxable loss for the year

before fiscal loss carry forward (518,648,726,685 ) 9,708 (53,424,879 ) (53,424,879 ) Fiscal loss carry forward (1,407,879,574,216 ) 9,631 (146,189,664 ) (146,189,664 )

Total estimated accumulated taxable loss (1,926,528,300,901

)

(199,614,543

) (199,614,543

)

Estimated corporate income tax – – –

Prepaid taxes : Income tax article 22 (44,580,486,515) 9,092 (4,903,200) (4,903,200) Income tax article 23 (78,750,000) 9,618 (8,187) (8,187)

Total prepaid taxes (44,659,236,515) (4,911,387) (4,911,387)

Estimated overpayment of corporate income tax (44,659,236,515

) (4,911,387

) (4,911,387

)



92




Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$ Loss before income tax as per

consolidated statements of comprehensive income (113,868,012,074 ) (36,178,327 ) (36,178,327 ) Profit before income tax of

the Subsidiaries

–

–

–

Elimination with discountinued operations

(1,110,367,644,627

)

(122,068,657

)

(122,068,657

)

Loss before income tax as per

statements of comprehensive Income of the Company (1,224,235,656,701 ) (158,246,984) (158,246,984)

Fiscal adjustments consisted of :

Permanent difference : Non deductible expenses (non taxable income) : Loss on foreign

exchange rate – – 5,722,906 5,722,906 Entertainment and representation 933,029,594 8,774 106,338 106,338

Donation 173,275,000 8,785 19,725 19,725 Allowance for impairment (274,213,845 ) 8,991 (30,499) (30,499) Tax expense 21,806,504,613 8,746 2,493,421 2,493,421 Payables’ written-off (3,095,834,930 ) 8,857 (349,556) (349,556)

Interest income (185,188,989 ) 8,792 (21,064) (21,064)

19,357,571,443 7,941,271 7,941,271

Timing differences :

Depreciation expense of property, plant and equipment 218,295,231,725 5,200 41,983,699 41,983,699

Amortization of deferred charges (310,582,360 ) 2,243 (138,478) (138,478) Long-term employee benefits liabilities 19,159,732,318 9,311 2,057,666 2,057,666

237,144,381,683 43,902,887 43,902,887



93




Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$ Estimated taxable loss for the year

before fiscal loss carry forward (967,733,703,575 ) 9,095 (106,402,826) (106,402,826) Fiscal loss carry forward (440,145,870,641 ) 11,063 (39,786,838) (39,786,838)

Total estimated accumulated

taxable loss (1,407,879,574,216

)

(146,189,664

) (146,189,664

)

Estimated corporate income tax – – –

Prepaid taxes : Income tax article 22 (36,167,173,650) 9,068 (3,988,440) (3,988,440)

Income tax article 23 – – – –

Total prepaid taxes (36,167,173,650) (3,988,440) (3,988,440)

Estimated overpayment of

corporate income tax (36,167,173,650

) (3,988,440

) (3,988,440

)

d. Deferred Tax Assets (Liabilities) The calculation of deferred tax assets and deferred tax liabilities with the maximum tax tariff of 25% in 2012, 2011 and 2010 are as follows :

2 0 1 2 Credited (charged) to the conosolidated statements of As of comprehensive As of December 31, 2011 income for the year December 31, 2012

US$ US$ US$ Deferred tax assets (liabilities) : Accumulated taxable loss 36,547,416 13,356,220 49,903,636 Valuation allowance (36,547,416) (13,356,220) (49,903,636) Depreciation expense of property, plant and equipment (9,402,121

) 9,249,015

(153,106

)

Amortization of deferred charges 837,119 (32,889) 804,230 Intangible assets – (3,187) (3,187) Long-term employee benefit liabilities 2,140,437 428,247 2,568,684

Total deferred tax assets (liabilities) (6,424,565) 9,641,186 3,216,621



94


d. Deferred Tax Assets (Liabilities) (Continued)

2 0 1 1 Credited (charged) to the consolidated statements of As of comprehensive As of December 31, income December 31, 2010 for the year Deconsolidation 2010

US$ US$ US$ US$ Deferred tax assets (liabilities) : Accumulated taxable loss 9,946,710 26,600,706 – 36,547,416 Valuation allowance (9,946,710) (26,600,706) – (36,547,416) Depreciation expense of property, plant and equipment (19,898,045

) 10,495,924

– (9,402,121

)

Amortization of deferred charges 871,739 (34,620) – 837,119 Long-term employee benefit liabilities 1,626,021 514,416 – 2,140,437

(17,400,285) 10,975,720 – (6,424,565)

The Subsidiaries : TJ 14,552,116 (1,084,290) (13,467,826) – TGB 18,215 922 (19,137) –

14,570,331 (1,083,368) (13,486,963) –

Total deferred tax assets (liabilities) (2,829,954) 9,892,352 (13,486,963) (6,424,565)

2 0 1 0 Credited (charged) to the statements comprehensive As of of income for As of December 31, 2009 the year December 31, 2010

US$ US$ US$ Deferred tax assets (liabilities) : Accumulated taxable loss 22,669,329 (18,939,421) 3,729,908 Valuation allowance (22,669,329) 18,939,421 (3,729,908) Depreciation expense of property, plant and equipment (30,759,842

) 10,861,797

(19,898,045

)

Amortization of deferred charges 908,180 (36,441) 871,739 Long-term employee benefit liabilities 1,216,623 409,398 1,626,021

(28,635,039) 11,234,754 (17,400,285)

The Subsidiaries : TJ 16,323,874 (1,771,758) 14,552,116 TGB 17,422 793 18,215

16,341,296 (1,770,965) 14,570,331

Total deferred tax assets (liabilities) (12,293,743) 9,463,789 (2,829,954)



95


d. Deferred Tax Assets (Liabilities) (Continued) There are no income tax charged/(credited) relating to other comprehensive income during the year. Deduction in 2011 represents deduction of deferred tax assets which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control (Note 45). The recognition of the Company and its Subsidiaries’ deferred tax assets is based on management’s estimates of the results of future operations including an estimate of output levels and commodity prices for the Company and its Subsidiaries’ products, the timing and extent of the reversal certain of the Company and its Subsidiaries’ deferred tax liabilities, and certain tax planning strategies. Based on these estimates, management believes that the Company will not realize its deferred tax asset arising from accumulated taxable loss. Accordingly, the management had made a valuation allowance of US$ 49,903,636, US$ 36,547,416, and US$ 9,946,710 as at December 31, 2012, 2011 and 2010, respectively. The basis supporting recognition of the deferred tax assets is reviewed regularly by management.

• A reconciliation between the total tax expense (income) and the amounts computed by applying the effective tax rate to profit (loss) before income tax is as follows : 2 0 1 2 2 0 1 1 US$ US$

Loss before income tax as per consolidated statements of comprehensive income (41,759,997 ) (36,178,327 ) Profit before income tax of the Subsidiaries − −

Elimination with discountinued operations − (122,068,657 )

Loss before income tax as per statement of comprehensive income of the Company (41,759,997 ) (158,246,984)

Tax benefit at tax rate 25% (10,439,999 ) (39,561,746)

Taxable loss at tax rate 25% 13,356,219 26,600,706

Tax effect of non-deductible expense (non-taxable income) (12,557,406) 1,985,320

Total tax income – from continuing operation (9,641,186) (10,975,720) Total tax expense – from discountinued operation (Note 45) − 1,083,368

Total tax income (9,641,186) (9,892,352)



96


e. Tax Income (Expense) 2 0 1 2 2 0 1 1 US$ US$ Continuing operations : Current income tax : The Company – – Subsidiaries – –

– –

Deferred tax income (expense) : The Company 9,641,186 10,975,720 Subsidiaries – –

9,641,186 10,975,720

Total tax income – from continuing operations 9,641,186 10,975,720 Total tax expense – from discountinued operations (Note 45)

–

(1,083,368

)

Total tax income 9,641,186 9,892,352

f. Tax Assessment Letter a. Company

• On November 7, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal period March 2012. Based on the Indonesian Tax Authorities letter No. 00004/104/12/092/12, the Company had additional tax liability of Rp 20,905,432. The tax liability was paid on November 28, 2012.

• On September 5, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period August 2011. Based on the Indonesian Tax Authorities letter No. 00028/407/11/092/12, the Company had an overpayment of Rp 17,500,076,809. The overpayment of Value Added Tax was received on September 27, 2012.

• On May 30, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 000108/503/10/511/12, the Company had no additional tax liability.



97


f. Tax Assessment Letter (Continued) a. Company (Continued)


• On May 30, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4(2) assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 000109/540/10/511/12, the Company had no additional tax liability.


• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00033/406/10/092/12, the Company had an overpayment of Rp 35,914,770,914. The overpayment of Corporate Income Tax has been compensated in June 2012 with the other tax liabilities for fiscal year 2010 with totalling amount of Rp 2,740,502,844. And the remaining of its overpayment amounted to Rp 33,174,268,070 were received on June 27, 2012.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00032/203/10/092/12, the Company had additional tax liability of Rp 2,340,007,727. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00021/201/10/092/12, the Company had additional tax liability of Rp 90,627,692. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.



98



• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4(2) assessment letter for fiscal year 2010. Based on the Indonesian Tax Authorities letter No. 00016/240/10/092/12, the Company had additional tax liability of Rp 236,944,163. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2010. Based on the Indonesian Tax Authorities letter No. 00013/277/10/092/12, the Company had additional tax liability of Rp 10,742,872. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On May 22, 2012, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2010. Based on the Indonesian Tax Authorities letter No. 00278/207/10/092/12, the Company had additional tax liability of Rp 55,069,976. The tax liability had been compensated in June 2012 with the overpayment of 2010 corporate income tax.

• On November 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period November 2010. Based on the Indonesian Tax Authorities letter No. 00058/407/10/092/11, the Company had an overpayment of Rp 10,359,423,414. The overpayment of Value Added Tax has been compensated in December 2011 with the November 2010 Value Added Tax liability amounted to Rp 48,621,160. And the remaining of its overpayment amounted to Rp 10,310,802,254 were received on December 19, 2011.

• On November 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period October 2010. Based on the Indonesian Tax Authorities letter No. 00026/207/10/092/11, the Company had additional tax liability of Rp 48,621,160. The tax liability had been compensated in December 2011 with the overpayment of November 2010 value added tax.



99



• On August 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period September 2010. Based on the Indonesian Tax Authorities letter No. 00051/407/10/092/11, the Company had an overpayment of Rp 8,767,928,486. The overpayment of Value Added Tax has been compensated in September 2011 with the other tax liabilities for fiscal year 2009 with totalling amount of Rp 8,712,581. And the remaining of its overpayment amounted to Rp 8,759,215,905 were received on September 20, 2011.

• On August 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period August 2010. Based on the Indonesian Tax Authorities letter No. 00021/207/10/092/11, the Company had additional tax liability of Rp 26,108,522. The tax liability was paid on September 9, 2011.

• On August 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period July 2010. Based on the Indonesian Tax Authorities letter No. 00020/507/10/092/11, the Company had no additional tax liability.

• On August 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period June 2010. Based on the Indonesian Tax Authorities letter No. 00019/507/10/092/11, the Company had no additional tax liability.

• On August 24, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period May 2010. Based on the Indonesian Tax Authorities letter No. 00018/507/10/092/11, the Company had no additional tax liability.

• On May 18, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period April 2010. Based on the Indonesian Tax Authorities letter No. 00035/407/10/092/11, the Company had an overpayment of Rp 13,552,130,826. The overpayment of Value Added Tax has been compensated in May 2011 with the other tax liabilities for fiscal year 2010 with totalling amount of Rp 99,079,275. And the remaining of its overpayment amounted to Rp 13,453,051,551 were received on June 9, 2011.



100



• On May 18, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period March 2010. Based on the Indonesian Tax Authorities letter No. 00010/207/10/092/11, the Company had an additional tax liability of Rp 1,621,560. The tax liabilities were paid on December 9, 2011.

• On April 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00018/501/09/511/11, the Company had no additional tax liability.

• On April 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00008/503/09/511/11, the Company had no additional tax liability.

• On April 26, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4 (2) assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00018/540/09/511/11, the Company had no additional tax liability.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00006/406/09/092/10, the Company had an overpayment of Rp 18,732,214,019. The overpayment of Corporate Income Tax has been compensated in May 2011 with the other tax liabilities for fiscal year 2009 with totalling amount of Rp 4,445,402,669. And the remaining of its overpayment amounted to Rp 14,286,811,350 were received on May 31, 2011.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00019/201/09/092/11, the Company had additional tax liability of Rp 175,063,304. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.



101



• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00011/203/09/092/11, the Company had additional tax liability of Rp 247,399,209. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00005/204/09/092/11, the Company had additional tax liability of Rp 1,470,055,683. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4 (2) assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00008/240/09/092/11, the Company had additional tax liability of Rp 989,042,079. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal year 2009. Based on the Indonesian Tax Authorities letter No. 00008/277/09/092/11, the Company had additional tax liability of Rp 29,348,684. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period December 2009. Based on the Indonesian Tax Authorities letter No. 00112/207/09/092/11, the Company had additional tax liability of Rp 6,453,266. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period February 2009. Based on the Indonesian Tax Authorities letter No. 00111/207/09/092/11, the Company had additional tax liability of Rp 12,784,716. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.



102



• On March 28, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period January 2009. Based on the Indonesian Tax Authorities letter No. 00110/207/09/092/11, the Company had additional tax liability of Rp 1,332,826. The tax liability had been compensated in May 2011 with the overpayment of 2009 corporate income tax.

• On February 16, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period February 2010. Based on the Indonesian Tax Authorities letter No. 00021/407/10/092/11, the Company had an overpayment of Rp 13,416,773,900. The overpayment of Value Added Tax has been compensated in February 2011 with the other tax liabilities for fiscal year 2010 with totalling amount of Rp 291,202,973. And the remaining of its overpayment amounted to Rp 13,125,570,927 were received on February 25, 2011.

• On February 16, 2011, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period January 2010. Based on the Indonesian Tax Authorities letter No. 00003/207/10/092/11, the Company had additional tax liability of Rp 66,860,404. The tax liability had been compensated in February 2011 with the overpayment of February 2010 Value Added Tax.

• On September 30, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal year 2006. Based on the Indonesian Tax Authorities letter No. 00015/204/06/092/10, the Company had an overpayment of Income Tax Article 26 of Rp 8,844,864,229. In the other that, the Company also received the interest of Rp 4,245,534,829, the totaling of Rp 13,090,399,058 had been received on November 24, 2010. Direktorat Jenderal Pajak has filed a Review Petition (PK) against the verdict of refund. If Review Petition is accepted and approved, the Company has to refund the above amount along with accrued interest. But until the date of report finished, the result has not been determined yet.



103



• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 26 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00014/204/08/092/10, the Company had additional tax liability of Rp 20,552,395,501. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. And based on the decision from Indonesian Tax Court No. KEP-00127/WPJ.19/KP.0203/2012, the Company had an overpayment of Income Tax Article 26 of Rp 20,544,225,183. The overpayment of Income Tax Article 26 had been received on August 31, 2012.

• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 23 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00023/203/08/092/10, the Company had additional tax liability of Rp 2,019,141,457. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. Further on July 7, 2010, the Company submits the objection letter to the Indonesian Tax Authorities.Until the date of report finished, the result has not determined yet.

• On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter for fiscal year 2008. Based on the Indonesian Tax Authorities letter No. 00019/201/08/092/10, the Company had additional tax liability of Rp 901,815,396. The tax liability had been compensated in May 2010 with the overpayment of 2008 corporate income tax. Further on July 7, 2010, the Company submits the objection letter to the Indonesian Tax Authorities.Until the date of report finished, the result has not determined yet.

g. Administration

• It is noted that value added taxes for the fiscal period September 2011 up to September 2012 is under examined by the Tax Authorities, and until the date of report finished, the result has not yet been determined.



104


g. Administration (Continued)

• Under the taxation laws of Indonesia, the Company submits tax returns on the basis of self assessment. Under prevailing regulations the Director General of Tax (“DGT”) may assess or amend taxes within a certain period. For the fiscal years of 2007 and before, this period is within 10 (ten) years of the time the tax become due, but not later than 2013, while for the fiscal years of 2008 and onwards, the period is within 5 (five) years of the time the tax becomes due.

• On September 23, 2008, the Government of Republic of Indonesia approved the new revised Income Tax law effective January 1, 2009. The revision includes, among others, the changes in the effective tax rate from 30% in 2008 to 28% in 2009, and to 25% in 2010. In addition to the impact on the current income tax for 2009, the revision will also impact the deferred income tax previously set up to reflect the reduction in effective tax rate.

• The Company’s management believes that the Company has complied with the prevailing tax regulations.

30. SHARE CAPITAL Pursuant to the notarial deed of Januar Tirtaamidjaja, S.H., No. 22 dated February 15, 1984, the authorized capital amounts to Rp 15,000,000,000 consisting of 600 shares with a par value of Rp 25,000,000 each. Issued and fully paid-up capital amounts to Rp 7,500,000,000 (equivalent to US$ 6,710,179) or consist of 300 shares. Pursuant to the General Shareholders Meeting with notarial deed of Aulia Taufani, S.H., No. 100 dated December 27, 2002, the shareholders agreed to approve the changes in the Company’s Articles of Association to increase the authorized capital from Rp 8,500,000,000,000 to become Rp 16,000,000,000,000 and issued and paid-in capital from Rp 2,196,960,000,000 to become Rp 4,174,224,000,000. Pursuant to the notarial deed of Aulia Taufan, S.H., No. 12 dated July 4, 2006 regarding the amendment of the Company’s Article of Association and the Extraordinary Shareholders’ Meeting with notarial deed of the same notary No. 111 dated June 21, 2006, the shareholders approved the following :

• The authorized capital of the Company amounts to Rp 16,000,000,000,000 and issued and fully paid up capital amounts to Rp 4,174,224,000,000.

• The allocation of 83,484,480,000 new shares (series C) par value Rp 2 each with to regard to the debt to equity conversion. The new shares of 43,144,238,750 shares for the unsecured creditors and new working capital lender and 40,340,241,250 shares for secured creditors.



105

30. SHARE CAPITAL (Continued)

• To record the paid in capital in excess of par value from debt to equity conversion of Rp 5,574,513,535,500 (equivalent to US$ 618,017,022).

The deed was approved by the Minister of Justice and Human Right in his decision letter No. C-25038 HT.01.04.TH.2006 dated August 28, 2006 and registered in the Department of Industry and Trade under No. 233/BH-1/IX/2006 dated September 1, 2006. As of December 31, 2006, the authorized capital of the Company amounted to Rp 16,000,000,000,000 consisting of 247,145,100,800 shares with the following classifications.

• Series A of 17,000,000,000 shares with par value of Rp 500 each.

• Series B of 146,660,620,800 shares with par value of Rp 50 each.

• Series C of 83,484,480,000 shares with par value of Rp 2 each. Issued and fully paid up capital was Rp 2,283,248,477,500 consisting of Series A of 4,393,920,000 shares, and Series C of 43,144,238,750 shares. In February 2008, the Company amended its Articles of Association in connection with the reverse stock split with ratio 20 : 1. Based on the notarial deed of Sutjipto S.H., No. 91 dated February 21, 2008 regarding the changes of the Articles of Association, the authorized capital of the Company amounts to Rp 16,000,000,000,000 consisting of 12,357,255,040 shares with following classifications:

• Series A of 850,000,000 shares with par value of Rp 10,000 each.

• Series B of 7,333,031,040 shares with par value of Rp 1,000 each.

• Series C of 4,174,224,000 shares with par value of Rp 40 each. The deed was approved by the Minister of Justice and Human Rights in his decision letter No. AHU-10588.AH.01.02 Tahun 2008 dated March 3, 2008. Issued and fully paid in capital amounted to Rp 4,174,224,000,000 (26%) consist of :

• 219,696,000 shares with par value of Rp 10,000 each or totaling Rp 2,196,960,000,000.

• 1,890,975,522 shares with par value of Rp 1,000 each or totaling Rp 1,890,975,522,000.

• 2,157,211,950 shares with par value of Rp 40 each or totaling Rp 86,288,478,000.



106

30. SHARE CAPITAL (Continued) The composition of stockholders as of February 21, 2008 based on notarial deed is as follows : Numbers of Percentage of Total Stockholders Shares ownership Rp US$ % Shares Series A 219,696,000 5.15 2,196,960,000,000 625,598,841Shares Series B 1,890,975,522 44.30 1,890,975,522,000 209,642,519Shares Series C 2,157,211,950 50.55 86,288,478,000 9,566,350

Total 4,267,883,472 100.00 4,174,224,000,000 844,807,710

Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009 and based on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta, the stockholders approved the issuance of 118,845,397 new authorized shares series C (5% of issued and paid-up capital) without preemptive rights in the framework of Grant Date I of stock options programme to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). The notarial deed was approved by the Minister of Law of the Republic of Indonesia based on his decision letter No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. Based on the Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2009, this program will be implemented on the period below :

Period Implementation Period I 5 (five) trading days starting from April 1, 2009 II 5 (five) trading days starting from October 1, 2009 III 5 (five) trading days starting from April 1, 2010 IV 5 (five) trading days starting from October 1, 2010 V 5 (five) trading days starting from April 1, 2011 VI 5 (five) trading days starting from October 3, 2011 VII 5 (five) trading days starting from February 1, 2012

Based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 107 dated February 23, 2012, the stockholders approved the exercise proce for the first stock option programme of Rp 45 per share. On March 5, 2012, the Company issued 118,845,397 new authorized shares series C with par value of Rp 40 each or totaling Rp 4,753,815,880 (equivalent to US$ 524,125). The deed was approved by the Minister of Law and Human Rights in his decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012.



107

30. SHARE CAPITAL (Continued) The composition of stockholders as of December 31, 2012, 2011 and 2010 based on the stockholder’s list issued by the Stock Administrative Office, PT Datindo Entrycom, of listed shares of the Company is as follows : 2 0 1 2 Numbers of Percentage of Total Stockholders Shares Ownership Rp US$ % Shares Series A:

PT Multikarsa Investama 131,394,719 5.26 1,313,947,195,000 374,155,125Public (below 5% each) 88,301,281 3.54 883,012,805,000 251,443,716

219,696,000 8.80 2,196,960,000,000 625,598,841

Shares Series B: – – – –

Shares Series C:

Damiano Investments BV., Netherland 1,289,079,472

51.65

51,563,178,880 5,716,539

Kyoa Investment Limited 150,837,200 6.04 6,033,488,000 668,901Others 653,500,693 26.19 26,140,027,720 2,895,102Unsettled 182,639,982 7.32 7,305,599,320 809,933

2,276,057,347 91.20 91,042,293,920 10,090,475

Total 2,495,753,347 100.00 2,288,002,293,920 635,689,316

2 0 1 1 Numbers of Percentage of Total Stockholders Shares ownership Rp US$ % Shares Series A: PT Multikarsa Investama 131,394,719 5.53 1,313,947,195,000 374,155,125Public (below 5% each) 88,301,281 3.71 883,012,805,000 251,443,716

219,696,000 9.24 2,196,960,000,000 625,598,841




108

30. SHARE CAPITAL (Continued) 2 0 1 1 Numbers of Percentage of Total Stockholders Shares ownership Rp US$ % Shares Series C: Damiano Investments BV., Netherland 1,282,035,520

53.94

51,281,420,800 5,685,301


2,157,211,950 90.76 86,288,477,500 9,566,350

Total 2,376,907,950 100.00 2,283,248,477,500 635,165,191

2 0 1 0 Numbers of Percentage of Total Stockholders Shares ownership Rp US$ % Shares Series A: PT Multikarsa Investama 131,394,719 5.53 1,313,947,195,000 374,155,125Public (below 5% each) 88,301,281 3.71 883,012,805,000 251,443,716

219,696,000 9.24 2,196,960,000,000 625,598,841


Shares Series C: Damiano Investments BV., Netherland 1,282,035,720

53.94 51,281,428,800 5,685,303


2,157,211,950 90.76 86,288,477,500 9,566,350

Total 2,376,907,950 100.00 2,283,248,477,500 635,165,191

Unsettled shares series C represent the creditors that have not exchanged with the new shares (through The Hongkong and Shanghai Banking Corporation Limited, Hong Kong – the custodian). These shareholders’ name is not yet registered in PT Datindo Entrycom (share administrator).



109

30. SHARE CAPITAL (Continued) Further, based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and based on notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, the stockholders approved the issuance of 74,872,600 new authorized shares series C (3% of issued and paid-up capital) without preemptive rights in the framework of Grant Date II of stock options programme to the Company’s management and employees (Management Employee Stock Option Programme / MESOP). Based on the Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2012, this program will be implemented as follows :

Period Implementation Period I Starting from December 15, 2012 up to December 22, 2012 II Starting from June 18, 2013 up to June 24, 2013 III Starting from December 18, 2013 up to December 24, 2013 IV Starting from June 2, 2014 up to June 24, 2014

Until now, it has not yet been implemented because the Company will execute them at the second period (June 2013). According to notarial deed of DR. H. Teddy Anwar, S.H., Spn. No. 111 dated August 16, 2002, the part of PT Multikarsa Investama’s shares of 2,454,081,290 (or after reverse stock 122,704,064 shares) were sold to PT Bina Prima Perdana. However, based on the data issued by PT Datindo Entrycom, the shares are still registered under the name of PT Multikarsa Investama. As of December 31, 2012, 2011 and 2010, the shares owned by the public included those owned by the directors of the Company (Mr. Seeniappa Jegatheesan and Mr. Peter Vinzenz Merkle), who held 29,716,099 shares, 2,388 shares, and 2,388 shares, respectively.

31. ADDITIONAL PAID-IN CAPITAL 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Paid-in capital in excess of par value from public offering in 1990 13,571,804 13,571,804 13,571,804 Shares issuance cost (7,263,223) (7,263,223) (7,263,223)

Subtotal 6,308,581 6,308,581 6,308,581

Paid-in capital in excess of par value from conversion of debt to equity in 2006 618,017,022 618,017,022 618,017,022



110

31. ADDITIONAL PAID-IN CAPITAL (Continued) 2 0 1 2 2 0 1 1 2 0 1 0 US$ US$ US$ Paid-in capital in excess of par value from 1st MESOP in 2012 65,516 – – Shares issuance cost (46,612) – –

Subtotal 18,904 – –

Total additional paid-in capital 624,344,507 624,325,603 624,325,603

As per the Composition Proposal (Rencana Perdamaian) the Company is issuing 16,780,718,747 shares series C to unsecured creditors and 26,363,520,000 shares series C for Damiano Investments BV., Netherland in regard to debt to equity conversion of Rp 5,660,802,013,000. Further, based on the amendment of the Company’s Articles of Association dated July 4, 2006 by notarial deed No. 12 of Aulia Taufani, S.H., the Company has recognized the advances for future stock subscription of Rp 5,660,802,013,000 as issued and paid-in capital amounting to Rp 86,288,477,500 and as additional paid-in capital amounting to Rp 5,574,513,535,500 (equivalent to US$ 618,017,022). Through the the framework of Grant Date I of stock options programme in February 23, 2012, the Company received Rp 5,348,042,865 for the issuance of 118,845,397 new authorized shares series C, with a nominal value amounting to Rp 40 per share. The conversion rate of US$ 1 is Rp 9,070.

32. APPROPRIATION FOR GENERAL RESERVE Under Indonesian Limited Company Law, the Company is required to set up a statutory reserve amounting to at least 20% of the Company’s issued and paid up capital. And, based on the annual general stockholders’ meeting as stated in notarial deed No. 351 dated June 23, 1997 and No. 402 dated June 24, 1996 of Adam Kasdarmadji S.H., notary in Jakarta, the stockholders agreed to appropriate a general reserve aggregating Rp 8,280,000,000 (equivalent to US$ 2,345,301) from retained earnings in accordance with article 61 of the Corporate Law No. 1 year 1995 for Limited Liability Companies. In 2012, 2011 and 2010, the Company was exempted from reserving additional amounts due to its accumulated deficit.



111

33. NON-CONTROLLING INTERESTS In 2011 and 2010, the non-controlling interest represents the non-controlling interest in net liabilities of Subsidiary derived from :

Balance as of Equity in net Balance as of December 31,

2010

Profit of

Subsidiary

Written-off due

to lost control

December 31,

2011

US$ US$ US$ US$ Non-controlling interests (8% ownership in

PT Texmaco Jaya Tbk (16,494,680) 112,005 16,382,675 −

Balance as of Equity in net profit Balance as of January 1, 2010 of Subsidiary December 31, 2010

US$ US$ US$

Non-controlling interests (8% ownership in PT Texmaco Jaya Tbk (15,031,748) 1,462,932 (16,494,680)

Deduction in 2011 represents the deduction of non-controlling interests which financial statements were no longer consolidated in 2011 due to the Subsidiary (PT Texmaco Jaya Tbk) is stated at bankruptcy and insolvency so it caused that the Company have lost of control. Consequently, the amount has been written-off from the consolidated statements of financial position and adjusted to retained earning (accumulated deficit).

34. EARNINGS (LOSS) PER SHARE a. Basic earnings (loss) per share

2 0 1 2 2 0 1 1 US$ US$ Weighted average number of shares outstanding 2,443,876,388 2,388,317,108Total comprehensive loss attributable to owners of the Company

(32,118,811

)

(8,952,775

)

Basic loss per share attributable to the owners of the Company

(0.01

) (0.00

)



112

34. EARNINGS (LOSS) PER SHARE (Continued) b. Dilluted earnings (loss) per share

2 0 1 2 2 0 1 1 US$ US$ Weighted average number of shares outstanding 2,431,991,848 2,388,317,108Total comprehensive loss attributable to owners of the Company

(32,118,811

)

(8,952,775

)

Dilluted loss per share attributable to the owners of the Company

(0.01

) (0.00

)

c. Reconciliation of earnings used in calculating earning per share

2 0 1 2 2 0 1 1 US$ US$ Total comprehensive loss attributable to owners of the Company used in calculating basic earnings per share

(32,118,811

)

(8,952,775

)

Adjustments for calculation of diluted earnings per shares regarding the share options – –

Total comprehensive loss attributable to owners of the Company used in calculating diluted earnings per share

(32,118,811

)

(8,952,775

)

d. Weighted average number of shares used as the denominator

2 0 1 2 2 0 1 1 Weighted average number of ordinary shares used as the denominator in calculating basic earnings (loss) per share before stock option 2,443,876,388 2,376,907,950 Adjustment regarding the issuance of stock option – 1.0048

Weighted average number of ordinary shares used as the denominator in calculating basic earnings (loss) per share after stock option 2,443,876,388 2,388,317,108 Adjustments for calculation of diluted earnings (loss) per shares regarding the share options (11,884,540) –

Weighted average number of ordinary shares used as the denominator in calculating diluted earning (loss) per share 2,431,991,848 2,388,317,108



113

34. EARNINGS (LOSS) PER SHARE (Continued) e. Information concerning the classification of securities for diluted earning per share

Options granted to employees are considered to be potential ordinary shares and have been included in the determination of diluted earning per share to the extent to which they are dilutive. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The options have not been included in the determination of basic earning per shares.

35. NON-CASH TRANSACTIONS In 2012, 2011 and 2010, the principal non-cash transaction consist of :

a. An acquisition vehicles by means of credit financing payable as discussed in Note 26. b. A reclassification of interest payables from accrued expenses to unsecured debts and notes

payables as discussed in Note 24.

36. INSURANCE CLAIM SETTLEMENT, NET This account represents the settlement of insurance claim on inventory loss from damage or inventory loss from theft. The settlement received by the Company in 2012 and 2011 amounting to US$ 1,667,691 (equivalent to Rp 14,963,001,657) and US$ 86,182 (equivalent to Rp 755,425,253), respectively.

37. NET SALES 2 0 1 2 2 0 1 1 US$ US$ Local Yarn 220,424,369 217,436,772 Fibre 218,908,889 224,661,910 Chips 46,116,172 56,044,474 Fleece (Knitting) 10,298,045 2,065,550 Bonded (Coating) 67,368 196,869 Others 1,726,343 480,247

497,541,186 500,885,822



114

37. NET SALES (Continued) 2 0 1 2 2 0 1 1 US$ US$ Export Yarn 75,079,171 104,401,090 Chips 17,048,390 11,920,054 Fibre 7,540,421 12,341,649 Fleece (Knitting) 877,827 1,351,748 PTA – 4,569,273 Bonded (Coating) – 65,082 Others 1,243,881 –

101,789,690 134,648,896

Total net sales 599,330,876 635,534,718

In 2012 and 2011, net sales of fleece (knitting) and bonded (coating) were US$ 11,243,240 and US$ 3,679,249, respectively consists of sales to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under bankruptcy) based on the tolling basis. In 2012 and 2011, no sales were earned from sales to related parties. In 2012 and 2011, no sales to third parties exceeded 10% of the operating revenues.

38. OTHER OPERATING REVENUES 2 0 1 2 2 0 1 1 US$ US$ Indirect materials damage 601,480 255,731 Product non-standard and others 599,395 277,313

Total other operating revenues 1,200,875 533,044

In 2012 and 2011, other operating revenues of fleece, bonded and garment was US$ 83,216 and US$ 108,278 represent the other operating revenues to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under bankruptcy) based on the tolling basis. In 2012 and 2011, no other operating revenues were earned from related parties. In 2012 and 2011, no sales to third parties exceeded 10% of the operating revenues.



115

39. COST OF GOODS SOLD 2 0 1 2 2 0 1 1 US$ US$ Raw materials At beginning of year 28,114,454 10,605,240 Purchases 384,877,731 436,498,322

Available for use 412,992,185 447,103,562 At end of year (19,078,632) (28,114,454)

Raw materials used 393,913,553 418,989,108

Indirect materials At beginning of year 17,702,072 15,705,458 Purchases 57,631,156 54,813,451

Available for use 75,333,228 70,518,909 At end of year (20,014,977) (17,702,072)

Indirect materials used 55,318,251 52,816,837

Direct labour 10,003,762 8,611,682 Manufacturing expense (Note 40) 146,278,804 158,847,893

Total manufacturing cost 605,514,370 639,265,520

Work in process At beginning of year 6,781,122 4,824,283 At end of year (6,073,039) (6,781,122)

Cost of goods manufactured 606,222,453 637,308,681

Finished goods At beginning of year 35,079,711 19,839,474 Purchases – 120,120 At end of year (34,787,985) (35,079,711)

Total cost of goods sold 606,514,179 622,188,564

In 2012 and 2011, total raw material and indirect material used included the raw material used for fleece (knitting) and bonded (coating) product after eliminated intercompany account were US$ 3,145,012 and US$ 1,248,113, respectively.



116

39. COST OF GOODS SOLD (Continued) In 2012 and 2011, there are no purchases from related parties. In 2012, purchases from third parties exceeded 10% of total purchases are as follows : 2 0 1 2 US$ Percentage PT Cipta Karya Persada 147,310,623 33.29% Kolmar Petrochemicals AG, Switzerland 95,991,285 21.69% PT Polychem Indonesia 85,537,650 19.33% In 2011, purchases from third parties exceeded 10% of total purchases are as follows : 2 0 1 1 US$ Percentage PT Cipta Karya Persada 160,219,417 32.61% Kolmar Petrochemicals AG, Switzerland 115,454,640 23.50% PT Polychem Indonesia 113,266,628 23.05%

40. MANUFACTURING EXPENSES 2 0 1 2 2 0 1 1 US$ US$ Depreciation expense of property, plant and equipment (Note 16)

69,574,411

86,134,534

Electricity and gas 57,256,598 53,550,215 Freight 4,680,362 6,406,043 Processing fee (tolling) 3,003,021 2,796,071 Rental 2,480,839 2,198,761 Repair and maintenance 2,059,569 2,167,874 Salary and allowances 1,321,414 1,501,741 Insurance 1,085,007 905,289 Others 4,817,583 3,187,365

Total manufacturing expenses 146,278,804 158,847,893

In 2012, the processing fee (tolling) of US$ 3,003,021 represent the processing fee to PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 763,471, PT Multikarsa Investama amounting to US$ 2,223,148, and other parties amounting to US$ 16,402. And in 2011, the processing fee (tolling) of US$ 2,796,071 represent the processing fee to PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 219,918, PT Multikarsa Investama amounting to US$ 2,179,023 and other parties amounting to US$ 21,251 (Note 46)



117

40. MANUFACTURING EXPENSES (Continued) In 2012 and 2011, rental expense to PT Texmaco Jaya Tbk (under bankruptcy) was US$ 201,348 and US$ 275,959, respectively (Note 46).

41. SELLING EXPENSES 2 0 1 2 2 0 1 1 US$ US$ Export charges 5,391,323 4,917,356 Freight 5,522,075 5,321,648 Marketing expenses 2,794,758 2,965,769 Advertising and promotion 20,796 18,712 Others 323,242 501,914

Total selling expenses 14,052,194 13,725,399

42. GENERAL AND ADMINISTRATIVE EXPENSES 2 0 1 2 2 0 1 1 US$ US$ Salaries, wages and benefits 8,601,313 7,843,534 Employees’ entitlement (Note 28) 2,737,627 2,547,290 Professional fees 1,815,789 885,210 Business traveling 1,104,199 1,155,441 Rent 877,955 761,530 Communication 460,601 474,970 Donation and Corporate Social Responsibility 300,344 244,009 Stationery 246,932 264,641 Repairs and maintenance 170,182 147,400 Entertainment and representation 116,815 117,175 Depreciation expense of property, plant and equipment (Note 16) 95,849 91,527 Electricity and water 65,664 80,398 Insurance 36,620 18,094 Amortization expenses (Note 17) 497 – Tax expenses (235,419 ) 2,580,763 Others 1,448,678 1,514,840

Total general and administrative expenses 17,843,646 18,726,822



118

43. FINANCE COSTS 2 0 1 2 2 0 1 1 US$ US$ Finance costs : Interest expense from working capital loan (Note 25) (2,936,962) (4,586,244) Interest expense from unsecured debts and notes payable (Note 24)

(885,278

) (861,026

)

Interest expense from credit financing payables (Note 26)

(12,287

) (15,140

)

Total interest expense (3,834,527) (5,462,410) Fee on Bank loans (Note 20) (13,969,873) (10,433,384) Bank charges (472,845) (440,611)

Total finance costs (18,277,245) (16,336,405)

Finance Income : Interest income from current accounts and time deposits

31,754

21,064

Total finance cost, net (18,245,491) (16,315,341)

44. MISCELLANEOUS INCOME, NET 2 0 1 2 2 0 1 1 US$ US$ Payables’ written-off 383,000 341,339 Penalty regarding the cancellation of sales 179,000 – Rebate on purchasing chemicals 157,044 172,179 Income from land rental 81,878 – Collectible of allowance for impairment (Note 8) – 30,499 Others 78,985 238,028

Total miscellaneous income, net 879,907 782,045

45. DISCOUNTINUED OPERATIONS On August 19, 2011, the Commercial Court of Central Jakarta declared that PT Texmaco Jaya Tbk (Subsidiary) is in state of bankruptcy and insolvency. Effective this period, the Subsidiary becomes subject to the control of the Court, causing the Company loss its control in the Subsidiary. The Court has been appointed team curator for saving the asset value of the bankruptcy and monitor the Subsidiary’s operations and cash flows.



119

45. DISCOUNTINUED OPERATIONS (Continued) In accordance with PSAK No. 4 (Revised 2009), if the Company losses control of a Subsidiary, therefore the Company should derecognizes the assets and liabilities of the Subsidiary at the their carrying amounts at the date when control is lost and derecognizes the carrying amount of any non-controlling interests in the former Subsidiary at the date when control is lost. Revenue and expenses, gains and losses relating to the discountinuation of this Subsidiary have been eliminated from profit or loss of the Company’s continuing operations and are shown as a single line item on the face of the consolidated statement of comprehensive income. PT Texmaco Jaya Tbk’s operating profit or loss until the loss of control (August 19, 2011) are summarized as follows : 2 0 1 1 US$ Operating revenues −

Cost of goods sold (362,851)

Gross loss (362,851)

Operating expenses : Selling expenses (1,987 ) General and administrative expenses (632,133 )

Total operating expenses (634,120)

Loss from operations (996,971)

Other income (charges) : Interest income 262 Loss on foreign exchange transactions (3,010,884) Depreciation expenses of unused property, plant and equipment (Note 16) (1,224,418) Interest expense and bank charges (83,904) Miscellaneous income, net 2,902

Total other income, net (4,316,042)

Loss before income tax (5,313,013) Tax expenses (Note 29e) (1,083,368)

Total comprehensive loss for the year (6,396,381)



120

45. DISCOUNTINUED OPERATIONS (Continued) The carrying amounts of assets and liabilities in PT Texmaco Jaya Tbk (under bankruptcy) as of August 19, 2011 are as follows : As of August 19, 2011 US$ Current assets : Cash and cash equivalents 35,518 Other receivables 22,991 Inventories 332,509 Purchase advances 49,485 Prepaid taxes 39,670

Total current assets 480,173

Non-current assets : Non-trade receivables from related party 9,989,391 Restricted cash in banks 770,196 Property, plant and equipment, net 58,452,622 Deferred tax assets 13,486,963

Total non-current assets 82,699,172

TOTAL ASSETS 83,179,345

Current liabilities : Short-term loans 36,716,382 Notes payable 20,467,597 Trade payables 5,225,337 Liabilities for purchase of property, plant and equipment 30,476 Taxes payable 348,716 Accrued expenses 23,287,008 Current portion of obligation under finance lease 4,300,981 Other current liabilities 14,992,195

Total current liabilities 105,368,692

Non-current liabilities : Employees’ benefit liabilities 1,652,239

Total non-current liabilities 1,652,239

TOTAL LIABILITIES 107,020,931

TOTAL NET LIABILITIES (23,841,586 )



121

45. DISCOUNTINUED OPERATIONS (Continued) The financial statements of PT Texmaco Jaya Tbk (Subsidiary) for the period January 1, 2011 up to August 19, 2011 were complied by the Subsidiary (Unaudited). Since the Company losses control of a subsidiary (PT Texmaco Jaya Tbk), the Company recognized the net liabilities of the Subsidiary totaling of Rp 656,593,951,279 (equivalent to US$ 23,841,586) as gain on disposal of Subsidiary and were presented after the taxation in the consolidated statements of comprehensive income. Until now, the progress of the curator team is completing the debt verification and in the near future, they will make a tender to sell the Subsidiary’s property, plant and equipments that was consists of factory’s machineries and equipments in Pemalang and Karawang. The bankruptcy or liquidation of Subsidiary (PT Texmaco Jaya Tbk) will have little impact to PT Asia Pacific Fibers Tbk (parent Company) now, as the operations of the Subsidiary had stopped since year 2004. However, with the existence of net liabilities in Subsidiary and disposal of Subsidiary, PT Asia Pacific Fibers Tbk as parent Company do not have an liabilities regarding the settlement of the Subsidiary’s liabilities to the other creditors, and also the Company do not get the gain regarding the disposal of Subsidiary in the future.

46. NATURE AND TRANSACTION WITH RELATED PARTIES

Nature of relationships and transaction with related parties : Nature of Name of related parties relationship Transaction Damiano Investments BV., Netherland Stockholder Loans, shareholder PT Multikarsa Investama Stockholder Loans, tolling arrangement PT Texmaco Jaya Tbk (under bankruptcy) Affiliated Company Loans, tolling arrangement Kyoa Investment Limited Stockholder Shareholder Related Parties Transactions In the normal course of business, the Company and its Subsidiaries entered into certain business and financial transactions with related parties. These transactions are normally made at normal price and conditions as of they were done with non-related parties. These transactions are as follows : Percentage to total Assets/ Liabilities /Expenses 2 0 1 2 2 0 1 1 2012 2011 US$ US$ % % Trade receivables 27,789,291 29,634,147 6.89 6.55



122

46. NATURE AND TRANSACTION WITH RELATED PARTIES (Continued)

Related Parties Transactions (Continued) Percentage to total Assets/ Liabilities /Expenses 2 0 1 2 2 0 1 1 2012 2011 US$ US$ % %

Non-trade receivables from related parties

32,474,040

34,996,344

8.05

7.73

Bank loans 78,752,462 70,339,624 6.56 5.77

Secured debts 664,778,224 664,373,826 55.35 54.51

Trade payables 7,150 – 0.00 –

Accrued expenses 404,920 106,835 0.03 0.00

Working capital loans 17,340,000 23,000,000 1.44 1.89

Manufacturing expense 3,187,967 3,075,422 0.50 0.38

• Compensation representing salary was given to the Company’s Commissioners and Directors for the years ended December 31, 2012 and 2011 amounting to Rp 6,940,860,309 and Rp 5,182,030,423, respectively. No contribution to retirement benefits, entitlement benefits and any other special benefits were given during the year 2012 and 2011.

47. SIGNIFICANT AGREEMENTS Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy) On April 1, 2008, the Company arranged the tolling / rental agreement with PT Texmaco Jaya Tbk for a period of twelve (12) months and can be renewed. This agreement is prepared because the Subsidiary does not have the necessary working capital to service the orders from its customers. Based on this agreement, the Company should pay the conversion charges that consisting of tolling fee, building and machinery rental to PT Texmaco Jaya Tbk each month. The tolling fees are calculated based on the production results. On August 3, 2009, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for a period of three (3) months and can be renewed. Based on this agreement, the Company should pay the tolling fee of US$ 1.20 per yard with the minimum production results of 100,000 yards to PT Texmaco Jaya Tbk each month. And on October 23, 2009, the Company renewed the tolling / rental agreement for seven (7) months from November 1, 2009 up to June 30, 2010.



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47. SIGNIFICANT AGREEMENTS (Continued) Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued) On July 15, 2010, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for fifthteen (15) months from July 1, 2010 up to September 30, 2011 and can be renewed. Based on this agreement, the Company should pay the tolling fee of US$ 1.20 per yard for the contract period from July 1, 2010 up to September 30, 2010, and US$ 0.75 per yard for the contract period from October 1, 2010 up to September 30, 2011. On January 10, 2011, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya Tbk for five (5) years from January 1, 2011 up to December 30, 2016 and can be renewed for three (3) years later. Based on this agreement, the Company should pay the tolling fee of US$ 0.30 per kgs and at least US$ 50,000 per month. Further, based on the latest amendment of tolling agreement with PT Texmaco Jaya Tbk (under bankruptcy) dated March 23, 2012, the Company agreed to pay the tolling fee of US$ 0.30 per kgs and subject to minimum fee of US$ 64,000 per month. Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy) Based on the land rental agreement dated June 15, 2009 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the land for 950 meters of gas pipe, 1,500 meters of water pipe, 800 meters of water pump facility and 1,000 meters of electricity cable. This agreement is valid for thirty (30) years from January 1, 2010 up to December 31, 2040. As consequently, the Company should pay the rental expenses amounted to Rp 100,000,000 per month. Based on the warehouse rental agreement dated March 30, 2011 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the warehouse for ten (10) months from March 1, 2011 up to December 31, 2011. Based on the amendment agreement dated June 28, 2012, the Company agreed to extent the warehouse rental up to December 31, 2012. Further, on December 28, 2012, this agreement has been extended till June 30, 2013. As consequently, the Company should pay the rental expenses amounted to Rp 43,200,000 per month. Based on the warehouse rental agreement dated November 17, 2011 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the warehouse for three (3) months from November 17, 2011 up to February 17, 2012. Based on the amendment agreement dated February 15, 2012, the Company agreed to extent the warehouse rental for six (6) months from February 17, 2012 up to August 17, 2012. Further on August 16, 2012, this agreement has been extended till February 16, 2013, and the re-extended is still in process. As consequently, the Company should pay the rental expenses amounted to Rp 9,000,000 per month.



124

47. SIGNIFICANT AGREEMENTS (Continued) Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued) Based on the warehouse rental agreement dated January 2, 2012 between the Company and PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the chiller machinery for one (1) years from January 2, 2012 up to December 31, 2012. Further, based on the amendment agreement dated November 28, 2012, the Company agreed to extent the warehouse rental for six (6) months from December 1, 2012 up to May 31, 2013. As consequently, the Company should pay the rental expenses amounted to Rp 5,000,000 per month. Warehouse Agreement with PT Texmaco Taman Synthetics Based on the rental agreement dated August 1, 2011 between the Company and PT Texmaco Taman Synthetics, the Company agreed to rent the laboratory equipments for five (5) years from August 1, 2011 up to July 31, 2015. As consequently, the Company should pay the rental expenses amounted to Rp 99,000,000 per month. Gas Turbine with PT Wismakarya Prasetya The Company and PT Wismakarya Prasetya (WKP) are operationally integrated as the production of electricity and steam are consumed only by the Company. Since 2004, the Company has been providing working capital support to WKP for the payment of old dues to PGN, PLN and Tax. Subsequent to the change of majority shareholders of the Company in 2006, the Company has entered into an agreement with WKP for the sale purchase of electricity, steam and gas on August 14, 2006. The Company has offered to increase the price of electricity and steam in line with the increase in the price of gas, vide its letter in April 22, 2010. Additionally, the Company would incur the cost of maintenance of turbines as per the standard running hours. The Company should pay the monthly electricity, steam and gas based on their consumption. Additionally, the Company would incur the cost of maintenance of turbines as per the standard running hours as a part of cost of purchase of electricity. This agreement is valid for a period of 5 years, and due on April 22, 2015. The Company has also fully provided for the Bank guarantee through SBLC for an amount of US$ 5,170,094 and Rp.16,498,800,000 as of March 2013 equivalent to two (2) months consumption of gas, as required by the Gas Supply Contract of PGN. The contract for the supply of gas to WKP is due for extension by end of March 2013. The Company and PT Wismakarya Prasetya (WKP) are engaged in the commercial discussion for finalizing the prices to be effective from January 1, 2013. WKP has made claims for the past period which are not commercially viable. In order to firm up the claim on WKP arising on account of sales advance, the Company has filed a legal suit through Karawang Court and issued a Default Notice to WKP on December 14, 2012 as per the agreement entered into between the Company (Polysindo/APF) and WKP on November 16, 2006. WKP has also confirmed their dues to the Company as at the end of the year 2012.



125

48. COMMITMENT (a) Capital Commitments

The capital expenditure committed but not yet inccurred as of December 31, 2012 is US$ 14,000,000. Amount outstanding above is relating to commitment made by the Company in development and increase in the Company’s filament yarn and fiber capacity. The commitment has to be exercised at the year 2013.

(b) Operating Lease Commitments

The Company leases various warehouse under non-cancellable operating lease agreements. The lease terms are between 1 (one) year up to thirty (30) years, and the majority of lease agreements are renewable at the end of the lease period. The following are counterparties of the Company’s lease commitments :

Counterparties

Leased items

Period of

agreement

Amount (Rp)

PT Texmaco Jaya Tbk (under bankruptcy)

Warehouse at Karawang

January 1, 2013 – June 30, 2013

Rp 43,200,000 each month

Warehouse at Karawang

August 16, 2012 – February 16, 2013


Warehouse at

Karawang

December 1, 2012 –

May 31, 2013

Rp 5,000,000

each month Land at Karawang January 1, 2010 –

January 1, 2040

Rp 100,000,000

each month PT Texmaco Taman Synthetics

Warehouse at Semarang

August 1, 2011 – July 31, 2015


The future aggregate minimum lease payment under non-cancellable operating leases are as follows : 2 0 1 2 2 0 1 1 US$ US$ No later than 1 year 278,201 331,172 Later than 1 year and no later than 5 years 690,900 867,681 Later than 5 years 2,730,093 3,043,670

Total 3,699,194 4,242,523



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49. CONTINGENCIES

• The Directorat Jenderal Pajak has filed a Review Petition against the verdict of the tax court for the refund of Rp 13,090,399,058 on November 24, 2010. If the Review Petition filed by the Directorat Jenderal Pajak is won, then the entire refund amount became payable along with the accrued interest till the date of refund. Until the date of report finished, the result has not been determined yet.

• Effective August 19, 2011, one of Subsidiary (PT Texmaco Jaya Tbk) becomes subject to the control of Court, causing the Company to lose its control. The Count has already set a Supervisory Judge and curator team to maintain and monitor the operation of bankruptcy assets and cash flows of the Subsidiary. Net liabilities at the date of lost its control is Rp 656,593,951,279. PT Asia Pacific Fibers Tbk as parent Company do not have obligation regarding the creditors’ payables of Subsidiary.

• Based on the correspondence letter from PT Bina Prima Perdana dated August 8, 2011, PT Bina Prima Perdana claims from the Company being the guarantor of the Subsidiary’s loans from Bank Dharmala and Bank Arya. However, the management of the Company mentioned that the above guarantees (promissory note) were not registered by PT Bina Prima Perdana during the debt verification by the curator of PT Asia Pacific Fibers Tbk (formerly PT Polysindo Eka Perkasa Tbk) during its bankruptcy process in 2005, and consequently, the above claims of PT Bina Prima Perdana were not valid. In addition, the restructuring process of unsecured debt in PT Asia Pacific Fibers Tbk has been completed.

• The Company’s land certificates with HGB No. 13 and HGB No. 14 located in Kiara Payung, Kec. Klari, Karawang have been pledged to PT Bank Negara Indonesia/ PT Bina Prima Perdana in respect of secured debts of PT Texmaco Jaya Tbk (under bankruptcy). PT Bina Prima Perdana has claimed with its letter dated February 21, 2013 amounted to Rp 19 billion from the Company for the release of the pledge. This is under discusson with PT Bina Prima Perdana (Note 16).

50. SEGMENT INFORMATION The Board of Director is the Company’s chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board of Director for the purposes of allocating resources and accessing performance. The Board of Director considers the business from both a geographic and product perspective. Geographically, management considers the performance in Indonesia, Asia, America, Europe, Australia and Africa. From a product perspective, management separately considers the business segment are as follows :



127

50. SEGMENT INFORMATION (Continued)

1. Chemical industry and synthetic fibre 2. Weaving and knitting

Although the weaving and knitting segment does not meet the quantitative thresholds required by SFAS 5 for reportable segments, management has conclude that this segment should be reported, as it is closely monitored by the strategic steering committee as a potential growth and is expected to materially contribute the Company’s revenue in the future.

Chemical Weaving Industry and and

2 0 1 2 Synthetic fibre Knitting Others Elimination Total US$ US$ US$ US$ US$

SEGMENT SALES :

External sales Local 488,293,432 10,448,629 − − 498,742,061

Export Asia 35,709,104 691,483 − − 36,400,587

America 28,909,074 − − − 28,909,074

Europe 16,744,050 186,344 − − 16,930,394

Australia 11,259,124 − − − 11,259,124

Africa 8,290,511 − − − 8,290,511

Total Export 100,911,863 877,827 − − 101,789,690

Inter segment sales 216,141,901 − − (216,141,901 ) −

Total segment sales 805,347,196 11,326,456 − (216,141,901 ) 600,531,751

Segment result (8,447,903 ) 2,465,475 − − (5,982,428 )

Unallocated expenses (16,806,846 ) (725,232 ) − − (17,532,078 )

Loss from operations (25,254,749 ) 1,740,243 − (23,514,506 )

Finance costs (18,213,903 ) (31,588 ) − − (18,245,491 )

Loss before income tax (43,468,652 ) 1,708,655 − (41,759,997 ) 0

Tax income 9,641,186

Total loss for the year from continuing operation

(32,118,811

)

Discountinued operation : Loss from disposal of Subsidiary −

Total loss for the year (Carried forward) (32,118,811 )



128




Total loss for the year (brought forward) (32,118,811 ) Other comprehensive income, net after tax −

Total comprehensive loss for the year (32,118,811 )

STATEMENT OF FINANCIAL

POSITION :

Segment assets (399,690,163 ) (3,541,552) (20,576) (403,252,291 )

Segment liabilities 1,200,226,996 789,213 74,931 1,201,091,140

OTHER INFORMATION : Capital expenditures (14,082,392 ) (145,391 ) − (14,227,783 )

Depreciation (69,656,131 ) (14,129 ) − (69,670,260 )



SEGMENT SALES :

External sales

Local 499,048,169 2,370,697 − − 501,418,866

Export Asia 53,301,178 1,126,920 − − 54,428,098

America 39,201,161 − − − 39,201,161

Europe 24,353,250 289,910 − − 24,643,160

Australia 8,745,493 − − − 8,745,493

Africa 7,630,984 − − − 7,630,984

Total Export 133,232,066 1,416,830 − − 134,648,896

Inter segment sales 228,753,393 24,016 − (228,777,409 ) −

Total segment sales 861,033,628 3,811,543 − (228,777,409 ) 636,067,762



129




RESULT :

Segment result 11,864,104 2,015,094 − − 13,879,198

Unallocated expenses (33,504,268 ) (237,916 ) − − (33,742,184 )

Loss from operations (21,640,164 ) 1,777,178 − − (19,862,986 )

Finance costs (16,303,683 ) (11,658 ) − − (16,315,341 )

Loss before income tax (37,943,847 ) 1,765,520 − − (36,178,327 )

Tax income 9,892,352

Total loss for the year from continuing operation

(26,285,975

)

Total profit from discountinued operation 17,445,205 )

Total loss for the year (8,840,770 )

Other comprehensive income, net after tax –

Total comprehensive loss for the year (8,840,770 )

STATEMENT OF FINANCIAL

POSITION :

Segment assets (450,827,948 ) (1,786,788) (20,576) − (452,635,312 )

Segment liabilities 1,217,589,825 1,233,623 74,931 − 1,218,898,379

OTHER INFORMATION :

Capital expenditures (9,003,874 ) (2,107 ) − − (9,005,981 )

Depreciation (86,220,674 ) (5,387 ) − − (86,226,061 )

The following table shows the carrying amount of segment non-current assets and additions to property, plant and equipment by geographical area in which the assets are located :

Carrying amount non-current assets Additions to property, plant and equipment

December 31, December 31, January 1, December 31, December 31,

2 0 1 2 2 0 1 1 2 0 1 1 2 0 1 2 2 0 1 1

US$ US$ US$ US$ US$

Indonesia 129,407,396 184,837,123 262,057,203 14,227,783 9,005,981



130

51. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN

CURRENCIES The Company has assets and liabilities denominated in foreign currencies as follows: 2 0 1 2 2 0 1 1 Foreign Equivalent in Foreign Equivalent in Currency US$ Currency US$ Assets : Cash and cash equivalents IDR 15,953,468,926 1,649,790 14,214,328,653 1,567,526 EUR 6,277 8,315 2,348 3,039 SGD 8,125 6,644 8,261 6,354 NOK 1,108 170 1,108 161

Trade receivables : Third parties IDR 2,019,778,766 208,871 102,616,673 11,316 Related parties IDR 268,722,447,174 27,789,291 268,722,447,174 29,634,147

Other receivables IDR 20,275,727,220 2,096,766 18,212,026,112 2,008,384

Other current financial assets IDR 10,248,315,332 1,059,805 5,237,815,332 577,615

Non-trade receivables from related parties

IDR

339,799,791,085

35,139,585

341,518,009,452

37,661,889

Other non-current financial assets

IDR

3,959,414,637

409,454

3,959,414,637

436,636

Total assets 68,368,691 71,907,067

Liabilities

Trade payables : Third parties IDR 30,425,613,348 3,146,392 35,088,919,356 3,869,532 YEN 4,780,473 55,368 3,779,861 48,770 SGD 27,904 22,817 32,654 25,113 GBP – – 16,660 25,665 EUR 284,392 376,738 136,455 176,648 SEK 5,128,579 789,041 – – Related parties IDR 69,142,248 7,150 – –

Accrued expenses IDR 413,168,541,805 42,726,840 411,036,714,332 45,328,266

Secured Debts IDR 1,344,552,714,414 139,043,714 1,344,552,714,414 148,274,450 EUR 15,688,978 20,783,207 15,688,978 20,310,187 YEN 3,001,711,400 34,756,139 3,001,711,400 38,664,463 CHF 45,902 50,302 45,902 48,779

Other short-term liabilities : Third parties IDR 18,295,341,577 1,891,973 9,296,681,940 1,025,219

Credit Financing Payables IDR 1,162,192,835 120,186 957,211,258 105,559

Long-term employee benefit IDR 99,356,704,849 10,274,737 77,637,935,506 8,561,749

Total liabilities 254,044,604 266,464,400

Net liabilities (185,675,913 ) (194,557,333 )



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51. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN

CURRENCIES (Continued) Monatary assets and liabilities mentioned above are translated using Bank Indonesia closing rate as at December 31, 2012 and 2011.

52. FINANCIAL ASSETS AND LIABILITIES The fair value of financial assets and liabilities are recorded in which the instrument could be exchanged in the transaction between the willing parties, not in sales due to financial difficulties or are forced liquidation. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value :

• Short-term financial assets and liabilities with remaining maturities of one (1) year or less (cash and cash equivalents, trade receivables, other receivables, other current financial assets, trade payables, accrued expenses, and other short-term financial liabilities). The net carrying value of these financial assets and liabilities is considered a reasonable approximation of their fair value due to their short-term maturities.

• Long-term fixed-rate financial instruments with remaining maturities over one (1) years. The fair value of these financial assets and liabilities is determined by discounting future cash flows using applicable interest rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities. Fair Value Hierarchy : Financial assets and financial liabilities measured at fair value in the consolidated statements of financial position are categorized in accordance with the fair value hierarchy. This hierarchy groups financial assets and financial liabilities into three (3) levels based on the significance of inputs used in measuring the fair value of the financial assets and financial liabilities. The table below analyses financial instruments carried at fair value, by the valuation method. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity’s specific estimates. The different levels have been defined as follows : a. Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities. b. Level 2 : Inputs other than quoted prices included within level 1 that are observable for the

asset or liability, either directly or indirectly. c. Level 3 : Inputs for the asset or liability that is not based on observable market data. Based on the above different level from fair value hierarchy, the following table represents the Company’s assets and liabilities that are measured at fair value as of December 31, 2012 and 2011:



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52. FINANCIAL ASSETS AND LIABILITIES (Continued)

December 31, 2 0 1 2 Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets :

Current Assets : Cash and cash equivalents – 9,793,989 – 9,793,989 Trade receivables, net – 85,777,319 – 85,777,319

Other receivables, net – 3,300,907 – 3,300,907 Other current financial assets – 7,720,808 – 7,720,808 Non-current assets : Non-trade receivables from

related parties – – 32,474,040 32,474,040 Other non-current financial Assets – – 1,113,711 1,113,711

Total financial assets – 106,593,023 33,587,751 140,180,774

Financial liabilities : Current Liabilities: Trade payables – 22,949,484 – 22,949,484

Accrued expenses – 43,319,170 – 43,319,170 Bank Loans – 78,563,511 – 78,563,511 Secured Debts – – 1,000,263,703 1,000,263,703

Current portion of long- term liabilities:

Working capital loans – 17,034,668 – 17,034,668 Credit financing payables – 64,651 – 64,651

Other short-term financial liabilities

–

4,150,965

–

4,150,965

Non-current:

Unsecured Debts and Notes Payable – 20,541,883 – 20,541,883 Credit financing payables – 55,535 – 55,535

Total financial liabilities – 186,679,867 1,000,263,703 1,186,943,570

December 31, 2 0 1 1 Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets : Current Assets : Cash and cash equivalents – 3,438,164 – 3,438,164

Trade receivables, net – 79,729,562 – 79,729,562 Other receivables, net – 2,529,473 – 2,529,473 Other current financial assets – 6,067,345 – 6,067,345 Non-current assets :

Non-trade receivables from related parties – – 34,996,344 34,996,344 Other non-current financial

Assets – – 1,140,893 1,140,893

Total financial assets – 91,764,544 36,137,237 127,901,781



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52. FINANCIAL ASSETS AND LIABILITIES (Continued)


Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial liabilities : Current Liabilities:

Trade payables – 23,798,883 – 23,798,883 Accrued expenses – 45,606,299 – 45,606,299 Bank Loans – 70,110,366 – 70,110,366 Secured Debts – – 1,012,928,220 1,012,928,220

Current portion of long- term liabilities:

Working capital loans – 8,191,329 – 8,191,329

Credit financing payables – 57,035 – 57,035 Other short-term financial liabilities

–

4,251,161

–

4,251,161

Non-current:

Unsecured Debts and Notes Payable – 20,019,949 – 20,019,949 Working capital loans – 14,389,581 – 14,389,581

Credit financing payables – 48,524 – 48,524

Total financial liabilities – 186,473,127 1,012,928,220 1,199,401,347

The fair value of financial instruments that are not traded in an active market is determined by using the valuation technique. The discount rate used to determine the present value of the net cash inflow/outflow was based on a market interest rate and the risk premium. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity’s specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The following table presents the changes in Level 3 instruments are as follows :

Non-trade Other receivables non-current

from related financial Secured parties assets debts Total

US$ US$ US$ US$

Beginning balance 34,996,344 1,140,893 (1,012,928,220 ) (974,125,438) Gain (loss) on foreign exchange, net

(121,304

)

(27,182

)

12,664,517

12,516,031

Settlement of tolling expenses (2,401,000 ) – – (2,401,000)

Ending balance 32,474,040 1,113,711 (1,000,263,703 ) (964,010,407)



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53. FINANCIAL RISK MANAGEMENT The Company is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk. The Company’s risk management focuses on actively securing the Company’s short-term to medium-term cash flows by minimizing the exposure on financial markets The Company does not actively engage in the trading of financial assets for speculative purposes nor does it take options. The most significant financial risks to which the Company is exposed to are described below. a. Market Risk

The Company is exposed to market risk through its use of financial instruments and specifically to currency risk and interest risk which result from both their operating and investing activities. (a) Foreign Currency Risk

Most of the Company’s transactions are carried out in other currencies. Exposure to currency exchange rates arise from the Company’s operational activities, which are denominated in Indonesian Rupiah and currencies other than United States Dollar. The Company also holds Indonesian Rupiah-denominated cash and cash equivalents. The Company is aware of the market risk due to foreign exchange fluctuation. Management has set up a policy to require Company to manage their foreign exchange risk against their functional currency. There are no specific arrangements to reduce such risk exposures through derivatives and other hedging instruments. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the Company’s functional currency. To mitigate the Company’s exposure to foreign currency risk, the Company actively monitors the foreign currency movements and together with principal to manage the impact of the foreign exchange fluctuations. Foreign currency denominated financial assets and liabilities, translated into United States Dollar at the middle rate, are stated in Assets and Liabilities in Foreign Currency (Note 51). The management believes that the Company is naturally hedged against foreign exchange risk. The risk is measured using cash flow forecasts with sensitivity analysis. The table below summarizes the sensitivity analysis to the possibility changes of foreign exchange rates, with considering all other factors are held constant, to the consolidated statement of comprehensive income for the year ended December 31, 2012 :



135

53. FINANCIAL RISK MANAGEMENT (Continued) a. Market Risk (Continued)

(a) Foreign Currency Risk (Continued)

2 0 1 2 US$ EUR increased by 0.10% (20,563) SEK increased by 1.16% (9,140) NOK decreased by 0.39% 28 SGD decreased by 1.05% 170 CHF decreased by 1.58% 798 IDR decreased by 0.20% 252,714 YEN decreased by 5.83% 2,029,504

Net 2,253,511

Management conducted a survey among banks to get an estimate on exchange rate of foreign currencies until the reporting date. The estimate changes of foreign exchange rate are increased by 0.10% for European Euro and 1.16% for Krona Swedish. And the estimate changes of foreign exchange rate are decreased by 0.39% for Krone Norwegian, 1.05% for Singapore Dollar, 1.58% for Swiss Franc, 0.20% for Indonesian Rupiah and 5.83% for Japanese Yen if compared with the exchange rate on December 31, 2012. The Company’s policy is to manage the financial assets denominated in foreign currencies are available to settle the financial liabilities denominated in foreign currencies. At December 31, 2012, the financial liabilities denominated in foreign currencies are in excess of financial assets denominated in foreign currencies at amount of US$ 185.675.913 due to unrestructured long-term secured debts are shown in their full value. If the above mentioned secured debts denominated in Indonesian Rupiah and currencies other than US Dollar are not considered, there are no excess of financial liabilities over the assets. This is a manageable level as the loans are repayable over a period of time.

(b). Interest Rate Risk

Interest rate risk is the impact of rate changes on interest bearing assets and liabilities. The interest risk exposure is mainly from changes in fixed rate and floating interest rates. When considered appropriate, in order to manage the interest rate risk, interest rate swaps are entered into to mitigate the fair value risk relating to fixed-interest assets or liabilities and the cash flow risk related to variable interest rate assets and liabilities.



136

53. FINANCIAL RISK MANAGEMENT (Continued) a. Market Risk (Continued)

(b). Interest Rate Risk (Continued)

The Company’s policy is to minimize interest rate risk exposure on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At December 31, 2012 and 2011, the Company have applied the fixed interest rates for their loans to banks, third parties and related parties. The interest rate risk from cash and cash equivalent, and trade and other receivables is not significant.

b. Credit Risk

Credit risk is the risk that counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example by granting receivables and advances to customers and related parties. The Company continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. The Company’s policy is to deal only with credit worthy counterparties. In addition, for a certain proportion of sales, advance payments are received to mitigate risks. The Company’s maximum exposure to credit risk is limited to the carrying amount of the financial assets as shown on the face of the consolidated statements of financial position, as summarized below. 2 0 1 2 2 0 1 1 US$ US$ Cash and cash equivalents 9,773,413 3,417,588 Trade receivables, net 85,777,319 79,729,562 Other receivables, net 3,300,907 2,529,473 Other current financial assets 7,720,808 6,067,345

Non-trade receivables from related parties, net 32,474,040 34,996,344 Other non-current financial assets 1,113,711 1,140,893

Total financial assets 140,160,198 127,881,205

(a) Cash and cash equivalents and other current financial assets

The credit risk for cash and cash equivalents and short-term investments are considered negligible, since the counterparties are reputable banks with high quality external credit ratings. The Company actively monitoring the cash and bank balances on weekly basis



137

53. FINANCIAL RISK MANAGEMENT (Continued) b. Credit Risk (Continued)

(b) Trade receivables

In respect of trade receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers. Based on historical information, the customer default rates in the settlement of receivables is low due to the settlement from customers are normally received by the Company with in the credit term. Moreever, some of export sales are on cash before delivery or a portion of the sales are collected a front (prefinance). Thus, the management noted that the outstanding of trade receivables have not impaired.

(c) Other receivables

In respect of other receivables, the Company is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Based on historical information about customer default rates, management consider the credit quality of other receivables have not impaired.

(d) Non-trade receivables from related parties

Non-trade receivables from related party represent the receivables from PT Multikarsa Investama (related party). The Company’s management stated that there is no impairment indication that could be counted from the estimated cash flow in the future, due to PT Multikarsa Investama is still in the debt restructuring process with PT Perusahaan Pengelola Aset (PPA). In addition, the said value will be suitably adjusted at the time of restructuring.

(e) Other non-current financial assets

The Company’s management noted that there is no impairment indication in the restricted cash in banks that could be counted from the estimated cash flow in the future, due to the Company is still in the debt restructuring process with PT Perusahaan Pengelola Aset (PPA). In addition, the said amount will be suitably adjusted at the time of restructuring.

c. Liquidity Risk

Liquidity risk is the risk arising from the Company not being able to meet its obligation. The Company manages its liquidity needs by carefully monitoring the payment schedule for short-term and long-term financial liabilities as well as forecast cash inflows and outflows due in day to day business.



138

53. FINANCIAL RISK MANAGEMENT (Continued) c. Liquidity Risk (Continued)

The entity uses maturity analysis to manage the liquidity, e.g., when the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to pay. The risk that the Company will be unable to do is inherent in the Company’s operational and can be affected by a range of institution-specific and market-wide events as the long-term secured debts of the Company are still unrestructured. In the normal course, the Company manages its liquidity needs by carefully monitoring scheduled debt servicing payments for current and long-term financial liabilities as well as other cash outflows on a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 90-day projection. The current financial dues including the bank loans for the procurement of raw materials, of the Company are fully covered by the current assets of the Company which can be converted into cash within a short period. The other long-term loans have fixed interest servicing and repayment schedule, which are fully budgeted in the 3 monthly cash flow estimates. The Company does not have any over due liability either short-term or long-term, except for secured debts that is still under the restructuring process As of December 31, 2012 and 2011, the Company’s financial liabilities have contractual which are presented below.

Current Non Current Within 6 to 12 1 to 5 More than

6 months months Years 5 years

US$ US$ US$ US$

December 31, 2012 :

Trade payables 22,949,484 − − − Accrued expenses 43,319,170 − − − Bank Loans 78,752,462 − − − Secured Debts 1,000,263,703 − − − Working Capital Loans − 17,340,000 − − Unsecured Debts and Notes payable

−

−

8,867,735

13,301,603

Credit Financing Payables 35,988 28,663 55,535 − Other short-term financial liabilities

4,150,965

−

−

−

Total 1,149,471,772 17,368,663 8,923,270 13,301,603



139

53. FINANCIAL RISK MANAGEMENT (Continued) c. Liquidity Risk (Continued)

Current Non Current

Within 6 to 12 1 to 5 More than 6 months months Years 5 years

US$ US$ US$ US$

December 31, 2011 : Trade payables 23,798,883 − − − Accrued expenses 45,606,299 − − − Bank Loans 70,339,624 − − − Secured Debts 1,012,928,220 − − − Working Capital Loans − 8,500,000 14,500,000 − Unsecured Debts and

Notes payable

−

−

4,937,627

17,007,384

Credit Financing Payables 29,379 27,656 48,524 − Other short-term financial liabilities

4,251,161

−

−

−

Total 1,156,953,566 8,527,656 19,486,151 17,007,384

54. CAPITAL MANAGEMENT POLICIES The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder return. In order to maintain the optimal capital structure, the Company may adjust the amount of dividends paid to shareholders. Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. The gearing ratio as of December 31, 2012 and 2011 are as follows : 2 0 1 2 2 0 1 1 US$ US$ Total borrowings 1,118,645,689 1,128,318,414 Less : Cash and cash equivalents (9,773,413) (3,417,588 ) Other current financial assets (827,301) (330,834 ) Other non-current financial assets (1,113,711) (1,140,893 )

Net debt (carried forward) 1,106,931,264 1,123,429,099



140

54. CAPITAL MANAGEMENT POLICIES (Continued) 2 0 1 2 2 0 1 1 US$ US$ Net debt (brought forward) 1,106,931,264 1,123,429,099 Total deficiency (797,838,849 ) (766,263,067 )

Gearing ratio (0.72 ) (0.68 )

The total borrowings include the unrestructured secured debts of US$ 1,000,263,703. The Company endevours to restructure this debt to a sustainable level and for which the negotiations are underway with its secured creditors including PPA/BPP. If the proposal of the Company which includes debt to equity swap and waiver of the past interest amounts is accepted by its creditors, it will considerably improve the capital gearing structure of the Company.

55. RESTATMENTS OF THE PRIOR YEARS’ FINANCIAL STATEMENTS The management makes adjustments to correct the followings : a. The understated of carrying amont of land in Bandung amounted to US$ 68,347 b. The understated of acquisition cost and its accumulated depreciation of building in Bandung

amounted to US$ 96,441, respectively. The carrying amount of its building is US$ Nil. According to PSAK No. 25, the total amount of correction of errors amounted to US$ 68,347 that related to prior period should be reported by adjusting the opening balance of unappropriate retained ernings (accumulated deficit) and as part of the equity attributable to the owners of the Company. The summary of the restatement of accounts are as follows :

As previously Reported

As Restated

US$ US$ Property, plant and equipments : As of January 1, 2011 304,392,472 304,460,819 As of December 31, 2011 184,768,776 184,837,123 Accumulated deficit – unappropriated : As of January 1, 2011 (2,019,193,395) (2,019,125,048) As of December 31, 2011 (2,028,146,170) (2,028,077,823)



141

56. ACCOUNT RECLASSIFICATIONS Certain accounts in the consolidated financial statements for the years ended December 31, 2011 and 2010 have been reclassified to conform with the presentation of the consolidated financial statements for the year ended December 31, 2012 which are in accordance with the Capital Market and Financial Institution Supervisory Agency (BAPEPAM-LK)’s Regulation No. VIII.G.7, enclosed in the decision letter No. KEP-347/BL/2012. The details of the significant accounts being reclassified are as follows :

Descriptions Before

Reclassification Reclassification After

Reclassification

US$ US$ US$

Consolidated statement of financial position as of December 31, 2011 :

Short-term investments 330,834 (330,834 ) – Other current assets 5,736,511 (5,736,511 ) – Other current financial assets – 6,067,345 6,067,345 Restricted cash in banks 1,140,893 (1,140,893 ) –

Other non-current financial assets – 1,140,893 1,140,893 Other current liabilities 4,251,161 (4,251,161 ) – Other current financial liabilities – 4,251,161 4,251,161

Consolidated statement of comprehensive income for the year ended December 31, 2011 :

Interest income 21,064 (21,064 ) – Interest expense and bank charges (16,336,405 ) 16,336,405 – Finance costs – (16,315,341 ) (16,315,341 )

Consolidated statement of financial position as of December 31, 2010 :

Short-term investments 111,222 (111,222 ) –

Other current assets 2,944,403 (2,944,403 ) – Other current financial assets – 3,055,625 3,055,625 Restricted cash in banks 1,905,194 (1,905,194 ) –

Other non-current financial assets – 1,905,194 1,905,194 Liabilities for purchase of property, plant and equipment 30,476 (30,476 ) – Other current liabilities 17,313,465 (17,313,465 ) –

Other current financial liabilities – 17,343,941 17,343,941 Obligation under finance lease 4,300,981 (4,300,981 ) – Finance Lease Liabilities – 4,300,981 4,300,981

57. PRONOUNCEMENT OF NEW ACCOUNTING STANDARDS The Indonesian Institute of Accountants (“IIA”) has issued new or revision of the following the Indonesian Financial Accounting Standards (“PSAK”) and its interpretation (“ISAK”). The accounting standards which will be effective or applicable on the Company financial statements covering periods beginning on or after January 1, 2013 :



142

57. PRONOUNCEMENT OF NEW ACCOUNTING STANDARDS (Continued)

• PSAK 38 – Business Combinations on Entities under Common Control

• ISAK 21 – Agreements for the Constructions of Real Estate

The Company and its Subsidiaries’ managements are currently evaluating the possible impact on these new accounting standards and interpretations on its consolidated financial statements.

58. SUPPLEMENTARY FINANCIAL INFORMATION The Company published consolidated financial statements. The supplementary financial information of PT Asia Pacific Fibers Tbk (Parent Company only) in schedule 1 until schedule 6 that has been prepared in order to analyse parent Company only’s result of operations. The following supplementary financial information of PT Asia Pacific Fibers Tbk (Parent Company only) should be read in conjuction with the consolidated financial statements of PT Asia Pacific Fibers Tbk and its Subsidiaries.

Schedule -1

SUPPLEMENTARY FINANCIAL INFORMATION

PT ASIA PACIFIC FIBERS Tbk (PARENT COMPANY ONLY)

STATEMENTS OF FINANCIAL POSITION December 31, 2012, December 31, 2011 and January 1, 2011

December 31,


2 0 1 1 (As Restated)

January 1, 2 0 1 1

(As Restated)

US$ US$ US$

ASSETS

CURRENT ASSETS Cash and cash equivalents 9,773,413 3,417,588 9,715,956 Trade receivables, net after allowance for

impairment of US$ 15,657,945 in 2012 and 2011 and US$ Nil in 2010 Third parties 57,988,028 50,095,415 46,948,271 Related parties 27,789,291 29,634,147 45,679,979 Other receivables, net after allowance for Impairment of US$ 36,721,575 in 2012 and 2011 and US$ 36,752,074 in 2010 Third parties 3,300,907 2,529,473 457,727

Other current financial assets 7,720,808 6,067,345 3,055,625 Inventories 79,954,633 87,677,359 50,974,455 Purchase advances 34,605,192 37,846,870 32,329,293 Prepaid taxes 14,786,048 13,202,393 13,891,922 Prepaid expenses 1,101,627 1,169,786 850,592

Total Current Assets 237,019,947 231,640,376 203,903,820

NON–CURRENT ASSETS Non-trade receivables from related parties, net after allowance for impairment of US$ 111,997,893 in 2012 and 2011 and US$ 5,587,181 in 2010 35,139,585 37,661,889 144,781,701

Other non-current financial assets 1,113,711 1,140,893 1,144,632 Property, plant and equipment, net after accumulated depreciation of US$ 1,658,522,816 in 2012, US$ 1,588,852,556 in 2011, and US$ 1,502,626,495 in 2010 129,394,646 184,837,123 262,057,203 Intangible assets 12,750 – – Investment in subsidiaries 31,170 31,170 16,175,401

Deferred tax assets 3,216,621 – –

Total Non–Current Assets 168,908,483 223,671,075 424,158,937

TOTAL ASSETS 405,928,430 455,311,451 628,062,757

Schedule -2



STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2012, December 31, 2011 and January 1, 2011



(As Restated)

January 1, 2 0 1 1

(As Restated)

US$ US$ US$


CURRENT LIABILITIES Trade payables Third parties 22,942,334 23,798,883 19,845,244 Related party 7,150 – 135,538 Accrued expenses 43,319,170 45,606,299 54,650,270

Taxes payable 1,751,095 1,937,308 2,039,546 Bank Loans 78,752,462 70,339,624 48,046,644 Secured Debts 1,000,263,703 1,012,928,220 1,012,905,635 Current portion of long-term liabilities: Working capital loans 17,340,000 8,500,000 4,333,000 Credit financing payables 64,651 57,035 52,884 Other short-term financial liabilities 4,076,034 4,176,230 4,813,702

Total Current Liabilities 1,168,516,599 1,167,343,599 1,146,822,463

NON–CURRENT LIABILITIES Borrowing from Other Financial

Institutions : Unsecured Debts and Notes Payable 22,169,338 21,945,011 21,077,129 Working capital loans – 14,500,000 36,277,862 Credit financing payables 55,535 48,524 77,437 Long-term employee benefit liabilities 10,274,737 8,561,749 6,504,083 Deferred tax liabilities – 6,424,565 17,400,285

Total Non–Current Liabilities 32,499,610 51,479,849 81,336,796

Schedule -3



STATEMENTS OF FINANCIAL POSITION (Continued) December 31, 2012, December 31, 2011 and January 1, 2011



(As Restated)

January 1, 2 0 1 1

(As Restated)

US$ US$ US$


EQUITY (DEFICIENCY) Share Capital Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value per Series B and

Rp 40 par value per Series C in 2012, 2011 and 2010 Issued and paid up 219,696,000 Series A and 2,276,057,347 Series C in 2012 and 2,157,211,950 Series C in 2011 and 2010 635,689,316 635,165,191 635,165,191 Additional paid-in capital 624,344,507 624,325,603 624,325,603 Retained earnings (accumulated deficit)

Appropriated 2,345,301 2,345,301 2,345,301 Unappropriated (2,057,466,903) (2,025,348,092) (1,861,932,597)

Total deficiency attributable to

the owners of the Company

(795,087,779

) (763,511,997

) (600,096,502

)

TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 405,928,430 455,311,451 628,062,757

Schedule -4



STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2012 and 2011

2 0 1 2 2 0 1 1 (As Restated)

US$ US$

Continuing operation :

REVENUES Net sales 599,330,876 635,534,718 Other operating revenues 1,200,875 533,044

Total revenues 600,531,751 636,067,762

COST OF GOODS SOLD (606,514,179 ) (622,188,564 )

GROSS PROFIT (LOSS) (5,982,428 ) 13,879,198

Selling expenses (14,052,194 ) (13,725,399 ) General and administrative expenses (17,843,646 ) (18,726,822 ) Insurance claim settlement, net 1,667,691 86,182 Gain (loss) on foreign exchange transactions, net 11,816,164 (2,158,190 ) Miscellaneous income (expense), net 879,907 (121,286,612 )

(17,532,078 ) (155,810,841 )

LOSS FROM OPERATIONS (23,514,506 ) (141,931,643 )

Finance costs (18,245,491 ) (16,315,341 )

LOSS BEFORE INCOME TAX (41,759,997 ) (158,246,984 )

TAX INCOME (EXPENSE)

Current period – – Deferred 9,641,186 10,975,720

Total tax income 9,641,186 10,975,720

TOTAL LOSS FOR THE YEAR FROM CONTINUING OPERATIONS

(32,118,811

)

(147,271,264

)

Discountinued operations : Loss on disposal of Subsidiary – (16,144,231 )

TOTAL PROFIT (LOSS) FOR THE YEAR (32,118,811 ) (163,415,495 )

OTHER COMPREHENSIVE INCOME, NET

AFTER TAX – –

TOTAL COMPREHENSIVE LOSS (32,118,811 ) (163,415,495 )

Earning per share :

Basic (0.01 ) (0.07 ) Diluted (0.01 ) (0.07 )

Schedule -5



STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2012 and 2011

Retained earnings (accumulated deficit)

Share Capital

Additional paid-in capital

Appropriated

Unappropriated

Total equity (deficiency)

US$ US$ US$ US$ US$ Balance as of January 1, 2011 (As Restated) 635,165,191 624,325,603 2,345,301 (1,861,932,597) (600,096,502) Total loss for the year – – – (163,415,495 ) (163,415,495 ) Other comprehensive income, net – – – – –

Balance as of December 31, 2011 (As Restated) 635,165,191 624,325,603 2,345,301 (2,025,348,092) (763,511,997) Issuance of share capital 524,125 18,904 – – 543,029 Total loss for the year – – – (32,118,811 ) (32,118,811 ) Other comprehensive income, net – – – – –

Balance as of December 31, 2012 635,689,316 624,344,507 2,345,301 (2,057,466,903) (795,087,779)

Schedule -6



STATEMENTS OF CASH FLOWS (Continued) For the years ended December 31, 2012 and 2011

2 0 1 2 2 0 1 1

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES Receipt from customers 634,181,470 646,901,210 Payment to suppliers (107,539,191) (121,707,320) Payment of salaries (16,579,363) (15,571,185) Other operating cash payments, net (61,251,557) (38,847,286)

Cash provided by operations 448,811,359 470,775,419 Interest received 31,754 21,064 Interest expense and bank charges paid (17,979,160) (15,781,720) Cash receipt from insurance claim settlement 1,667,691 86,182 Payment of income tax (4,911,388) (11,407,441) Refund of income tax 5,940,924 7,119,722

Net Cash Provided By Operating Activities 433,561,180 450,813,226

CASH FLOWS FROM INVESTING ACTIVITIES Payment to acquire property, plant and equipment (13,295,299) (9,005,981) Increase of other current financial assets (521,237) (233,946) Payment of non-trade receivables from related parties (2,224,168) (2,825,916 )

Net Cash Used In Investing Activities (16,040,704 ) (12,065,843 )

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of share capitals 591,434 – Payment of bank loans (404,619,673) (428,449,261) Receipt of working capital loans 12,940,000 8,500,000 Payment of working capital loans (18,600,000) (26,110,862)

Receipt of credit financing payables 83,316 35,069 Payment of credit financing payables (68,689) (59,831)

Net Cash Used In Financing Activities (409,673,612 ) (446,084,885 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

7,846,864

(7,337,502

)

EFFECT OF FOREIGN EXCHANGE RATE (1,491,039) 1,039,134

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

3,417,588

9,715,956

CASH AND CASH EQUIVALENTS AT END OF YEAR

9,773,413

3,417,588

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